O
verview
I
ntroduction
This Prospectus provides the
information you need to make an informed decision about investing in the Fund
described beginning on page 8. It contains important facts about the Trust as
a whole and the Fund in particular.
The Fund is an “index fund”
that seeks investment results that correspond generally to the price and yield
performance, before fees and expenses, of its underlying index (the “Underlying
Index”). The Underlying Index is a group of securities that the sponsor of the
index (the “Index Provider”) selects as representative of global market
performance across all industries, including developed and emerging markets.
The Index Provider determines the relative weightings of the securities in the
index and publishes information regarding the market value of the index. Additional
information regarding the Index Provider is provided in the section entitled
More
Information about the Underlying Index and Index Provider
on page
19.
The Fund is designed to be
used as part of broader asset allocation strategies. Accordingly, an investment
in the Fund may not be appropriate as a complete investment program.
NTI, the investment adviser
to the Fund, is a subsidiary of The Northern Trust Company (“TNTC”), which is a
subsidiary of Northern Trust Corporation, a company that is regulated by the
Board of Governors of the Federal Reserve System as a financial holding company
under the U.S. Bank Holding Company Act of 1956, as amended. NTI and its
affiliates are not affiliated with the Index Provider. Unless otherwise
indicated, NTI, TNTC and Northern Trust Corporation are referred to
collectively in this Prospectus as “Northern Trust.”
The
Principal Investment Strategies of the
Fund
and the
Principal Risk Factors Applicable to the Fund
sections discuss the principal strategies and risks applicable to the Fund,
while the
Description
of the NETS™ Fund
section provides important information about the
Fund, including a brief description of the Fund’s Underlying Index and its fees
and expenses.
The Trust also offers other
investment portfolios in separate prospectuses, including the NETS™ S&P/ASX 200 Index Fund (Australia), NETS™ BEL
20® Index Fund (Belgium), NETS™ BOVESPA Index Fund
(Brazil), NETS™ FTSE All-World Canada Index Fund, NETS™ Hang Seng China
Enterprises Index Fund, NETS™ CAC40® Index Fund (France), NETS™ DAX® Index Fund (Germany),
NETS™ Hang Seng Index Fund (Hong
Kong), NETS™ ISEQ 20™ Index Fund (Ireland), NETS™ TA-25 Index Fund (Israel),
NETS™ S&P/MIB Index Fund
(Italy), NETS™ TOPIX® Index Fund (Japan), NETS™ Tokyo Stock Exchange REIT Index Fund, NETS™ FTSE Bursa Malaysia
100
Index Fund, NETS™ AEX-index® Fund (The Netherlands), NETS™ IPC® Index Fund (Mexico), NETS™ PSI 20®
Index Fund (Portugal), NETS™ RTS Index Fund (Russia),
NETS™ FTSE Singapore Straits Times
Index Fund, NETS™ OMXS30 Index Fund (Sweden) NETS™ SLI Index
Fund (Switzerland), NETS™ FTSE/JSE Top 40 Index Fund (South Africa), NETS™ TAIEX Index Fund (Taiwan), NETS™ FTSE SET
Large Cap Index Fund
(Thailand), and the NETS™ FTSE 100 Index Fund (United Kingdom).
I
nvestment Objective of the Fund
The Fund seeks investment
results that correspond generally to the price and yield performance, before
fees and expenses, of its Underlying Index. The Fund’s investment objective and
Underlying Index may be changed without shareholder approval. Shareholders will
be given 60 days’ prior notice of any such change.
The Board of Trustees of the
NETS Trust (the “Board”) reserves the right to substitute a replacement index
if: the Index Provider of the Underlying Index no longer calculates the index,
the Underlying Index license is terminated for any reason, the identity or the
character of the Underlying Index is materially changed, or for any other reason
determined by the Board in good faith. If the Board determines that it is
impracticable to substitute a replacement index, it will take whatever action
is deemed to be in the best interests of the Fund’s shareholders.
1
P
rincipal Investment Strategies of the Fund
NTI uses a “passive” or
indexing approach to try to achieve the Fund’s investment objective. Unlike
many investment companies, the Fund does not try to “beat” the index it tracks
and does not seek temporary defensive positions when markets decline or appear
overvalued.
The Fund will normally
invest at least 90% of its total assets in the securities of its Underlying
Index and in American Depositary Receipts (“ADRs”), Global Depositary Receipts
(“GDRs”) and Euro Depositary Receipts (“EDRs”) (collectively “Depositary
Receipts”) based on the securities in its Underlying Index.
The Fund may also invest up
to 10% of its assets (its “10% Asset Basket”) in certain futures, options and
swap contracts (which may be leveraged and are considered derivatives), cash
and cash equivalents, as well as in stocks not included in its Underlying
Index, but which NTI believes will help the Fund track its Underlying Index.
NTI uses a representative
sampling indexing strategy to manage the Fund.
R
epresentative Sampling
“Representative sampling” is
investing in a representative sample of securities in the Underlying Index,
which has a similar investment profile as the Underlying Index. Securities
selected have aggregate investment characteristics (based on market
capitalization and industry weightings), fundamental characteristics (such as
return variability, earnings valuation and yield) and liquidity measures
similar to those of the Underlying Index. The Fund may or may not hold all of
the securities that are included in the Underlying Index.
C
orrelation
Correlation is the extent to
which the values of different types of investments move in tandem with one
another in response to changing economic and market conditions. An index is a
theoretical financial calculation, while the Fund is an actual investment
portfolio. The performance of the Fund and its Underlying Index may vary somewhat
due to transaction costs, asset valuations, foreign currency valuations, market
impact, corporate actions (such as mergers and spin-offs), legal restrictions
(such as diversification requirements that apply to the Fund but not to the
Underlying Index) and timing variances.
NTI expects that, over time,
the correlation between the Fund’s performance and that of its Underlying
Index, before fees and expenses, will exceed 95%. A correlation percentage of
100% would indicate perfect correlation.
Tracking variance is
monitored by the Investment Adviser at least quarterly. In the event the
performance of the Fund is not comparable to the performance of its designated
index, the Board of Trustees will evaluate the reasons for the deviation and
the availability of corrective measures.
I
ndustry Concentration Policy
The Fund will not
concentrate its investments (i.e., hold 25% or more of its total assets in the
stocks of a particular industry or group of industries), except that, to the
extent practicable, the Fund will concentrate to approximately the same extent
that its Underlying Index concentrates in the stocks of such particular
industry or group of industries.
2
P
rincipal Risk Factors Applicable to the
Fund
The Fund is subject to the
principal risks described below. Some or all of these risks may adversely
affect the Fund’s NAV, trading price, yield, total return and/or its ability to
meet its objectives.
A
sian Market Risk
The global economy may be
affected by Asian economies. Most Asian economies are characterized by periods
of over-extension of credit, currency devaluations and restrictions, rising
unemployment, high inflation, decreased exports and economic recessions.
Currency devaluations in any one Asian country can have a significant effect on
the entire Asian region. Economic downturns and significant volatility have
characterized most Asian economies more recently. Increased political and
social unrest in any Asian country could cause further economic and market
uncertainty in the region. The risks related to Asian countries, as well as any
changes to the economies of Asian countries, may adversely affect the global
economy.
A
sset Class Risk
The returns from the types
of securities in which the Fund invests may underperform returns from the various
general securities markets or different asset classes. The stocks in the
Underlying Index may underperform fixed-income investments and stock market
investments that track other markets, segments and sectors. Different types of
securities tend to go through cycles of outperformance and underperformance in
comparison to the general securities markets.
C
entral and South American Markets Risk
The global economy may be
affected by the economies of Central and South American countries. The
economies of Central and South American countries have experienced considerable
difficulties in the past decade, including high inflation rates, high interest
rates and currency devaluations. As a result, Central and South American
securities markets have experienced great volatility. In addition, a number of
Central and South American countries are among the largest emerging country
debtors. There have been moratoria on, and reschedulings of, repayment with
respect to these debts. Such events can restrict the flexibility of these
debtor nations in the international markets and result in the imposition of
onerous conditions on their economies. The political history of certain Central
and South American countries has been characterized by political uncertainty,
intervention by the military in civilian and economic spheres and political
corruption. Such developments, if they were to recur, could reverse favorable
trends toward market and economic reform, privatization and removal of trade
barriers. Certain Central and South American countries have entered into
regional trade agreements that would, among other things, reduce barriers
between countries, increase competition among companies and reduce government
subsidies in certain industries. No assurance can be given that these changes
will result in the economic stability intended. There is a possibility that
these trade arrangements will not be implemented, will be implemented but not
completed or will be completed but then partially or completed unwound. Any of
the foregoing risk factors may have an adverse effect on the global economy.
C
ounterparty Risk
Counterparty Risk is the
risk that a counterparty to a swap contract or other similar investment
instrument may default on its payment obligation to the Fund. Such a default may
cause the value of an investment in the Fund to decrease.
C
urrency Risk
Currency risk is the
potential for price fluctuations in the dollar value of foreign securities
because of changing currency exchange rates. Because the Fund’s NAV is
determined on the basis of U.S. dollars,
3
you may lose money if the
local currency of a foreign market depreciates against the U.S. dollar, even if
the local currency value of the Fund’s holdings goes up.
D
erivatives Risk
Derivatives risk is the risk
that loss may result from the Fund’s investments in options, futures and swap
contracts, which may be leveraged and are types of derivatives. Investments in
leveraged instruments may result in losses exceeding the amounts invested. The
Fund may use these instruments to help the Fund track its Underlying Index.
Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices and thus
the Fund’s losses may be greater if it invests in derivatives than if it
invests only in conventional securities.
E
merging Market Risk
Emerging market risk is the
risk that the securities markets of emerging countries are less liquid, are
especially subject to greater price volatility, have smaller market capitalizations,
have less government regulation and are not subject to as extensive and
frequent accounting, financial and other reporting requirements as the
securities markets of more developed countries, as has historically been the
case.
The risks of foreign investment
are heightened when the issuer is located in an emerging country. Emerging
countries are generally located in the Asia and Pacific regions, the Middle
East, Eastern Europe, Latin, Central and South America and Africa. The Fund’s
purchase and sale of portfolio securities in certain emerging countries may be
constrained by limitations relating to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed based
on the aggregate trading volume by or holdings of the Fund, Northern Trust and
its clients and other service providers. The Fund may not be able to sell
securities in circumstances where price, trading or settlement volume
limitations have been reached.
Foreign investment in the
securities markets of certain emerging countries is restricted or controlled to
varying degrees which may limit investment in such countries or increase the
administrative costs of such investments. For example, certain Asian countries
require governmental approval prior to investments by foreign persons or limit
investment by foreign persons to only a specified percentage of an issuer’s
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the issuer available
for purchase by nationals. In addition, certain countries may restrict or
prohibit investment opportunities in issuers or industries deemed important to
national interests. Such restrictions may affect the market price, liquidity
and rights of securities that may be purchased by the Fund. The repatriation of
both investment income and capital from certain emerging countries is subject
to restrictions such as the need for governmental consents.
Many emerging countries have
recently experienced currency devaluations and substantial (and, in some cases,
extremely high) rates of inflation. Other emerging countries have experienced
economic recessions. These circumstances have had a negative effect on the
economies and securities markets of those emerging countries. Economies in
emerging countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, have been and may continue to be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade.
Many emerging countries are
subject to a substantial degree of economic, political and social instability.
Governments of some emerging countries are authoritarian in nature or have been
installed or removed as a result of military coups, while governments in other emerging
countries have periodically used force to suppress civil dissent. Disparities
of wealth, the pace and success of democratization, and ethnic, religious and
racial disaffection, among other factors, have also led to social unrest,
violence and/or labor unrest in some emerging countries. Unanticipated
political or social developments may result in sudden and significant
investment losses. Investing in emerging countries involves greater risk of
loss due to expropriation, nationalization, confiscation of assets and property
or the imposition of restrictions on
4
foreign investments and on
repatriation of capital invested. As an example, in the past some Eastern
European governments have expropriated substantial amounts of private property,
and many claims of the property owners have never been fully settled. There is
no assurance that similar expropriations will not recur in Eastern European or
other countries.
The Fund’s investment in
emerging countries may also be subject to withholding or other taxes, which may
be significant and may reduce the return from an investment in such countries
to the Fund.
Settlement and clearance
procedures in emerging countries are frequently less developed and reliable
than those in the United States and may involve the Fund’s delivery of
securities before receipt of payment for their sale. In addition, significant
delays may occur in certain markets in registering the transfer of securities.
Settlement, clearance or registration problems may make it more difficult for the
Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities, to have a portion of its assets uninvested
or to incur losses due to the failure of a counterparty to pay for securities
the Fund has delivered or the Fund’s inability to complete its contractual
obligations because of theft or other reasons. In addition, local agents and
depositories are subject to local standards of care that may not be as rigorous
as developed countries. Governments and other groups may also require local
agents to hold securities in depositories that are not subject to independent
verification. The less developed a country’s securities market, the greater the
risk to the Fund.
The creditworthiness of the
local securities firms used by the Fund in emerging countries may not be as
sound as the creditworthiness of firms used in more developed countries. As a
result, the Fund may be subject to a greater risk of loss if a securities firm
defaults in the performance of its responsibilities.
The small size and
inexperience of the securities markets in certain emerging countries and the
limited volume of trading in securities in those countries may make the Fund’s
investments in such countries less liquid and more volatile than investments in
countries with more developed securities markets (such as the United States,
Japan and most Western European countries). The Fund’s investments in emerging
countries are subject to the risk that the liquidity of a particular
investment, or investments generally, in such countries will shrink or
disappear suddenly and without warning as a result of adverse economic, market
or political conditions or adverse investor perceptions, whether or not
accurate. Because of the lack of sufficient market liquidity, the Fund may
incur losses because it will be required to effect sales at a disadvantageous
time and then only at a substantial drop in price. Investments in emerging
countries may be more difficult to price precisely because of the
characteristics discussed above and lower trading volumes.
The Fund’s use of foreign
currency management techniques in emerging countries may be limited. Due to the
limited market for these instruments in emerging countries, all or a
significant portion of the Fund’s currency exposure in emerging countries may
not be covered by such instruments.
F
oreign Security Risk
The Fund invests its assets in both the U.S. and
foreign equity markets. Foreign
markets are subject to special risks associated with foreign investment
including, but not limited to: generally less liquid and less efficient
securities markets; generally greater price volatility; exchange rate
fluctuations and exchange controls; imposition of restrictions on the
expatriation of funds or other assets; less publicly available information
about issuers; the imposition of taxes; higher transaction and custody costs;
settlement delays and risk of loss; difficulties in enforcing contracts; less
liquidity and smaller market capitalizations; lesser regulation of securities markets;
different accounting and disclosure standards; governmental interference;
higher inflation; social, economic and political uncertainties; the risk of
expropriation of assets; and the risk of war and/or terrorism. Shareholder
rights under the laws of some foreign countries may not be as favorable as U.S.
laws. Thus, a shareholder may have more difficulty in asserting its rights or
enforcing a judgment against a foreign company than a shareholder of a
comparable U.S. company.
5
I
nflation Risk
Inflation risk is the risk
that the value of assets or income from investments will be less in the future
as inflation decreases the value of money. As inflation increases, the value
of a Fund’s assets can decline as can the value of a Fund’s distributions.
Common stock prices may be particularly sensitive to rising interest rates,
as the cost of capital rises and borrowing costs increase.
I
ssuer Risk
Issuer risk is the risk that
any of the individual companies that the Fund invests in may perform badly,
causing the value of its securities to decline. Poor performance may be caused
by poor management decisions, competitive pressures, changes in technology,
disruptions in supply, labor problems or shortages, corporate restructurings,
fraudulent disclosures or other factors. Issuers may, in times of distress or
on their own discretion, decide to reduce or eliminate dividends which would
also cause their stock prices to decline.
M
anagement Risk
The Fund does not fully
replicate its Underlying Index and may hold securities not included in its
Underlying Index. Therefore, the Fund is subject to management risk. That is,
NTI’s investment strategy, the implementation of which is subject to a number
of constraints, may not produce the intended results.
The Fund is not actively
managed. The Fund may be affected by a general decline in the market segments
relating to its Underlying Index. The Fund invests in securities included in,
or representative of, its Underlying Index regardless of their investment
merit. NTI does not attempt to take defensive positions in declining markets.
M
arket Risk
Market risk is the risk that
the value of the securities in which the Fund invests may go up or down in
response to the prospects of individual issuers and/or general economic
conditions. Price changes may be temporary or last for extended periods. You
could lose money over short periods due to fluctuation in the Fund’s net asset
value (“NAV”) in response to market movements, and over longer periods during
market downturns.
M
arket Trading Risks
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Absence of Prior Active Market
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Although the shares of the
Fund described in this Prospectus are or will be listed for trading on the
Listing Exchanges and may be listed on certain foreign exchanges, there can
be no assurance that an active trading market for such shares will develop or
be maintained.
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Lack of Market Liquidity
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Secondary market trading
in Fund shares may be halted by a Listing Exchange because of market
conditions or for other reasons. In addition, trading in Fund shares is
subject to trading halts caused by extraordinary market volatility pursuant
to “circuit breaker” rules. There can be no assurance that the requirements
necessary to maintain the listing of the shares of the Fund will continue to
be met or will remain unchanged.
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Shares of the Fund May Trade at Prices Other Than NAV
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Shares of the Fund may
trade at, above or below their NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The
trading prices of the
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6
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Fund’s shares will
fluctuate in accordance with changes in its NAV as well as market supply and
demand. However, given that shares can be created and redeemed only in
Creation Units at NAV (unlike shares of many closed-end funds, which
frequently trade at appreciable discounts from, and sometimes at premiums to,
their NAVs), NTI believes that large discounts or premiums to the NAV of the
Fund’s shares should not be sustained. While the creation/redemption feature
is designed to make it likely that the Fund’s shares normally will trade
close to the Fund’s NAV, disruptions to creations and redemptions may result
in trading prices that differ significantly from NAV.
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Since foreign exchanges
may be open on days when the Fund does not price its shares, the value of the
securities in the Fund’s portfolio may change on days when shareholders will
not be able to purchase or sell the Fund’s shares.
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Secondary Market Trading Risk
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Shares of the Fund may
trade in the secondary market on days when the Fund does not accept orders to
purchase or redeem shares. On such days, shares may trade in the secondary
market with more significant premiums or discounts than might be experienced
on days when the Fund accepts purchase and redemption orders.
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N
on-Diversification Risk
The Fund is classified as
“non-diversified.” This means that the Fund may invest most of its assets in
securities issued by or representing a small number of companies. As a result,
the Fund may be more susceptible to the risks associated with these particular
companies, or to a single economic, political or regulatory occurrence
affecting these companies.
T
racking Risk
Tracking risk is the risk
that the Fund’s performance may vary substantially from the performance of the
Underlying Index it tracks as a result of imperfect correlation between the
Fund’s securities and those of the Underlying Index. Imperfect correlation may
result from share purchases and redemptions, expenses, changes in the
Underlying Indexes, asset valuations, foreign currency valuations, market
impact, corporate actions (such as mergers and spin-offs), legal restrictions
(such as tax-related diversification requirements that apply to the Fund but
not to the Underlying Index) and timing variances, among other factors.
P
ortfolio Holdings Information
A description of the Trust’s
policies and procedures with respect to the disclosure of the Fund’s portfolio
securities is available in the Fund’s Statement of Additional Information
(“SAI”). The top largest holdings of the Fund can be found at www.netsetfs.com.
Fund fact sheets provide information regarding the Fund’s top holdings and may
be requested by calling 1-866-928-NETS.
7
Description of the NETS™ Fund
NETS™ FTSE CNBC Global 300 Index Fund
CUSIP: 64118K696
Trading Symbol: MYG
Underlying Index: FTSE CNBC Global 300 Index
Investment
Objective
The NETS™
FTSE CNBC Global 300 Index Fund seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of publicly traded securities in the aggregate in the global market,
as represented by the FTSE CNBC Global 300 Index (the “Underlying Index”).
Principal Investment Strategy
The Underlying Index
consists of 300 securities derived from the FTSE Global Equity Index. The 300
securities are comprised of the largest 15 stocks by full market capitalization
from each of the 18 industry supersectors (from the FTSE All Cap Developed
Index), as well as the 30 largest stocks from the emerging markets (from FTSE
Emerging All Cap Index). The Underlying Index is designed to show broad market
performance world-wide across all industries, and in both developed and
emerging markets. As of September 5, the Underlying Index consisted of
companies in the following 32 countries: Argentina, Australia, Belgium,
Brazil, Canada, China, Czech Republic, Egypt, Finland, France, Germany, Greece,
Hong Kong, India, Ireland, Israel, Italy, Japan, Korea, Mexico, Netherlands,
Norway, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand,
Taiwan, United Kingdom and United States. As of September 5, 2008, approximately 50% of
the Underlying Index consisted of U.S.-based issuers. As of September 5, the
Underlying Index’s three largest stocks were Exxon Mobil Corporation, General
Electric and Microsoft Corporation and its three largest industries were
Integrated Oil and Gas, Banks and Pharmaceuticals. As of September 5, 2008, the
capitalization of companies in the Underlying Index ranged from $511.4 million to
$395.5 billion. The Fund uses a representative sampling strategy in seeking
to track the Underlying Index.
Performance
Information
The bar chart and
performance table have been omitted because the Fund has been in operation for
less than one calendar year.
Fees and Expenses
Most investors will buy and sell shares of
the Fund through brokers.
The following
table describes the fees and expenses that you will incur if you own shares of
the Fund. You will also incur usual and customary brokerage commissions when
buying or selling shares of the Fund.
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Shareholder Fees
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None
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(fees paid
directly from your investment, but see the Creation Transaction Fees and Redemption Transaction Fees section below)
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Annual Fund Operating Expenses
1
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(expenses that are deducted from the Fund’s
assets)
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Management
Fees
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0.43
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%
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Distribution
and Service (12b-1) Fees
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None
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Other
Expenses
2, 3
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None
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Total Annual Fund Operating Expenses
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0.43
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%
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8
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1.
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Expressed as a percentage of
average net assets.
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2.
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The Trust’s Investment
Advisory Agreement provides that NTI will pay all operating expenses of the
Fund, except for the fee payments under the Investment Advisory Agreement,
interest expenses, brokerage commissions and other trading expenses, fees and
expenses of the independent trustees, taxes and other extraordinary costs
such as litigation and other expenses not incurred in the ordinary course of
business.
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3.
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The Fund had not commenced
operations as of the date of this prospectus. Other Expenses are estimates
based on the expenses the Fund expects to incur for the fiscal year ending
October 31, 2008 and are expected to be less than 0.01%.
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Example
This example
is intended to help you compare the cost of owning shares of the Fund with the
cost of investing in other funds. This example does not take into account
brokerage commissions that you pay when purchasing or selling Shares of the
Fund.
The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund’s operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions, your costs would be:
Creation Transaction Fees
and Redemption Transaction Fees
The Fund
issues and redeems Shares at NAV only in large blocks of 100,000 Shares (each
block of 100,000 Shares called a “Creation Unit”) or multiples thereof. As a
practical matter, only broker-dealers or large institutional investors with
creation and redemption agreements known as Authorized Participants (“APs”) can
purchase or redeem these Creation Units. Purchasers of Creation Units at NAV
must pay a standard Creation Transaction Fee of $5,000 per transaction
(assuming 100,000 Shares in each Creation Unit). The fee is a single
charge and will be the same regardless of the number of Creation Units
purchased by an investor on the same day. The value of a Creation Unit
as of first creation was approximately $2,500,000. An AP who holds Creation
Units and wishes to redeem at NAV would also pay a standard Redemption Fee of
$5,000 per transaction (assuming 100,000 Shares in each Creation Unit), on the
date of such redemption, regardless of the number of Creation Units redeemed
that day. If a Creation Unit is purchased or redeemed for cash, a higher
Transaction Fee will be charged. See “Transaction Fees” later in this
Prospectus.
Investors who
hold Creation Units will also pay the Annual Fund Operating Expenses described
in the table above. Assuming an investment in a Creation Unit of $2,500,000 and
a 5% return each year, and assuming that the Fund’s gross operating expenses
remain the same, the total costs would be $15,996 if the Creation Unit is
redeemed after one year, and $39,517 if the Creation Unit is redeemed after
three years.
The
Transaction Fee is not an expense of the Fund and does not impact the Fund’s
expense ratio.
9
Management
Investment
Adviser
Northern Trust Investments,
N.A. (“NTI”), 50 South LaSalle Street, Chicago, IL 60603, is an investment
adviser registered under the Investment Advisers Act of 1940, as amended. It
primarily manages assets for defined contribution and benefit plans, investment
companies and other institutional investors. NTI is a subsidiary of The
Northern Trust Company (“TNTC”).
TNTC is an Illinois state
chartered banking organization and a member of the Federal Reserve System.
Formed in 1889, TNTC administers and manages assets for individuals, personal
trusts, defined contribution and benefit plans and other institutional and
corporate clients. TNTC is the principal subsidiary of Northern Trust
Corporation, a company that is regulated by the Board of Governors of the
Federal Reserve System as a financial holding company under the U.S. Bank
Holding Company Act of 1956, as amended.
Northern Trust Corporation,
through its subsidiaries, has for more than 100 years managed the assets of
individuals, charitable organizations, foundations and large corporate
investors. As of March 31, 2008, NTI and its affiliates had assets under
custody of $4.0 trillion and assets under investment management of $778.6
billion.
Under the Advisory Agreement
with the Fund, NTI, subject to the general supervision of the Fund’s Board of
Trustees, is responsible for making investment decisions for the Fund and for placing
purchase and sale orders for portfolio securities.
As compensation for its
advisory services and assumption of Fund expenses, NTI is entitled to a unitary
management fee, computed daily and payable monthly, at the annual rate set
forth in the table below (expressed as a percentage of the Fund’s average daily
net assets). Because the Fund has been in operation for less than one full
fiscal year, this percentage reflects the rate at which NTI is expected to be
paid.
From the unitary management
fee, NTI pays substantially all expenses of the Fund, including the cost of
transfer agency, custody, fund administration, legal, audit and other services,
except for the fee payments under the Investment Advisory Agreement, interest
expenses, brokerage commissions and other trading expenses, fees and expenses
of the independent trustees, taxes and other extraordinary costs such as
litigation and other expenses not incurred in the ordinary course of business.
The unitary management fee
rate payable by the Fund is set forth in the table below.
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|
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Fund
|
|
Unitary Management Fee (as a
percentage of the Fund’s average daily
net assets)
|
|
|
|
|
NETS™ FTSE CNBC Global 300 Index Fund
|
|
0.43%
|
A discussion regarding the
basis for the Trust’s Board of Trustees’ approval of the Investment Advisory
Agreement with NTI will be available in the Fund’s annual report for the period
ending October 31, 2008.
Portfolio
Managers
The Portfolio Managers
listed below are primarily responsible for the day-to-day management of the
Fund.
Chad
M. Rakvin
. Chad
Rakvin is a Senior Vice President and Director of Global Equity Index
Management for NTI. He is responsible for both domestic and international
equity index management. Prior to joining Northern Trust in 2004, Mr. Rakvin
was a principal with Barclays Global Investors since 1999, most recently as a
Principal of the Index Research Group. He has 12 years of investment management
experience, is a CFA charterholder and a member of the CFA Institute.
10
Shaun
Murphy
. Shaun Murphy,
Senior Vice President, leads NTI’s international index team in New York. His
team is responsible for the management and trading of global stock, bond and
currency overlay portfolios. Mr. Murphy has been a portfolio manager and trader
of global index funds since 1999. Prior to joining Northern Trust in 2004, Mr.
Murphy was previously a Portfolio Manager at State Street Global Advisors in
London. He is a CFA charterholder and a member of the CFA Institute.
Brent
Reeder
. Brent Reeder,
Senior Vice President, leads NTI’s domestic index team. Prior to joining
Northern Trust in 1993, Mr. Reeder was a portfolio manager and trader of
domestic index funds. Mr. Reeder has a broad range of expertise in both large
capitalization and small capitalization index mandates. Before his portfolio
management role, Mr. Reeder spent five years in trust operations as a team
leader of the foundations and endowments team.
The Fund’s SAI provides
additional information about the Portfolio Managers’ compensation, other
accounts managed by the Portfolio Managers, and the Portfolio Managers’
ownership of shares in the Fund.
Administrator,
Custodian and Transfer Agent
JP Morgan Investor Services
Co. (“J.P. Morgan”) is the administrator for the Fund. JP Morgan Chase Bank, NA
is the custodian and transfer agent for the Fund.
Distributor
Foreside Fund Services, LLC
distributes Creation Units for the Fund on an agency basis. The Distributor
does not maintain a secondary market in shares of the Fund. The Distributor has
no role in determining the policies of the Fund or the securities that are
purchased or sold by the Fund. The Distributor’s principal address is Three
Canal Plaza, Suite 100, Portland, ME 04101. The Distributor is not affiliated
with NTI or with JP Morgan Chase & Co. or its affiliates.
11
Shareholder Information
Additional shareholder
information, including how to buy and sell shares of the Fund, is available
free of charge by calling toll-free: 1-866-928-NETS or visiting our website
www.netsetfs.com.
Buying
and Selling Shares
Shares of the Fund trade on
a Listing Exchange and elsewhere during the trading day. Shares can be bought
and sold throughout the trading day like other shares of publicly traded
securities. There is no minimum investment for purchases made on a Listing
Exchange. When buying or selling shares through a broker, you will incur
customary brokerage commissions and charges. In addition, you will also incur
the cost of the “spread,” which is the difference between what professional
investors are willing to pay for Fund shares (the “bid” price) and the price at
which they are willing to sell Fund shares (the “ask” price). The commission is
frequently a fixed amount and may be a significant proportional cost for
investors seeking to buy or sell small amounts of shares. The spread with
respect to shares of the Fund varies over time based on the Fund’s trading
volume and market liquidity, and is generally lower if the Fund has a lot of
trading volume and market liquidity and higher if the Fund has little trading
volume and market liquidity. Because of the costs of buying and selling Fund
shares, frequent trading may reduce investment return.
Shares of the Fund may be
acquired or redeemed directly from the Fund only in Creation Units or multiples
thereof, as discussed in the Creations and Redemptions section on page 17. Once
created, shares of the Fund generally trade in the secondary market in amounts
less than a Creation Unit.
Shares of the Fund trade
under the trading symbols listed for the Fund in the
Description of the NETS™ Fund
section.
The Trust’s Board of
Trustees has adopted a policy whereby the Fund does not monitor for frequent
purchases and redemptions of Fund shares (“frequent trading”). The Board of
Trustees believes that a frequent trading monitoring policy is unnecessary for
the Fund because shares of the Fund are listed and traded on Listing Exchanges.
It is also unlikely that a shareholder could take advantage of a potential
arbitrage opportunity presented by a lag between a change in the value of the
Fund’s portfolio securities after the close of the primary markets for the
Fund’s portfolio securities and the reflection of that change in the Fund’s NAV
(“market timing”), because the Fund sells and redeems its shares directly
through transactions that are in-kind and/or for cash with a deadline for
placing cash-related transactions no later than the close of the primary
markets for the Fund’s portfolio securities.
The Fund is or will be
listed on at least one Listing Exchange, the NYSE Arca. The Listing Exchange is
open for trading Monday through Friday and is closed on weekends and the
following holidays, as observed: New Year’s Day, Martin Luther King, Jr. Day,
Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Fund’s primary Listing Exchange
(“Primary Listing Exchange”) is listed below:
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Fund
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Primary Listing Exchange
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NETS™ FTSE CNBC Global 300 Index Fund
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NYSE Arca
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Section 12(d)(1) of the
Investment Company Act of 1940 restricts investments by registered investment
companies in the securities of other investment companies, including shares of
the Fund. Registered investment companies are permitted to invest in the Fund
beyond the limits set forth in section 12(d)(1), subject to certain terms and
conditions set forth in an SEC exemptive order issued to the Trust, including
that such investment companies enter into an agreement with the Trust.
12
Book
Entry
Shares of the Fund are held
in book-entry form, which means that no stock certificates are issued. The
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding shares of the Fund and is recognized as the owner of all shares for
all purposes.
Investors owning shares of
the Fund are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all shares of the
Fund. Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of stock certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any rights as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book entry or “street name” form.
Share Prices
The trading prices of shares
in the secondary market may differ in varying degrees from their daily NAVs and
can be affected by market forces such as supply and demand, economic conditions
and other factors.
The approximate value of
shares of the Fund, known as the “indicative optimized portfolio value”
(“IOPV”), will be disseminated every fifteen seconds throughout the trading day
by the Listing Exchange on which the Fund is listed or by other information
providers or market data vendors. The IOPV is based on the current market value
of the securities and cash required to be deposited in exchange for a Creation
Unit. The IOPV does not necessarily reflect the precise composition of the
current portfolio of securities held by the Fund at a particular point in time
nor the best possible valuation of the current portfolio. The IOPV should not
be viewed as a “real-time” update of the NAV, because the IOPV may not be
calculated in the same manner as the NAV, which is computed once a day as
discussed below. The IOPV is generally determined by using current market
quotations and/or price quotations obtained from broker-dealers that may trade
in the portfolio securities held by the Fund. The quotations of certain Fund
holdings may not be updated during U.S. trading hours if such holdings do not
trade in the U.S. The Fund is not involved in, or responsible for, the
calculation or dissemination of the IOPV and makes no warranty as to its
accuracy.
Shares of the Fund may trade
in the secondary market on days when the Fund does not accept orders to
purchase or redeem shares. On such days, shares may trade in the secondary
market with more significant premiums or discounts than might otherwise be
experienced on days when the Fund accepts purchase and redemption orders.
Determination
of Net Asset Value
The Fund calculates its NAV
generally once daily Monday through Friday generally as of the regularly
scheduled close of business of the New York Stock Exchange (“NYSE”) (normally
4:00 p.m. Eastern time) on each day that the NYSE, the Fund’s Primary Listing
Exchange and the Fund custodian are open for business, based on prices at the
time of closing, provided that any assets or liabilities denominated in
currencies other than the U.S. dollar shall be translated into U.S. dollars at
the prevailing market rates on the date of valuation as quoted by one or more
major banks or dealers that make a two-way market in such currencies (or a data
service provider based on quotations received from such banks or dealers). The
NAV of the Fund is calculated by dividing the value of the net assets of the
Fund (i.e., the value of its total assets less total liabilities) by the total
number of outstanding shares of the Fund, generally rounded to the nearest
cent.
In calculating the Fund’s NAV,
the Fund’s investments are generally valued using market valuations. A market
valuation generally means a valuation (i) obtained from an exchange, a pricing
service, or a major market maker (or dealer), (ii) based on a price quotation
or other equivalent indication of value supplied by an exchange, a pricing
service, or a major market maker (or dealer), or (iii) based on amortized cost.
In the case of shares of the Fund that are not traded on an exchange, a market
valuation means the Fund’s published NAV per share. The Fund may use various
pricing services or discontinue the use of any pricing
13
service. A price
obtained from a pricing service based on such
pricing service’s valuation matrix may be considered a market valuation.
In the event that current
market valuations are not readily available or such valuations do not reflect
current market values, the affected investments will be valued using fair value
pricing pursuant to the pricing policy and procedures approved by the Fund’s
Board of Trustees. The frequency with which the Fund’s investments are valued
using fair value pricing is primarily a function of the types of securities and
other assets in which the Fund invests pursuant to its investment objective,
strategies and limitations.
Investments that may be
valued using fair value pricing include, but are not limited to: (i) an
unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the “Securities Act”)); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the time
as of which the Fund’s NAV is computed and that may materially affect the value
of the Fund’s investments). Examples of events that may be “significant events”
are government actions, natural disasters, armed conflict, acts of terrorism,
and significant market fluctuations.
Valuing the Fund’s
investments using fair value pricing will result in using prices for those
investments that may differ from current market valuations. Use of fair value
prices and certain current market valuations could result in a difference
between the prices used to calculate the Fund’s net asset value and the prices
used by the Fund’s Underlying Index, which, in turn, could result in a
difference between the Fund’s performance and the performance of the Fund’s
Underlying Index.
Because foreign markets may
be open on different days than the days during which a shareholder may purchase
the Fund’s shares, the value of the Fund’s investments may change on days when
shareholders are not able to purchase the Fund’s shares. Additionally, due to
varying holiday schedules redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days. A list of the holiday
schedules of the foreign exchanges of the Fund’s Underlying Index as well as
the dates on which a settlement period would exceed seven calendar days in 2008
is contained in the SAI.
The value of assets
denominated in foreign currencies is converted into U.S. dollars using exchange
rates deemed appropriate by NTI as investment adviser. Any use of a different
rate from the rates used by each Index Provider may adversely affect the Fund’s
ability to track its Underlying Index.
Dividends
and Distributions
Dividends from net
investment income, including any net foreign currency gains, generally are declared
and paid at least annually and any net realized securities gains are
distributed at least annually. In order to improve tracking error or comply
with the distribution requirements of the Internal Revenue Code of 1986,
dividends may be declared and paid more frequently than annually for the Fund.
Dividends and other
distributions on shares are distributed on a pro rata basis to beneficial
owners of such shares. Dividend payments are made through DTC participants to
beneficial owners then of record with proceeds received from the Fund.
Dividends and securities gains distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional shares of the Fund.
No dividend reinvestment
service is provided by the Trust. Broker-dealers may make available the DTC
book-entry Dividend Reinvestment Service for use by beneficial owners of the
Fund for reinvestment of their dividend distributions. Beneficial owners should
contact their broker to determine the availability and costs of the service and
the details of participation therein. Brokers may require beneficial owners to
adhere to specific procedures and timetables. If this service is available and
used, dividend distributions of both income and realized gains will be
automatically reinvested in additional whole shares of the Fund purchased in
the secondary market.
14
Taxes
The following is a summary
of certain tax considerations that may be relevant to an investor in the Fund.
Except where otherwise indicated, the discussion relates to investors who are
individual United States citizens or residents and is based on current tax law.
You should consult your tax advisor for further information regarding federal,
state, local and/or foreign tax consequences relevant to your specific situation.
Distributions.
The Fund intends to qualify as a regulated
investment company for federal tax purposes, and to distribute to shareholders
substantially all of its net investment income and net capital gain each year.
Except as otherwise noted below, you will generally be subject to federal
income tax on the Fund’s distributions to you, regardless of whether they are
paid in cash or reinvested in Fund shares. For federal income tax purposes,
Fund distributions attributable to short-term capital gains and net investment
income are taxable to you as ordinary income. Distributions attributable to net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) of the Fund generally are taxable to you as long-term capital gains.
This is true no matter how long you own your Fund shares. The maximum long-term
capital gain rate applicable to individuals, estates and trusts is currently
15%. You will be notified annually of the tax status of distributions to you.
Distributions of “qualifying
dividends” will also generally be taxable to you at long-term capital gain
rates, as long as certain requirements are met. In general, if 95% or more of
the gross income of the Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions paid by the Fund
to individual shareholders will be treated as qualifying dividends. But if less
than 95% of the gross income of the Fund (other than net capital gain) consists
of qualifying dividends, then distributions paid by the Fund to individual
shareholders will be qualifying dividends only to the extent they are derived
from qualifying dividends earned by the Fund. For the lower rates to apply, you
must have owned your Fund shares for at least 61 days during the 121-day period
beginning on the date that is 60 days before the Fund’s ex-dividend date (and
the Fund will need to have met a similar holding period requirement with
respect to the shares of the corporation paying the qualifying dividend). The
amount of the Fund’s distributions that qualify for this favorable treatment
may be reduced as a result of the Fund’s securities lending activities (if
any), a high portfolio turnover rate or investments in debt securities or
“non-qualified” foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making
the distribution. Accordingly, distributions from many of the Fund’s holdings
may not be qualifying dividends.
A portion of distributions
paid by the Fund to shareholders who are corporations may also qualify for the
dividends-received deduction for corporations, subject to certain holding
period requirements and debt financing limitations. The amount of the dividends
qualifying for this deduction may, however, be reduced as a result of the
Fund’s securities lending activities, by a high portfolio turnover rate or by
investments in debt securities or foreign corporations.
Distributions from the Fund
will generally be taxable to you in the year in which they are paid, with one
exception. Dividends and distributions declared by the Fund in October, November
or December and paid in January of the following year are taxed as though they
were paid on December 31.
You should note that if you
buy shares of the Fund shortly before it makes a distribution, the distribution
will be fully taxable to you even though, as an economic matter, it simply
represents a return of a portion of your investment. This adverse tax result is
known as “buying into a dividend.”
Foreign Taxes.
The Fund may be subject to foreign
withholding taxes with respect to dividends or interest received from sources
in foreign countries. If at the close of the taxable year more than 50% in
value of the Fund’s assets consists of stock in foreign corporations, the Fund
will be eligible to make an election to treat a proportionate amount of those taxes
as constituting a distribution to each shareholder, which would allow you
either (1) to credit that proportionate amount of taxes against U.S. federal
income tax liability as a
15
foreign tax credit or (2) to
take that amount as an itemized deduction. If the Fund is not eligible or
chooses not to make this election it will be entitled to deduct such taxes in
computing the amounts it is required to distribute.
Sales and Exchanges.
The sale of Fund shares is a taxable event on
which a gain or loss may be recognized. For federal income tax purposes, an
exchange of shares of one Fund for shares of another Fund is considered the
same as a sale. The amount of gain or loss is based on the difference between
your tax basis in Fund shares and the amount you receive for them upon
disposition. Generally, you will recognize long-term capital gain or loss if
you have held your Fund shares for over twelve months at the time you sell or
exchange them. Gains and losses on shares held for twelve months or less will generally
constitute short-term capital gains, except that a loss on shares held six
months or less will be recharacterized as a long-term capital loss to the
extent of any capital gains distributions that you have received on the shares.
A loss realized on a sale or exchange of Fund shares may be disallowed under
the so-called “wash sale” rules to the extent the shares disposed of are
replaced with other shares of that same Fund within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of,
such as pursuant to a dividend reinvestment in shares of the Fund. If
disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired.
IRAs and Other Tax-Qualified Plans.
The one major exception to the preceding tax
principles is that distributions on, and sales, exchanges and redemptions of,
shares held in an IRA or other tax-qualified plan will not be currently taxable
unless the shares were purchased with borrowed funds.
Backup Withholding.
The Fund will be required in certain cases to
withhold and remit to the U.S. Treasury 28% of the dividends and gross sales
proceeds paid to any shareholder (i) who had provided either an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the Internal Revenue Service for failure to report the receipt
of taxable interest or dividend income properly, or (iii) who has failed to
certify to the Trust, when required to do so, that he or she is not subject to
backup withholding or that he or she is an “exempt recipient.”
U.S. Tax Treatment of Foreign
Shareholders.
Nonresident
aliens, foreign corporations and other foreign investors in the Fund will
generally be exempt from U.S. federal income tax on Fund distributions attributable
to net capital gains and, in the case of distributions attributable to the
Fund’s taxable year ending on October 31, 2008, net short-term capital gains,
of the Fund. The exemption may not apply, however, if the investment in the
Fund is connected to a trade or business of the foreign investor in the United
States or if the foreign investor is present in the United States for 183 days
or more in a year and certain other conditions are met.
Fund distributions
attributable to other categories of Fund income, such as dividends from
portfolio companies, will generally be subject to a 30% withholding tax when
paid to foreign shareholders. The withholding tax may, however, be reduced
(and, in some cases, eliminated) under an applicable tax treaty between the
United States and a shareholder’s country of residence or incorporation,
provided that the shareholder furnishes the Fund with a properly completed Form
W-8BEN to establish entitlement for these treaty benefits. Also, for the Fund’s
taxable year ending on October 31, 2008, Portfolio distributions attributable
to U.S.-source interest income of the Fund will be exempt from U.S. federal
income tax for foreign investors, but they may need to file a federal income
tax return to obtain a refund of any withholding taxes.
For the Fund’s taxable years
beginning after October 31, 2008, the exemption of foreign investors from U.S.
federal income tax on Fund distributions attributable to U.S.-source interest
income and short-term capital gains will be unavailable, but distributions
attributable to long-term capital gains will continue to be exempt.
A foreign investor will
generally not be subject to U.S. tax on gains realized on sales or exchanges of
Fund shares unless the investment in the Fund is connected to a trade or
business of the investor in the United States or if the investor is present in
the United States for 183 days or more in a year and certain other conditions
are met.
16
All foreign investors should
consult their own tax advisors regarding the tax consequences in their country
of residence of an investment in the Fund.
State and Local Taxes.
You may also be subject to state and local
taxes on income and gain attributable to your ownership of Fund shares. State
income taxes may not apply, however, to the portions of the Fund’s
distributions, if any, that are attributable to interest earned by the Fund on
U.S. government securities. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
Sunset of Tax Provisions.
Some of the tax provisions described above
are subject to sunset provisions. Specifically, a sunset provision provides
that the 15% long-term capital gain rate will increase to 20% and the taxation
of dividends at the long-term capital gain rate will change for taxable years
beginning after December 31, 2010.
Consult Your Tax Professional.
Your investment in the Fund could have
additional tax consequences. You should consult your tax professional for
information regarding all tax consequences applicable to your investments in
the Fund. More tax information relating to the Fund is also provided in the
Statement of Additional Information. This short summary is not intended as a
substitute for careful tax planning.
Creations
and Redemptions
The shares that trade in the
secondary market are “created” at NAV by market makers, large investors and
institutions only in block-size Creation Units. The number of shares per
Creation Unit for the Fund is listed below:
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Fund
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Number of Shares per Creation Unit
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NETS™ FTSE CNBC Global 300 Index Fund
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100,000
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Each “creator” enters into
an authorized participant agreement with Foreside Fund Services, LLC, the
Fund’s Distributor, which is subject to acceptance by the transfer agent, and
then deposits into the Fund a portfolio of securities closely approximating the
holdings of the Fund and, if necessary, a specified amount of cash, in exchange
for a specified number of Creation Units. Similarly, shares can be redeemed
only in a specified number of Creation Units, principally in-kind for a
portfolio of securities held by the Fund and, if necessary, a specified amount
of cash. Except when aggregated in Creation Units, shares are not redeemable.
The prices at which creations and redemptions occur are based on the next
calculation of NAV after an order is received in a form described in the
authorized participant agreement.
The Trust may in its
discretion make available purchases and redemptions of Creation Units of the
Fund’s shares in U.S. dollars rather than on an in-kind basis.
The Fund intends to comply
with the federal securities laws in accepting securities for deposits and
satisfying redemptions with redemption securities, including requiring that the
securities accepted for deposits and the securities delivered to satisfy
redemption requests are securities that may be sold in transactions that would
be exempt from registration under the Securities Act. Further, an Authorized
Participant that is not a “qualified institutional buyer,” as such term is
defined under Rule 144A of the Securities Act, will not be able to receive Fund
securities that are restricted securities eligible for resale under Rule 144A.
Creations and redemptions must
be made through a firm that is either a member of the Continuous Net Settlement
System of the National Securities Clearing Corporation or a DTC participant,
and in each case, must have executed an authorized participant agreement with
the Distributor with respect to creations and redemptions of Creation Units. Information
about the procedures regarding creation and redemption of Creation Units
(including the cut-off times for receipt of creation and redemption orders) is
included in the SAI.
17
Because new
shares may be created and issued on an ongoing basis, at any point during the
life of the Fund a “distribution,” as such term is used in the Securities Act,
may be occurring. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner that could render them
statutory underwriters and subject to the prospectus delivery and liability
provisions of the Securities Act. Nonetheless, any determination of whether one
is an underwriter must take into account all the relevant facts and
circumstances of each particular case.
Broker-dealers
should also note that dealers who are not “underwriters,” but are participating
in a distribution (as contrasted to ordinary secondary transactions), and thus
dealing with shares that are part of an “unsold allotment” within the meaning
of section 4(3)(C) of the Securities Act, would be unable to take advantage of
the prospectus delivery exemption provided by section 4(3) of the Securities
Act. For delivery of prospectuses to exchange members, the prospectus delivery
mechanism of Rule 153 under the Securities Act is available only with respect
to transactions on a national securities exchange.
Transaction Fees
The Fund will
impose a purchase transaction fee and a redemption transaction fee to offset
transfer and other transaction costs associated with the issuance and
redemption of Creation Units. Purchasers and redeemers of Creation Units for cash
are required to pay a higher fee to compensate for brokerage and market impact
expenses and other associated costs. The standard creation and redemption
transaction fees for creations and redemptions in kind for the Fund are
discussed below. The standard creation transaction fee is charged to each
purchaser on the day such purchaser creates a Creation Unit. The fee is a
single charge and will be the amount indicated below regardless of the number
of Creation Units purchased by an investor on the same day. Similarly, the
redemption transaction fee will be the amount indicated regardless of the
number of Creation Units redeemed that day. NTI may, from time to time, at its
own expense, compensate purchasers of Creation Units who have purchased
substantial amounts of Creation Units and other financial institutions for
administrative or marketing services.
The standard
creation and redemption transaction fees for creations and redemptions through
DTC for cash (when cash creations and redemptions are available or specified)
will also be subject to an additional fee up to the maximum amount shown below
under “Maximum Additional Variable Charge for Cash Purchases/Maximum Additional
Variable Charge for Cash Redemptions.” In addition, purchasers of shares in Creation
Units are responsible for payment of the costs of transferring the securities
to the Fund. Redeemers of shares in Creation Units are responsible for the
costs of transferring the securities from the Fund
.
Investors who use the services
of a broker or other such intermediary may pay fees for such services. The
following table also shows, as of September 5, 2008, the approximate value of
one Creation Unit for the Fund, including the standard creation and redemption
transaction fee and the number of shares per Creation Unit.
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NETS™ Fund
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Approximate
Value of
Creation Unit
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Fee for
In-kind and
Cash
Purchases
and
Redemptions
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Maximum
Additional
Variable
Charge
for Cash
Purchases*
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Maximum
Additional
Variable
Charge
for Cash
Redemptions*
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Number of
Shares
Per
Creation
Unit
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NETS™ FTSE CNBC
Global 300 Index Fund
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$
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2,500,000
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$
|
5,000
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0.60
|
%
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0.60
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%
|
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100,000
|
|
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*
|
As a percentage of amount
invested.
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Householding
Householding
is an option available to certain investors. Householding is a method of
delivery, based on the preference of the individual investor, in which a single
copy of certain shareholder documents can be delivered to investors who share
the same address, even if their accounts are registered under different names.
Householding is available through certain broker-dealers. If you are interested
in enrolling in householding and receiving a single copy of prospectuses and
other shareholder documents, please contact your broker-dealer. If you are
currently enrolled in householding and wish to change your householding status,
please contact your broker-dealer.
18
Financial Highlights
There are no
financial highlights for the Fund because it commenced operations on or after
the date of this Prospectus.
More Information about the Underlying
Index and Index Provider
FTSE CNBC
Global 300 Index is a service mark of FTSE and has been licensed for use for
certain purposes by NTI. FTSE is a trademark of
the London Stock Exchange Plc and the Financial Times Limited and is used by FTSE International Limited
under license. FTSE does not sponsor, endorse or promote the Fund and is not in
any way connected to it and does not accept any liability in relation to its
issue, operation and trading.
FTSE is
referred to as the “Index Provider.”
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FTSE
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FTSE Group
(FTSE) is a world-leader in the creation and management of over 100,000
equity, bond and hedge fund indices. With offices in Beijing, London,
Frankfurt, Hong Kong, Boston, Shanghai, Madrid, Paris, New York, San Francisco,
Sydney and Tokyo, FTSE Group services clients in 77 countries worldwide. FTSE
is an independent company owned by The Financial Times and the London Stock
Exchange. FTSE does not give financial advice to clients, which allows for
the provision of truly objective market information. FTSE indices are used
extensively by investors world-wide such as consultants, asset owners, asset
managers, investment banks, stock exchanges and brokers.
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Disclaimers
The NETS™ Fund
is not sponsored, endorsed, sold or promoted by the Index Provider. Neither the
Index Provider, any of its affiliates nor any other party involved in making or
compiling the Underlying Index makes any representation or warranty, express or
implied, to the owners of the NETS™ Fund or any member of the public regarding
the advisability of investing in securities generally or in the NETS™ Fund
particularly or the ability of the Underlying Index to track general stock
market performance. The Index Provider is the licensor of certain trademarks,
service marks and trade names of the Index Provider and of the Underlying
Index, which are determined, composed and calculated by the Index Provider
without regard to TNTC, NTI or the NETS™ Fund. The Index Provider has no
obligation to take the needs of TNTC, NTI or the owners of the NETS™ Fund into
consideration in determining, composing or calculating the Underlying Index.
The Index Provider is not responsible for and has not participated in the
determination of the prices and amount of shares of the NETS™ Fund or the
timing of the issuance or sale of such shares or in the determination or the
calculation of the equation by which shares of the NETS™ Fund are to be
converted into cash. Neither the Index Provider, any of its affiliates nor any
other party involved in making or compiling the Underlying Index has any
obligation or liability to owners of the NETS™ Fund in connection with the
administration of the NETS™ Fund, or the marketing or trading of shares of the
NETS™ Fund.
Although the
Index Provider obtains information for inclusion in or for use in the
calculation of the Underlying Index from sources which the Index Provider
consider reliable, neither the Index Provider, any of its affiliates nor any other
party involved in making or compiling the Underlying Index guarantees the
accuracy and/or the completeness of the Underlying Index or any data included
therein. Neither the Index Provider, any of its affiliates nor any other party
involved in making or compiling the Underlying Index makes any warranty,
express or implied, as to results to be obtained by NTI, the owners of the NETS™
Fund, or any other person or entity from the use of the Underlying Index or any
data included therein in connection with the rights licensed hereunder or for
any other use. Neither the Index Provider, any of its affiliates nor any other
party involved in making or compiling the Underlying Index shall have any
liability
19
for any
errors, omissions or interruptions of or in connection with the Underlying
Index or any data included therein. Neither the Index Provider, any of its
affiliates nor any other party involved in making or compiling the Underlying
Index makes any express or implied warranties, and the Index Provider hereby
expressly disclaims all warranties of merchantability or fitness for a
particular purpose with respect to the Underlying Index or any data included
therein. Without limiting any of the foregoing, in no event shall the Index
Provider, any of its affiliates or any other party involved in making or
compiling the Underlying Index have any liability for any direct, indirect, special,
punitive, consequential or any other damages (including lost profits) even if
notified of the possibility of such damages. For the avoidance of doubt, this
disclaimer does not create any contractual or quasi-contractual relationship
between any owner of the NETS™ Fund or any other person dealing with the NETS™
Fund and the Index Provider, any of its affiliates or any other party involved
in making or compiling the Underlying Index, and must not be construed to have
created such relationship.
For purposes
of the disclaimers below, the NYSE Arca is a Listing Exchange.
Shares of the
Trust are not sponsored, endorsed or promoted by the Listing Exchanges. The
Listing Exchanges make no representation or warranty, express or implied, to
the owners of the shares of the NETS™ Fund or any member of the public
regarding the ability of the NETS™ Fund to track the total return performance
of the Underlying Index or the ability of the Underlying Index identified
herein to track stock market performance. The Listing Exchanges are not
responsible for, nor have they participated in, the determination of the
compilation or the calculation of the Underlying Index, nor in the
determination of the timing of, prices of, or quantities of the shares of the
NETS™ Fund to be issued, nor in the determination or calculation of the
equation by which the shares are redeemable. The Listing Exchanges have no
obligation or liability to owners of the shares of the NETS™ Fund in connection
with the administration, marketing or trading of the shares of the Fund.
The Listing
Exchanges do not guarantee the accuracy and/or the completeness of any
Underlying Index or any data included therein. The Listing Exchanges make no
warranty, express or implied, as to results to be obtained by the Trust on
behalf of its NETS™ Fund as licensee, licensee’s customers and counterparties,
owners of the shares of the Trust, or any other person or entity from the use
of any Underlying Index or any data included therein in connection with the
rights licensed as described herein or for any other use. The Listing Exchanges
make no express or implied warranties, and hereby expressly disclaim all
warranties of merchantability or fitness for a particular purpose with respect
to any Underlying Index or any data included therein. Without limiting any of
the foregoing, in no event shall the Listing Exchanges have any liability for
any direct, indirect, special, punitive, consequential or any other damages
(including lost profits) even if notified of the possibility of such damages.
NTI does not
guarantee the accuracy and/or the completeness of the Underlying Index or any
data included therein or the descriptions of the Index Provider, and NTI shall
have no liability for any errors, omissions, or interruptions therein.
NTI makes no
warranty, express or implied, as to results to be obtained by the NETS™ Fund,
to the owners of the shares of the NETS™ Fund, or to any other person or
entity, from the use of the Underlying Index or any data included therein. NTI
makes no express or implied warranties, and expressly disclaims all warranties
of merchantability or fitness for a particular purpose or use with respect to
the Underlying Index or any data included therein. Without limiting any of the
foregoing, in no event shall NTI have any liability for any special, punitive, direct,
indirect, or consequential damages (including lost profits), even if notified
of the possibility of such damages.
NETS™ is a
trademark of NTI.
20
Supplemental
Information
I. Premium/Discount Information
Tables
presenting information about the differences between the daily market price on
secondary markets for shares of the Fund and the Fund’s net asset value have been
omitted because the Fund has been in operation for less than a year.
II. Total Return Information
Tables
presenting information about the total return of the Fund’s Underlying Index
and the total return of the Fund have been omitted because the Fund has been in
operation for less than a year.
21
FOR MORE
INFORMATION
ANNUAL/SEMIANNUAL
REPORTS
Additional
information about the NETS™ Fund’s investments will be available in the Fund’s
annual and semiannual reports to shareholders when they are prepared. In the
Fund’s annual reports, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund’s performance during
its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
Additional
information about the Fund and its policies is available in the Fund’s
Statement of Additional Information. The Statement of Additional Information is
incorporated by reference into this Prospectus (and is legally considered part
of this Prospectus).
The Fund’s
annual and semiannual reports and the Statement of Additional Information are
available free upon request by calling the NETS™ Funds Center at 866-928-NETS.
To obtain other information and for
shareholder inquiries:
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BY TELEPHONE
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Call
866-928-NETS
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BY MAIL
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NETS Trust
P.O. Box 75986
Chicago, IL 60675-5986
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ON THE INTERNET
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The Fund’s
documents are available online and may be downloaded from:
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•
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The SEC’s
Web site at sec.gov (text-only).
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•
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NETS™ Fund’s Web site at www.netsetfs.com.
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You may review
and obtain copies of NETS™ Fund’s documents by visiting the SEC’s Public
Reference Room in Washington, D.C. You also may obtain copies of NETS™ Fund’s
documents by sending your request and a duplicating fee to the SEC’s Public
Reference Section, Washington, D.C. 20549-0102 or by electronic request to:
publicinfo@sec.gov. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at 202/551-8090.
DISTRIBUTOR
Foreside Fund Services, LLC
http://www.foresides.com
Investment Company Act File No.: 811-22140
NETS™ Funds
Statement of
Additional Information
Dated October 14,
2008
This
Statement of Additional Information (“Additional Statement”) is not a
prospectus. It should be read in conjunction with the current Prospectuses (the
“Prospectuses”) for the following funds of NETS Trust (the “Trust”) as such
Prospectuses may be revised or supplemented from time to time:
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NETS™ BOVESPA Index Fund
(Brazil)
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NETS™ FTSE All-World Canada
Index Fund
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NETS™ IPC
®
Index Fund (Mexico)
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NETS™ OMXS30 Index Fund
(Sweden)
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NETS™ SLI Index Fund
(Switzerland)
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NETS™ FTSE CNBC Global 300
Index Fund
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The
Prospectuses for the various funds of the Trust included in this Additional
Statement are dated October 14, 2008. Capitalized terms used herein that are
not defined have the same meaning as in the Prospectuses, unless otherwise
noted. A copy of the Prospectuses may be obtained without charge by writing to
NETS Investor Services, at 801 S. Canal Street, Dept. C-5S, Chicago, IL 60607,
calling 1-866-928-NETS or visiting www.netsetfs.com. NETS™ is a trademark of
Northern Trust Investments, N.A. (“NTI”).
i
ii
G
ENERAL DESCRIPTION OF THE TRUST AND ITS FUNDS
The
Trust currently consists of 26 investment portfolios. The Trust was formed as a
Maryland Business Trust on October 29
,
2007 and is authorized to have multiple
series or portfolios. The Trust is a management investment company, registered
under the Investment Company Act of 1940, as amended (the “1940 Act”). The
offering of the Trust’s shares is registered under the Securities Act of 1933,
as amended (the “Securities Act”). This Additional Statement relates to the
following non-diversified funds (each, a “Fund” and collectively, the “Funds”):
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NETS™ BOVESPA Index Fund
(Brazil)
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NETS™ FTSE All-World Canada
Index Fund
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NETS™ IPC
®
Index Fund (Mexico)
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NETS™ OMXS30 Index Fund
(Sweden)
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NETS™ SLI Index Fund
(Switzerland)
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NETS™ FTSE CNBC Global 300
Index Fund
|
The
investment objective of each Fund is to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of a specified benchmark index (each an “Underlying Index”). Each
Fund is managed by NTI, a subsidiary of The Northern Trust Company (“TNTC”).
The
Funds offer and issue shares at their net asset value per share (“NAV”) only in
aggregations of a specified number of shares (each, a “Creation Unit” or a
“Creation Unit Aggregation”), generally in exchange for a basket of equity
securities included in its Underlying Index (the “Deposit Securities”),
together with the deposit of a specified cash payment (the “Cash Component”).
The shares of the Funds are, or will be, listed and expected to be traded on
national securities exchanges (each, a “Listing Exchange”) as follows:
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FUND
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EXCHANGE
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NETS™ BOVESPA Index Fund
(Brazil)
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NYSE Arca
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NETS™ FTSE All-World Canada
Index Fund
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Nasdaq
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NETS™ IPC
®
Index Fund (Mexico)
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Nasdaq
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NETS™ OMXS30 Index Fund
(Sweden)
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Nasdaq
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NETS™ SLI Index Fund
(Switzerland)
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Nasdaq
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NETS™ FTSE CNBC Global 300
Index Fund
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NYSE Arca
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Shares
trade in the secondary market and elsewhere at market prices that may be at,
above or below NAV. Shares are redeemable only in Creation Unit Aggregations
and, generally, in exchange for portfolio securities and a Cash Component.
Creation Units typically are a specified number of shares. The number of shares
per Creation Unit of each Fund are as follows:
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FUND
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NUMBER OF SHARES
PER CREATION UNIT
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NETS™ BOVESPA Index Fund
(Brazil)
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100,000
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NETS™ FTSE All-World Canada
Index Fund
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100,000
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NETS™ IPC
®
Index Fund (Mexico)
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100,000
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NETS™ OMXS30 Index Fund
(Sweden)
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100,000
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NETS™ SLI Index Fund
(Switzerland)
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100,000
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NETS™ FTSE CNBC Global 300
Index Fund
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100,000
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The
Trust reserves the right to offer a “cash” option for creations and redemptions
of shares. Currently, the NETS™
BOVESPA Index Fund (Brazil) requires purchases and redemptions of the Fund’s
shares in U.S. dollars rather than on an in-kind basis. Shares may be
issued in advance of receipt of Deposit Securities subject to various
conditions including a requirement to maintain on deposit with the Trust cash
at least equal to 110% of the market
1
value of the missing Deposit Securities. The required
amount of deposit may be changed by NTI from time to time. See the Purchase and
Redemption of Creation Units section of this Additional Statement for further
discussion. In each instance of such cash creations or redemptions, transaction
fees may be imposed that will be in addition to the transaction fees associated
with in-kind creations or redemptions. In all cases, such conditions and fees
will be limited in accordance with the requirements of the Securities and
Exchange Commission (the “SEC”) applicable to management investment companies
offering redeemable securities.
A
DDITIONAL INVESTMENT INFORMATION
E
XCHANGE LISTING AND TRADING
A
discussion of exchange listing and trading matters associated with an
investment in each Fund is contained in the Prospectuses in the “Shareholder Information” section. The
discussion below supplements, and should be read in conjunction with, that
section of the Prospectuses.
Shares
of each Fund are listed for trading on at least one Listing Exchange, such as
the NYSE Arca, Inc., and The Nasdaq Stock Market, Inc.
(“NASDAQ”) and trade throughout the day on the Listing Exchange and other
secondary markets. There can be no assurance that the requirements of a Listing
Exchange necessary to maintain the listing of shares of any Fund will continue
to be met. A Listing Exchange may, but is not required to, remove the shares of
a Fund from its listing if (1) following the initial twelve-month period
beginning upon the commencement of trading of a Fund, there are fewer than
fifty (50) record and/or beneficial holders of the Fund for thirty (30) or more
consecutive trading days, (2) the value of the Underlying Index on which the
Fund is based is no longer calculated or available, (3) the “indicative
optimized portfolio value” (“IOPV”) of a Fund is no longer calculated or
available, or (4) any other event shall occur or condition exist that, in
the opinion of the Listing Exchange, makes further dealings on the Listing
Exchange inadvisable. A Listing Exchange will remove the shares of a Fund from
listing and trading upon termination of the Fund.
As
in the case of other publicly-traded securities, brokers’ commissions on
transactions will be based on negotiated commission rates at customary levels.
In
order to provide additional information regarding the indicative value of
shares of each Fund, a Listing Exchange disseminates every fifteen seconds,
through the facilities of the Consolidated Tape Association, an updated IOPV
for each Fund as calculated by an information provider or a market data vendor.
The Trust is not involved in or responsible for any aspect of the calculation
or dissemination of the IOPVs, and makes no representation or warranty as to
the accuracy of the IOPVs.
An
IOPV has an equity securities value component and a cash component. The equity
securities values included in an IOPV are the values of the Deposit Securities
for the applicable Fund. While the IOPV reflects the current market value of
the Deposit Securities required to be deposited in connection with the purchase
of a Creation Unit Aggregation, it does not necessarily reflect the precise
composition of the current portfolio of securities held by the applicable Fund
at a particular point in time because the current portfolio of the Fund may
include securities that are not a part of the Deposit Securities. Therefore, a
Fund’s IOPV disseminated during the Listing Exchange trading hours should not
be viewed as a real time update of the Fund’s NAV, which is calculated only
once a day.
In
addition to the equity component described in the preceding paragraph, the IOPV
for each Fund includes a cash component consisting of estimated accrued
dividends and other income, less expenses. If applicable, each IOPV also
reflects changes in currency exchange rates between the U.S. Dollar and the
applicable foreign currency.
The
Trust reserves the right to adjust the share prices of Funds in the future to
maintain convenient trading ranges for investors. Any adjustments would be
accomplished through stock splits or reverse stock splits, which would have no
effect on the net assets of the applicable Fund.
- 2 -
I
NVESTMENT OBJECTIVE, STRATEGIES AND RISKS
Each
Fund seeks to achieve its objective by investing primarily in securities issued
by companies that comprise the relevant Underlying Index and through
transactions that provide substantially similar exposure to securities in the
Underlying Index. Each Fund operates as an index fund and will not be actively
managed. Adverse performance of a security in a Fund’s portfolio will
ordinarily not result in the elimination of the security from a Fund’s
portfolio. Each Fund will normally invest at least 90% of its total assets in
the securities of its Underlying Index and, except in the case of the NETS™ IPC
®
Index Fund (Mexico), in
American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and
Euro Depositary Receipts (“EDRs”) (collectively “Depositary Receipts”) based on
the securities in its Underlying Index. Each Fund may also invest up to 10% of
its assets in certain futures, options and swap contracts, cash and cash
equivalents, as well as in stocks not included in its Underlying Index but
which NTI believes will help the Fund track its Underlying Index.
The
NETS™ BOVESPA Index Fund
(Brazil), NETS™ IPC
®
Index
Fund (Mexico), NETS™ OMXS30 Index Fund (Sweden), NETS™ SLI Index Fund
(Switzerland), and NETS™ FTSE CNBC Global 300 Index Fund engage in a
representative sampling strategy, which is investing in a representative sample
of securities in the Underlying Index, selected by NTI to have a similar
investment profile as the Underlying Index. Securities selected have aggregate
investment characteristics (based on market capitalization and industry
weightings), fundamental characteristics (such as return variability, earnings
valuation and yield) and liquidity measures similar to those of the relevant
Underlying Index. The NETS™ FTSE
All-World Canada Index Fund engages in a replication strategy, which is
investing in the securities of the Underlying Index in approximately the same
proportions as in the Underlying Index. Funds that use representative sampling
may or may not hold all of the securities that are included in the relevant
Underlying Index. This Fund may utilize a representative sampling strategy with
respect to its Underlying Index when a replication strategy might be
detrimental to its beneficial owners, such as when there are practical
difficulties or substantial costs involved in compiling a portfolio of equity
securities to follow a Fund’s Underlying Index.
Each
Fund has adopted a non-fundamental investment policy in accordance with Rule
35d-1 under the 1940 Act to invest, under normal circumstances, at least 80% of
the value of its net assets, plus the amount of any borrowings for investment
purposes, in securities of the Fund’s Underlying Index and in Depositary
Receipts based on securities in the Underlying Index. Each Fund has also
adopted a policy to provide its shareholders with at least 60 days’ prior
written notice of any change in such policy. If, subsequent to an investment,
the 80% requirement is no longer met, a Fund’s future investments will be made
in a manner that will bring the Fund into compliance with this policy.
The
following supplements the information contained in the Prospectuses concerning
the investment objectives and policies of the Funds.
DEPOSITARY
RECEIPTS.
Each Fund will normally invest at least 90% of its total
assets in the securities of its Underlying Index and, except in the case of the
NETS™ IPC
®
Index Fund (Mexico), in Depositary Receipts based on the securities in its
Underlying Index. ADRs are receipts that are traded in the United States
evidencing ownership of the underlying foreign securities and are denominated
in U.S. dollars. EDRs and GDRs are receipts issued by a non-U.S. financial
institution evidencing ownership of underlying foreign or U.S. securities and
usually are denominated in foreign currencies. EDRs and GDRs may not be
denominated in the same currency as the securities they represent. Generally,
EDRs and GDRs are designed for use in the foreign securities markets.
To
the extent a Fund invests in ADRs, such ADRs will be listed on a national
securities exchange. To the extent a Fund invests in GDRs or EDRs, such GDRs
and EDRs will be listed on a foreign exchange. A Fund will not invest in any
unlisted Depositary Receipt, any Depositary Receipt that NTI deems to be
illiquid or any Depository Receipt for which pricing information is not readily
available. Generally, all depositary receipts must be sponsored. A Fund,
however, may invest in unsponsored depositary receipts under certain limited
circumstances. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangement with the issuer. Therefore, there may be less
information available
- 3 -
regarding such issuers and there may not be a
correlation between such information and the market value of the depositary
receipts.
NON-DIVERSIFICATION
RISK.
Non-diversification risk is the risk that a non-diversified
Fund may be more susceptible to adverse financial, economic or other
developments affecting any single issuer, and more susceptible to greater
losses because of these developments. Each Fund is classified as
“non-diversified” for purposes of the 1940 Act. A “non-diversified”
classification means that a Fund is not limited by the 1940 Act with regard to
the percentage of its assets that may be invested in the securities of a single
issuer. The securities of a particular issuer may dominate the Underlying Index
of such a Fund and, consequently, the Fund’s investment portfolio. Each Fund
may also concentrate its investments in a particular industry or group of industries,
as noted in the description of the Fund. The securities of issuers in
particular industries may dominate the Underlying Index of such a Fund and,
consequently, the Fund’s investment portfolio. This may adversely affect its
performance or subject the Fund’s shares to greater price volatility than that
experienced by less concentrated investment companies. Additionally, each Fund,
except the NETS™ FTSE CNBC Global
300 Index Fund, invests substantially all of its assets within the
equity markets of a single country outside the U.S.
Each
Fund intends to maintain the required level of diversification and otherwise
conduct its operations so as to qualify as a “regulated investment company” for
purposes of the Internal Revenue Code (the “IRC”), and to relieve the Fund of
any liability for federal income tax to the extent that its earnings are
distributed to shareholders. Compliance with the diversification requirements
of the IRC may limit the investment flexibility of certain Funds and may make
it less likely that such Funds will meet their investment objectives.
SHORT-TERM INSTRUMENTS AND TEMPORARY INVESTMENTS
.
To the extent consistent with its
investment policies, each Fund may invest in short-term instruments, including
money market instruments, on an ongoing basis to provide liquidity or for other
reasons. Money market instruments are generally short-term investments that may
include but are not limited to: (i) shares of money market funds
(including those advised by NTI); (ii) obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities (including
government-sponsored enterprises); (iii) negotiable certificates of
deposit (“CDs”), bankers’ acceptances, fixed time deposits, bank notes and
other obligations of U.S. and foreign banks (including foreign branches) and
similar institutions; (iv) commercial paper rated at the date of purchase
“Prime-1” by Moody’s Investors Service, Inc. (“Moody’s”), “A-1” by Standard
& Poors Rating Service (“S&P”) or, if unrated, of comparable quality as
determined by NTI; (v) non-convertible corporate debt securities (
e.g.
,
bonds and debentures) with remaining maturities at the date of purchase of not
more than 397 days and that satisfy the rating requirements set forth in Rule
2a-7 under the 1940 Act; (vi) repurchase agreements; and
(vii) short-term U.S. dollar-denominated obligations of foreign banks
(including U.S. branches) that, in the opinion of NTI, are of comparable
quality to obligations of U.S. banks which may be purchased by a Fund. Any of
these instruments may be purchased on a current or a forward-settled basis.
Time
deposits are non-negotiable deposits maintained in banking institutions for
specified periods of time at stated interest rates. Bankers’ acceptances are
time drafts drawn on commercial banks by borrowers, usually in connection with
international transactions. Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank holding companies,
corporations and finance companies. Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. Bankers’ acceptances are
negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are “accepted” by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party. Bank notes generally rank junior to deposit liabilities of banks and
pari passu with other senior, unsecured obligations of the bank. Bank notes are
classified as “other borrowings” on a bank’s balance sheet, while deposit notes
and certificates of deposit are classified as deposits. Bank notes are not
insured by the FDIC or any other insurer. Deposit notes are insured by the FDIC
only to the extent of $100,000 per depositor per bank.
- 4 -
Each
Fund may invest a portion of its assets in the obligations of foreign banks and
foreign branches of domestic banks. Such obligations include Eurodollar
Certificates of Deposit (“ECDs”), which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits (“ETDs”), which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits (“CTDs”), which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule
Bs, which are obligations issued by Canadian branches of foreign or domestic
banks; Yankee Certificates of Deposit (“Yankee CDs”), which are U.S.
dollar-denominated certificates of deposit issued by a U.S. branch of a foreign
bank and held in the United States; and Yankee Bankers’ Acceptances (“Yankee
BAs”), which are U.S. dollar-denominated bankers’ acceptances issued by a U.S.
branch of a foreign bank and held in the United States.
Commercial
paper purchased by the Funds may include asset-backed commercial paper.
Asset-backed commercial paper is issued by a special purpose entity that is
organized to issue the commercial paper and to purchase trade receivables or
other financial assets. The credit quality of asset-backed commercial paper
depends primarily on the quality of these assets and the level of any
additional credit support.
EQUITY
SWAPS, TOTAL RATE OF RETURN SWAPS AND CURRENCY SWAPS.
Each Fund may
invest up to 10% of its total assets in swap contracts.
A
Fund may enter into equity swap contracts to invest in a market without owning
or taking physical custody of securities in circumstances in which direct
investment is restricted for legal reasons or is otherwise impracticable. These
instruments are privately negotiated over-the-counter derivative products. A
great deal of flexibility is possible in the way these instruments are
structured. The counterparty to an equity swap contract will typically be a
bank, investment banking firm or broker/dealer. Equity swap contracts may be
structured in different ways. For example, a counterparty may agree to pay a
Fund the amount, if any, by which the notional amount of the equity swap
contract would have increased in value had it been invested in particular
stocks (or an index of stocks), plus the dividends that would have been
received on those stocks. In these cases, the Fund may agree to pay to the
counterparty the amount, if any, by which that notional amount would have
decreased in value had it been invested in the stocks. Therefore, the return to
the Fund on any equity swap contract should be the gain or loss on the notional
amount plus dividends on the stocks less the interest paid by the Fund on the
notional amount. In other cases, the counterparty and the Fund may each agree
to pay the other the difference between the relative investment performances
that would have been achieved if the notional amount of the equity swap
contract had been invested in different stocks (or indices of stocks).
Total
rate of return swaps are contracts that obligate a party to pay or receive
interest in exchange for the payment by the other party of the total return
generated by a security, a basket of securities, an index or an index
component. The Funds also may enter into currency swaps, which involve the
exchange of the rights of a Fund and another party to make or receive payments
in specific currencies. Currency swaps involve the exchange of rights of a Fund
and another party to make or receive payments in specific currencies.
Some
transactions are entered into on a net basis,
i.e
., the two payment
streams are netted out, with a Fund receiving or paying, as the case may be,
only the net amount of the two payments. A Fund will enter into equity swaps
only on a net basis. Payments may be made at the conclusion of an equity swap
contract or periodically during its term. Equity swaps do not involve the
delivery of securities or other underlying assets. Accordingly, the risk of
loss with respect to equity swaps is limited to the net amount of payments that
a Fund is contractually obligated to make. If the other party to an equity
swap, or any other swap entered into on a net basis, defaults, a Fund’s risk of
loss consists of the net amount of payments that such Fund is contractually
entitled to receive, if any. In contrast, other transactions may involve the
payment of the gross amount owed. For example, currency swaps usually involve
the delivery of the entire principal amount of one designated currency in
exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations. To the extent that
the amount payable by a Fund under a swap is covered by segregated cash or
liquid assets, the Fund and the Investment Adviser believe that transactions do
not constitute senior securities under the 1940 Act and, accordingly, will not
treat them as being subject to a Fund’s borrowing restrictions.
- 5 -
A
Fund will not enter into any swap transactions unless the unsecured commercial
paper, senior debt or claims-paying ability of the other party is rated either
A, or A-1 or better by S&P, or Fitch Ratings (“Fitch”); or A or Prime-1 or
better by Moody’s, or has received a comparable rating from another
organization that is recognized as a nationally recognized statistical rating
organization (“NRSRO”) or, if unrated by such rating organization, is
determined to be of comparable quality by the Investment Adviser. If there is a
default by the other party to such a transaction, a Fund will have contractual
remedies pursuant to the agreements related to the transaction. Such
contractual remedies, however, may be subject to bankruptcy and insolvency laws
that may affect such Fund’s rights as a creditor (
e.g.
, a Fund may not receive
the net amount of payments that it contractually is entitled to receive). The
swap market has grown substantially in recent years with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid in comparison with markets for other similar
instruments which are traded in the interbank market.
The
use of equity, total rate of return and currency swaps is a highly specialized
activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions.
FOREIGN
CURRENCY TRANSACTIONS.
To the extent consistent with
its investment policies, each Fund may invest in forward foreign currency
exchange contracts and foreign currency futures contracts. No Fund, however,
expects to engage in currency transactions for speculative purposes or for the
purpose of hedging against declines in the value of a Fund’s assets that are
denominated in a foreign currency. A Fund may enter into forward foreign
currency exchange contracts and foreign currency futures contracts to
facilitate local settlements or to protect against currency exposure in
connection with its distributions to shareholders.
Foreign
currency exchange contracts involve an obligation to purchase or sell a
specified currency on a future date at a price set at the time of the contract.
Forward currency contracts do not eliminate fluctuations in the values of
portfolio securities but rather allow a Fund to establish a rate of exchange
for a future point in time. Foreign currency futures contracts involve an
obligation to deliver or acquire the specified amount of a specific currency,
at a specified price and at a specified future time. Such futures contracts may
be settled on a net cash payment basis rather than by the sale and delivery of
the underlying currency. A Fund may incur costs in connection with forward
foreign currency exchange and futures contracts and conversions of foreign
currencies and U.S. dollars.
Liquid
assets equal to the amount of a Fund’s assets that could be required to
consummate forward contracts will be segregated except to the extent the
contracts are otherwise “covered.” The segregated assets will be valued at
market or fair value. If the market or fair value of such assets declines,
additional liquid assets will be segregated daily so that the value of the
segregated assets will equal the amount of such commitments by the Fund. A
forward contract to sell a foreign currency is “covered” if a Fund owns the
currency (or securities denominated in the currency) underlying the contract,
or holds a forward contract (or call option) permitting the Fund to buy the
same currency at a price that is (i) no higher than the Fund’s price to sell
the currency or (ii) greater than the Fund’s price to sell the currency
provided the Fund segregates liquid assets in the amount of the difference. A
forward contract to buy a foreign currency is “covered” if a Fund holds a
forward contract (or call option) permitting the Fund to sell the same currency
at a price that is (i) as high as or higher than the Fund’s price to buy the
currency or (ii) lower than the Fund’s price to buy the currency provided the
Fund segregates liquid assets in the amount of the difference.
FOREIGN
INVESTMENTS - GENERAL.
Each Fund invests predominately
in foreign securities.
Investment
in foreign securities involves special risks. These include market risk,
interest rate risk and the risks of investing in securities of foreign issuers
and of companies whose securities are principally traded outside the United
States on foreign exchanges or foreign over-the-counter markets and in
investments denominated in foreign currencies. Market risk involves the
possibility that stock prices will decline over short or even extended periods.
The stock markets tend to be cyclical, with periods of generally rising prices
and periods of generally declining prices. These cycles will affect the value
of a Fund to the extent that it invests in foreign stocks. In addition, the
performance of investments in securities denominated in a foreign currency will
depend on the strength of the
- 6 -
foreign
currency against the U.S. dollar and the interest rate environment in the
country issuing the currency. Absent other events which could otherwise affect
the value of a foreign security (such as a change in the political climate or
an issuer’s credit quality), appreciation in the value of the foreign currency
generally can be expected to increase the value of a foreign
currency-denominated security in terms of U.S. dollars. A rise in foreign interest
rates or decline in the value of the foreign currency relative to the U.S.
dollar generally can be expected to depress the value of a foreign
currency-denominated security.
There
are other risks and costs involved in investing in foreign securities, which
are in addition to the usual risks inherent in domestic investments. Investment
in foreign securities involves higher costs than investment in U.S. securities,
including higher transaction and custody costs as well as the imposition of additional
taxes by foreign governments. Foreign investments also involve risks associated
with the level of currency exchange rates, less complete financial information
about the issuers, less market liquidity, more market volatility and political
instability. Future political and economic developments, the possible
imposition of withholding taxes on dividend income, the possible seizure or
nationalization of foreign holdings, the possible establishment of exchange
controls, or the adoption of other governmental restrictions might adversely
affect an investment in foreign securities. Additionally, foreign banks and
foreign branches of domestic banks are subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping requirements.
Also, the legal remedies for investors may be more limited than the remedies
available in the U.S.
Although
a Fund may invest in securities denominated in foreign currencies, its
portfolio securities and other assets are valued in U.S. dollars. Currency
exchange rates may fluctuate significantly over short periods of time causing,
together with other factors, a Fund’s NAV to fluctuate as well. Currency
exchange rates can be affected unpredictably by the intervention or the failure
to intervene by U.S. or foreign governments or central banks, or by currency
controls or political developments in the U.S. or abroad. To the extent that a
Fund’s total assets, adjusted to reflect a Fund’s net position after giving
effect to currency transactions, are denominated in the currencies of foreign
countries, a Fund will be more susceptible to the risk of adverse economic and
political developments within those countries.
A
Fund also is subject to the possible imposition of exchange control regulations
or freezes on the convertibility of currency. In addition, through the use of
forward currency exchange contracts with other instruments, any net currency
positions of the Funds may expose them to risks independent of their securities
positions.
Dividends
and interest payable on a Fund’s foreign portfolio securities may be subject to
foreign withholding taxes. To the extent such taxes are not offset by credits
or deductions allowed to investors under U.S. federal income tax law, they may
reduce the net return to the shareholders. See “Taxes” on page 43.
The
costs attributable to investing abroad usually are higher than investments in
domestic securities for several reasons, such as the higher cost of investment
research, higher costs of custody of foreign securities, higher commissions
paid on comparable transactions on foreign markets and additional costs arising
from delays in settlements of transactions involving foreign securities.
Certain
Funds may invest a significant percentage of their assets in the securities of
issuers located in geographic regions with securities markets that are highly
developed, liquid and subject to extensive regulation, including Japan.
FOREIGN
INVESTMENTS – EMERGING MARKETS.
Countries with
emerging markets are generally located in the Asia and Pacific regions, the
Middle East, Eastern Europe, Central America, South America and Africa. To the
extent permitted by their investment policies, the Funds may invest their
assets in countries with emerging economies or securities markets. The NETS™ BOVESPA Index Fund (Brazil) and the NETS™
IPC
®
Index Fund (Mexico) invest
predominantly in emerging market securities.
The
securities markets of emerging countries are less liquid and subject to greater
price volatility, and have a smaller market capitalization, than the U.S.
securities markets. In certain countries, there may be fewer publicly
- 7 -
traded
securities and the market may be dominated by a few issues or sectors. Issuers
and securities markets in such countries are not subject to as extensive and
frequent accounting, financial and other reporting requirements or as
comprehensive government regulations as are issuers and securities markets in
the U.S. In particular, the assets and profits appearing on the financial
statements of emerging country issuers may not reflect their financial position
or results of operations in the same manner as financial statements for U.S.
issuers. Substantially less information may be publicly available about
emerging country issuers than is available about issuers in the United States.
Emerging
country securities markets are typically marked by a high concentration of
market capitalization and trading volume in a small number of issuers
representing a limited number of industries, as well as a high concentration of
ownership of such securities by a limited number of investors. The markets for
securities in certain emerging countries are in the earliest stages of their
development. Even the markets for relatively widely traded securities in
emerging countries may not be able to absorb, without price disruptions, a
significant increase in trading volume or trades of a size customarily
undertaken by institutional investors in the securities markets of developed
countries. The limited size of many of these securities markets can cause
prices to be erratic for reasons apart from factors that affect the soundness
and competitiveness of the securities issuers. For example, prices may be
unduly influenced by traders who control large positions in these markets.
Additionally, market making and arbitrage activities are generally less
extensive in such markets, which may contribute to increased volatility and
reduced liquidity of such markets. The limited liquidity of emerging country
securities may also affect a Fund’s ability to accurately value its portfolio
securities or to acquire or dispose of securities at the price and time it
wishes to do so or in order to meet redemption requests.
Certain
emerging market countries may have antiquated legal systems, which may
adversely impact the Funds. For example, while the potential liability of a
shareholder in a U.S. corporation with respect to acts of the corporation is
generally limited to the amount of the shareholder’s investment, the notion of
limited liability is less clear in certain emerging market countries.
Similarly, the rights of investors in emerging market companies may be more
limited than those of shareholders in U.S. corporations.
Transaction
costs, including brokerage commissions or dealer mark-ups, in emerging
countries may be higher than in developed securities markets. In addition,
existing laws and regulations are often inconsistently applied. As legal
systems in emerging countries develop, foreign investors may be adversely
affected by new or amended laws and regulations. In circumstances where
adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law.
Certain
emerging countries may restrict or control foreign investments in their
securities markets. These restrictions may limit a Fund’s investment in certain
emerging countries and may increase the expenses of the Fund. Certain emerging
countries require governmental approval prior to investments by foreign persons
or limit investment by foreign persons to only a specified percentage of an
issuer’s outstanding securities or a specific class of securities which may
have less advantageous terms (including price) than securities of the company
available for purchase by nationals. In addition, the repatriation of both
investment income and capital from emerging countries may be subject to
restrictions which require governmental consents or prohibit repatriation
entirely for a period of time. Even where there is no outright restriction on
repatriation of capital, the mechanics of repatriation may affect certain
aspects of the operation of the Fund. A Fund may be required to establish
special custodial or other arrangements before investing in certain emerging
countries.
Emerging
countries may be subject to a substantially greater degree of economic,
political and social instability and disruption than more developed countries.
This instability may result from, among other things, the following: (i) authoritarian
governments or military involvement in political and economic decision making,
including changes or attempted changes in governments through
extra-constitutional means; (ii) popular unrest associated with demands
for improved political, economic or social conditions; (iii) internal
insurgencies; (iv) hostile relations with neighboring countries;
(v) ethnic, religious and racial disaffection or conflict; and (vi) the
absence of developed legal structures governing foreign private investments and
private property. Such economic, political and social instability could disrupt
the principal financial markets in which a Fund may invest and adversely affect
the value of the Fund’s assets. A Fund’s investments can also be adversely
affected by any increase in taxes or by political, economic or diplomatic
developments.
- 8 -
A
Fund may invest in former “east bloc” countries in Eastern Europe. Most Eastern
European countries had a centrally planned, socialist economy for a substantial
period of time. The governments of many Eastern European countries have more
recently been implementing reforms directed at political and economic
liberalization, including efforts to decentralize the economic decision-making
process and move towards a market economy. However, business entities in many
Eastern European countries do not have an extended history of operating in a
market-oriented economy, and the ultimate impact of Eastern European countries’
attempts to move toward more market-oriented economies is currently unclear. In
addition, any change in the leadership or policies of Eastern European
countries may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and adversely affect existing investment
opportunities.
The
economies of emerging countries may suffer from unfavorable growth of gross
domestic product, rates of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments. Many emerging countries have
experienced in the past, and continue to experience, high rates of inflation.
In certain countries inflation has at times accelerated rapidly to
hyperinflationary levels, creating a negative interest rate environment and
sharply eroding the value of outstanding financial assets in those countries.
Other emerging countries, on the other hand, have recently experienced
deflationary pressures and are in economic recessions. The economies of many
emerging countries are heavily dependent upon international trade and are
accordingly affected by protective trade barriers and the economic conditions
of their trading partners. In addition, the economies of some emerging
countries are vulnerable to weakness in world prices for their commodity
exports.
Foreign
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. Such delays in settlement could result in temporary periods when
a portion of the assets of a Fund remain uninvested and no return is earned on
such assets. The inability of a Fund to make intended security purchases or
sales due to settlement problems could result either in losses to a Fund due to
subsequent declines in value of the portfolio securities or, if a Fund has
entered into a contract to sell the securities, could result in possible
liability to the purchaser.
FUTURES
CONTRACTS AND RELATED OPTIONS.
To the extent consistent
with its investment policies, each Fund may invest up to 10% of its total
assets in U.S. or foreign futures contracts and may purchase and sell call and
put options on futures contracts. These futures contracts and options will be
used to simulate full investment in the respective Underlying Index, to
facilitate trading or to reduce transaction costs. Each Fund will only enter
into futures contracts and options on futures contracts that are traded on a
U.S. or foreign exchange. No Fund will use futures or options for speculative
purposes.
The
Trust, on behalf of each Fund, has claimed an exclusion from the definition of
the term “commodity pool operator” under the Commodity Exchange Act, and,
therefore, is not subject to registration or regulation as a pool operator
under that Act with respect to the Funds. The Funds will engage in transactions
in futures contracts and related options only to the extent such transactions
are consistent with the requirement of the Internal Revenue Code of 1986, as
amended (the “Code”) for maintaining their qualifications as regulated
investment companies for federal income tax purposes.
Participation
in foreign futures and foreign options transactions involves the execution and
clearing of trades on or subject to the rules of a foreign board of trade.
Neither the National Futures Association (the “NFA”) nor any domestic exchange
regulates activities of any foreign boards of trade, including the execution,
delivery and clearing of transactions, or has the power to compel enforcement
of the rules of a foreign board of trade or any applicable foreign law. This is
true even if the exchange is formally linked to a domestic market so that a
position taken on the market may be liquidated by a transaction on another
market. Moreover, such laws or regulations will vary depending on the foreign
country in which the foreign futures or foreign options transaction occurs. For
these reasons, persons who trade foreign futures or foreign options contracts
may not be afforded certain of the protective measures provided by the
Commodity Exchange Act, the Commodity Futures Trading Commission’s (the “CFTC”)
regulations and the rules of the NFA and any domestic exchange, including the
right to use reparations proceedings before the CFTC and arbitration
proceedings provided them by the NFA or any domestic futures exchange. In
particular, a Fund’s investments in foreign futures or foreign options
transactions may not be provided the same
- 9 -
protections in
respect of transactions on United States futures exchanges. In addition, the
price of any foreign futures or foreign options contract may be affected by any
variance in the foreign exchange rate between the time an order is placed and
the time it is liquidated, offset or exercised.
In
connection with a Fund’s position in a futures contract or related option, the
Fund will segregate liquid assets or will otherwise cover its position in
accordance with applicable SEC requirements.
For
a further description of futures contracts and related options, see Appendix B
to this Additional Statement.
ILLIQUID
OR RESTRICTED SECURITIES.
To the extent consistent
with its investment policies, each Fund may invest up to 15% of its net assets
in securities that are illiquid. The Funds may purchase commercial paper issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “1933
Act”) and securities that are not registered under the 1933 Act but can be sold
to “qualified institutional buyers” in accordance with Rule 144A under the 1933
Act. These securities will not be considered illiquid so long as the Investment
Adviser determines, under guidelines approved by the Trust’s Board of Trustees,
that an adequate trading market exists. This practice could increase the level
of illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
INVESTMENT
COMPANIES.
To the extent consistent with its
investment policies, each Fund may invest in the securities of other investment
companies. Such investments will be limited so that, as determined after a
purchase is made, either: (a) not more than 3% of the total outstanding stock
of such investment company will be owned by a Fund, the Trust as a whole and
its affiliated persons (as defined in the 1940 Act); or (b) (i) not more than
5% of the value of the total assets of a Fund will be invested in the
securities of any one investment company, (ii) not more than 10% of the value
of its total assets will be invested in the aggregate securities of investment
companies as a group and (iii) not more than 3% of the outstanding voting stock
of any one investment company will be owned by the Fund. Pursuant to an
exemptive order, these limits will not apply to the investment of securities
lending collateral by the Funds in certain investment company portfolios
advised by NTI or its affiliates. In addition, pursuant to the exemptive order,
the Funds may invest their uninvested cash balances in shares of affiliated
money market portfolios to the extent that a Fund’s aggregate investment of
such balances in such portfolios does not exceed 25% of the Fund’s total
assets. Investments by the Funds in other investment companies, including
exchange-traded funds (“ETFs”), will be subject to the limitations of the 1940
Act except as permitted by SEC orders. The Funds may rely on SEC orders that
permit them to invest in certain ETFs beyond the limits contained in the 1940
Act, subject to certain terms and conditions. Generally, these terms and
conditions require the Board to approve policies and procedures relating to
certain of the Funds’ investments in ETFs. These policies and procedures
require, among other things, that (i) the Investment Adviser conduct the Funds’
investment in ETFs without regard to any consideration received by the Funds or
any of their affiliated persons and (ii) the Investment Adviser certify to the
Board quarterly that it has not received any consideration in connection with
an investment by the Funds in an ETF, or if it has, the amount and purpose of
the consideration will be reported to the Board and an equivalent amount of
advisory fees shall be waived by the Investment Adviser.
Certain
investment companies whose securities are purchased by the Funds may not be
obligated to redeem such securities in an amount exceeding 1% of the investment
company’s total outstanding securities during any period of less than 30 days.
Therefore, such securities that exceed this amount may be illiquid.
If
required by the 1940 Act, each Fund expects to vote the shares of other
investment companies that are held by it in the same proportion as the vote of
all other holders of such securities.
MISCELLANEOUS.
Securities may be purchased on margin only to obtain
such short-term credits as are necessary for the clearance of purchases and
sales of securities.
OPTIONS.
To the extent consistent with its investment policies,
each Fund may invest up to 10% of nets assets in put options and buy call
options and write covered call and secured put options. Such options may relate
to particular securities, foreign and domestic stock indices, financial
instruments, foreign currencies or the yield
- 10 -
differential
between two securities (“yield curve options”) and may or may not be listed on
a domestic or foreign securities exchange or issued by the Options Clearing
Corporation. A call option for a particular security or currency 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 prior to the expiration of
the option, regardless of the market price of the security or currency. The
premium paid to the writer is in consideration for undertaking the obligation
under the option contract. A put option for a particular security or currency
gives the purchaser the right to sell the security or currency at the stated
exercise price to the expiration date of the option, regardless of the market
price of the security or currency. In contrast to an option on a particular
security, an option on an index provides the holder with the right to make or
receive a cash settlement upon exercise of the option. The amount of this
settlement will be equal to the difference between the closing price of the
index at the time of exercise and the exercise price of the option expressed in
dollars, times a specified multiple.
Options
trading is a highly specialized activity, which entails greater than ordinary
investment risk. Options on particular securities may be more volatile than the
underlying instruments and, therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying instruments themselves.
The
Funds will write call options only if they are “covered.” In the case of a call
option on a security or currency, the option is “covered” if a Fund owns the
security or currency underlying the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or, if
additional cash consideration is required, liquid assets in such amount are
segregated) upon conversion or exchange of other securities held by it. For a
call option on an index, the option is covered if a Fund maintains with its
custodian a portfolio of securities substantially replicating the index, or
liquid assets equal to the contract value. A call option also is covered if a
Fund holds a call on the same security, currency or index as the call written
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written provided the Fund segregates liquid assets in the amount of the
difference.
All
put options written by a Fund would be covered, which means that such Fund will
segregate cash or liquid assets with a value at least equal to the exercise
price of the put option or will use the other methods described in the next
sentence. A put option also is covered if a Fund holds a put option on the same
security or currency as the option written where the exercise price of the
option held is (i) equal to or higher than the exercise price of the option
written, or (ii) less than the exercise price of the option written provided
the Fund segregates liquid assets in the amount of the difference.
With
respect to yield curve options, a call (or put) option is covered if a Fund
holds another call (or put) option on the spread between the same two
securities and segregates liquid assets sufficient to cover the Fund’s net
liability under the two options. Therefore, the Fund’s liability for such a
covered option generally is limited to the difference between the amount of the
Fund’s liability under the option written by the Fund less the value of the
option held by the Fund. Yield curve options also may be covered in such other
manner as may be in accordance with the requirements of the counterparty with
which the option is traded and applicable laws and regulations.
A
Fund’s obligation to sell subject to a covered call option written by it, or to
purchase a security or currency subject to a secured put option written by it,
may be terminated prior to the expiration date of the option by the Fund’s
execution of a closing purchase transaction, which is effected by purchasing on
an exchange an option of the same series (
i.e
., same underlying security or
currency, 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 security or currency or to permit the writing
of a new option containing different terms on such underlying security. The
cost of such a liquidation purchase plus transaction costs may be greater than
the premium received upon the original option, in which event the Fund will
have incurred a loss in the transaction. There is no assurance that a liquid
secondary market will exist for any particular option. An option writer, unable
to effect a closing purchase transaction, will not be able to sell the
underlying security or currency (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 optioned security or currency is delivered upon exercise
with the result that the writer
- 11 -
in such
circumstances will be subject to the risk of market decline or appreciation in
the instrument during such period.
When
a Fund purchases an option, the premium paid by it is recorded as an asset of
the Fund. When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund’s statement of assets and liabilities as a deferred credit.
The amount of this asset or deferred credit will be subsequently
marked-to-market to reflect the current value of the option purchased or
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the current bid price. If an option purchased by the
Fund expires unexercised, the Fund realizes a loss equal to the premium paid.
If a Fund enters into a closing sale transaction on an option purchased by it,
the Fund will realize a gain if the premium received by the Fund on the closing
transaction is more than the premium paid to purchase the option, or a loss if
it is less. If an option written by a Fund expires on the stipulated expiration
date or if a Fund enters into a closing purchase transaction, it will realize a
gain (or loss if the cost of a closing purchase transaction exceeds the net
premium received when the option is sold) and the deferred credit related to
such option will be eliminated. If an option written by a Fund is exercised,
the proceeds of the sale will be increased by the net premium originally
received and the Fund will realize a gain or loss.
There
are several risks associated with transactions in certain options. For example,
there are significant differences between the securities, currency and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded over-the-counter
or on an exchange, may be absent for reasons which include the following: there
may be insufficient trading interest in certain options; restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
trading halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities or currencies;
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; the facilities of an exchange or the Options Clearing Corporation may
not at all times be adequate to handle current trading value; or one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that exchange (or in
that class or series of options) would cease to exist, although outstanding
options that had been issued by the Options Clearing Corporation as a result of
trades on that exchange would continue to be exercisable in accordance with
their terms.
REAL
ESTATE INVESTMENT TRUSTS.
To the extent consistent
with its investment policies, each Fund may invest in equity real estate
investment trusts (“REITs”). REITs are pooled investment vehicles which invest
primarily in real estate or real estate related loans. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have
appreciated in value. Equity REITs may further be categorized by the type of
real estate securities they own, such as apartment properties, retail shopping
centers, office and industrial properties, hotels, healthcare facilities,
manufactured housing and mixed property types. Mortgage REITs invest the
majority of their assets in real estate mortgages and derive income from the collection
of interest payments. Hybrid REITs combine the characteristics of both equity
and mortgage REITs. Like regulated investment companies such as the Funds,
REITs are not taxed on income distributed to shareholders provided they comply
with certain requirements under the Code. A Fund will indirectly bear its
proportionate share of any expenses paid by REITs in which it invests in
addition to the expenses paid by the Fund.
Investing
in REITs involves certain unique risks. Equity REITs may be affected by changes
in the value of the underlying property owned by such REITs, while mortgage
REITs may be affected by the quality of any credit extended. REITs are
dependent upon management skills, are not diversified (except to the extent the
Code requires), and are subject to the risks of financing projects. REITs are
subject to heavy cash flow dependency, default by borrowers, self-liquidation,
and the possibilities of failing to qualify for the exemption from tax for
distributed income under the Code and failing to maintain their exemptions from
the 1940 Act. REITs (especially mortgage REITs) are also subject to interest
rate risks. Investing in REITs also involves risks similar to those associated
with investing in small capitalization companies. That is, they may have
limited financial resources, may
- 12 -
trade less
frequently and in a limited volume and may be subject to abrupt or erratic
price movements in comparison to larger capitalization companies.
REPURCHASE
AGREEMENTS.
To the extent consistent with its
investment policies, each Fund may agree to purchase portfolio securities from
financial institutions subject to the seller’s agreement to repurchase them at
a mutually agreed upon date and price (“repurchase agreements”). Repurchase
agreements are considered to be loans under the 1940 Act. Although the
securities subject to a repurchase agreement may bear maturities exceeding one
year, settlement for the repurchase agreement will never be more than one year
after the Fund’s acquisition of the securities and normally will be within a
shorter period of time. Securities subject to repurchase agreements normally
are held either by the Trust’s custodian or sub-custodian (if any), or in the
Federal Reserve/Treasury Book-Entry System. The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the agreement in an amount exceeding the repurchase price (including accrued
interest). Default by the seller would, however, expose the Fund to possible
loss because of adverse market action or delay in connection with the
disposition of the underlying obligations. In addition, in the event of a
bankruptcy, a Fund could suffer additional losses if a court determines that
the Fund’s interest in the collateral is unenforceable.
REVERSE
REPURCHASE AGREEMENTS.
To the extent consistent with
its investment policies, each Fund may borrow funds by selling portfolio
securities to financial institutions such as banks and broker/dealers and
agreeing to repurchase them at a mutually specified date and price (“reverse
repurchase agreements”). The Funds may use the proceeds of reverse repurchase
agreements to purchase other securities either maturing, or under an agreement
to resell, on a date simultaneous with or prior to the expiration of the
reverse repurchase agreement. Reverse repurchase agreements are considered to
be borrowings under the 1940 Act. Reverse repurchase agreements involve the
risk that the market value of the securities sold by the Fund may decline below
the repurchase price. The Funds will pay interest on amounts obtained pursuant
to a reverse repurchase agreement. While reverse repurchase agreements are
outstanding, the Funds will segregate liquid assets in an amount at least equal
to the market value of the securities, plus accrued interest, subject to the
agreement.
SECURITIES
LENDING.
Collateral for loans of portfolio securities
made by a Fund may consist of cash, cash equivalents, securities issued or
guaranteed by the U.S. government or its agencies or irrevocable bank letters
of credit (or any combination thereof). The borrower of securities will be
required to maintain the market value of the collateral at not less than the
market value of the loaned securities, and such value will be monitored on a
daily basis. When a Fund lends its securities, it continues to receive payments
equal to the dividends and interest paid on the securities loaned and
simultaneously may earn interest on the investment of the cash collateral. Investing
the collateral subjects it to market depreciation or appreciation, and a Fund
is responsible for any loss that may result from its investment in borrowed
collateral. A Fund will have the right to terminate a loan at any time and
recall the loaned securities within the normal and customary settlement time
for securities transactions. Although voting rights, or rights to consent,
attendant to securities on loan pass to the borrower, such loans may be called
so that the securities may be voted by a Fund if a material event affecting the
investment is to occur. As with other extensions of credit there are risks of
delay in recovering, or even loss of rights in, the collateral should the
borrower of the securities fail financially.
TRACKING
VARIANCE.
As discussed in the Prospectuses, the Funds
are subject to the risk of tracking variance. Tracking variance may result from
share purchases and redemptions, transaction costs, expenses and other factors.
Share purchases and redemptions may necessitate the purchase and sale of
securities by a Fund and the resulting transaction costs which may be
substantial because of the number and the characteristics of the securities
held. In addition, transaction costs are incurred because sales of securities
received in connection with spin-offs and other corporate reorganizations are
made to conform a Fund’s holdings to its investment objective. Tracking
variance also may occur due to factors such as the size of a Fund, the
maintenance of a cash reserve pending investment or to meet expected
redemptions, changes made in the Fund’s designated index or the manner in which
the index is calculated or because the indexing and investment approach of the
Investment Adviser does not produce the intended goal of the Fund. Tracking
variance is monitored by the Investment Adviser at least quarterly. In the
event the performance of a Fund is not comparable to the performance of its
designated index, the Board of Trustees will evaluate the reasons for the
deviation and the availability of corrective measures.
- 13 -
WARRANTS.
To the extent consistent with its investment policies,
each Fund may purchase warrants and similar rights, which are privileges issued
by corporations enabling the owners to subscribe to and purchase a specified
number of shares of the corporation at a specified price during a specified
period of time. The prices of warrants do not necessarily correlate with the
prices of the underlying shares. The purchase of warrants involves the risk
that a Fund could lose the purchase value of a warrant if the right to
subscribe to additional shares is not exercised prior to the warrant’s
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security’s market price such as
when there is no movement in the level of the underlying security.
THE INDICES
BOVESPA Index
The
BOVESPA Index consists of stocks that represent more than 80% of the number of trades
and the financial value of stocks traded primarily on the São Paulo Stock
Exchange.
FTSE All-World Canada
Index
The
FTSE All-World Canada Index is a free-float-adjusted,
market-capitalization-weighted index designed to measure the market performance
of large- and mid-capitalization stocks of companies trading primarily on the
Toronto Stock Exchange.
IPC
®
Index
The IPC
®
Index is a market-capitalization
weighted index consisting of 35-50 of the largest and most liquid companies
traded on the Mexican Stock Exchange.
OMXS30 Index
The
OMXS30 Index consists of the 30 most traded stocks on the Stockholm Stock
Exchange.
SLI Swiss Leader
Index
The
SLI Swiss Leader Index is a free float adjusted, market capitalization-weighted
index consisting of 30 of the largest and most liquid stocks of Switzerland and
Liechtenstein companies traded primarily on the SWX Swiss Exchange.
FTSE CNBC Global 300
Index
The
FTSE CNBC Global 300 Index is calculated by FTSE Group. It is designed to show
broad market performance world-wide across all industries, developed and
emerging markets. The index comprises the largest 15 stocks by full market
capitalization from each of the 18 Industry Classification Benchmark
Supersectors (using FTSE All Cap Developed Index), as well as the 30 largest
stocks from the emerging markets (using FTSE Emerging All Cap Index).
INVESTMENT RESTRICTIONS
Each
Fund is subject to the fundamental investment restrictions enumerated below
which may be changed with respect to a particular Fund only by a vote of the
holders of a majority of such Fund’s outstanding shares as described in
“Description of Shares” on page 32.
- 14 -
No Fund may:
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1)
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Make loans,
except through (a) the purchase of debt obligations in accordance with the
Fund’s investment objective and strategies, (b) repurchase agreements with
banks, brokers, dealers and other financial institutions, (c) loans of
securities, and (d) loans to affiliates of the Fund to the extent permitted
by law.
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2)
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Purchase or
sell real estate or real estate limited partnerships, but this restriction
shall not prevent a Fund from investing directly or indirectly in portfolio
instruments secured by real estate or interests therein or from acquiring
securities of real estate investment trusts or other issuers that deal in
real estate.
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3)
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Purchase or
sell physical commodities unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Funds (i)
from purchasing or selling options, futures contracts or other derivative
instruments, or (ii) from investing in securities or other instruments backed
by physical commodities).
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4)
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Act as
underwriter of securities, except as a Fund may be deemed to be an
underwriter under the 1933 Act in connection with the purchase and sale of
portfolio instruments in accordance with its investment objective and
portfolio management strategies.
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5)
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Borrow
money, except that to the extent permitted by applicable law (a) a Fund may
borrow from banks, other affiliated investment companies and other persons,
and may engage in reverse repurchase agreements and other transactions which
involve borrowings, in amounts up to 33 1/3% of its total assets (including
the amount borrowed) or such other percentage permitted by law, (b) a Fund
may borrow up to an additional 5% of its total assets for temporary purposes,
(c) a Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities, and (d) a Fund may
purchase securities on margin. If due to market fluctuations or other reasons
a Fund’s borrowings exceed the limitations stated above, the Trust will
promptly reduce the borrowings of a Fund in accordance with the 1940 Act.
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6)
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Issue any
senior security, except as permitted under the 1940 Act, as amended and as
interpreted, modified or otherwise permitted by regulatory authority having
jurisdiction, from time to time.
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7)
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Concentrate
its investments (
i.e.,
invest 25% or more of its total
assets in the securities of a particular industry of group of industries),
except that a Fund will concentrate to approximately the same extent that its
Underlying Index concentrates in the securities of such particular industry
or group of industries. For purposes of this limitation, securities of the
U.S. government (including its agencies and instrumentalities), repurchase
agreements collateralized by U.S. government securities, and securities of
state or municipal governments and their political subdivisions are not
considered to be issued by members of any industry.
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Notwithstanding
other fundamental investment restrictions (including, without limitation, those
restrictions relating to issuer diversification, industry concentration and
control), each Fund may purchase securities of other investment companies to
the full extent permitted under Section 12 or any other provision of the 1940
Act (or any successor provision thereto) or under any regulation or order of
the SEC.
For the
purposes of Investment Restrictions Nos. 1 and 5 above, the Funds expect that
they would be required to file an exemptive application with the SEC and
receive the SEC’s approval of that application prior to entering into lending
or borrowing arrangements with affiliates. As of the date of this Additional
Statement, the Funds had not filed such an exemptive application.
As
of September 9, 2008, as a result of each Fund’s policy to concentrate to
approximately the same extent that its Underlying Index concentrates in an
industry or group of industries, each of the following Funds was concentrated
(that is, held 25% or more of its total assets) in the industries specified:
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Fund
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Industry(ies)
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NETS™ BOVESPA Index Fund (Brazil)
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Materials
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NETS™ FTSE All-World Canada Index Fund
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Financials,
Energy
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NETS™ IPC
®
Index
Fund (Mexico)
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Telecommunication
Services
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NETS™ OMXS30 Index Fund (Sweden)
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Industrials
and Financials
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NETS™ SLI Index Fund (Switzerland)
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Financials
and Health Care
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NETS™ FTSE CNBC Global 300 Index Fund
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None
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- 15 -
For
the purpose of industry concentration, in determining industry classification,
a Fund may use one of the following: the Bloomberg Industry Group
Classification, Standard & Poors, J.J. Kenny Municipal Purpose Codes, FT
Interactive Industrial Codes, Securities Industry Classification Codes, Global
Industry Classification Standard or the Morgan Stanley Capital International
industry classification titles.
Any
Investment Restriction which involves a maximum percentage (other than the
restriction set forth above in Investment Restriction No. 5) will not be
considered violated unless an excess over the percentage occurs immediately
after, and is caused by, an acquisition or encumbrance of securities or assets
of a Fund. The 1940 Act requires that if the asset coverage for borrowings at
any time falls below the limits described in Investment Restriction No. 5, the
Fund will, within three days thereafter (not including Sundays and holidays),
reduce the amount of its borrowings to an extent that the net asset coverage of
such borrowings shall conform to such limits.
CONTINUOUS OFFERING
The
method by which Creation Unit Aggregations of shares are created and traded may
raise certain issues under applicable securities laws. Because new Creation
Unit Aggregations of shares are issued and sold by the Funds on an ongoing
basis, at any point a “distribution,” as such term is used in the Securities
Act, may occur. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner which could render them
statutory underwriters and subject them to the prospectus delivery requirement
and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
the Distributor, breaks them down into constituent shares, and sells such
shares directly to customers, or if it chooses to couple the creation of a
supply of new shares with an active selling effort involving solicitation of secondary
market demand for shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client
in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that could lead to a
categorization as an underwriter. Broker-dealer firms should also note that
dealers who are not “underwriters” but are effecting transactions in shares,
whether or not participating in the distribution of shares, generally are
required to deliver a prospectus. This is because the prospectus delivery
exemption in Section 4(3) of the Securities Act is not available in
respect of such transactions as a result of Section 24(d) of the 1940 Act.
Firms that incur a prospectus delivery obligation with respect to shares of the
Funds are reminded that, pursuant to Rule 153 under the Securities Act, a
prospectus delivery obligation under Section 5(b)(2) of the Securities Act
owed to an exchange member in connection with a sale on the Listing Exchange is
satisfied by the fact that the prospectus is available at the Listing Exchange
upon request. The prospectus delivery mechanism provided in Rule 153 is only
available with respect to transactions on an exchange.
PORTFOLIO HOLDINGS
Policy On
Disclosure Of Portfolio Holdings
The
Board of Trustees of the Trust has adopted a policy on disclosure of portfolio
holdings, which it believes is in the best interest of the Funds’ shareholders.
The policy provides that neither the Funds nor their Investment Adviser,
Distributor or any agent, or any employee thereof (“Fund Representative”) will
disclose a
- 16 -
Fund’s
portfolio holdings information to any person other than in accordance with the
policy. For purposes of the policy, “portfolio holdings information” means a
Fund’s actual portfolio holdings, as well as non-public information about its
trading strategies or pending transactions including the portfolio holdings,
trading strategies or pending transactions of any commingled fund portfolio
which contains identical holdings as the Fund. Under the policy, neither a Fund
nor any Fund Representative may solicit or accept any compensation or other
consideration in connection with the disclosure of portfolio holdings
information. A Fund Representative may provide portfolio holdings information
to third parties if such information has been included in a Fund’s public
filings with the SEC or is disclosed on the Fund’s publicly accessible Website.
Under the policy, each business day portfolio holdings information will be
provided to the Transfer Agent or other agent for dissemination through the
facilities of the National Securities Clearing Corporation (“NSCC”) and/or
other fee based subscription services to NSCC members and/or subscribers to
those other fee based subscription services, including Authorized Participants,
(defined below) and to entities that publish and/or analyze such information in
connection with the process of purchasing or redeeming Creation Units or
trading shares of Funds in the secondary market. Information with respect to
each Fund’s portfolio holdings is also disseminated daily on the Funds’
website. The Distributor may also make available portfolio holdings information
to other institutional market participants and entities that provide
information services. This information typically reflects each Fund’s
anticipated holdings on the following business day. “Authorized Participants”
are generally large institutional investors that have been authorized by the
Distributor to purchase and redeem large blocks of shares (known as Creation
Units) pursuant to legal requirements, including the exemptive order granted by
the SEC, to which the Funds offer and redeem shares (“Northern Exemptive
Order”). Other than portfolio holdings information made available in connection
with the creation/redemption process, as discussed above, portfolio holdings
information that is not filed with the SEC or posted on the publicly available
Website may be provided to third parties only in limited circumstances.
Third-party recipients will be required to keep all portfolio holdings
information confidential and prohibited from trading on the information they receive.
Disclosure to such third parties must be approved in advance by the Trust’s
Chief Compliance Officer (“CCO”). Disclosure to providers of auditing, custody,
proxy voting and other similar services for the Funds, as well as rating and
ranking organizations, will generally be permitted; however, information may be
disclosed to other third parties (including, without limitation, individuals,
institutional investors, and Authorized Participants that sell shares of a
Fund) only upon approval by the CCO, who must first determine that the Fund has
a legitimate business purpose for doing so. In general, each recipient of
non-public portfolio holdings information must sign a confidentiality and
non-trading agreement, although this requirement will not apply when the
recipient is otherwise subject to a duty of confidentiality as determined by
the CCO. In accordance with the policy, the recipients who may receive
non-public portfolio holdings information are as follows: the Investment
Adviser and its affiliates, the Funds’ independent registered public accounting
firm, the Funds’ distributor, administrator and custodian, the Funds’ legal
counsel, the disinterested Trustees’ counsel, Bell Boyd & Lloyd, LLP, the
Funds’ financial printer, Command Financial Press, and the Funds’ proxy voting
service, and Institutional Shareholder Services Inc. These entities are
obligated to keep such information confidential. Third-party providers of
custodial or accounting services to a Fund may release non-public portfolio
holdings information of the Fund only with the permission of Fund
Representatives. From time to time, portfolio holdings information may be
provided to broker-dealers solely in connection with a Fund seeking portfolio
securities trading suggestions. In providing this information reasonable
precautions, including limitations on the scope of the portfolio holdings
information disclosed, are taken in an effort to avoid any potential misuse of
the disclosed information. Portfolio holdings will be disclosed through required
filings with the SEC. Each Fund files its portfolio holdings with the SEC for
each fiscal quarter on Form N-CSR (with respect to each annual period and
semiannual period) and Form N-Q (with respect to the first and third quarters
of the Fund’s fiscal year). Shareholders may obtain a Fund’s Forms N-CSR and
N-Q filings on the SEC’s Website at sec.gov. In addition, the Funds’ Forms
N-CSR and N-Q filings may be reviewed and copied at the SEC’s public reference
room in Washington, DC. You may call the SEC at 1-800-SEC-0330 for information
about the SEC’s Website or the operation of the public reference room.
Under
the policy, the Board is to receive information, on a quarterly basis,
regarding any other disclosures of non-public portfolio holdings information
that were permitted during the preceding quarter.
- 17 -
MANAGEMENT OF THE TRUST
TRUSTEES AND
OFFICERS
The
business and affairs of the Trust are managed under the direction of the
Trustees. Set forth below is information about the Trustees and Officers of the
Funds. A brief statement of their present positions and principal occupations
during the past five years is also provided. As of the date of this Statement
of Additional Information, each Trustee oversees the 26 portfolios of the NETS
Trust.
NON-INTERESTED
TRUSTEES
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NAME, ADDRESS
(1)
, AGE,
POSITIONS HELD WITH
TRUST AND LENGTH OF
SERVICE AS
TRUSTEE
(2)
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PRINCIPAL
OCCUPATIONS DURING PAST FIVE YEARS
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OTHER
DIRECTORSHIPS
HELD BY TRUSTEE
(3)
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Theodore A.
Olson
Age: 69
Trustee since 2007
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Director and
Member of Finance Committee of Clara Abbott Foundation since 2002; Retired
since 1999; Director of The Hundred Club of Lake County (not for profit)
since 1989.
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Trustee and
Chairman of NT Alpha Strategies Fund since 2004.
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Ralph F.
Vitale
Age: 59
Trustee since 2007
Chairman since Jan. 2008
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Director of
Boston Rheology, LLC since 2005; Director of Boxford Housing Trust from 2004
to 2006; Executive Vice President of Securities Finance for State Street
Corporation from 1997 to 2003 (retired since 2003).
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Trustee of
NT Alpha Strategies Fund since 2006.
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John J.
Masterson
Age: 48
Trustee since 2007
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Partner and
Managing Director for Global Securities Department of Goldman Sachs & Co.
from 2002 to 2007 (retired since 2007); Member of Board of Directors of
Boston Global Advisors (agency lending) from 2002 to 2006.
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Trustee of
NT Alpha Strategies Fund since 2007.
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(1)
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Each Non-Interested Trustee
may be contacted by writing to the Trustee, c/o Paul Dykstra, Bell, Boyd
& Lloyd LLP, 70 West Madison Street, Suite 3100, Chicago, IL 60602.
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(2)
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Each Trustee will hold
office for an indefinite term until the earliest of: (i) the next meeting of
shareholders, if any, called for the purpose of considering the election or
re-election of such Trustee and until the election and qualification of his
or her successor, if any, elected at such meeting; or (ii) the date a Trustee
resigns or retires, or a Trustee is removed by the Board of Trustees or
shareholders, in accordance with the Trust’s Agreement and Declaration of
Trust.
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(3)
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This column includes only
directorships of companies required to report to the SEC under the Exchange
Act (
i.e
.,
public companies) or other investment companies registered under the 1940
Act.
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- 18 -
INTERESTED TRUSTEE
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NAME, ADDRESS
(1)
, AGE,
POSITIONS HELD WITH
TRUST AND LENGTH OF
SERVICE AS
TRUSTEE
(2)
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PRINCIPAL
OCCUPATIONS DURING PAST FIVE YEARS
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OTHER
DIRECTORSHIPS
HELD BY TRUSTEE
(3)
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Michael A.
Vardas, Jr.
(4)
Age: 46
Trustee and President since 2007
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Managing
Director of Northern Trust Investments, N.A. since 2005; Senior Vice
President and Head of Global Securities Lending at The Northern Trust
Company, from 2002 to 2005.
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None
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(1)
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Mr. Vardas may be contacted
by writing to him at 50 S. LaSalle St., Chicago, Illinois 60603.
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(2)
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Each Trustee will hold
office for an indefinite term until the earliest of: (i) the next meeting of
shareholders, if any, called for the purpose of considering the election or
re-election of such Trustee and until the election and qualification of his
or her successor, if any, elected at such meeting; or (ii) the date a Trustee
resigns or retires, or a Trustee is removed by the Board of Trustees or
shareholders, in accordance with the Trust’s Agreement and Declaration of
Trust.
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(3)
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This column includes only
directorships of companies required to report to the SEC under the Exchange
Act (
i.e
.,
public companies) or other investment companies registered under the 1940
Act.
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(4)
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An “interested person,” as
defined by the 1940 Act. Mr. Vardas is deemed to be an “interested” Trustee
because he is an officer of NTI and its parent company.
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- 19 -
OFFICERS OF THE TRUST
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NAME, ADDRESS, AGE,
POSITIONS HELD WITH
TRUST AND LENGTH
OF SERVICE
(1)
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PRINCIPAL
OCCUPATIONS DURING PAST FIVE YEARS
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Peter K.
Ewing
Age: 49
65 East 55th Street,
24th Floor
New York, NY 10022
Vice President since 2007
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Senior Vice
President, Northern Trust Investments, N.A. and Senior Vice President, The
Northern Trust Company, since November 2006; Managing Director of Product
Development and other positions, PlusFunds Group, Inc., from August 2003 to
June 2006; Director of Investment Products, Rydex Capital Partners, from
February 2002 to August 2003.
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Chad Rakvin
Age: 37
65 East 55th Street, 24th Fl.
New York, NY 10022
Vice President since 2007
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|
Senior Vice
President, Northern Trust Investments, N.A., since 2004; Global Equity Index
Director, The Northern Trust Company, since 2004; Principal, Head of Index
Research, Barclays Global Investors, from 1999 to 2004.
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Steven A.
Schoenfeld
Age: 45
65 East 55th St., 24th Fl.
New York, NY 10022
Vice President since 2007
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|
Senior Vice
President, Northern Trust Investments, N.A., since 2006; Chief Investment Officer,
Northern Trust Global Investments, since 2006; Chief Investment Strategist,
Northern Trust Global Investments, from 2004 to 2006; Founder and Managing
Partner, Global Index Strategies Inc., from 2003 to 2004; Chief Investment
Officer, Active Index Advisors, March 2003 to November 2003; Managing
Director, Barclays Global Investors, from 1996 to 2003.
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Trudance
L.C. Bakke
Age: 37
Three Canal Plaza, Suite 100
Portland, ME 04101
Treasurer since Feb. 2008
|
|
Director,
Fund Financial Reporting at Foreside Financial Group, LLC, since August 2006;
Product Manager/Senior Vice President, Citigroup Global Transaction Services
from 1996 to July 2006.
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Craig R.
Carberry, Esq.
Age: 48
50 South LaSalle
Street
Chicago, IL 60603
Secretary since 2007
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Senior
Attorney, The Northern Trust Company, since May 2000.
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Joseph
Costello
Age: 34
65 East 55th St., 24th Fl.
New York, NY 10022
Chief Compliance Officer
since 2007
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|
Vice
President, The Northern Trust Company and Compliance Specialist for Northern
Trust Global Investments, since 2003; Assistant Vice President of Compliance,
Arnhold and S. Bleichroeder Advisor, LLC, from 2000 to 2003.
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Michael
Grossman
Age: 37
50 South LaSalle Street
Chicago, IL 60603
AML Officer since 2007
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|
Vice
President and Compliance Manager in the Anti-Money Laundering Unit, The
Northern Trust Company, since 2007; Vice President and Anti-Money Laundering
Advisory Officer, LaSalle Bank, N.A., from 2005 to 2006; and Assistant Vice
President and Compliance Officer, LaSalle Financial Services, Inc. from 2001
to 2006.
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- 20 -
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NAME, ADDRESS, AGE,
POSITIONS HELD WITH
TRUST AND LENGTH
OF SERVICE
(1)
|
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PRINCIPAL
OCCUPATIONS DURING PAST FIVE YEARS
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Thomas A.
Perugini
Age: 38
73 Tremont Street, Suite 11
Boston, MA 02108
Assistant Treasurer since
Jan. 2008
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Vice
President of Fund Administration, Treasury and Compliance for JPMorgan
Worldwide Securities Services from 2006 to present; 1995 - 2006, Fund
Administration at State Street Corp, most recently as a Vice President, Senior
Director.
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Diana E.
McCarthy, Esq.
Age: 57
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-
6996
Assistant Secretary since
2007
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Partner in
the law firm of Drinker Biddle & Reath LLP since 2002.
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Gregory L.
Pickard
Age: 43
73 Tremont Street, Suite 11
Boston, MA 02108
Assistant Secretary since
Jan. 2008
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Executive
Director and Associate General Counsel, JP Morgan Investor Services Co. 2002
to present.
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(1)
|
Officers hold office at the
pleasure of the Board of Trustees until the next annual meeting of the Trust
or until their successors are duly elected and qualified, or until they die,
resign, are removed or become disqualified.
|
Certain
officers hold comparable positions with certain other investment companies of
which NTI, JP Morgan Investor Services Co., JP Morgan Chase Bank, NA or
Foreside Fund Services, LLC, or an affiliate thereof is the investment adviser,
administrator, custodian, transfer agent and/or distributor.
STANDING
BOARD COMMITTEES
The Board
of Trustees has established two standing committees in connection with its
governance of the Fund: Audit and Governance.
The
Audit Committee consists of Messrs. Olson (Chairperson), Masterson and Vitale.
The Audit Committee oversees the audit process and provides assistance to the
full Board of Trustees with respect to fund accounting, tax compliance and
financial statement matters. In performing its responsibilities, the Audit
Committee selects and recommends annually to the entire Board of Trustees an
independent registered public accounting firm to audit the books and records of
the Trust for the ensuing year, and reviews with the firm the scope and results
of each audit. The Audit Committee convenes to meet with the independent
registered public accounting firm to review the scope and results of the audit
and to discuss other non-audit matters as requested by the Board’s Chairperson,
the Committee Chairperson or the independent registered public
accounting firm. Mr. Olson is an audit committee financial expert and is
independent for the purpose of the definition of audit committee financial
expert as applicable to the Funds.
- 21 -
The
Governance Committee consists of Messrs. Olson, Masterson (Chairperson) and
Vitale. The functions performed by the Governance Committee include, among
other things, selecting and nominating candidates to serve as non-interested
Trustees, reviewing and making recommendations regarding Trustee compensation
and developing policies regarding Trustee education. As stated above, each
Trustee holds office for an indefinite term until the occurrence of certain
events. In filling Board vacancies, the Governance Committee will consider
nominees recommended by shareholders. Nominee recommendations should be
submitted to the Trust at its mailing address stated in the Funds’ Prospectuses
and should be directed to the attention of NETS Trust Governance Committee.
TRUSTEE OWNERSHIP OF FUND SHARES
The
following table shows the dollar range of shares of the Funds owned by each
Trustee in the NETS™ Funds and other registered investment companies overseen
by the Trustees in the NETS™ Family of Investment Companies.
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Information as of December 31, 2007
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Name of Non-
Interested Trustee
|
|
Dollar Range of Equity Securities in each Fund
|
|
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Companies Overseen by Trustee in
Family of Investment Companies *
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Theodore A. Olson
|
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$
|
0
|
|
$
|
0
|
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Ralph F. Vitale
|
|
$
|
0
|
|
$
|
0
|
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John J. Masterson
|
|
$
|
0
|
|
$
|
0
|
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Name of Interested
Trustee
|
|
Dollar Range of Equity Securities in each Fund
|
|
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Companies Overseen by Trustee in
Family of Investment Companies *
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Michael A. Vardas, Jr.
|
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$
|
0
|
|
$
|
0
|
|
* The Family of
Investment Companies consists only of the NETS Trust.
TRUSTEE COMPENSATION
The
Trust pays each Trustee who is not an officer, director or employee of Northern
Trust Corporation or its subsidiaries annual fees for his or her services as a
Trustee of the Trust and as a member of Board committees, plus additional fees
for Board and Committee meetings attended by such Trustee. In recognition of
their services, the fees paid to the Board and Committee chairpersons are
larger than the fees paid to other members of the Trust’s Board and Committees.
The Trustees also are reimbursed for travel expenses incurred in connection
with attending such meetings. The Trust also may pay the incidental costs of a
Trustee to attend training or other types of conferences relating to the
investment company industry. The Trust does not provide pension or retirement
benefits to its Trustees.
The
Trust’s officers do not receive fees from the Trust for services in such
capacities. Northern Trust Investments, N.A. and/or its affiliates, of which
Messrs. Carberry, Costello, Ewing, Grossman, Rakvin, Schoenfeld, and Vardas are
officers, receive fees from the Trust as Investment Adviser.
- 22 -
Drinker
Biddle & Reath LLP, of which Ms. McCarthy is a partner, receives fees from
the Trust for legal services.
CODE OF
ETHICS
The
Trust, its Investment Adviser and principal underwriter have adopted codes of
ethics (the “Codes of Ethics”) under Rule 17j-1 of the 1940 Act. The Codes of
Ethics permit personnel, subject to the Codes of Ethics and their provisions,
to invest in securities, including securities that may be purchased or held by
the Trust.
INVESTMENT
ADVISER
Northern
Trust Investments, N.A. (“NTI” or “Investment Adviser”), a subsidiary of The
Northern Trust Company (“TNTC”), serves as the investment adviser of the Funds.
TNTC is a direct wholly-owned subsidiary of Northern Trust Corporation, a
financial holding company. NTI is located at 50 South LaSalle Street, Chicago,
Illinois 60603. Unless otherwise indicated, NTI and TNTC are referred to
collectively in this Additional Statement as “Northern Trust.”
NTI
is an investment adviser registered under the Investment Advisers Act of 1940.
It primarily manages assets for defined contribution and benefit plans,
investment companies and other institutional investors. TNTC is an Illinois
state chartered banking organization and a member of the Federal Reserve
System. Formed in 1889, it administers and manages assets for individuals,
personal trusts, defined contribution and benefit plans and other institutional
and corporate clients. It is the principal subsidiary of Northern Trust
Corporation.
Northern
Trust is one of the nation’s leading providers of trust and investment
management services. Northern Trust is one of the largest banking organizations
in the United States. Northern Trust believes it has built its organization by
serving clients with integrity, a commitment to quality and personal attention.
Its stated mission with respect to all its financial products and services is
to achieve unrivaled client satisfaction. With respect to such clients, the
Trust is designed to assist: (i) defined contribution plan sponsors and their
employees by offering a range of diverse investment options to help comply with
404(c) regulation and also may provide educational material to their employees;
(ii) employers who provide post-retirement Employees’ Beneficiary Associations
(“VEBA”) and require investments that respond to the impact of federal
regulations; (iii) insurance companies with the day-to-day management of
uninvested cash balances as well as with longer-term investment needs; and (iv)
charitable and not-for-profit organizations, such as endowments and
foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives. Northern
Trust Corporation, through its subsidiaries, has for more than 100 years
managed the assets of individuals, charitable organizations, foundations and
large corporate investors. As of December 31, 2007, Northern Trust had assets
under custody of $4.1 trillion, and assets under investment management of
$757.2 billion.
The
Trust’s Investment Advisory and Ancillary Services Agreement with the
Investment Adviser (the “Advisory Agreement”) has been approved by the Board of
Trustees, including the “non-interested” Trustees, and the initial shareholder
of the Funds. Under the Advisory Agreement with the Trust, the Investment
Adviser, subject to the general supervision of the Trust’s Board of Trustees,
makes decisions with respect to, and places orders for, all purchases and sales
of portfolio securities for each Fund and also provides certain ancillary
services. The Investment Adviser is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for NETS™ Funds). In
making investment recommendations for the Funds, investment advisory personnel
may not inquire or take into consideration whether issuers of securities
proposed for purchase or sale for the Funds’ accounts are customers of TNTC’s
commercial banking department. These requirements are designed to prevent
investment advisory personnel for the Funds from knowing which companies have
commercial business with TNTC and from purchasing securities where they know
the proceeds will be used to repay loans to the bank. The Advisory Agreement
also provides that in selecting brokers or dealers to place orders for
transactions on (i) common and preferred stocks, the Investment Adviser shall
use its best judgment to obtain the best overall terms available, and (ii) on
bonds and other
- 23 -
fixed income obligations, the Investment Adviser shall
attempt to obtain best net price and execution or use its best judgment to
obtain the best overall terms available.
Transactions
on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. In assessing the best overall
terms available for any transaction, the Investment Adviser considers all
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In evaluating the best
overall terms available and in selecting the broker or dealer to execute a
particular transaction, the Investment Adviser may consider the brokerage and
research services provided to the Funds and/or other accounts over which the
Investment Adviser or an affiliate exercise investment discretion. A broker or
dealer providing brokerage and/or research services may receive a higher
commission than another broker or dealer would receive for the same
transaction. These brokerage and research services may include but are not
limited to, furnishing of advice, either directly or through publications or
writings, as to the value of securities, the advisability of investing in
securities and the availability of securities or purchasers or sellers of
securities. The Investment Adviser also may obtain economic statistics,
forecasting services, industry and company analyses, portfolio strategies,
quantitative data, quotation services, order management systems for certain
purposes, certain news services, credit rating services, testing services,
execution services, market information systems, consulting services from
economists and political analysts, computer software or on-line data feeds.
These services and products may disproportionately benefit other accounts
(“Other Accounts”) over which the Investment Adviser or its affiliates exercise
investment discretion. For example, research or other services paid for through
the Funds’ commissions may not be used in managing the Funds. In addition,
Other Accounts may receive the benefit, including disproportionate benefits, of
economies of scale or price discounts in connection with products or services
that may be provided to the Funds and to such Other Accounts. To the extent
that the Investment Adviser uses soft dollars, it will not have to pay for
those products or services itself. The Investment Adviser may receive research
that is bundled with the trade execution, clearing, and/or settlement services
provided by a particular broker-dealer. In that event, the research will
effectively be paid for by client commissions that will also be used to pay for
execution, clearing and settlement services provided by the broker-dealer and
will not be paid by the Investment Adviser.
Northern
Trust and its affiliates may also receive products and services that provide
both research and non-research benefits to them (“mixed-use items”). The
research portion of mixed-use items may be paid for with soft dollars. When
paying for the research portion of mixed-use items with soft dollars, Northern
Trust makes a good faith allocation between the cost of the research portion
and the cost of the non-research portion of the mixed-use items. Northern Trust
will pay for the non-research portion of the mixed-use items with hard dollars.
Supplemental
research information so received is in addition to, and not in lieu of,
services required to be performed by the Investment Adviser and does not reduce
the advisory fees payable to the Investment Adviser by the Funds. The Trustees
will periodically review the commissions paid by the Funds to consider whether
the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Funds. It is possible
that certain of the supplemental research or other services received will
primarily benefit one or more other investment companies or other accounts for
which investment discretion is exercised. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
Transactions
on U.S. stock exchanges, and increasingly equity securities traded
over-the-counter, involve the payment of negotiated brokerage commissions and
the cost of transactions may vary among different brokers. Over-the-counter
transactions in equity securities also may involve the payment of negotiated
commissions to brokers. Transactions on foreign stock exchanges involve payment
for brokerage commissions, which generally are fixed by applicable regulatory
bodies. Many over-the-counter issues, including corporate debt and government
securities, are normally traded on a “net” basis (
i.e.
, without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. With respect to over-the-counter transactions, the Investment
Adviser will often deal directly with dealers who make a market in the
instruments involved except in those circumstances where more favorable prices
and execution are available elsewhere. The cost of foreign and domestic
- 24 -
securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer’s markup or markdown.
The
Funds may participate, if and when practicable, in bidding for the purchase of
portfolio securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Funds will
engage in this practice, however, only when the Investment Adviser believes
such practice to be in the Funds’ interests.
On
occasions when the Investment Adviser deems the purchase or sale of a security
to be in the best interests of a Fund as well as other fiduciary or agency
accounts managed by it (including any other Fund, investment company or account
for which Northern Trust acts as adviser), the Advisory Agreement provides that
the Investment Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased for such Fund
with those to be sold or purchased for such other accounts in order to obtain
the best net price and execution. In such an event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Investment Adviser in the manner it considers
to be most equitable and consistent with its fiduciary obligations to the Fund
and other accounts involved. In some instances, this procedure may adversely
affect the size of the position obtainable for the Fund or the amount of the
securities that are able to be sold for the Fund. To the extent that the
execution and price available from more than one broker or dealer are believed
to be comparable, the Agreement permits the Investment Adviser, at its
discretion but subject to applicable law, to select the executing broker or
dealer on the basis of the Investment Adviser’s opinion of the reliability and
quality of the broker or dealer.
The
Advisory Agreement provides that the Investment Adviser may render similar
services to others so long as its services under the Advisory Agreement are not
impaired thereby. The Advisory Agreement also provides that the Trust will
indemnify the Investment Adviser against certain liabilities (including
liabilities under the federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Advisory Agreement) or, in lieu thereof, contribute to resulting losses.
The Advisory Agreement provides that the Investment Adviser shall not be subject
to any liability in connection with the performance of its services thereunder
in absence of willful malfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Pursuant
to the Advisory Agreement, the Investment Adviser is responsible for all
expenses of the Funds, except for the fee payments under the Investment
Advisory Agreement, interest expenses, brokerage commissions and other trading
expenses, fees and expenses of the independent trustees, taxes and other
extraordinary costs such as litigation and other expenses not incurred in the
ordinary course of business. For its services to each Fund, the Investment
Adviser is entitled to an advisory fee, computed daily and payable monthly, at
annual rates set forth in the table below (expressed as a percentage of each
Fund’s respective average daily net assets).
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|
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|
|
FUND
|
|
ADVISORY
FEE
|
|
|
|
|
NETS™ BOVESPA Index Fund
(Brazil)
|
|
0.65%
|
|
NETS™ FTSE All-World Canada
Index Fund
|
|
0.47%
|
|
NETS™ IPC
®
Index Fund (Mexico)
|
|
0.47%
|
|
NETS™ OMXS30 Index Fund
(Sweden)
|
|
0.47%
|
|
NETS™ SLI Index Fund
(Switzerland)
|
|
0.47%
|
|
NETS™ FTSE CNBC Global 300
Index Fund
|
|
0.43%
|
Unless
sooner terminated, the Trust’s Advisory Agreement will continue in effect with
respect to a particular Fund until February 26, 2010, and thereafter for
successive 12-month periods, provided that the continuance is approved at least
annually (i) by the vote of a majority of the Trustees who are not parties to
the agreement or “interested persons” (as such term is defined in the 1940 Act)
of any party thereto, cast in person at a meeting called for the purpose of
voting on such approval and (ii) by the Trustees or by the vote of a majority
of the outstanding shares of such Fund (as defined under “Description of
Shares”). The Advisory Agreement is terminable
- 25 -
at any time without penalty by the Trust (by specified
Trustee or shareholder action) or by the Investment Adviser on 60 days’ written
notice.
The
Board’s considerations regarding approval of the Advisory Agreement for the
Funds will be included in the Funds’ Annual Report to Shareholders for the
period ending October 31, 2008.
Under
a Service Mark License Agreement (the “License Agreement”) with NETS Trust,
Northern Trust Corporation agrees that the name “NETS” may be used in
connection with the Trust’s business on a royalty-free basis. Northern Trust
Corporation has reserved to itself the right to grant the non-exclusive right
to use the name “NETS” to any other person. The License Agreement provides that
at such time as the Agreement is no longer in effect, the Trust will cease
using the name “NETS.”
PORTFOLIO
MANAGERS
Accounts Managed by the Portfolio Manager
The
following table describes certain information with respect to accounts for
which the portfolio manager has day-to-day responsibility, including all NETS™
Funds managed by the portfolio manager.
The
table below discloses accounts within each type of category listed below for
which Shaun Murphy was jointly and primarily responsible for day-to-day
portfolio management as of March 31, 2008.
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
Type of Accounts
|
|
Total
Number of
Accounts
Managed
|
|
Total Assets
(in Millions)
|
|
Number of
Accounts Managed
with Advisory Fee
Based on
Performance
|
|
Total Assets with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment Companies:
|
|
6
|
|
|
$
|
3,591.8
|
|
0
|
|
|
0
|
|
|
|
Other Pooled Investment Vehicles:
|
|
15
|
|
|
$
|
13,682.1
|
|
0
|
|
|
0
|
|
|
|
Other Accounts:
|
|
23
|
|
|
$
|
42,029.2
|
|
0
|
|
|
0
|
|
|
The table below discloses accounts within each type of category listed
below for which Chad M. Rakvin was jointly and primarily responsible for
day-to-day portfolio management as of March 31, 2008.
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|
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|
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|
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|
|
|
|
|
|
|
|
|
Type of Accounts
|
|
Total
Number of
Accounts
Managed
|
|
Total Assets
(in Millions)
|
|
Number of
Accounts Managed
with Advisory Fee
Based on
Performance
|
|
Total Assets with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment Companies:
|
|
26
|
|
|
$
|
18,718.3
|
|
0
|
|
|
0
|
|
|
|
Other Pooled Investment Vehicles:
|
|
45
|
|
|
$
|
69,519.5
|
|
0
|
|
|
0
|
|
|
|
Other Accounts:
|
|
98
|
|
|
$
|
95,080.7
|
|
0
|
|
|
0
|
|
|
The table below discloses accounts within each type of category listed
below for which Brent Reeder was jointly and primarily responsible for
day-to-day portfolio management as of March 31, 2008.
- 26 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Accounts
|
|
Total
Number of
Accounts
Managed
|
|
Total Assets
(in Millions)
|
|
Number of
Accounts Managed
with Advisory Fee
Based on
Performance
|
|
Total Assets with
Advisory Fee
Based on
Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered Investment Companies:
|
|
20
|
|
|
$
|
14,520.1
|
|
0
|
|
|
0
|
|
|
|
Other Pooled Investment Vehicles:
|
|
30
|
|
|
$
|
55,837.4
|
|
0
|
|
|
0
|
|
|
|
Other Accounts:
|
|
75
|
|
|
$
|
53,051.6
|
|
0
|
|
|
0
|
|
|
Material
Conflicts of Interest
The
Investment Adviser’s portfolio managers are often responsible for managing one
or more NETS portfolio, as well as other accounts, including separate accounts
and other pooled investment vehicles. A portfolio manager may manage a separate
account or other pooled investment vehicle that may have a materially higher or
lower fee arrangement with the Investment Adviser than the Funds. The
side-by-side management of these accounts may raise potential conflicts of
interest relating to cross trading, the allocation of investment opportunities
and the aggregation and allocation of trades. In addition, while portfolio
managers generally only manage accounts with similar investment strategies, it
is possible that, due to varying investment restrictions among accounts and for
other reasons, certain investments could be made for some accounts and not
others or conflicting investment positions could be taken among accounts. The
Investment Adviser has a fiduciary responsibility to manage all client accounts
in a fair and equitable manner. It seeks to provide best execution of all
securities transactions and aggregate and then allocate securities to client
accounts in a fair and timely manner. To this end, the Investment Adviser has
developed policies and procedures designed to mitigate and manage the potential
conflicts of interest that may arise from side-by-side management. In addition,
the Investment Adviser and the Trust have adopted policies limiting the
circumstances under which cross-trades may be effected between the Funds and
another client account. The Investment Adviser conducts periodic reviews of
trades for consistency with these policies.
The
Investment Adviser will give advice and make investment decisions for the Funds
as it believes is in the fiduciary interests of the Funds. The advice or
investment decisions made for the Funds may differ from, and may conflict with,
advice given or investment decisions made for the Investment Adviser or its
affiliates or for other funds or accounts managed by the Investment Adviser or
its affiliates. For example, other funds or accounts managed by the Investment
Adviser or its affiliates may sell short securities of an issuer in which the
Funds have taken, or will take, a long position. That short sale may result in
impairment of the price of the security that the Funds hold. Conversely, a Fund
may establish a short position in a security and another account of the
Investment Adviser or fund may buy that same security. That subsequent purchase
may result in an increase of the price of the underlying position in the short
sale exposure of the Funds and such increase in price would be to the Funds’
detriment. Conflicts may also arise because portfolio decisions regarding a
Fund may benefit the Investment Adviser or its affiliates or another account or
fund managed by the Investment Adviser or its affiliates. For example, the sale
of a long position or establishment of a short position by a Fund may impair
the price of the same security sold short by (and therefore benefit) another
account or fund managed by the Investment Adviser or its affiliates, and the
purchase of a security or covering a short position in a security by a Fund may
increase the price of the same security held by (and therefore benefit) another
account or fund managed by the Investment Adviser or its affiliates. Actions
taken with respect to the Investment Adviser and its affiliates’ other funds or
accounts managed by them may adversely impact the Funds, and actions taken by
the Funds may benefit the Investment Adviser or its affiliates or its other
funds or accounts.
To
the extent permitted by applicable law, the Investment Adviser may make
payments to authorized dealers and other financial intermediaries
(“Intermediaries”) from time to time to promote the Funds. These payments may
be made out of the Investment Adviser’s assets, or amounts payable to the
Investment Adviser rather than a separately identifiable charge to the Funds.
These payments may compensate Intermediaries for, among other things: marketing
the Funds; access to the Intermediaries’ registered representatives or
salespersons, including at
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conferences and other meetings; assistance in training
and education of personnel; marketing support; and/or other specified services
intended to assist in the distribution and marketing of the Funds. The payments
may also, to the extent permitted by applicable regulations, contribute to
various non-cash and cash incentive arrangements to promote certain products,
as well as sponsor various educational programs and sales contests.
Portfolio
Manager Compensation Structure
The
compensation for the portfolio managers of the Funds is based on the
competitive marketplace and consists of a fixed base salary plus a variable
annual cash incentive award. In addition, non-cash incentives, such as stock
options or restricted stock of Northern Trust Corporation, may be awarded from
time to time. The annual incentive award is discretionary and is based on a
quantitative and qualitative evaluation of each portfolio manager’s investment
performance and contribution to his or her respective team plus the financial
performance of the investment business unit and Northern Trust Corporation as a
whole. The annual incentive award is not based on performance of the Funds or
the amount of assets held in the Funds. Moreover, no material differences exist
between the compensation structure for mutual fund accounts and other types of
accounts.
Disclosure
of Securities Ownership
As
of the date of this Additional Statement, no shares of the Funds were
outstanding and the Fund’s portfolio manager
s
did not beneficially own
any shares of the Fund.
PROXY VOTING
The
Trust has delegated the voting of portfolio securities to its Investment
Adviser. The Investment Adviser has adopted proxy voting policies and
procedures (the “Proxy Voting Policy”) for the voting of proxies on behalf of
client accounts for which the Investment Adviser has voting discretion,
including the Funds. Under the Proxy Voting Policy, shares are to be voted in
the best interests of the Funds.
A
Proxy Committee comprised of senior investment and compliance officers of the
Investment Adviser has adopted certain guidelines (the “Proxy Guidelines”)
concerning various corporate governance issues. The Proxy Committee has the
responsibility for the content, interpretation and application of the Proxy
Guidelines and may apply these Proxy Guidelines with a measure of flexibility.
The Investment Adviser has retained an independent third party (the “Service
Firm”) to review proxy proposals and to make voting recommendations to the
Proxy Committee in a manner consistent with the Proxy Guidelines.
The
Proxy Guidelines provide that the Investment Adviser will generally vote for or
against various proxy proposals, usually based upon certain specified criteria.
As an example, the Proxy Guidelines provide that the Investment Adviser will
generally vote in favor of proposals to:
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repeal existing classified boards and elect
directors on an annual basis;
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adopt a written majority voting or withhold policy
(in situations in which a company has not previously adopted such a policy);
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lower supermajority shareholder vote requirements
for charter and bylaw amendments;
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lower supermajority shareholder vote requirements
for mergers and other business combinations;
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increase common share authorizations for a stock
split;
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implement a reverse stock split; and
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approve an ESOP or other broad based employee stock
purchase or ownership plan, or increase authorized shares for existing plans.
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The Proxy Guidelines also provide that the Investment
Adviser will generally vote against proposals to:
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classify the board of directors;
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require that poison pill plans be submitted for
shareholder ratification;
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adopt dual class exchange offers or dual class
recapitalizations;
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require a supermajority shareholder vote to approve
mergers and other significant business combinations;
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require a supermajority shareholder vote to approve
charter and bylaw amendments; and
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adopt certain social and environmental proposals
deemed unwarranted by the company’s board of directors.
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In certain circumstances, the Proxy Guidelines provide
that proxy proposals will be addressed on a case-by-case basis, including those
regarding executive and director compensation plans, mergers and acquisitions,
ratification of poison pill plans, a change in the company’s state of
incorporation and an increase in authorized common stock.
Except
as otherwise provided in the Proxy Voting Policy, the Proxy Committee may vote
proxies contrary to the recommendations of the Service Firm if it determines
that such action is in the best interest of the Fund. In exercising its
discretion, the Proxy Committee may take into account a variety of factors
relating to the matter under consideration, the nature of the proposal and the
company involved. As a result, the Proxy Committee may vote in one manner in
the case of one company and in a different manner in the case of another where,
for example, the past history of the company, the character and integrity of
its management, the role of outside directors, and the company’s record of
producing performance for investors justifies a high degree of confidence in
the company and the effect of the proposal on the value of the investment.
Similarly, poor past performance, uncertainties about management and future
directions, and other factors may lead the Proxy Committee to conclude that
particular proposals present unacceptable investment risks and should not be
supported. The Proxy Committee also evaluates proposals in context. A
particular proposal may be acceptable standing alone, but objectionable when
part of an existing or proposed package. Special circumstances may also justify
casting different votes for different clients with respect to the same proxy
vote.
The
Investment Adviser may occasionally be subject to conflicts of interest in the
voting of proxies due to business or personal relationships with persons having
an interest in the outcome of certain votes. For example, the Investment
Adviser may provide trust, custody, investment management, brokerage,
underwriting, banking and related services to accounts owned or controlled by
companies whose management is soliciting proxies. Occasionally, the Investment
Adviser may also have business or personal relationships with other proponents
of proxy proposals, participants in proxy contests, corporate directors or
candidates for directorships. The Investment Adviser may also be required to
vote proxies for securities issued by Northern Trust Corporation or its
affiliates or on matters in which the Investment Adviser has a direct financial
interest, such as shareholder approval of a change in the advisory fees paid by
a Fund. The Investment Adviser seeks to address such conflicts of interest through
various measures, including the establishment, composition and authority of the
Proxy Committee and the retention of the Service Firm to perform proxy review
and vote recommendation functions. The Proxy Committee has the responsibility
to determine whether a proxy vote involves a conflict of interest and how the
conflict should be addressed in conformance with the Proxy Voting Policy. The
Proxy Committee may resolve such conflicts in any of a variety of ways,
including without limitation the following: voting in accordance with the Proxy
Guideline based recommendation of the Service Firm; voting in accordance with
the recommendation of an independent fiduciary appointed for that purpose;
voting pursuant to client direction by seeking instructions from the Board of
Trustees; or by voting pursuant to a “mirror voting” arrangement under which
shares are voted in the same manner and proportion as shares over which the
Investment Adviser does not have voting discretion. The method selected by the
Proxy Committee may vary depending upon the facts and circumstances of each
situation.
The
Investment Adviser may choose not to vote proxies in certain situations. This
may occur, for example, in situations where the exercise of voting rights could
restrict the ability to freely trade the security in question (as is the case,
for example, in certain foreign jurisdictions known as “blocking markets”). In
circumstances in which the Service Firm does not provide recommendations for a
particular proxy, the Proxy Committee may obtain recommendations from analysts
at the Investment Adviser who review the issuer in question or the industry in
general. The Proxy Committee will apply the Proxy Guidelines as discussed above
to any such recommendation.
This
summary of the Trust’s Proxy Voting Policies and Proxy Guidelines is also
posted in the resources section of the Trust’s website. You may also obtain,
upon request and without charge, a paper copy of the Trust’s Proxy Voting
Policies and Proxy Guidelines or a Statement of Additional Information by
calling 866/928-NETS.
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Information
regarding how the Funds voted proxies, if any, relating to portfolio securities
for the most recent 12 month period ended June 30 will be available, without charge,
upon request, by contacting the Adviser or by visiting the SEC’s Website.
ADMINISTRATOR
JP
Morgan Investor Services Co. (the “Administrator”), 73 Tremont Street, Floor
11, Boston, MA 02108, acts as Administrator for the Funds under a Fund Service
Agreement with the Trust. Subject to the general supervision of the Trust’s
Board of Trustees, the Administrator provides supervision of all aspects of the
Trust’s non-investment advisory operations and performs various administration,
compliance, accounting and regulatory services, including but not limited to:
(i) providing office facilities and furnishing corporate officers for the
Trust; (ii) coordination, preparation and review of financial statements; (iii)
monitoring compliance with federal tax and securities laws; (iv) performing
certain functions ordinarily performed by the office of a corporate treasurer,
and furnishing the services and facilities ordinarily incident thereto, such as
expense accrual monitoring and payment of the Trust’s bills, preparing monthly
reconciliation of the Trust’s expense records, updating projections of annual
expenses, preparing materials for review by the Board of Trustees and
compliance testing; (v) maintaining the Trust books and records in accordance
with applicable statutes, rules and regulations; (vi) preparing post-effective
amendments to the Trust’s registration statement; (vii) calculating each Fund’s
NAV; (viii) accounting for dividends and interest received and distributions
made by the Trust; and (ix) preparing and filing the Trust’s federal and state
tax returns (other than those required to be filed by the Trust’s Custodian and
Transfer Agent) and providing shareholder tax information to the Trust’s
Transfer Agent.
Subject
to the limitations described below, as compensation for their administrative
services and the assumption of related expenses, the Administrator is entitled
to asset-based fees in the amount of .015% of assets under management for
accounting services, .025% of assets under management for administration and
compliance services, as well as other non-asset based annual fees for
regulatory services. The initial term of the Administration Agreement is three
years. The Trust may terminate the Administration Agreement during the initial
term on sixty days written notice to the Administrator and upon payment of a
termination fee equal to thirty six minus the number of months elapsed since
the date the Administrator commenced providing services under the
Administration Agreement times the average monthly fees paid during the
six-month period prior to the Trust’s notice of termination. Following the
initial term the Trust may terminate the agreement on sixty days notice. Under
the Advisory Agreement, the Investment Adviser has contractually assumed the
Trust’s obligation to pay the fees of the Administrator.
DISTRIBUTOR
The
Trust has entered into a Distribution Agreement under which Foreside Fund
Services, LLC (“Foreside”), with principal offices at Three Canal Plaza, Suite 100, Portland,
ME, 04101, as agent, receives orders to create and redeem shares in Creation
Unit Aggregations and transmits such orders to the Trust’s Custodian
and Transfer Agent. Foreside is a wholly-owned subsidiary of Foreside Financial
Group, LLC. The Distributor has no obligation to sell any specific quantity
of Fund shares. Foreside bears the following costs and expenses relating
to the distribution of shares: (i) the costs of processing and maintaining
records of creations of Creation Units; (ii) all costs of maintaining the
records required of a registered broker/dealer; (iii) the expenses of maintaining
its registration or qualification as a dealer or broker under federal or
state laws; (iv) filing fees; and (v) all other expenses incurred in connection
with the distribution services as contemplated in the Distribution Agreement.
No compensation is payable by the Trust to Foreside for such distribution
services. The Distribution Agreement provides that the Trust will indemnify
Foreside against certain liabilities relating to untrue statements or omissions
of material fact except those resulting from the reliance on information
furnished to the Trust by Foreside, or those resulting from the willful misfeasance,
bad faith or gross negligence of Foreside, or Foreside’s reckless disregard
of its duties and obligations under the Distribution Agreement. The Distributor,
its affiliates and officers have no role in determining the investment policies
or which securities are to be purchased or sold by the Trust or its Funds.
The Distributor is not affiliated with the Trust, NTI or any stock exchange.
- 30 -
Additionally,
NTI or its affiliates may, from time to time, and from its own resources, pay,
defray or absorb costs relating to distribution, including payments out of its
own resources to the Distributor or to otherwise promote the sale of shares.
Principal Financial
Officer/Treasurer
Services Agreement
The
Trust has entered into a Principal Financial Officer/ Treasurer Services
Agreement (“PFO Agreement”) with Foreside, pursuant to which Foreside provides
the Trust with the services of Trudance L.C. Bakke to serve as the Trust’s
Principal Financial Officer and Treasurer. Foreside is entitled to receive an
annual flat fee and reimbursement for certain out-of-pocket expenses incurred
by Foreside in providing services to the Trust under the PFO Agreement.
Pursuant to the Advisory Agreement, the Investment Adviser has contractually
assumed the Trust’s obligation to pay the fees due under the PFO Agreement.
T
RANSFER AGENT
Under
its Agency Services Agreement with the Trust, JP Morgan Chase Bank, NA
(“Transfer Agent”) as Transfer Agent has undertaken to perform some or all of
the following services: (i) perform and facilitate the performance of purchases
and redemptions of Creation Units; (ii) prepare and transmit payments for dividends
and distributions; (iii) maintain shareholder records; (iv) record the issuance
of shares and maintain records of the number of authorized shares; (v) prepare
and transmit information regarding purchases and redemptions of shares; (vi)
communicate information regarding purchases and redemptions of shares and other
relevant information to appropriate parties; (vii) maintain required books and
records; and (viii) perform other customary services of a transfer agent and
dividend disbursing agent for an ETF (exchange traded fund).
As
compensation for the services rendered by the Transfer Agent under the Agency
Services Agreement the Transfer Agent is entitled to certain expenses as
provided under the Agency Services Agreement and asset-based fees which are
payable monthly. The initial term of the Agency Services Agreement is three
years. The Trust may terminate the Agency Services Agreement during the initial
term on sixty days written notice to the Transfer Agent and upon payment of a
termination fee equal to thirty-six minus the number of months elapsed since
the date the Transfer Agent commenced providing services under the Agency
Services Agreement times the average monthly fees paid during the six-month
period prior to the Trust’s notice of termination. Following the initial term
the Trust may terminate the agreement on sixty days notice. Under the Advisory
Agreement, the Investment Adviser has contractually assumed the Trust’s
obligation to pay the fees of the Transfer Agent.
C
USTODIAN
Under
its Domestic Custody Agreement and the Global Custody Rider with the Trust, JP
Morgan Chase Bank, NA (the “Custodian”) (i) holds each Fund’s cash and
securities; (ii) maintains such cash and securities in separate accounts in the
name of each Fund; (iii) receives, delivers and releases securities on behalf
of each Fund; (iv) collects and receives all income, principal and other
payments in respect of each Fund’s investments held by the Custodian; and (v)
maintains a statement of account for each account of the Trust. The Custodian
may employ one or more sub-custodians, provided that the Custodian, shall be
liable for direct losses due to the sub-custodian’s insolvency or the
sub-custodian’s failure to use reasonable care, fraud or willful default in the
provision of its services. The Custodian will enter into agreements with
financial institutions and depositories located in foreign countries with
respect to the custody of the Funds’ foreign securities.
As
compensation for the services rendered under the Domestic Custody Agreement and
Global Custody Rider with respect to the Trust by the Custodian to each Fund,
the Custodian is entitled to fees and reasonable out-of-pocket expenses. The
initial term of the Domestic Custody Agreement and Global Custody Rider is
three years. The Trust may terminate the Domestic Custody Agreement and the
Global Custody Rider during the initial term on sixty days written notice to
the Custodian and upon payment of a termination fee equal to thirty-six minus
the number of months elapsed since the date the Custodian commenced providing
services under the Domestic Custody Agreement and the Global Custody Rider
times the average monthly fees paid during the six-month period prior to the
Trust’s notice of termination. Following the initial term the Trust may
terminate the agreement on sixty days
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notice. Under
the Advisory Agreement, the Investment Adviser has contractually assumed the
Trust’s obligation to pay the fees of the Custodian.
D
ESCRIPTION OF
SHARES
The
Declaration of Trust of the Trust (the “Declaration”) permits the Trust’s Board
of Trustees to issue an unlimited number of full and fractional shares of
beneficial interest of one or more separate series representing interests in
one or more investment portfolios. The Trustees or Trust may create additional
series and each series may be divided into classes.
Under
the terms of the Declaration, each share of each Fund has a par value of
$0.0001, which represents a proportionate interest in the particular Fund with
each other share of its class in the same Fund and is entitled to such
dividends and distributions out of the income belonging to the Fund as are
authorized by the Trustees and declared by the Trust. Upon any liquidation of a
Fund, shareholders of each class of a Fund are entitled to share pro rata in
the net assets belonging to that class available for distribution. Shares do
not have any preemptive or conversion rights. The right of redemption is
described under “About Your Account” in the Prospectuses. In addition, pursuant
to the terms of the 1940 Act, the right of a shareholder to redeem shares and
the date of payment by a Fund may be suspended for more than seven days (i) for
any period during which the New York Stock Exchange is closed, other than the
customary weekends or holidays, or trading in the markets the Fund normally
utilizes is closed or is restricted as determined by the SEC, (ii) during any
emergency, as determined by the SEC, as a result of which it is not reasonably
practicable for the Fund to dispose of instruments owned by it or fairly to
determine the value of its net assets, or (iii) for such other period as the
SEC may by order permit for the protection of the shareholders of the Fund. The
Trust also may suspend or postpone the recording of the transfer of its shares
upon the occurrence of any of the foregoing conditions. In addition, shares of
each Fund are redeemable at the unilateral option of the Trust. The Declaration
permits the Board to alter the number of shares constituting a Creation Unit or
to specify that shares of beneficial interest of the Trust may be individually
redeemable. Shares when issued as described in the Prospectuses are validly
issued, fully paid and nonassessable. In the interests of economy and
convenience, certificates representing shares of the Funds are not issued.
Following
the creation of the initial Creation Unit Aggregation(s) of a Fund and
immediately prior to the commencement of trading in such Fund’s shares, a
holder of shares may be a “control person” of the Fund, as defined in the 1940
Act. A Fund cannot predict the length of time for which one or more
shareholders may remain a control person of the Fund.
The
proceeds received by each Fund for each issue or sale of its shares, and all
net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors of that Fund, will be specifically
allocated to and constitute the underlying assets of that Fund. The underlying
assets of each Fund will be segregated on the books of account, and will be
charged with the liabilities in respect to that Fund and with a share of the
general liabilities of the Trust. Expenses with respect to the Funds normally
are allocated in proportion to the NAV of the respective Funds except where
allocations of direct expenses can otherwise be fairly made.
Shareholders
are entitled to one vote for each full share held and proportionate fractional
votes for fractional shares held. Each Fund and other Funds of the Trust
entitled to vote on a matter will vote in the aggregate and not by Fund, except
as required by law or when the matter to be voted on affects only the interests
of shareholders of a particular Fund.
Rule
18f-2 under the 1940 Act provides that any matter required by the provisions of
the 1940 Act or applicable state law, or otherwise, to be submitted to the
holders of the outstanding voting securities of an investment company such as
the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each
investment portfolio affected by such matter. Rule 18f-2 further provides that
an investment portfolio shall be deemed to be affected by a matter unless the
interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement, a
distribution plan subject to Rule 12b-1 under the 1940 Act or any change in a
fundamental investment policy would be effectively acted upon
- 32 -
with respect
to an investment portfolio only if approved by a majority of the outstanding
shares of such investment portfolio. However, the Rule also provides that the
ratification of the appointment of independent accountants, the approval of
principal underwriting contracts and the election of Trustees are exempt from
the separate voting requirements stated above.
The
Trust is not required to hold annual meetings of shareholders and does not
intend to hold such meetings. In the event that a meeting of shareholders is
held, each share of the Trust will be entitled, as determined by the Trustees
without the vote or consent of shareholders, either to one vote for each share
or to one vote for each dollar of NAV represented by such shares on all matters
presented to shareholders, including the election of Trustees (this method of
voting being referred to as “dollar-based voting”). However, to the extent
required by the 1940 Act or otherwise determined by the Trustees, series and
classes of the Trust will vote separately from each other. Shareholders of the
Trust do not have cumulative voting rights in the election of Trustees and,
accordingly, the holders of more than 50% of the aggregate voting power of the
Trust may elect all of the Trustees, irrespective of the vote of the other
shareholders. Meetings of shareholders of the Trust, or any series or class
thereof, may be called by the Trustees or upon the written request of holders
of at least a majority of the shares entitled to vote at such meeting. The
shareholders of the Trust will have voting rights only with respect to the
limited number of matters specified in the Declaration and such other matters
as the Trustees may determine or may be required by law.
The
Declaration authorizes the Trustees, without shareholder approval (except as
stated in the next paragraph), to cause the Trust, or any series thereof, to
merge or consolidate with any corporation, association, trust or other
organization or sell or exchange all or substantially all of the property
belonging to the Trust, or any series thereof. In addition, the Trustees,
without shareholder approval, may adopt a “master-feeder” structure by
investing substantially all of the assets of a series of the Trust in the
securities of another open-end investment company or pooled portfolio.
The
Declaration also authorizes the Trustees, in connection with the termination or
other reorganization of the Trust or any series or class by way of merger,
consolidation, the sale of all or substantially all of the assets, or
otherwise, to classify the shareholders of any class into one or more separate
groups and to provide for the different treatment of shares held by the
different groups, provided that such termination or reorganization is approved
by a majority of the outstanding voting securities (as defined in the 1940 Act)
of each group of shareholders that are so classified.
The
Declaration permits the Trustees to amend the Declaration without a shareholder
vote. However, shareholders of the Trust have the right to vote on any
amendment: (i) that would adversely affect the voting rights of shareholders
specified in the Declaration; (ii) that is required by law to be approved by
shareholders; (iii) to the amendment section of the Declaration; or (iv) that
the Trustees determine to submit to shareholders.
The
Declaration permits the termination of the Trust or of any series or class of
the Trust: (i) by a majority of the affected shareholders at a meeting of
shareholders of the Trust, series or class; or (ii) by a majority of the
Trustees without shareholder approval if the Trustees determine that such
action is in the best interest of the Trust or its shareholders. The factors
and events that the Trustees may take into account in making such determination
include: (i) the inability of the Trust or any series or class to maintain its
assets at an appropriate size; (ii) changes in laws or regulations governing
the Trust, or any series or class thereof, or affecting assets of the type in
which it invests; or (iii) economic developments or trends having a significant
adverse impact on their business or operations.
In
the event of a termination of the Trust or the Fund, the Board, in its sole
discretion, could determine to permit the shares to be redeemable in
aggregations smaller than Creation Unit Aggregations or to be individually redeemable.
In such circumstance, the Trust may make redemptions in-kind, for cash, or for
a combination of cash or securities.
Under
the Maryland Business Trust Act (the “Maryland Act”), shareholders generally
are not personally liable for the debts or obligations of the Trust. The
Maryland Act entitles shareholders of the Trust to the same limitation of
liability as is available to shareholders of corporations incorporated in the
State of Maryland. However,
- 33 -
no similar
statutory or other authority limiting business trust shareholder liability
exists in many other states. As a result, to the extent that the Trust or a
shareholder is subject to the jurisdiction of courts in such other states,
those courts may not apply Maryland law and may subject the shareholders to
liability. To offset this risk, the Declaration: (i) contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides that notice of such disclaimer may be given in each agreement, obligation
and instrument entered into or executed by the Trust or its Trustees and (ii)
provides for indemnification out of the property of the applicable series of
the Trust of any shareholder held personally liable for the obligations of the
Trust solely by reason of being or having been a shareholder and not because of
the shareholder’s acts or omissions or for some other reason. Thus, the risk of
a shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (i) a court refuses to apply Maryland law; (ii) the
liability arises under tort law or, if not, no contractual limitation of
liability is in effect; and (iii) the applicable series of the Trust is unable
to meet its obligations.
The
Declaration provides that the Trustees will not be liable to any person other
than the Trust or a shareholder and that a Trustee will not be liable for any
act as a Trustee. Additionally, subject to applicable federal law, no person
who is or who has been a Trustee or officer of the Trust shall be liable to the
Trust or to any shareholder for money damages except for liability resulting
from (a) actual receipt of an improper benefit or profit in money, property or
services or (b) active and deliberate dishonesty established by a final
judgment and which is material to the cause of action. However, nothing in the
Declaration protects a Trustee against any liability to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office. The Declaration provides for indemnification of Trustees and
officers of the Trust unless the indemnitee is liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such person’s office.
The
Declaration provides that each shareholder, by virtue of becoming such, will be
held to have expressly assented and agreed to the terms of the Declaration.
The
Declaration provides that a shareholder of the Trust may bring a derivative
action on behalf of the Trust only if the following conditions are met: (i)
shareholders who hold at least 10% of the outstanding shares of the Trust, or
10% of the outstanding shares of the series or class to which such action
relates, must join in the request for the Trustees to commence such action; and
(ii) the Trustees must be afforded a reasonable amount of time to consider such
shareholder request and to investigate the basis of such claim. The Declaration
also provides that no person, other than the Trustees, who is not a shareholder
of a particular series or class shall be entitled to bring any derivative
action, suit or other proceeding on behalf of or with respect to such series or
class. The Trustees will be entitled to retain counsel or other advisers in
considering the merits of the request and will require an undertaking by the
shareholders making such request to reimburse the Trust for the expense of any
such advisers in the event that the Trustees determine not to bring such
action.
The
Trustees may appoint separate Trustees with respect to one or more series or
classes of the Trust’s shares (the “Series Trustees”). To the extent provided
by the Trustees in the appointment of Series Trustees, Series Trustees: (i)
may, but are not required to, serve as Trustees of the Trust or any other
series or class of the Trust; (ii) may have, to the exclusion of any other
Trustee of the Trust, all the powers and authorities of Trustees under the
Declaration with respect to such series or class; and/or (iii) may have no
power or authority with respect to any other series or class.
The
term “majority of the outstanding shares” of either the Trust or a particular
Fund or investment portfolio means, with respect to the approval of an
investment advisory agreement, a distribution plan or a change in a fundamental
investment policy, the vote of the lesser of (i) 67% or more of the shares of
the Trust or such Fund or portfolio present at a meeting, if the holders of
more than 50% of the outstanding shares of the Trust or such Fund or portfolio
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Trust or such Fund or portfolio.
- 34 -
B
OOK-ENTRY ONLY
SYSTEM
The
following information supplements and should be read in conjunction with the
Shareholder Information section in the Prospectuses.
The
Depository Trust Company (“DTC”) Acts
as Securities Depository for the Shares of the Trust. Shares of each
Fund are represented by securities registered in the name of DTC or its nominee
and deposited with, or on behalf of, DTC.
DTC,
a limited-purpose trust company, was created to hold securities of its
participants (the “DTC Participants”) and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities’
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is a
subsidiary of the Depository Trust and Clearing Corporation (“DTCC”), which is
owned by its member firms including international broker/dealers, correspondent
and clearing banks, mutual fund companies and investment banks. Access to the
DTC system is also available to others such as banks, brokers, dealers and
Trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly (the “Indirect Participants”).
Beneficial
ownership of shares is limited to DTC Participants, Indirect Participants and
persons holding interests through DTC Participants and Indirect Participants.
Ownership of beneficial interests in NETS™ shares (owners of such beneficial
interests are referred to herein as “Beneficial Owners”) is shown on, and the
transfer of ownership is effected only through, records maintained by DTC (with
respect to DTC Participants) and on the records of DTC Participants (with
respect to Indirect Participants and Beneficial Owners that are not DTC
Participants). Beneficial Owners will receive from or through the DTC
Participant a written confirmation relating to their purchase of shares. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability of certain investors to acquire beneficial interests in
shares.
Beneficial
Owners of shares are not entitled to have shares registered in their names,
will not receive or be entitled to receive physical delivery of certificates in
definitive form and are not considered the registered holder thereof.
Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC
Participant and any Indirect Participant through which such Beneficial Owner
holds its interests, to exercise any rights of a holder of shares. The Trust
understands that under existing industry practice, in the event the Trust
requests any action of holders of shares, or a Beneficial Owner desires to take
any action that DTC, as the record owner of all outstanding shares, is entitled
to take, DTC would authorize the DTC Participants to take such action and that
the DTC Participants would authorize the Indirect Participants and Beneficial
Owners acting through such DTC Participants to take such action and would
otherwise act upon the instructions of Beneficial Owners owning through them.
As described above, the Trust recognizes DTC or its nominee as the owner of all
shares for all purposes.
Conveyance
of all notices, statements and other communications to Beneficial Owners is
effected as follows. Pursuant to the Depositary Agreement between the Trust and
DTC, DTC is required to make available to the Trust upon request and for a fee
to be charged to the Trust a listing of the share holdings of each DTC
Participant. The Trust shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding shares of the Funds, directly or
indirectly, through such DTC Participant. The Trust shall provide each such DTC
Participant with copies of such notice, statement or other communication, in
such form, number and at such place as such DTC Participant may reasonably
request, in order that such notice, statement or communication may be
transmitted by such DTC Participant, directly or indirectly, to such Beneficial
Owners. In addition, the Trust shall pay to each such DTC Participant a fair
and reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.
Share
distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all shares of the Trust. DTC or its nominee, upon receipt
of any such distributions, shall credit immediately DTC Participants’
- 35 -
accounts with
payments in amounts proportionate to their respective beneficial interests in
shares as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a “street name,” and will be the
responsibility of such DTC Participants. The Trust has no responsibility or
liability for any aspects of the records relating to or notices to Beneficial
Owners, or payments made on account of beneficial ownership interests in such
shares, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests or for any other aspect of the relationship
between DTC and the DTC Participants or the relationship between such DTC
Participants and the Indirect Participants and Beneficial Owners owning through
such DTC Participants.
DTC
may determine to discontinue providing its service with respect to shares of
the Trust at any time by giving reasonable notice to the Trust and discharging
its responsibilities with respect thereto under applicable law. Under such
circumstances, the Trust shall take action either to find a replacement for DTC
to perform its functions at a comparable cost or, if such a replacement is
unavailable, to issue and deliver printed certificates representing ownership
of shares, unless the Trust makes other arrangements with respect thereto
satisfactory to the Listing Exchange on which shares are listed.
P
URCHASE AND REDEMPTION OF CREATION
UNITS
C
REATION UNIT
AGGREGATIONS
The
Trust issues and sells shares of each Fund only in Creation Unit Aggregations.
The Board reserves the right to declare a split or a consolidation in the
number of shares outstanding of any Fund of the Trust, and to make a
corresponding change in the number of shares constituting a Creation Unit, in
the event that the per share price in the secondary market rises (or declines)
to an amount that falls outside the range deemed desirable by the Board.
P
URCHASE AND
ISSUANCE OF CREATION UNIT AGGREGATIONS
G
eneral.
The
Trust issues and sells shares of each Fund only in Creation Units on a
continuous basis through the Distributor, without a sales load, at the Fund’s
NAV next determined after receipt, on any Business Day (as defined herein), of
an order in proper form.
A
“Business Day” with respect to each Fund is any day on which the NYSE, the
Fund’s Listing Exchange and the Fund’s Custodian is open for business. As of
the date of this Additional Statement, each Listing Exchange observes the
following holidays, as observed: New Year’s Day, Martin Luther King, Jr. Day,
Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
P
ortfolio Deposit.
The
consideration for purchase of a Creation Unit of shares
of a
Fund (except for the NETS™ BOVESPA
Index Fund (Brazil)) generally consists of the in-kind deposit of a
designated portfolio of equity securities (the “Deposit Securities”)
constituting an optimized representation of the Fund’s Underlying Index and an
amount of cash in U.S. dollars computed as described below (the “Cash
Component”). Together, the Deposit Securities and the Cash Component constitute
the “Portfolio Deposit,” which represents the minimum initial and subsequent
investment amount for a Creation Unit of the Fund. The Cash Component is an
amount equal to the Balancing Amount (as defined below). The “Balancing Amount”
is an amount equal to the difference between (x) the net asset value (per
Creation Unit) of the Fund and (y) the “Deposit Amount” which is the market
value (per Creation Unit) of the Deposit Securities. The Balancing Amount
serves the function of compensating for any differences between the net asset
value per Creation Unit and the Deposit Amount. If the Balancing Amount is a
positive number (
i.e.
, the net asset value per Creation Unit is more than the
Deposit Amount), the Authorized Participant will deliver the Balancing Amount.
If the Balancing Amount is a negative number (
i.e.
, the net asset value
per Creation Unit is less than the Deposit Amount), the Authorized Participant
will receive the Balancing Amount. Payment of any stamp duty or other similar
fees and expenses payable upon transfer of beneficial
- 36 -
ownership of
the Deposit Securities shall be the sole responsibility of the Authorized
Participant that purchased the Creation Unit. The Authorized Participant must
ensure that all Deposit Securities properly denote change in
beneficial ownership.
NTI
makes available through the National Securities Clearing Corporation (“NSCC”)
on each Business Day, prior to the opening of business on the Listing Exchange
(currently 9:30 a.m., Eastern Time), the list of the names and the required
number of shares of each Deposit Security to be included in the current
Portfolio Deposit (based on information at the end of the previous Business
Day) for each Fund. Such Portfolio Securities are applicable, subject to any
adjustments as described below, to purchases of Creation Units of a given Fund
until such time as the next-announced Deposit Securities composition is made
available.
The
identity and number of shares of the Deposit Securities required for a
Portfolio Deposit for each Fund changes pursuant to changes in the composition
of the Fund’s Portfolio and as rebalancing adjustments and corporate action
events are reflected from time to time by NTI with a view to the investment
objective of the Fund. The composition of the Deposit Securities may also
change in response to adjustments to the weighting or composition of the
securities constituting the Underlying Index.
In
addition, the Trust reserves the right to permit or require the substitution of
an amount of cash (that is a
“cash in lieu” amount) to be added to the Cash Component to replace any Deposit
Security which may not be available in sufficient quantity for delivery or that
may not be eligible for transfer through the systems of DTC or the Clearing
Process (discussed below) or for other similar reasons. The Trust also reserves
the right to permit or require a “cash in lieu” amount where the delivery of
Deposit Securities by the Authorized Participant (as described below) would be
restricted under the securities laws or where delivery of Deposit Securities to
the Authorized Participant would result in the disposition of Deposit
Securities by the Authorized Participant becoming restricted under the
securities laws, and in certain other situations. The adjustments described
above will reflect changes, known to NTI on the date of announcement to be in
effect by the time of delivery of the Portfolio Deposit, in the composition of
the Underlying Index, or resulting from stock splits and other corporate
actions.
In
addition to the list of names and numbers of securities constituting the
current Deposit Securities of a Portfolio Deposit, on each Business Day, the
Cash Component effective through and including the previous Business Day, per
outstanding Creation Unit of each Fund, will be made available.
R
ole of
the Authorized Participant.
Creation Units of shares may be
purchased only by or through a DTC Participant that has entered into an
Authorized Participant Agreement with the Distributor (an Authorized
Participant). Such Authorized Participant will agree pursuant to the terms of
such Authorized Participant Agreement on behalf of itself or any investor on
whose behalf it will act, as the case may be, to certain conditions, including
that such Authorized Participant will make available in advance of each
purchase of Creation Units an amount of cash sufficient to pay the Cash
Component, once the net asset value of a Creation Unit is next determined after
receipt of the purchase order in proper form, together with the transaction fee
described below. The Authorized Participant may require the investor to enter into
an agreement with such Authorized Participant with respect to certain matters,
including payment of the Cash Component. Investors who are not Authorized
Participants must make appropriate arrangements with an Authorized Participant.
Investors should be aware that their particular broker may not be a DTC
Participant or may not have executed an Authorized Participant Agreement, and
that therefore orders to purchase Creation Units may have to be placed by the
investor’s broker through an Authorized Participant. As a result, purchase
orders placed through an Authorized Participant may result in additional
charges to such investor. The Trust does not expect to enter into an Authorized
Participant Agreement with more than a small number of DTC Participants that have
international capabilities. A list of the current Authorized Participants may
be obtained from the Distributor.
P
urchase Order.
To initiate an
order for a Creation Unit of shares of a Fund,
the
Authorized Participant must submit to the Distributor an irrevocable order to
purchase shares of the Funds. With respect to a Fund, the Distributor will
notify NTI and the Custodian of such order. The Custodian will then provide
such information to the appropriate local sub-custodian(s). For those Funds,
the Custodian shall cause the appropriate local sub-custodian(s) of the Fund to
maintain an account into which the Authorized Participant shall deliver, on
behalf of
- 37 -
itself or the
party on whose behalf it is acting, the securities included in the designated
Portfolio Deposit (or the cash value of all or a part of such securities, in
the case of a permitted or required cash purchase or “cash in lieu” amount),
with any appropriate adjustments as advised by the Trust. Deposit Securities
must be delivered to an account maintained at the applicable local
sub-custodian. Those placing orders to purchase Creation Units through an
Authorized Participant should allow sufficient time to permit proper submission
of the purchase order to the Distributor by the Cut-Off Time (as defined below)
on such Business Day.
The
Authorized Participant must also make available on or before the contractual
settlement date, by means satisfactory to the Trust, immediately available or
same day funds in U.S. dollars estimated by the Trust to be sufficient to pay
the Cash Component next determined after acceptance of the purchase order,
together with the applicable purchase transaction fee. Any excess funds will be
returned following settlement of the issue of the Creation Unit. Those placing
orders should ascertain the applicable deadline for cash transfers by
contacting the operations department of the broker or depositary institution
effectuating the transfer of the Cash Component. This deadline is likely to be
significantly earlier than the closing time of the regular trading session on
the Listing Exchange.
Investors
should be aware that an Authorized Participant may require orders for purchases
of shares placed with it to be in the particular form required by the
individual Authorized Participant.
T
iming
of Submission of Purchase Orders.
With respect to all Funds, except NETS™ BOVESPA
Index Fund (Brazil), an Authorized Participant must submit an
irrevocable purchase order no later than the earlier of (i) 4:00 p.m.,
Eastern Time or (ii) the closing time of the trading session on the relevant
Fund’s Listing Exchange, on any Business Day in order to receive that Business
Day’s NAV. With respect to the NETS™
BOVESPA Index Fund (Brazil), irrevocable purchase orders by Authorized
Participants will be accepted only if they are placed before 12:00 p.m. Eastern
Time on any Business Day. Such purchase order, if accepted, will receive that
Business Day’s NAV. Orders to purchase shares of the NETS™ BOVESPA Index Fund
(Brazil) that are submitted on the Business
Day immediately preceding a holiday or a day (other than a weekend) when the equity
markets in the relevant foreign market are closed will not be accepted. In such
cases, a purchase order must be submitted on the next Business Day.
A
cceptance of Purchase
Order.
Subject to the conditions that (i) an
irrevocable purchase
order has been submitted by the Authorized Participant (either on its own or
another investor’s behalf) and (ii) arrangements satisfactory to the Trust
are in place for payment of the Cash Component and any other cash amounts which
may be due, the Trust will accept the order, subject to its right (and the
right of the Distributor and NTI) to reject any order until acceptance.
Once
the Trust has accepted an order, upon next determination of the NAV of the
shares, the Trust will confirm the issuance of a Creation Unit of the Fund,
against receipt of payment, at such NAV. The Distributor will then transmit a
confirmation of acceptance to the Authorized Participant that placed the order.
The
Trust reserves the absolute right to reject or revoke acceptance of a purchase
order transmitted to it by the Distributor in respect of any Fund if
(a) the order is not in proper form; (b) the investor(s), upon obtaining
the shares ordered, would own 80% or more of the currently outstanding shares
of any Fund; (c) the Deposit Securities delivered do not conform to the
identify and number of shares disseminated through the facilities of the NSCC
for that date by NTI, as described above; (d) acceptance of the Deposit
Securities would have certain adverse tax consequences to the Fund;
(e) the acceptance of the Portfolio Deposit would, in the opinion of
counsel, be unlawful; (f) the acceptance of the Portfolio Deposit would
otherwise, in the discretion of the Trust or NTI, have an adverse effect on the
Trust or the rights of beneficial owners; or (g) in the event that
circumstances outside the control of the Trust, the Distributor and NTI make it
for all practical purposes impossible to process purchase orders. Examples of
such circumstances include acts of God; public service or utility problems
resulting in telephone, telecopy or computer failures; fires, floods or extreme
weather conditions; market conditions or activities causing trading halts;
systems failures involving computer or other informational systems affecting
the Trust, the Distributor, DTC, NSCC, NTI, the Funds’ Custodian, a
sub-custodian or any other participant in the creation process; and similar
extraordinary events. The Trust shall notify a prospective purchaser and/or the
Authorized Participant acting on
- 38 -
behalf of such
person of its rejection of the order of such person. The Trust, the Funds’
Custodian, any sub-custodian and the Distributor are under no duty, however, to
give notification of any defects or irregularities in the delivery of Portfolio
Deposits nor shall either of them incur any liability for the failure to give
any such notification.
I
ssuance of a Creation
Unit.
Except as provided herein, a Creation Unit of
shares of a Fund
will not be issued until the transfer of good title to the Trust of the Deposit
Securities and the payment of the Cash Component have been completed. When the
applicable local sub-custodian(s) have confirmed to the Custodian that the
required securities included in the Portfolio Deposit (or the cash value
thereof) have been delivered to the account of the applicable local
sub-custodian or sub-custodians, the Distributor and the Adviser shall be
notified of such delivery, and the Trust will issue, and cause the delivery of
the Creation Unit. Creation Units typically are issued on a “T+3 basis” (that is
three Business Days after
trade date). However, as discussed in Appendix A, each Fund reserves the right
to settle Creation Unit transactions on a basis other than T+3 in order to
accommodate foreign market holiday schedules, to account for different
treatment among foreign and U.S. markets of dividend record dates and
ex-dividend dates (that is the
last day the holder of a security can sell the security and still receive
dividends payable on the security), and in certain other circumstances.
To
the extent contemplated by an Authorized Participant’s agreement with the
Distributor, the Trust will issue Creation Units to such Authorized Participant
notwithstanding the fact that the corresponding Portfolio Deposits have not
been received in part or in whole, in reliance on the undertaking of the
Authorized Participant to deliver the missing Deposit Securities as soon as
possible, which undertaking shall be secured by such Authorized Participant’s
delivery and maintenance of collateral having a value at least equal to 110%,
which NTI may change from time to time, of the value of the missing Deposit
Securities in accordance with the Trust’s then-effective procedures. Such
collateral must be delivered no later than 2:00 p.m., Eastern Time, on the
contractual settlement date. The only collateral that is acceptable to the
Trust is cash in U.S. Dollars or an irrevocable letter of credit in form, and
drawn on a bank, that is satisfactory to the Trust. The cash collateral posted
by the Authorized Participant may be invested at the risk of the Authorized
Participant, and income, if any, on invested cash collateral will be paid to
that Authorized Participant. Information concerning the Trust’s current
procedures for collateralization of missing Deposit Securities is available
from the Distributor. The Authorized Participant Agreement will permit the
Trust to buy the missing Deposit Securities at any time and will subject the
Authorized Participant to liability for any shortfall between the cost to the
Trust of purchasing such securities and the cash collateral or the amount that
may be drawn under any letter of credit.
In
certain cases, Authorized Participants will create and redeem Creation Units on
the same trade date. In these instances, the Trust reserves the right to settle
these transactions on a net basis. All questions as to the number of shares of
each security in the Deposit Securities and the validity, form, eligibility and
acceptance for deposit of any securities to be delivered shall be determined by
the Trust, and the Trust’s determination shall be final and binding.
C
ash
Purchase Method.
When cash purchases of Creation Units are available or specified
for a Fund, they will be effected in essentially the same manner as in-kind
purchases thereof. Currently, the NETS™ BOVESPA Index Fund (Brazil) requires creations
and redemptions
of the Fund’s shares in U.S. dollars. The Trust may in the future permit or
require creations and redemptions of the NETS™ BOVESPA Index Fund (Brazil) in-kind. In
addition, the Trust may in
its discretion make Creation Units of any of the other Funds available for
purchase and redemption in U.S. dollars. In the case of a cash purchase, the
investor must pay the cash equivalent of the Deposit Securities it would
otherwise be required to provide through an in-kind purchase, plus the same
Cash Component required to be paid by an in-kind purchaser. In addition, to
offset the Trust’s brokerage and other transaction costs associated with using
the cash to purchase the requisite Deposit Securities, the investor will be
required to pay a fixed purchase transaction fee, plus an additional variable
charge for cash purchases, which is expressed as a percentage of the value of
the Deposit Securities. The transaction fees for in-kind and cash purchases of
Creation Units are described below.
P
urchase Transaction Fee.
A
purchase transaction fee payable to the Trust is
imposed to
compensate the Trust for the transfer and other transaction costs of a Fund
associated with the issuance of Creation Units. Purchasers of Creation Units
for cash are required to pay an additional variable charge to compensate the
relevant
- 39 -
Fund for
brokerage and market impact expenses relating to investing in portfolios
securities. Where the Trust permits an in-kind purchaser to substitute cash in
lieu of depositing a portion of the Deposit Securities, the purchaser will be
assessed the additional variable charge for cash purchases on the “cash in
lieu” portion of its investment. Purchasers of Creation Units are responsible
for the costs of transferring the securities constituting the Deposit
Securities to the account of the Trust. Investors who use the services of a
broker, or other such intermediary may be charged a fee for such services. The
purchase transaction fees for in-kind purchases and cash purchases (when
available) are listed in the table below. This table is subject to revision
from time to time.
|
|
|
|
|
|
|
|
|
|
|
|
|
NETS™
FUND
|
|
Fee for In-Kind and
Cash Purchases
|
|
Maximum Additional
Variable Charge for
Cash Purchase*
|
|
|
|
|
|
|
NETS™ BOVESPA Index Fund (Brazil)
|
|
$2,400
|
|
**
|
|
|
NETS™ FTSE All-World Canada Index Fund
|
|
$1,900
|
|
0.30
|
%
|
|
NETS™ IPC
®
Index
Fund (Mexico)
|
|
$1,400
|
|
0.50
|
%
|
|
NETS™ OMXS30 Index Fund (Sweden)
|
|
$1,300
|
|
0.30
|
%
|
|
NETS™ SLI Index Fund (Switzerland)
|
|
$1,500
|
|
0.40
|
%
|
|
NETS™ FTSE CNBC Global 300 Index Fund
|
|
$5,000
|
|
0.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
*
|
As a percentage of the
value of amount invested.
|
|
|
|
|
|
|
|
**
|
The maximum additional
variable charge for cash purchases will be a percentage of the value of the
Portfolio Securities, which will not exceed 3.00%.
|
|
|
|
R
EDEMPTION OF
CREATION UNITS
Shares
of a Fund may be redeemed only in Creation Units at their NAV next determined
after receipt of a redemption request in proper form by the Distributor. The
Trust will not redeem shares in amounts less than Creation Units. Beneficial
owners also may sell shares in the secondary market, but must accumulate enough
NETS™ shares to constitute a Creation Unit in order to have such shares
redeemed by the Trust. There can be no assurance, however, that there will be
sufficient liquidity in the public trading market at any time to permit
assembly of a Creation Unit. Investors should expect to incur brokerage and
other costs in connection with assembling a sufficient number of NETS™ shares
to constitute a redeemable Creation Unit.
With
respect to each Fund (other than the NETS™ BOVESPA Index Fund (Brazil), which
currently redeems Creation Units solely for cash) NTI makes available through
the NSCC prior to the opening of business on the Listing Exchange (currently
9:30 a.m., Eastern Time) on each Business Day, the identity and number of
shares that will be applicable (subject to possible amendment or correction) to
redemption requests received in proper form (as defined below) on that day
(“Portfolio Securities”). Portfolio Securities received on redemption may not
be identical to Deposit Securities that are applicable to creation of Creation
Units. Unless cash redemptions are available or specified for a Fund, the
redemption proceeds for a Creation Unit generally consist of Portfolio
Securities on the Business Day of the request for redemption, plus cash in an amount
equal to the difference between the NAV of the shares being redeemed, as next
determined after a receipt of a request in proper form, and the value of the
Portfolio Securities, less the redemption transaction fee described below. The
redemption transaction fee described below is deducted from such redemption
proceeds.
A
redemption transaction fee payable to the Trust is imposed to offset transfer
and other transaction costs that may be incurred by the relevant Fund,
including market impact expenses relating to disposing of portfolio securities.
The redemption transaction fee for redemptions in kind and for cash and the
additional variable charge for cash redemptions (when cash redemptions are
available or specified) are listed in the table below. Investors will also bear
the costs of transferring the Portfolio Deposit from the Trust to their account
or on their order. Investors who use the services of a broker or other such
intermediary may be charged a fee for such services.
- 40 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NETS™ Fund
|
|
Fee for In-kind and
Cash Redemptions
|
|
Maximum Additional
Variable Charge for
Cash Redemption*
|
|
|
|
|
|
|
|
|
NETS™ BOVESPA Index Fund (Brazil)
|
|
|
$
|
2,400
|
|
|
**
|
|
|
|
NETS™ FTSE All-World Canada Index Fund
|
|
|
$
|
1,900
|
|
|
0.30
|
%
|
|
|
NETS™ IPC
®
Index
Fund (Mexico)
|
|
|
$
|
1,400
|
|
|
0.50
|
%
|
|
|
NETS™ OMXS30 Index Fund (Sweden)
|
|
|
$
|
1,300
|
|
|
0.30
|
%
|
|
|
NETS™ SLI Index Fund (Switzerland)
|
|
|
$
|
1,500
|
|
|
0.40
|
%
|
|
|
NETS™ FTSE CNBC Global 300 Index Fund
|
|
|
$
|
5,000
|
|
|
0.60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
As a percentage
of the value of amount invested.
|
|
|
|
|
|
|
|
** The
maximum additional variable charge for cash redemptions will be a percentage
of the value of the portfolio securities comprising the Creation Units
redeemed, which will not exceed 2.00%.
|
|
|
Redemption
requests in respect of Creation Units must be submitted to the Distributor by
or through an Authorized Participant. Investors other than Authorized
Participants are responsible for making arrangements for a redemption request
through an Authorized Participant. An Authorized Participant must submit an
irrevocable redemption request no later than the earlier of (i) 4:00 p.m.,
Eastern Time or (ii) the closing time of the trading session on the relevant
Fund’s Listing Exchange, on any Business Day in order to receive that Business
Day’s NAV. The Distributor will provide a list of current Authorized
Participants upon request. The Authorized Participant must transmit the request
for redemption, in the form required by the Trust, to the Distributor in
accordance with procedures set forth in the Authorized Participant Agreement.
Investors should be aware that their particular broker may not have executed an
Authorized Participant Agreement, and that, therefore, requests to redeem
Creation Units may have to be placed by the investor’s broker through an
Authorized Participant who has executed an Authorized Participant Agreement. At
any given time there will be only a limited number of broker-dealers that have
executed an Authorized Participant Agreement. Investors making a redemption
request should be aware that such request must be in the form specified by such
Authorized Participant. Investors making a request to redeem Creation Units
should allow sufficient time to permit proper submission of the request by an
Authorized Participant and transfer of the shares to the Trust’s Transfer
Agent; such investors should allow for the additional time that may be required
to effect redemptions through their banks, brokers or other financial
intermediaries if such intermediaries are not Authorized Participants.
Orders
to redeem Creation Unit Aggregations of funds must be delivered through an
Authorized Participant that has executed an Authorized Participant Agreement.
Investors other than Authorized Participants are responsible for making
arrangements for a redemption request to be made through an Authorized
Participant. An order to redeem Creation Unit Aggregations of the Fund is
deemed received by the Trust on the Business Day if: (i) such order is received
by the Fund’s Distributor not later than the closing time of the applicable
Listing Exchange on the applicable Business Day; (ii) such order is accompanied
or followed by the requisite number of shares of the Fund specified in such
order, which delivery must be made through DTC to the Fund’s Custodian no later
than 10:00 a.m., Eastern Time, on the next Business Day following the day the
order was transmitted; and (iii) all other procedures set forth in the
Authorized Participant Agreement are properly followed. Deliveries of Fund
securities to redeeming investors generally will be made within three Business
Days. Due to the schedule of holidays in certain countries, however, the
delivery of in-kind redemption proceeds for the Fund may take longer than three
Business Days after the day on which the redemption request is received in
proper form. In such cases, the local market settlement procedures will not
commence until the end of the local holiday periods as described in Appendix A.
A
redemption request is considered to be in “proper form” if (i) an
Authorized Participant has transferred or caused to be transferred to the
Trust’s Transfer Agent the Creation Unit of shares being redeemed through the
book-entry system of DTC so as to be effective by the Listing Exchange closing
time on any Business Day and (ii) a request in form satisfactory to the
Trust is received by the Distributor from the Authorized Participant on behalf
of itself or another redeeming investor within the time periods specified
above. If the Transfer Agent does not receive the investor’s shares through
DTC’s facilities by 10:00 a.m., Eastern Time, on the Business Day next
following the day that the redemption request is received, the redemption
request shall be rejected. Investors should be aware that the deadline for such
transfers of shares through the DTC system may be significantly earlier than
the close of
- 41 -
business on
the Listing Exchange. Those making redemption requests should ascertain the
deadline applicable to transfers of shares through the DTC system by contacting
the operations department of the broker or depositary institution effecting the
transfer of the shares.
Upon
receiving a redemption request, the Distributor shall notify the Trust and the
Trust’s Transfer Agent of such redemption request. The tender of an investor’s
shares for redemption and the distribution of the cash redemption payment in
respect of Creation Units redeemed will be effected through DTC and the
relevant Authorized Participant to the beneficial owner thereof as recorded on
the book-entry system of DTC or the DTC Participant through which such investor
holds, as the case may be, or by such other means specified by the Authorized
Participant submitting the redemption request.
In
connection with taking delivery of shares of Portfolio Securities upon
redemption of shares of the Fund, a redeeming Beneficial Owner, or Authorized
Participant acting on behalf of such Beneficial Owner, must maintain appropriate
security arrangements with a qualified broker-dealer, bank or other custody
providers in each jurisdiction in which any of the Portfolio Securities are
customarily traded, to which account such Portfolio Securities will be
delivered.
Deliveries
of redemption proceeds by the Funds generally will be made within three
Business Days (that is “T+3”).
However, as discussed in Appendix A, each Fund reserves the right to settle
redemption transactions and deliver redemption proceeds on a basis other than
T+3 to accommodate foreign market holiday schedules, to account for different
treatment among foreign and U.S. markets of dividend record dates and dividend
ex-dates (that is the last date
the holder of a security can sell the security and still receive dividends
payable on the security sold), and in certain other circumstances. For each
country relating to a Fund, Appendix A hereto identifies the instances where
more than seven days would be needed to deliver redemption proceeds. Pursuant
to an order of the SEC, in respect of each Fund, the Trust will make delivery
of in-kind redemption proceeds within the number of days stated in Appendix A
to be the maximum number of days necessary to deliver redemption proceeds.
If
neither the redeeming Beneficial Owner nor the Authorized Participant acting on
behalf of such redeeming Beneficial Owner has appropriate arrangements to take
delivery of the portfolio securities in the applicable jurisdiction and it is
not possible to make other such arrangements, or if it is not possible to
effect deliveries of the Portfolio Securities in such jurisdiction, the Trust
may in its discretion redeem such shares in cash, and the redeeming Beneficial
Owner will be required to receive its redemption proceeds in cash. In addition,
an investor may request a redemption in cash that the Trust may, in its sole
discretion, permit. In either case, the investor will receive a cash payment
equal to the net asset value of its shares based on the NAV of shares of the
relevant Fund next determined after the redemption request is received in
proper form (minus a redemption transaction fee and additional variable charge
for cash redemptions specified above, to offset the Trust’s brokerage and other
transaction costs associated with the disposition of Portfolio Securities). The
Trust may also, in its sole discretion, upon request of a shareholder, provide
such redeemer a portfolio of securities that differ from the exact composition
of the Portfolio Securities but does not differ in NAV. Redemptions of shares
for Deposit Securities will be subject to compliance with applicable U.S.
federal and state securities laws and each Fund (whether or not it otherwise
permits cash redemptions) reserves the right to redeem Creation Units for cash
to the extent that the Fund could not lawfully deliver specific Deposit
Securities upon redemptions or could not do so without first registering the
Deposit Securities under such laws.
In
the event that cash redemptions are permitted or required by the Trust,
proceeds will be paid to the Authorized Participant redeeming shares on behalf
of the redeeming investor as soon as practicable after the date of redemption
(within seven calendar days thereafter, except for the instances listed in
Appendix A hereto where more than seven calendar days would be needed).
To
the extent contemplated by an Authorized Participant’s agreement with the
Distributor, in the event the Authorized Participant that has submitted a
redemption request in proper form is unable to transfer all or part of the
Creation Units to be redeemed to the Trust, at or prior to 10:00 a.m., Eastern
Time, on the Business Day after the date of submission of such redemption
request, the Distributor will nonetheless accept the redemption request in
reliance on the undertaking by the Authorized Participant to deliver the
missing shares as soon as possible. Such
- 42 -
undertaking
shall be secured by the Authorized Participant’s delivery and maintenance of
collateral consisting of cash having a value at least equal to 110%, which NTI
may change from time to time, of the value of the missing shares in accordance
with the Trust’s then-effective procedures. The only collateral that is
acceptable to the Trust is cash in U.S. dollars or an irrevocable letter of
credit in form, and drawn on a bank, that is satisfactory to the Trust. The
Trust’s current procedures for collateralization of missing shares require,
among other things, that any cash collateral shall be held by the Trust’s
Custodian, and that the fees of the Custodian and any sub-custodians in respect
of the delivery, maintenance and redelivery of the cash collateral shall be
payable by the Authorized Participant. The cash collateral posted by the
Authorized Participant may be invested at the risk of the Authorized
Participant, and income, if any, on invested cash collateral will be paid to
that Authorized Participant. The Authorized Participant Agreement permits the
Trust to purchase the missing shares or acquire the portfolio securities and
the Cash Component underlying such shares at any time and subjects the
Authorized Participant to liability for any shortfall between the cost to the
Trust of purchasing such shares, Portfolio Securities or Cash Component and the
cash collateral or the amount that may be drawn under any letter of credit.
Because
the portfolio securities of a Fund may trade on the relevant exchange(s) on
days that the Listing Exchange is closed or are otherwise not Business Days for
such Fund, shareholders may not be able to redeem their shares of such Fund, or
to purchase or sell shares of such Fund on the Listing Exchange, on days when
the NAV of such Fund could be significantly affected by events in the relevant
foreign markets.
The
right of redemption may be suspended or the date of payment postponed with
respect to any Fund (1) for any period during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings);
(2) for any period during which trading on the New York Stock Exchange is
suspended or restricted; (3) for any period during which an emergency
exists as a result of which disposal of the shares of the Fund’s portfolio
securities or determination of its net asset value is not reasonably practicable;
or (4) in such other circumstance as is permitted by the SEC.
T
AXES
The
following summarizes certain additional tax considerations generally affecting
the Funds and their shareholders that are not described in the Prospectuses. No
attempt is made to present a detailed explanation of the tax treatment of the
Funds or their shareholders, and the discussions here and in the Prospectuses
are not intended as a substitute for careful tax planning. Potential investors
should consult their tax advisers with specific reference to their own tax
situations.
The
discussions of the federal tax consequences in the Prospectuses and this
Additional Statement are based on the Code and the regulations, rulings and
decision under it, as in effect on the date of this Additional Statement.
Future legislative or administrative changes or court decisions may
significantly change the statements included herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
F
EDERAL - GENERAL INFORMATION
Each
Fund intends to qualify as a regulated investment company under Subchapter M of
Subtitle A, Chapter 1, of the Code. As a regulated investment company, each
Fund generally will be exempt from federal income tax on its net investment
income and realized capital gains that it distributes to shareholders, provided
that it distributes an amount equal to at least the sum of 90% of its
tax-exempt income and 90% of its investment company taxable income (net
investment income and the excess of net short-term capital gain over net
long-term capital loss), if any, for the year (the “Distribution Requirement”)
and satisfies certain other requirements of the Code that are described below.
Each Fund intends to make sufficient distributions or deemed distributions each
year to avoid liability for corporate income tax. If a Fund were to fail to
make sufficient distributions, it could be liable for corporate income tax and
for excise tax in respect of the shortfall or, if the shortfall is large
enough, such Fund could be disqualified as a regulated investment company.
- 43 -
In
addition to satisfaction of the Distribution Requirement, each Fund must derive
with respect to a taxable year at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and gains from the
sale or other disposition of stock or securities or foreign currencies, or from
other income derived with respect to its business of investing in such stock,
securities, or currencies or net income derived from an interest in a qualified
publicly traded partnership. Also, at the close of each quarter of its taxable
year, at least 50% of the value of each Fund’s assets must consist of cash and
cash items, U.S. government securities, securities of other regulated
investment companies and securities of other issuers (as to which each Fund has
not invested more than 5% of the value of its total assets in securities of
such issuer and as to which each Fund does not hold more than 10% of the
outstanding voting securities (including equity securities of a qualified
publicly traded partnership) of such issuer), and no more than 25% of the value
of each Fund’s total assets may be invested in the securities of (i) any one
issuer (other than U.S. government securities and securities of other regulated
investment companies), (ii) two or more issuers which such Fund controls and
which are engaged in the same or similar trades or businesses or (iii) one or
more qualified publicly traded partnerships. Each Fund intends to comply with
these requirements.
If
for any taxable year any Fund does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to shareholders. In such event,
the shareholders would recognize dividend income on distributions to the extent
of such Fund’s current and accumulated earnings and profits.
The
Code imposes a nondeductible 4% excise tax on regulated investment companies
that fail to currently distribute an amount equal to specified percentages of
their ordinary taxable income and capital gain net income (excess of capital
gains over capital losses). Each Fund intends to make sufficient distributions
or deemed distributions of its ordinary taxable income and capital gain net
income each calendar year to avoid liability for this excise tax.
Each
Fund intends to distribute annually to its shareholders substantially all of
its investment company taxable income, and any net realized long-term capital
gains in excess of net realized short-term capital losses (including any
capital loss carryovers). However, if a Fund retains for investment an amount
equal to all or a portion of its net long-term capital gains in excess of its
net short-term capital losses (including any capital loss carryovers), it will
be subject to a corporate tax (currently at a maximum rate of 35%) on the
amount retained. In that event, such Fund will designate such retained amounts
as undistributed capital gains in a notice to its shareholders who
(a) will be required to include in income for U.S. federal income tax
purposes, as long-term capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit their proportionate
shares of the 35% tax paid by such Fund on the undistributed amount against their
U.S. federal income tax liabilities, if any, and to claim refunds to the extent
their credits exceed their liabilities, if any, and (c) will be entitled
to increase their tax basis, for U.S. federal income tax purposes, in their
shares by an amount equal to 65% of the amount of undistributed capital gains
included in the shareholder’s income. Organizations or persons not subject to
U.S. federal income tax on such capital gains will be entitled to a refund of
their pro rata share of such taxes paid by such Fund upon filing appropriate
returns or claims for refund with the Internal Revenue Service.
Distributions
of net realized long-term capital gains, if any, that a Fund designates as
capital gains dividends are taxable as long-term capital gains, whether paid in
cash or in shares and regardless of how long a shareholder has held shares of
such Fund. All other dividends of a Fund (including dividends from short-term
capital gains) from its current and accumulated earnings and profits (“regular
dividends”) are generally subject to tax as ordinary income.
If
an individual, trust or estate receives a regular dividend or qualified
dividends qualifying for the long-term capital gains rates and such dividend
constitutes an “extraordinary dividend,” and the individual subsequently
recognizes a loss on the sale or exchange of stock in respect of which the
extraordinary dividend was paid, then the loss will be long-term capital loss
to the extent of such extraordinary dividend. An “extraordinary dividend” on
common stock for this purpose is generally a dividend (i) in an amount
greater than or equal to 10% of the taxpayer’s tax basis (or trading value) in
a share of stock, aggregating dividends with ex-dividend dates within an 85-day
period or (ii) in an amount greater than 20% of the taxpayer’s tax basis
(or trading value) in a share of stock, aggregating dividends with ex-dividend
dates within a 365-day period.
- 44 -
Distributions
in excess of a Fund’s current and accumulated earnings and profits will, as to
each shareholder, be treated as a tax-free return of capital to the extent of a
shareholder’s basis in his shares of such Fund, and as a capital gain
thereafter (if the shareholder holds his shares of such Fund as capital assets).
Shareholders receiving dividends or distributions in the form of additional
shares should be treated for U.S. federal income tax purposes as receiving a
distribution in an amount equal to the amount of money that the shareholders
receiving cash dividends or distributions will receive, and should have a cost
basis in the shares received equal to such amount. Dividends paid by a Fund
that are attributable to dividends received by a Fund from domestic
corporations may qualify for the federal dividends-received deduction for
corporations.
Investors
considering buying shares just prior to a dividend or capital gain distribution
should be aware that, although the price of shares just purchased at that time
may reflect the amount of the forthcoming distribution, such dividend or
distribution may nevertheless be taxable to them. If a Fund is the holder of
record of any stock on the record date for any dividends payable with respect
to such stock, such dividends will be included in such Fund’s gross income not
as of the date received but as of the later of (a) the date such stock
became ex-dividend with respect to such dividends (that is, the date on which a buyer of the stock would not be
entitled to receive the declared, but unpaid, dividends) or (b) the date
such Fund acquired such stock. Accordingly, in order to satisfy its income
distribution requirements, a Fund may be required to pay dividends based on
anticipated earnings, and shareholders may receive dividends in an earlier year
than would otherwise be the case.
B
ACK-UP WITHHOLDING
In
certain cases, a Fund will be required to withhold at the applicable
withholding rate, and remit to the U.S. Treasury such amounts withheld from any
distributions paid to a shareholder who: (1) has failed to provide a
correct taxpayer identification number; (2) is subject to backup
withholding by the Internal Revenue Service; (3) has failed to certify to
a Fund that such shareholder is not subject to backup withholding; or
(4) has not certified that such shareholder is a U.S. person (including a
U.S. resident alien).
S
ECTIONS 351 AND 362
The
Trust on behalf of each Fund has the right to reject an order for a purchase of
shares of a Fund if the purchaser (or group of purchasers) would, upon
obtaining the shares so ordered, own 80% or more of the outstanding shares of a
given Fund and if, pursuant to Sections 351 and 362 of the Code, that Fund
would have a basis in the securities different from the market value of such
securities on the date of deposit. If a Fund’s basis in such securities on the
date of deposit was less than market value on such date, such Fund, upon
disposition of the securities, would recognize more taxable gain or less
taxable loss than if its basis in the securities had been equal to market
value. It is not anticipated that the Trust will exercise the right of
rejection except in a case where the Trust determines that accepting the order
could result in material adverse tax consequences to a Fund or its
shareholders. The Trust also has the right to require information necessary to
determine beneficial share ownership for purposes of the 80% determination.
Q
UALIFIED DIVIDEND INCOME.
Distributions
by each Fund of investment company taxable income (excluding any short-term
capital gains) whether received in cash or shares will be taxable either as
ordinary income or as qualified dividend income, eligible for the reduced maximum
rate to individuals of 15% (5% for individuals in lower tax brackets) to the
extent each Fund receives qualified dividend income on the securities it holds
and such Fund designates the distribution as qualified dividend income.
Qualified dividend income is, in general, dividend income from taxable domestic
corporations and certain foreign corporations (
e.g.
, foreign corporations
incorporated in a possession of the United States or in certain countries with
a comprehensive tax treaty with the United States, or the stock of which is
readily tradable on an established securities market in the United States). A
dividend will not be treated as qualified dividend income to the extent that
(i) the shareholder has not held the shares on which the dividend was paid
for more than 60 days during the 121-day period that begins on the date that is
60 days before the date on which the shares become ex dividend with respect to
such dividend (and each Fund also satisfies those holding period requirements
with respect to the securities it holds that paid the dividends distributed to
the shareholder), (ii) the
- 45 -
shareholder is
under an obligation (whether pursuant to a short sale or otherwise) to make
related payments with respect to substantially similar or related property, or
(iii) the shareholder elects to treat such dividend as investment income
under section 163(d)(4)(B) of the Code. Absent further legislation, the maximum
15% rate on qualified dividend income will not apply to dividends received in
taxable years beginning after December 31, 2010. Distributions by each
Fund of its net short-term capital gains will be taxable as ordinary income.
Capital gain distributions consisting of each Fund’s net capital gains will be
taxable as long-term capital gains.
C
ORPORATE DIVIDENDS RECEIVED DEDUCTION
A
Fund’s dividends that are paid to its corporate shareholders and are attributable
to qualifying dividends it received from U.S. domestic corporations may be
eligible, in the hands of such shareholders, for the corporate dividends
received deduction, subject to certain holding period requirements and debt
financing limitations.
N
ET CAPITAL LOSS CARRYFORWARDS
Net
capital loss carryforwards may be applied against any net realized capital gains
in each succeeding year, or until their respective expiration dates, whichever
occurs first.
E
XCESS INCLUSION INCOME
Certain
types of income received by a Fund from real estate investment Trusts
(“REITs”), real estate mortgage investment conduits (“REMICs”), taxable
mortgage pools or other investments may cause a Fund to designate some or all
of its distributions as “excess inclusion income.” To Fund shareholders such
excess inclusion income may (1) constitute taxable income, as “unrelated
business taxable income” (“UBTI”) for those shareholders who would otherwise be
tax-exempt such as individual retirement accounts, 401(k) accounts, Keogh
plans, pension plans and certain charitable entities; (2) as UBTI cause a
charitable remainder Trust to be subject to a 100% excise tax on its UBTI;
(3) not be offset against net operating losses for tax purposes;
(4) not be eligible for reduced U.S. withholding for non-U.S. shareholders
even from tax treaty countries; and (5) cause a Fund to be subject to tax
if certain “disqualified organizations” as defined by the Code are Fund
shareholders.
T
AXATION OF INCOME FROM CERTAIN FINANCIAL INSTRUMENTS AND PFICS
The
tax principles applicable to transactions in financial instruments and futures
contracts and options that may be engaged in by a Fund including the effect of
fluctuations in the value of foreign currencies, and investments in passive
foreign investment companies (“PFICs”), are complex and, in some cases,
uncertain. Such transactions and investments may cause a Fund to recognize
taxable income prior to the receipt of cash, thereby requiring such Fund to
liquidate other positions, or to borrow money, so as to make sufficient
distributions to shareholders to avoid corporate-level tax. Moreover, some or
all of the taxable income recognized may be ordinary income or short-term
capital gain, so that the distributions may be taxable to shareholders as
ordinary income.
In
addition, in the case of any shares of a PFIC in which a Fund invests, such
Fund may be liable for corporate-level tax on any ultimate gain or
distributions on the shares if such Fund fails to make an election to recognize
income annually during the period of its ownership of the shares.
S
ALES OF SHARES
Upon
the sale or exchange of his shares, a shareholder will realize a taxable gain
or loss equal to the difference between the amount realized and his basis in
his shares. A redemption of shares by a Fund will be treated as a sale for this
purpose. Such gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder’s hands, and will be long-term
capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for one year or less.
Any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced, including replacement through the reinvesting
of dividends and capital gains distributions in a Fund, within a 61-day period
beginning 30 days before and ending 30
- 46 -
days after the
disposition of the shares. In such a case, the basis of the shares acquired
will be increased to reflect the disallowed loss. Any loss realized by a
shareholder on the sale of a Fund share held by the shareholder for six months
or less will be treated for U.S. federal income tax purposes as a long-term
capital loss to the extent of any distributions or deemed distributions of
long-term capital gains received by the shareholder with respect to such share.
If a shareholder incurs a sales charge in acquiring shares of a Fund, disposes
of those shares within 90 days and then acquires shares in a mutual fund for
which the otherwise applicable sales charge is reduced by reason of a
reinvestment right (
e.g.,
an exchange
privilege), the original sales charge will not be taken into account in
computing gain/loss on the original shares to the extent the subsequent sales
charge is reduced. Instead, the disregarded portion of the original sales
charge will be added to the tax basis of the newly acquired shares.
Furthermore, the same rule also applies to a disposition of the newly acquired
shares made within 90 days of the second acquisition. This provision prevents a
shareholder from immediately deducting the sales charge by shifting his or her
investment within a family of mutual funds.
O
THER TAXES
Dividends,
distributions and redemption proceeds may also be subject to additional state,
local and foreign taxes depending on each shareholder’s particular situation.
T
AXATION OF NON-U.S. SHAREHOLDERS
Dividends
paid by a Fund to non-U.S. shareholders are generally subject to withholding
tax at a 30% rate or a reduced rate specified by an applicable income tax
treaty to the extent derived from investment income and short-term capital
gains. In order to obtain a reduced rate of withholding, a non-U.S. shareholder
will be required to provide an IRS Form W- 8BEN certifying its entitlement to
benefits under a treaty. The withholding tax does not apply to regular
dividends paid to a non-U.S. shareholder who provides a Form W-8ECI, certifying
that the dividends are effectively connected with the non-U.S. shareholder’s
conduct of a trade or business within the United States. Instead, the
effectively connected dividends will be subject to regular U.S. income tax as
if the non-U.S. shareholder were a U.S. shareholder. A non-U.S. corporation
receiving effectively connected dividends may also be subject to additional
“branch profits tax” imposed at a rate of 30% (or lower treaty rate). A
non-U.S. shareholder who fails to provide an IRS Form W-8BEN or other
applicable form may be subject to backup withholding at the appropriate rate.
In
general, United States federal withholding tax will not apply to any gain or
income realized by a non-U.S. shareholder in respect of any distributions of
net long-term capital gains over net short-term capital losses, exempt-interest
dividends, or upon the sale or other disposition of shares of a Fund.
For
foreign shareholders of a Fund a distribution attributable to such Fund’s sale
of a real estate investment Trust or other U.S. real property holding company
will be treated as real property gain subject to 35% withholding tax if 50% or
more of the value of such Fund’s assets are invested in real estate investment
trusts and other U.S. real property holding corporations and if the foreign
shareholder has held more than 5% of a class of stock at any time during the
one-year period ending on the date of the distribution. A distribution from a
Fund will be treated as attributable to a U.S. real property interest only if
such distribution is attributable to a distribution received by such Fund from
a real estate investment trust. Restrictions apply regarding wash sales and
substitute payment transactions.
R
EPORTING
If
a shareholder recognizes a loss with respect to a Fund’s shares of $2 million
or more for an individual shareholder or $10 million or more for a corporate
shareholder, the shareholder may be required to file with the Internal Revenue
Service a disclosure statement on Form 8886. Direct shareholders of portfolio
securities are in many cases exempted from this reporting requirement, but
under current guidance, shareholders of a regulated investment company are not
exempted. The fact that a loss is reportable under these regulations does not
affect the legal determination of whether the taxpayer’s treatment of the loss
is proper. Shareholders should consult their tax advisors to determine the
applicability of these regulations in light of their individual circumstances.
Under recently
- 47 -
enacted
legislation, certain tax-exempt entities and their managers may be subject to
excise tax if they are parties to certain reportable transactions.
The
foregoing discussion is a summary only and is not intended as a substitute for
careful tax planning. Purchasers of shares should consult their own tax
advisers as to the tax consequences of investing in such shares, including
under state, local and foreign tax laws. Finally, the foregoing discussion is
based on applicable provisions of the Code, regulations, judicial authority and
administrative interpretations in effect on the date of this Statement of
Additional Information. Changes in applicable authority could materially affect
the conclusions discussed above, and such changes often occur.
N
ET ASSET VALUE
The
NAV for each Fund is calculated by deducting all of a Fund’s liabilities
(including accrued expenses) from the total value of its assets (including the
securities held by the Fund plus any cash or other assets, including interest
and dividends accrued but not yet received) and dividing the result by the
number of shares outstanding, and generally rounded to the nearest cent,
although each Fund reserves the right to calculate its NAV to more than two
decimal places. The NAV for each Fund will generally be determined by JP Morgan
Investor Services Co. (“Chase”) once daily Monday through Friday generally as
of the regularly scheduled close of business of the NYSE (normally 4:00 p.m.
Eastern Time) on each day that the NYSE, the Fund’s Listing Exchange and the
Fund’s Custodian are open for trading, based on prices at the time of closing,
provided that (a) any assets or liabilities denominated in currencies
other than the U.S. dollar shall be translated into U.S. dollars at the
prevailing market rates on the date of valuation as quoted by one or more major
banks or dealers that makes a two-way market in such currencies (or a data
service provider based on quotations received from such banks or dealers); and
(b) U.S. fixed-income assets may be valued as of the announced closing
time for trading in fixed-income instruments on any day that the Bond Market
Association announces an early closing time.
In
calculating a Fund’s NAV, the Fund’s investments are generally valued using
market valuations. In the event that current market valuations are not readily
available or such valuations do not reflect current market values, the affected
investments will be valued using fair value pricing pursuant to the pricing
policy and procedures approved by the Board of Trustees. A market valuation
generally means a valuation (i) obtained from an exchange, a pricing
service, or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer) or (iii) based on
amortized cost. In the case of shares of funds that are not traded on an
exchange, a market valuation means such fund’s published net asset value per
share. Chase may use various pricing services or discontinue the use of any
pricing service. A price obtained from a pricing service based on such pricing
service’s valuation matrix may be considered a market valuation.
The
value of assets denominated in foreign currencies is converted into U.S.
dollars using exchange rates deemed appropriate by NTI as investment adviser.
Any use of fair value prices, current market valuations or exchange rates
different from the prices and rates used by the Index Providers may adversely
affect a Fund’s ability to track its underlying index.
D
IVIDENDS AND DISTRIBUTIONS
G
ENERAL POLICIES
Dividends
from net investment income, including any net foreign currency gains, are
declared and paid at least annually and any net realized securities gains are
distributed at least annually. In order to improve tracking error or comply
with the distribution requirements of the Internal Revenue Code of 1986,
dividends may be declared and paid more frequently than annually for certain
Funds. Dividends and securities gains distributions are distributed in U.S.
dollars and cannot be automatically reinvested in additional shares of the
Funds. The Trust
- 48 -
reserves the
right to declare special distributions if, in its reasonable discretion, such
action is necessary or advisable to preserve the status of each Fund as a
registered investment company (“RIC”) or to avoid imposition of income or
excise taxes on undistributed income.
Dividends
and other distributions of shares are distributed on a pro rata basis to
Beneficial Owners of such shares. Dividend payments are made through DTC Participants
and Indirect Participants to Beneficial Owners then of record with proceeds
received from the Funds.
D
IVIDEND REINVESTMENT SERVICE
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by
Beneficial Owners of Funds for reinvestment of their dividend distributions.
Beneficial Owners should contact their broker to determine the availability and
costs of the service and the details of participation therein. Brokers may
require Beneficial Owners to adhere to specific procedures and timetables. If
this service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole shares of
the same Fund purchased in the secondary market.
O
THER INFORMATION
C
OUNSEL
Drinker
Biddle & Reath LLP, with offices at One Logan Square, 18th and Cherry
Streets, Philadelphia, PA 19103-6996, is counsel to the Trust.
I
NDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte
& Touche LLP, located at 111 South Wacker Drive, Chicago, Illinois,
60606-4301 serves as the independent registered public accounting firm of the
Trust, audits the Funds’ financial statements and may perform other services.
F
INANCIAL STATEMENTS
Financial
statements for the Funds are not available because, as of the date of this
Additional Statement, the Funds have no financial information to report.
A
DDITIONAL INFORMATION
The
Prospectuses and this Additional Statement do not contain all the information
included in the Registration Statement filed with the SEC under the 1933 Act
with respect to the securities offered by the Trust’s Prospectuses. Certain
portions of the Registration Statement have been omitted from the Prospectuses
and this Additional Statement pursuant to the rules and regulations of the SEC.
The Registration Statement, including the exhibits filed therewith, may be
examined at the office of the SEC in Washington, D.C.
Statements
contained in the Prospectuses or in this Additional Statement as to the
contents of any contract or other documents referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which
the Prospectuses and this Additional Statement form a part, each such statement
being qualified in all respects by such reference.
- 49 -
A
PPENDIX A
Each
Fund generally intends to effect deliveries of Creation Units and portfolio
securities on a basis of “T” plus three business days. Each Fund may effect
deliveries of Creation Units and portfolio securities on a basis other than T plus
three in order to accommodate local holiday schedules, to account for different
treatment among foreign and U.S. markets of dividend record dates and
ex-dividend dates, or under certain other circumstances. The ability of the
Trust to effect in-kind creations and redemptions within three business days of
receipt of an order in good form is subject, among other things, to the
condition that, within the time period from the date of the order to the date
of delivery of the securities, there are no days that are holidays in the
applicable foreign market. For every occurrence of one or more intervening
holidays in the applicable foreign market that are not holidays observed in the
U.S. equity market, the redemption settlement cycle will be extended by the number
of such intervening holidays. In addition to holidays, other unforeseeable
closings in a foreign market due to emergencies may also prevent the Trust from
delivering securities within the normal settlement period.
The
securities delivery cycles currently practicable for transferring portfolio
securities to redeeming investors, coupled with foreign market holiday
schedules, will require a delivery process longer than seven calendar days for
some Funds in certain circumstances. The holidays applicable to each Fund
during the remainder of calendar year 2008 are listed below, as are instances
where more than seven days will be needed to deliver redemption proceeds.
Although certain holidays may occur on different dates in subsequent years, the
number of days required to deliver redemption proceeds in any given year is not
expected to exceed the maximum number of days listed below for each Fund. The
proclamation of new holidays, the treatment by market participants of certain
days as “informal holidays” (
e.g.
, days on which no or limited
securities transactions occur, as a result of substantially shortened trading
hours), the elimination of existing holidays, or changes in local securities
delivery practices, could affect the information set forth herein at some time
in the future.
NETS™ BOVESPA INDEX FUND (BRAZIL)
Regular Holidays.
The dates of the regular Brazilian holidays in the calendar year 2008
are as follows:
|
|
|
|
|
|
|
|
|
|
|
Nov 20
|
Dec 24
|
Dec 25
|
Dec 31
|
Redemption.
The Trust is not aware of a redemption request over any Brazilian holiday that
would result in a settlement period exceeding 7 calendar days during the remainder of calendar year 2008.
NETS™ FTSE ALL-WORLD CANADA INDEX FUND
Regular Holidays.
The dates of the regular Canadian holidays in the calendar year 2008 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
Oct 13
|
Dec 25
|
|
|
|
Nov 11
|
Dec 26
|
|
|
Redemption.
The Trust is not aware of a redemption request over any Canadian holiday
that would result in a settlement period exceeding 7 calendar days during the
remainder of calendar year 2008.
NETS™ IPC
®
INDEX FUND (MEXICO)
Regular Holidays.
The dates of the regular
Mexican holidays in the calendar year 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Nov 2
|
Dec 12
|
|
|
|
Nov 17
|
Dec 25
|
|
|
Redemption.
The Trust is not aware of a
redemption request over any Mexican holiday that would result in a settlement
period exceeding 7 calendar days during the remainder of calendar year 2008.
- 50 -
NETS™ OMXS30 INDEX FUND (SWEDEN)
Regular Holidays.
The dates of the regular Swedish holidays in the calendar year 2008 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec 24
|
Dec 25
|
Dec 26
|
Dec 31
|
Redemption.
The Trust is not aware of a redemption request over any Swedish holiday
that would result in a settlement period extending 7 calendar days during the
remainder of calendar year 2008.
NETS™ SLI INDEX FUND (SWITZERLAND)
Regular Holidays.
The dates of the regular
Swiss holidays in the calendar year 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Dec 8
|
Dec 25
|
Dec 31
|
|
|
Dec 24
|
Dec 26
|
|
|
Redemption.
The Trust is not aware of a redemption request over any Swiss holiday
that would result in a settlement period exceeding 7 calendar days during the
remainder of calendar year 2008.
NETS™ FTSE CNBC GLOBAL 300 INDEX FUND
Regular Holidays.
The dates of the regular holidays of Argentina, Australia, Belgium, Brazil,
Canada, China, Czech Republic, Finland, France, Germany, Greece, Hong Kong,
India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Mexico, Netherlands,
Norway, Russia, South Africa, Spain, Sweden, Switzerland, Thailand, Taiwan,
United Kingdom and United States in the calendar year 2008 are as follows:
|
|
|
|
|
|
Argentina:
|
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|
|
|
|
|
|
|
|
|
|
|
|
Nov 6
|
Dec 8
|
Dec 25
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 4
|
Dec 25
|
Dec 31
|
|
|
Dec 24
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belgium:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 11
|
Dec 25
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 20
|
Dec 24
|
Dec 25
|
Dec 31
|
|
|
|
|
|
|
|
|
|
|
|
Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct 13
|
Dec 25
|
|
|
|
Nov 11
|
Dec 26
|
|
|
|
|
|
|
|
- 51 -
|
|
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|
|
|
China:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct 13
|
Dec 25
|
|
|
|
Nov 11
|
|
|
|
|
Nov 27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Czech
Republic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct 28
|
Dec 24
|
Dec 26
|
|
|
Nov 17
|
Dec 25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finland:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 24
|
Dec 25
|
Dec 26
|
Dec 31
|
|
|
|
|
|
|
|
|
|
|
|
France:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 11
|
Dec 25
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany:
|
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|
|
|
|
|
|
|
|
|
|
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|
|
Dec 24
|
Dec 26
|
|
|
|
Dec 25
|
Dec 31
|
|
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|
|
|
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|
|
|
|
|
|
Greece:
|
|
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|
|
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|
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|
Oct 28
|
Dec 25
|
Dec 26
|
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|
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|
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|
|
Hong
Kong:
|
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|
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|
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|
|
Dec 25
|
|
|
|
|
Dec 26
|
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|
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|
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|
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|
|
India:
|
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|
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|
|
Oct 28
|
Nov 13
|
Dec 25
|
|
|
Oct 30
|
Dec 9
|
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|
|
|
|
|
|
|
|
|
Indonesia:
|
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|
|
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|
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|
|
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|
Dec 8
|
Dec 29
|
|
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|
Dec 25
|
Dec 31
|
|
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|
Dec 26
|
|
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|
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|
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|
|
- 52 -
|
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|
Ireland:
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|
|
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|
Oct 27
|
Dec 25
|
Dec 31
|
|
|
Dec 24
|
Dec 26
|
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|
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|
|
Israel:
|
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|
Oct 13
|
Oct 17
|
Oct 21
|
|
|
Oct 14
|
Oct 18
|
|
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|
Oct 15
|
Oct 19
|
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|
Oct 16
|
Oct 20
|
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|
|
Italy:
|
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|
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|
|
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|
|
Dec 8
|
Dec 25
|
Dec 31
|
|
|
Dec 24
|
Dec 26
|
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|
|
|
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|
|
Japan:
|
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|
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|
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|
|
|
|
|
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|
Oct 13
|
Nov 24
|
Dec 31
|
|
|
Nov 3
|
Dec 23
|
|
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|
Nov 23
|
Dec 30
|
|
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|
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|
|
Korea:
|
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|
|
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|
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|
Dec 25
|
|
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|
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|
|
|
|
Mexico:
|
|
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|
|
|
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|
|
|
|
|
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|
|
Nov 2
|
Dec 12
|
|
|
|
Nov 17
|
Dec 25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands:
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Dec 24
|
Dec 25
|
Dec 26
|
Dec 31
|
|
|
|
|
|
|
|
|
|
|
|
Norway:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 24
|
Dec 25
|
Dec 26
|
Dec 31
|
|
|
|
|
|
- 53 -
|
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|
|
|
|
Russia:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 3
|
Nov 4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South
Africa:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 16
|
Dec 25
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
Spain:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 25
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sweden:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 24
|
Dec 25
|
Dec 26
|
Dec 31
|
|
|
|
|
|
|
|
|
|
|
|
Switzerland:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 8
|
Dec 25
|
Dec 31
|
|
|
Dec 24
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taiwan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thailand:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct 23
|
Dec 5
|
Dec 10
|
Dec 31
|
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 25
|
Dec 26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov 27
|
Dec 25
|
|
|
|
|
|
|
|
- 54 -
Redemption.
The longest redemption cycle
for the NETS™ FTSE CNBC Global 300
Index Fund is a function of the longest redemption cycles among the
countries whose stocks comprise this Fund. For the remainder of calendar year
2008, the dates of the regular holidays affecting the following securities
markets present the worst-case redemption cycle for the NETS™ FTSE CNBC Global 300 Index Fund as follows:
|
|
|
|
|
|
Country
|
Redemption
Request
Date
|
Redemption
Settlement
Date (R)
|
Settlement
Period
|
|
|
|
|
|
China
|
9/26/08
|
10/08/08
|
12
|
|
|
9/29/08
|
10/09/08
|
10
|
|
|
9/30/08
|
10/10/08
|
10
|
|
|
|
|
|
|
Czech Republic
|
12/19/08
|
12/29/08
|
10
|
|
|
12/22/08
|
12/30/08
|
8
|
|
|
12/23/08
|
12/31/08
|
8
|
|
|
|
|
|
|
Indonesia
|
9/26/08
|
10/06/08
|
10
|
|
|
9/29/08
|
10/07/08
|
8
|
|
|
9/30/08
|
10/08/08
|
8
|
|
|
|
|
|
|
Japan
|
12/26/08
|
01/05/09
|
10
|
|
|
12/29/08
|
01/06/09
|
8
|
|
|
12/30/08
|
01/07/09
|
8
|
|
|
|
|
|
|
Russia*
|
12/26/08
|
01/08/09
|
13
|
|
|
12/27/08
|
01/09/09
|
13
|
|
|
12/28/08
|
01/10/09
|
13
|
* The settlement cycle in Russia is negotiated on a
deal by deal basis and holidays are subject to change without notice
Thus, in the calendar year 2008, 13 calendar days would be the maximum
number of calendar days necessary to satisfy a redemption request made on the NETS™ FTSE CNBC Global 300 Index Fund.
- 55 -
APPENDIX B
As
stated in the Prospectuses, the Funds may enter into certain futures
transactions. Some of these transactions are described in this Appendix. The
Funds may also enter into other futures transactions or other securities and
instruments that are available in the markets from time to time.
|
|
|
|
I.
|
Index and
Security Futures Contracts
|
A
stock index assigns relative values to the stocks included in the index, which
fluctuates with changes in the market values of the stocks included. Some stock
index futures contracts are based on broad market indices, such as the S&P
500 or the New York Stock Exchange Composite Index. In contrast, certain futures
contracts relate to narrower market indices, such as the S&P 100
®
or indexes based
on an industry or market segment, such as oil and gas stocks. Since 2001,
trading has been permitted in futures based on a single stock and on
narrow-based security indices (as defined in the Commodity Futures
Modernization Act of 2000) (together “security futures”; broader-based index
futures are referred to as “index futures”). Some futures contracts are traded
on organized exchanges regulated by the CFTC. These exchanges may be either
designated by the CFTC as a contract market or registered with the CFTC as a
Derivatives Transaction Execution Facility (DTEF). Transactions on such
exchanges are cleared through a clearing corporation, which guarantees the
performance of the parties to each contract. Futures contracts also may be
traded on electronic trading facilities or over-the-counter. These various
trading facilities are licensed and/or regulated by varying degrees by the
CFTC. The Funds may also engage in transactions in foreign stock index futures.
|
|
|
|
II.
|
Futures Contracts on Foreign Currencies
|
A
futures contract on foreign currency creates a binding obligation on one party
to deliver, and a corresponding obligation on another party to accept delivery
of, a stated quantity of foreign currency for an amount fixed in U.S. dollars.
Foreign currency futures may be used by a Fund to help the Fund track the price
and yield performance of its Underlying Index.
Unlike
purchases or sales of portfolio securities, no price is paid or received by a
Fund upon the purchase or sale of a futures contract. Initially, the Funds will
be required to deposit with the broker or in a segregated account with a
custodian or sub-custodian an amount of liquid assets, known as initial margin,
based on the value of the contract. The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the customer
to finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract, which is returned to
the Funds upon termination of the futures contract assuming all contractual
obligations have been satisfied. Subsequent payments, called variation margin,
to and from the broker, will be made on a daily basis as the price of the
underlying instruments fluctuates making the long and short positions in the
futures contract more or less valuable, a process known as “marking-to-market.”
For example, when a Fund has purchased a futures contract and the price of the
contract has risen in response to a rise in the underlying instruments, that
position will have increased in value and the Fund will be entitled to receive
from the broker a variation margin payment equal to that increase in value.
Conversely, where a Fund has purchased a futures contract and the price of the
future contract has declined in response to a decrease in the underlying instruments,
the position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. Prior to expiration of the futures
contract, the Investment Adviser may elect to close the position by taking an
opposite position, subject to the availability of a secondary market, which
will operate to terminate a Fund’s position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or gain.
- 56 -
|
|
|
|
IV.
|
Risks of Transactions in Futures Contracts
|
There
are several risks in connection with the use of futures by the Funds, even for
futures that are used for hedging (non-speculative) purposes. One risk arises
because of the imperfect correlation between movements in the price of the
futures and movements in the price of the instruments which are the subject of
the hedge. The price of the future may move more than or less than the price of
the instruments being hedged. If the price of the futures moves less than the
price of the instruments which are the subject of the hedge, the hedge will not
be fully effective but, if the price of the instruments being hedged has moved
in an unfavorable direction, a Fund would be in a better position than if it
had not hedged at all. If the price of the instruments being hedged has moved
in a favorable direction, this advantage will be partially offset by the loss
on the futures. If the price of the futures moves more than the price of the
hedged instruments, the Fund involved will experience either a loss or gain on
the futures which will not be completely offset by movements in the price of
the instruments that are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of instruments being hedged and movements
in the price of futures contracts, the Funds may buy or sell futures contracts
in a greater dollar amount than the dollar amount of instruments being hedged
if the volatility over a particular time period of the prices of such
instruments has been greater than the volatility over such time period of the
futures, or if otherwise deemed to be appropriate by the Investment Adviser.
Conversely, a Fund may buy or sell fewer futures contracts if the volatility
over a particular time period of the prices of the instruments being hedged is
less than the volatility over such time period of the futures contract being
used, or if otherwise deemed to be appropriate by the Investment Adviser.
In
addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the futures and the instruments being
hedged, the price of futures may not correlate perfectly with movement in the
cash market due to certain market distortions. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
off-setting transactions which could distort the normal relationship between
the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Investment Adviser may
still not result in a successful hedging transaction over a short time frame.
In
general, positions in futures may be closed out only on an exchange, board of
trade or other trading facility, which provides a secondary market for such
futures. Although the Funds intend to purchase or sell futures only on trading
facilities where there appear to be active secondary markets, there is no
assurance that a liquid secondary market on any trading facility will exist for
any particular contract or at any particular time. In such an event, it may not
be possible to close a futures investment position, and in the event of adverse
price movements, the Funds would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset on a futures contract.
Further,
it should be noted that the liquidity of a secondary market in a futures
contract may be adversely affected by “daily price fluctuation limits”
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
- 57 -
Successful
use of futures by Funds is also subject to the Investment Adviser’s ability to
predict correctly movements in the direction of the market. In addition, in
such situations, if a Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. The Fund may have to sell securities at a time when
it may be disadvantageous to do so.
Futures
purchased or sold by a Fund (and related options) may be traded on foreign
exchanges. Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of a
foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade,
including the execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked to
a domestic market so that a position taken on the market may be liquidated by a
transaction on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or foreign
options transaction occurs. For these reasons, customers who trade foreign
futures or foreign options contracts may not be afforded certain of the
protective measures provided by the Commodity Exchange Act, the CFTC regulations
and the rules of the National Futures Association and any domestic exchange or
other trading facility (including the right to use reparations proceedings
before the CFTC and arbitration proceedings provided by the National Futures
Association or any domestic futures exchange), nor the protective measures
provided by the Securities and Exchange Commission’s rules relating to security
futures. In particular, the investments of the Funds in foreign futures, or
foreign options transactions may not be provided the same protections in
respect to transactions on United States futures trading facilities. In
addition, the price of any foreign futures or foreign options contract may be
affected by any variance in the foreign exchange rate between the time an order
is placed and the time it is liquidated, offset or exercised.
|
|
|
|
V.
|
Options on Futures Contracts
|
The
Funds may purchase and write options on the futures contracts described above.
A futures option gives the holder, in return for the premium paid, the right to
buy (call) from or sell (put) to the writer of the option of a futures contract
at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer
or seller of a futures contract, the holder, or writer, of an option has the
right to terminate its position prior to the scheduled expiration of the option
by selling, or purchasing an option of the same series, at which time the
person entering into the closing transaction will realize a gain or loss. A
Fund will be required to deposit initial margin and variation margin with
respect to put and call options on futures contracts written by it pursuant to
brokers’ requirements similar to those described above. Net option premiums
received will be included as initial margin deposits.
Investments
in futures options involve some of the same considerations that are involved in
connection with investments in futures contracts (for example, the existence of
a liquid secondary market). See “Risks of Transactions in Futures Contracts”
above. In addition, the purchase or sale of an option also entails the risk
that changes in the value of the underlying futures contract will not
correspond to changes in the value of the option purchased. Depending on the
pricing of the option compared to either the futures contract upon which it is
based, or upon the price of the securities being hedged, an option may or may
not be less risky than ownership of the futures contract or such securities. In
general, the market prices of options can be expected to be more volatile than
the market prices on the underlying futures contract. Compared to the purchase or
sale of futures contracts, however, the purchase of call or put options on
futures contracts may frequently involve less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). The writing of an option on a futures contract involves
risks similar to those risks relating to the sale of futures contracts.
The
Funds intend to comply with the regulations of the CFTC exempting it from
registration as a “Commodity Pool Operator.” The Funds are operated by persons
who have claimed an exclusion from the definition of the term “Commodity Pool
Operator” under the Commodity Exchange Act and, therefore, are not subject to registration or regulations as
a pool operator under such Act. Accounting for futures contracts will be in
accordance with generally accepted accounting principles.
- 58 -
PART C
OTHER INFORMATION
Item 23.
Exhibits
|
(a)
|
|
(1)
|
|
Certificate of Trust
1
|
|
|
|
(2)
|
|
Agreement and Declaration of Trust
3
|
|
|
|
(3)
|
|
Amended and Restated Schedule A to the Agreement and Declaration of Trust
6
|
|
(b)
|
|
|
|
By-Laws of the Trust
2
|
|
(c)
|
|
|
|
Not applicable
|
|
(d)
|
|
(1)
|
|
Investment Advisory and Ancillary Services Agreement between the Trust
and Northern Trust Investments, N.A.
5
|
|
|
|
(2)
|
|
Amended and Restated Appendix A to the Investment Advisory and Ancillary Services Agreement between the Trust and Northern Trust
Investments, N.A.
6
|
|
(e)
|
|
(1)
|
|
Distribution Agreement between the Trust and the Distributor
4
|
|
|
|
(2)
|
|
Form of Participant Agreement
2
|
|
|
|
(3)
|
|
Form of Amended and Restated
Exhibit A to the Distribution Agreement between the Trust and the Distributor
6
|
|
(f)
|
|
|
|
Not applicable
|
|
(g)
|
|
(1)
|
|
Domestic Custody Agreement between the Trust and JPMorgan Chase
Bank, N.A.
3
|
|
|
|
(2)
|
|
Global Custody Rider to Domestic Custody Agreement between the Trust
and JPMorgan Chase Bank, N.A.
3
|
|
|
|
(3)
|
|
Form of Amended and Restated
Appendix A to the Domestic Custody Agreement between the Trust and JPMorgan
Chase Bank, N.A.
6
|
|
(h)
|
|
(1)
|
|
Agency Services Agreement between the Trust and JPMorgan Chase
Bank, N.A.
3
|
|
|
|
(2)
|
|
Fund Service Agreement between the Trust and J.P. Morgan Investor
Services Co.
3
|
|
|
|
(3)
|
|
Form of Sublicense Agreement between the Trust and Northern Trust
Investments, N.A.
2
|
|
|
|
(4)
|
|
PFO/Treasurer Services Agreement
5
|
|
|
|
(5)
|
|
Form of Amended and Restated Exhibit A to the Agency Services Agreement between the Trust and JPMorgan Chase Bank, N.A.
6
|
|
(i)
|
|
(1)
|
|
Opinion of Drinker Biddle & Reath
LLP
6
|
|
(j)
|
|
(1)
|
|
Consent of independent public accounting firm
6
|
|
(k)
|
|
|
|
Not applicable
|
1
|
(l)
|
|
|
|
Not applicable
|
|
(m)
|
|
|
|
Not applicable
|
|
(n)
|
|
|
|
Not applicable
|
|
(o)
|
|
|
|
Not applicable
|
|
(p)
|
|
(1)
|
|
Code of Ethics of the Trust
2
|
|
|
|
(2)
|
|
Code of Ethics of Northern Trust Investments, N.A.
2
|
|
(q)
|
|
(1)
|
|
Powers of Attorney
2
|
|
1
|
|
Incorporated herein by reference to the Initial Registration Statement filed on November 1, 2007.
|
|
2
|
|
Incorporated herein by reference to Pre-Effective Amendment No. 1 filed on February 13, 2008.
|
|
3
|
|
Incorporated herein by reference to Pre-Effective Amendment No. 2 filed on March 17, 2008.
|
|
4
|
|
Incorporated herein by reference to Post-Effective Amendment No. 1 filed on July 9, 2008.
|
|
5
|
|
Incorporated herein by reference
to Post-Effective Amendment No. 3 filed on August 26, 2008.
|
|
6
|
|
Filed herewith.
|
|
|
Item 24.
Persons Controlled by or Under Common Control with Registrant
None.
Item 25.
Indemnification
Section 3 of Article IV of the Registrant’s Agreement and Declaration of Trust, a copy of which is incorporated by reference herein as Exhibit (a)(1), provides
for indemnification of the Registrant’s officers and Trustees under certain circumstances.
Section 7 of the Investment Advisory and Ancillary Services Agreement between the Registrant and the investment adviser (the “Adviser”) provides for indemnification of the Adviser or, in
lieu thereof, contribution by Registrant, in connection with certain claims and liabilities to which the Adviser may be subject. A copy of the Investment Advisory and Ancillary Services Agreement is included as Exhibit (d)(1).
A mutual fund trustee and officer liability policy purchased by the Registrant insures the Registrant and its Trustees and officers, subject to the policy’s coverage limits and exclusions and varying deductibles, against
loss resulting from claims by reason of any act, error, omission, misstatement, misleading statement, neglect or breach of duty.
2
Item 26.
Business and Other Connections of Investment Advisers
Northern Trust Investments, N.A. (“NTI”) a wholly-owned subsidiary of The Northern Trust Company (“TNTC”), an Illinois state chartered bank, serves as the investment adviser of the
Funds. TNTC is a wholly-owned subsidiary of Northern Trust Corporation, a financial holding company. NTI is located at 50 South LaSalle Street, Chicago, IL 60603. Unless otherwise indicated, NTI and TNTC are referred to collectively as
“Northern Trust.”
Set forth below is a list of officers and directors of NTI, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by such officers
and directors during the past two years. Most officers and directors of NTI hold comparable positions with TNTC (other than as director), as indicated below, and certain other officers of NTI hold comparable positions with Northern Trust Bank, N.A.,
a wholly-owned subsidiary of Northern Trust Corporation. The tables below were provided to the Registrant by the Investment Adviser for inclusion in this Registration Statement.
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
Walid T. Abdul Karim,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Bradford S. Adams, Jr.,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
James A. Aitcheson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Darlene Allen,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Brayton B. Alley,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
David M. Alongi,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Stephen G. Atkins,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Scott R. Ayres,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Frederick A. Azar,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Richard E. Balon, Jr.,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
3
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Walid S. Bandar,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Ellen G. Baras,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Andrea C. Barr,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jeremy M. Baskin,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Belinda M. Basso,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Carl P. Beckman,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President & Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
Gregory S. Behar,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jacquelyn M. Benson,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Bergson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Timothy P. Blair,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Ali K. Bleecker,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Eric Vonn Boeckmann,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Julia Bristow Briggs,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Steven Brodeur,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
4
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Kieran Browne,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Elizabeth J. Buerckholtz,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Martin B. Bukoll,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. Campbell, Jr.,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Craig R. Carberry,
|
|
The Northern Trust Company
|
|
Senior Attorney
|
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
Christopher W. Carlson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Mark D. Carlson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Robert A. Carlson,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Lisa R. Carriere,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Keith D. Carroll,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Clinton S. Cary,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Edward J. Casey,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Chico,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Richard L. Clark,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
John Sterling Cole II,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
5
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
Kevin Anthony Connellan,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
David A. Corris,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Joseph H. Costello,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Stephen J. Cousins,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
John P. Cristello,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Alain Cubeles,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Susan C. Czochara,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Louis R. D’Arienzo,
|
|
Northern Trust Bank, N.A.
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
James Danaher,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Jordan D. Dekhayser,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
William Dennehy II,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
Michael C. Dering,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Philip S. DeSantis,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Timothy J. Detroy,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Caroline E. Devlin,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
6
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
Joseph R. Diehl, Jr.,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
John C. Doell,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Anna Dvinsky Domb,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Michael T. Doyle,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Peter John Driscoll,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Michael J. Drucker,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Orie Leslie Dudley, Jr.,
|
|
The Northern Trust Company and
|
|
Executive Vice President and
|
|
Director, Executive
|
|
Northern Trust Corporation
|
|
Chief Investment Officer
|
|
Vice President & CIO
|
|
|
|
|
|
|
|
Margret Eva Duvall,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Patrick E. Dwyer,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Benjamin Easow,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Craig Steven Edwards,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
Michael P. Egizio,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Shannon L. Eidson,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Deborah S. English,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Steven R. Everett,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
7
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
Peter, K. Ewing,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Rosa E. Fausto,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Gregory Fink,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
David B. Fitchett,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Peter J. Flood,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Joseph J. Flowers,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Carolyn D. Franklin,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Lee R. Freitag,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Christopher A. Fronk,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Sophia S. Gellen,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Stephanie L. Geller,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Kim Marie Geraghty,
|
|
The Northern Trust Company
|
|
Former Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Jennifer Ann Gerlach,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Donna Gingras,
|
|
Northern Trust Securities, Inc.
|
|
Senior Vice President
|
|
Senior Vice President & Controller
|
|
|
|
|
|
|
|
Izabella Goldenberg,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
8
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
Mark C. Gossett,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Director, Senior Vice President
|
|
|
|
|
|
& COO
|
|
|
|
|
|
|
|
Katherine D. Graham,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Robert S. Gray,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Laura Jean Gregg,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Michelle D. Griffin,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Ann M. Halter,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Alice S. Hammer,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Scott A. Hammond,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Geoffrey M. Hance,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
William A. Hare,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Alec R. Harrell,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Nora J. Harris,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Philip Dale Hausken,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Sheri Barker Hawkins,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
9
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer A. Heckler,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Robert G. Heppell,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Stefanie Jaron Hest,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kent C. Hiemenz,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Susan Hill,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jackson L. Hockley,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jean-Pierre Holland,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Bruce S. Honig,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Ylondia M. Hudson,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
William E. Hyatt,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Daniel T. Hynes,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Inzunza,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
John W. Iwanicki,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Tamara L. Jackson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Peter M. Jacobs,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
10
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Chrisopher J. Jaeger,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Amy L. Johnson,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Barbara M. Johnston,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Lucia A. Johnston,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Evangeline Mendoza Joves,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
David P. Kalis,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen Kalp,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Ann F. Kanter,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kendall Lee Kay,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Archibald E. King III,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Deborah L. Koch,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
John A. Konstantos,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Konstantinos S. Kordalis,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Donald H. Korytowski,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
11
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Nikolas Kotsogiannis,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Kovacs,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Michael L. Krauter,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kevin R. Kresnicka,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
John L. Krieg,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
David Lamb,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Heather M. Letts,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Dustin A. Lewellyn,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Julie M. Loftus,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Lyle Logan,
|
|
The Northern Trust Company
|
|
Executive Vice President
|
|
Director & Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jeanne M. Ludwig,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Mary Lukic,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Lisa Ann Lupi,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Cary J .Lyne,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
William A. Lyons,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
12
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Stella Mancusi,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
George P. Maris,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Daniel James Marshe,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Deborah A. Mastuantuono,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Peter L. Matteucci,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Mary Jane McCart,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
James D. McDonald,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Lisa M. McDougal,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Douglas J. McEldowney,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Timothy T. McGregor,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
David K. McHugh,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Melinda S. Mecca,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Ashish R. Mehta,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Marilyn J. Meservey,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President & Asst. Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
Peter M. Michaels,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
13
|
Name
and Position with Investment
|
|
Name
of Other Company
|
|
Position
with Other Company
|
|
Adviser
(NTI)
|
|
|
|
|
|
|
|
|
|
|
|
John P. Mirante,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Tomothy A.
Misik,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
James L.
Mitchell,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Scott O.
Muench,
|
|
Northern
Trust Bank, N.A.
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Shaun D.
Murphy,
|
|
The Northern
Trust Company
|
|
Senior Vice
President
|
|
Senior Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
Matthew L.
Myre,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Curtis A.
Nass,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Charles J.
Nellans,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J.
Nelson,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Eric D. Nelson,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Greg M. Newman,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
William M.
Nickey III,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E.
O’Brien,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Eileen M.
O’Connor,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J.
O’Shaughnessy,
|
|
The Northern
Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
14
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Matthew Peron,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Personette,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Phelan,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan S. Pincus,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Donald R. Pollak,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Ofelia M. Potter,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Stephen N. Potter,
|
|
The Northern Trust Company
|
|
Director
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Nancy Prezioso Babich,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Katie D. Pries,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Patrick D. Quinn,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Andrew F. Rakowski,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Chad M. Rakvin,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Brent D. Reeder,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jacqueline R. Reller,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Donna Lee Renaud,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
15
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Kristina Anne Richardson,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Alan W. Robertson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Director & Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Colin A. Robertson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Heather Parkes Rocha,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Duane Scott Rocheleau,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Theresa M. Rowohlt,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Lori Rae Runquist,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
John D. Ryan,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Alexander D. Ryer,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Joyce St. Clair,
|
|
The Northern Trust Company
|
|
Executive Vice President
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. Santiccioli,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Schoenfeld,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Eric K. Schweitzer,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Guy J. Sclafani,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Richard Raymond Seward,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
16
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Vernessa Sewell,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Christopher D. Shipley,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
John D. Skjervem,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Stephen P. Sliney,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Mark C. Sodergren,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Theodore T. Southworth,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Carol J. Spartz,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Allison Walpole Stewart,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Colin S. Stewart,
|
|
Northern Trust Securities, Inc.
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kurt S. Stoeber,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Peter C. Stournaras,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Robert N. Streed,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Carol H. Sullivan,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Kevin P. Sullivan,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Carolyn B. Szaflik,
|
|
Northern Trust Bank, N.A.
|
|
Vice President
|
|
Vice President
|
|
|
|
|
17
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
|
|
|
|
Jon E. Szostak II,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Frank D. Szymanek,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Brad L. Taylor,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
James C. Taylor,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Sunitha C. Thomas,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jane W. Thompson,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer Kamp Trethaway,
|
|
The Northern Trust Company
|
|
Executive Vice President
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Betsy Licht Turner,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Matthew R. Tushman,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
David J. Unger,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Christopher W. Van Alstyne,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Brett A. Varchetto,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Michael A. Vardas,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Director & Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Richard Allan Vigsnes II,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
Jens A. Vinje,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
18
|
Name and Position with Investment
|
|
Name of Other Company
|
|
Position with Other Company
|
|
Adviser (NTI)
|
|
|
|
|
|
|
|
Frederick H. Waddell,
|
|
The Northern Trust Company
|
|
President C&IS
|
|
Director & President & CEO
|
|
|
|
|
|
|
|
Sharon M. Walker,
|
|
Northern Trust Bank, N.A.
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Jeff M. Warland,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Scott B. Warner,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Lloyd A. Wennlund,
|
|
The Northern Trust Company
|
|
Executive Vice President
|
|
Director and Executive
|
|
Northern Trust Securities, Inc.
|
|
President
|
|
Vice President
|
|
|
|
|
|
|
|
Anthony E. Wilkins,
|
|
The Northern Trust Company
|
|
Senior Vice President
|
|
Senior Vice President
|
|
|
|
|
|
|
|
Thomas C. Williams,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Marie C. Winters,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Joseph E. Wolfe,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Kai Yee Wong,
|
|
Northern Trust Bank, N.A.
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Mary Kay Wright,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
|
|
|
Matthew C. Wruck,
|
|
The Northern Trust Company
|
|
Vice President
|
|
Vice President
|
|
|
|
|
Item 27.
Principal Underwriters
|
|
(a)
|
|
Foreside Fund Services, LLC, Registrant’s underwriter, serves as underwriter for
the following investment companies registered under the Investment Company
Act of 1940, as amended:
|
19
|
|
|
1.
|
|
American Beacon Funds
|
|
|
|
2.
|
|
American Beacon Mileage Funds
|
|
|
|
3.
|
|
American Beacon Select Funds
|
|
|
|
4.
|
|
Henderson Global Funds
|
|
|
|
5.
|
|
Ironwood Series Trust
|
|
|
|
6.
|
|
Bridgeway Funds, Inc.
|
|
|
|
7.
|
|
Monarch Funds
|
|
|
|
8.
|
|
Century Capital Management Trust
|
|
|
|
9.
|
|
Sound Shore Fund, Inc.
|
|
|
|
10.
|
|
Forum Funds
|
|
|
|
11.
|
|
Hirtle Callaghan Trust
|
|
|
|
12.
|
|
Central Park Group Multi-Event Fund
|
|
|
|
13.
|
|
The CNL Funds
|
|
|
|
14.
|
|
PMC Funds, Series of the Trust for Professional Managers
|
|
|
|
15.
|
|
SPA ETF Trust
|
|
|
|
16.
|
|
FocusShares Trust
|
|
|
|
17.
|
|
The Japan Fund, Inc.
|
|
|
|
18.
|
|
Wintergreen Fund, Inc.
|
|
|
|
19.
|
|
RevenueShares ETF Trust
|
|
|
(b)
|
|
The following officers of Foreside Fund Services,
LLC, the Registrant’s
underwriter, hold the following positions with the Registrant. Their business
address is Three Canal Plaza, Portland, Maine 04101.
|
|
|
Name
|
|
Position with Underwriter
|
|
Position with
|
|
|
|
|
|
|
Registrant
|
|
|
Mark S. Redman
|
|
President
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None
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Richard J. Berthy
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Vice President and
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None
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Treasurer
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Nanette K. Chern
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Chief Compliance Officer
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None
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and Vice President
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Mark A. Fairbanks
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Deputy Chief Compliance
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None
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Officer, Vice President
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Jennifer E. Hoopes
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Secretary
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None
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Item 28.
Location of Accounts and Records
The Agreement and Declaration of Trust, By-Laws and minute books of the Registrant are in the physical possession of J.P. Morgan Investor Services Co., 73 Tremont Street, Boston, MA 02108. Records
for Foreside Fund Services, LLC, the distributor, are
20
located at Three Canal Plaza, Portland, ME 04101. All other accounts, books and other documents required to be maintained under Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules promulgated
thereunder are in the physical possession of The Northern Trust Company, 50 S. LaSalle Street, Chicago, Illinois 60603 and NTI, 50 S. LaSalle Street, Chicago Illinois 60603.
Item 29.
Management Services
Not Applicable.
Item 30.
Undertakings
Not Applicable.
21
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all the
requirements for the effectiveness of this Post Effective Amendment No. 6 pursuant
to Rule 485(b) under the Securities Act and has duly caused this Post-Effective
Amendment No. 6 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and State of Illinois
on the 14th day of October 2008.
|
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By:
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/s/ Michael A. Vardas, Jr.
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Michael A. Vardas, Jr.
|
|
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President
|
Pursuant to the requirements
of the Securities Act, this Post-Effective Amendment No. 6 to Registrant's Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
|
Name
|
|
Title
|
|
Date
|
|
|
|
/s/
Michael A. Vardas, Jr.
|
|
President (Principal
|
|
October
14, 2008
|
|
Michael A. Vardas,
Jr.
|
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Executive Officer)
and Trustee
|
|
|
|
|
|
|
|
/s/
Trudance L.C. Bakke
|
|
Treasurer (Principal
|
|
October
14, 2008
|
|
Trudance L.C.
Bakke
|
|
Financial Officer
and
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|
|
|
|
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Principal Accounting
|
|
|
|
|
|
Officer)
|
|
|
|
|
|
*
|
|
Trustee
|
|
October
14, 2008
|
|
John J. Masterson
|
|
|
|
|
|
|
|
|
|
*
|
|
Trustee
|
|
October
14, 2008
|
|
Theodore A. Olsen
|
|
|
|
|
|
|
|
|
|
*
|
|
Trustee
|
|
October
14, 2008
|
|
Ralph F. Vitale
|
|
|
|
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|
|
|
|
|
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|
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|
|
|
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*
/s/ Diana E. McCarthy
|
|
|
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Diana E. McCarthy
Attorney-In-Fact, pursuant to power of attorney
|
|
|
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|
CERTIFICATE
The undersigned Assistant Secretary for NETS Trust (the “Trust”) hereby certifies that the Board of Trustees of the Trust duly adopted the following resolution at a meeting of the Board held on November 14, 2007.
RESOLVED,
that the Form of Power of Attorney presented to this meeting appointing Craig R. Carberry, Diana E. McCarthy, Peter K. Ewing and Michael A. Vardas, Jr. as attorneys in-fact for the Trust with regard to all filings and amendments to the Trust’s Registration Statement with the Securities and Exchange Commission made by the Trust be, and it hereby is, approved.
|
Dated:
October 14, 2008
|
|
|
|
/s/ Diana E. McCarthy
|
|
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Diana E. McCarthy
|
|
|
Assistant Secretary
|
EXHIBIT INDEX
|
(a)
|
(3) Amended and Restated Schedule A to the Agreement and Declaration of Trust
|
|
|
|
(d)
|
(2) Amended and Restated Appendix A to the Investment Advisory and Ancillary Services Agreement between the Trust and Northern Trust Investments, N.A.
|
|
|
|
(e)
|
(3) Form of Amended and Restated Exhibit A to the Distribution Agreement between the Trust and the Distributor
|
|
|
|
(g)
|
(3) Form of Amended and Restated Appendix A to the Domestic Custody Agreement between the Trust and JPMorgan Chase Bank, N.A.
|
|
|
|
(h)
|
(5) Form of Amended and Restated Exhibit A to the Agency Services Agreement between the Trust and JPMorgan Chase Bank, N.A.
|
|
|
|
(i)
|
(1) Opinion of Drinker Biddle & Reath LLP
|
|
|
|
(j)
|
(1) Consent of independent public accounting firm
|
|
|
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