UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
[PARA 40. 501] Information Required in Information Statement.
Reg. Section 240.14c-101.
SCHEDULE 14C INFORMATION
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IXIS ADVISOR FUNDS TRUST III
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IXIS ADVISOR FUNDS TRUST III
399 Boylston Street
Boston, MA 02116
IXIS Equity Diversified Portfolio
IXIS Moderate Diversified Portfolio
(each a "Portfolio," together the "Portfolios")
INFORMATION STATEMENT
April 28, 2006
The Trustees of IXIS Advisor Funds Trust III (the "Trust") are distributing
this Information Statement in connection with the approval of new sub-advisory
agreements for the Mid Cap Value disciplines of the Portfolios, each dated
April 3, 2006 (the "New Sub-Advisory Agreements"), by and among the Trust, on
behalf of the Portfolios, IXIS Asset Management Advisors, L.P. ("IXIS
Advisors") and Dreman Value Management, L.L.C. ("Dreman"). This Information
Statement is intended to explain why the sub-advisory agreements in effect for
the Mid Cap Value disciplines of the Portfolios, managed by Reich & Tang Asset
Management LLC (Reich & Tang"), prior to April 3, 2006 (the "Previous
Sub-Advisory Agreements") terminated and why the Trust's Board of Trustees
approved the New Sub-Advisory Agreements. This Information Statement also
describes generally the terms of the New Sub-Advisory Agreements. As explained
in this Information Statement, the New Sub-Advisory Agreements are
substantially similar to the Previous Sub-Advisory Agreements. The Trustees are
distributing this Information Statement on or about April 28, 2006 to the
shareholders of record as of April 7, 2006.
The Portfolios are providing this Information Statement solely for your
information as required by an exemptive order issued by the Securities and
Exchange Commission (the "SEC"), as described herein. WE ARE NOT ASKING YOU FOR
A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement consists of two parts.
PART I contains information relating to the New Sub-Advisory Agreements, the
Previous Sub-Advisory Agreements and the Advisory Agreements (as defined below).
PART II contains information about the Trust, IXIS Advisors, Dreman and certain
brokerage and other miscellaneous matters.
I. NEW SUB-ADVISORY AGREEMENTS
The Portfolios are multi-manager funds, which means that their portfolios are
divided into multiple disciplines, each managed by different money management
firms as sub-advisers to IXIS Advisors, which serves as the adviser to the
Portfolios. IXIS Equity Diversified Portfolio is divided into four disciplines
and IXIS Moderate Diversified Portfolio is divided into five disciplines. A
money management firm may serve as a sub-adviser to more than one discipline.
The Mid Cap Value disciplines of the Portfolios that were managed by Reich &
Tang under the Previous Sub-Advisory Agreements and that are currently managed
by Dreman under the New Sub-Advisory Agreements are referred to herein as the
"Disciplines."
The Trustees have approved the New Sub-Advisory Agreements which are
substantially similar to the Previous Sub-Advisory Agreements, except as
described below under "New Sub-Advisory Arrangements for the Disciplines." The
New Sub-Advisory Agreements have not affected the aggregate management fees
paid by the Portfolios.
In general, a mutual fund cannot enter into a new advisory agreement, including
a sub-advisory agreement such as the New Sub-Advisory Agreements, unless the
shareholders of that mutual fund vote to approve that agreement. The
Portfolios, however, have entered into the New Sub-Advisory Agreements without
shareholder action pursuant to an exemptive order from the SEC (the "Exemptive
Order"). The Exemptive Order allows the Trustees to approve sub-advisory
agreements among the Portfolios, IXIS Advisors and a sub-adviser (such as
Dreman) that is not otherwise affiliated with IXIS Advisors or the Portfolios
without any action by the shareholders of the Portfolios as long as the
Portfolios provide to their shareholders an information statement (such as this
Information Statement) within 90 days after the hiring of any new sub-adviser.
Description of the Advisory Agreements
IXIS Advisors has acted as the Portfolios' adviser since the inception of each
Portfolio, and currently acts as the Portfolios' adviser pursuant to advisory
agreements dated July 14, 2004 for IXIS Moderate Diversified Portfolio and
January 31, 2005 for IXIS Equity Diversified Portfolio, (the "Advisory
Agreements"). The Trustees of the Trust approved the Advisory Agreements at
meetings held on June 4, 2004 for IXIS Moderate Diversified Portfolio and
November 19, 2004 for IXIS Equity Diversified Portfolio and last approved the
continuance of the Advisory Agreements at a meeting held on May 20, 2005. The
Advisory Agreements were last approved by the Portfolios' shareholders on
January 27, 2005 for IXIS Equity Diversified Portfolio and July 12, 2004 for
IXIS Moderate Diversified Portfolio. The purpose of submission of the Advisory
Agreements to shareholders at such time was for such agreement's initial
approval upon each Portfolio's inception. Under the Advisory Agreements, IXIS
Advisors has overall advisory and administrative responsibility with respect to
the Portfolios. The Advisory Agreements also provide that IXIS Advisors will,
subject to IXIS Advisors' right to delegate such responsibilities to other
parties, provide to the Portfolios both (1) portfolio management services
(defined to mean managing the investment and reinvestment of the assets of the
Portfolios, subject to the supervision and control of the Trustees) and
(2) administrative services (defined to mean furnishing or paying the expenses
of the Portfolios for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain other administrative and
general management services).
Under the Advisory Agreements, the annual management fee rate payable by the
IXIS Equity Diversified Portfolio to IXIS Advisors is 0.80% of the first $1
billion of the average daily net assets of the Portfolio and 0.75% of such
assets in excess of $1 billion (or such lesser amount as IXIS Advisors may from
time to time agree to receive) minus any fees payable by the Portfolio directly
to its sub-advisers. The annual management fee rate payable by the IXIS
Moderate Diversified Portfolio to IXIS Advisors is 0.75% of the first $1
billion of the average daily net assets of the Portfolio and 0.70% of such
assets in excess of $1 billion (or such lesser amount as IXIS Advisors may from
time to time agree to receive) minus any fees payable by the Portfolio directly
to its sub-advisers. For the fiscal year ended December 31, 2005, the
Portfolios paid IXIS Advisors aggregate advisory fees of $133,846 for IXIS
Equity Diversified Portfolio and $897,702 for IXIS Moderate Diversified
Portfolio.
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Of this amount, the management fee paid to IXIS Advisors for its services to
the Portfolios under the Advisory Agreement was $58,554 for IXIS Equity
Diversified Portfolio and $420,190 for IXIS Moderate Diversified Portfolio. The
remainder of the aggregate advisory fee, $75,292 for IXIS Equity Diversified
Portfolio and $477,512 for IXIS Moderate Diversified Portfolio, was paid
directly to the Portfolios' sub-advisers.
Previous Sub-Advisory Arrangements for the Disciplines
IXIS Advisors has delegated its responsibility under the Advisory Agreements to
provide portfolio management services to the Portfolios to different
sub-advisers, with each sub-adviser managing one or more different disciplines
of the Portfolios. Until March 31, 2006, IXIS Advisors delegated its
responsibility for managing the assets of the Disciplines to Reich & Tang
pursuant to the Previous Sub-Advisory Agreements. The Trustees of the Trust
approved the Previous Sub-Advisory Agreements at meetings held on June 4, 2004
for IXIS Moderate Diversified Portfolio and November 19, 2004 for IXIS Equity
Diversified Portfolio. The Board approved the continuance of the Previous
Sub-Advisory Agreements at a meeting held on May 20, 2005. The Previous
Sub-Advisory Agreements were last approved by the Portfolios' shareholders on
January 27, 2005 for IXIS Equity Diversified Portfolio and July 12, 2004 for
IXIS Moderate Diversified Portfolio. The purpose of submission of the Previous
Sub-Advisory Agreements to shareholders at such time was for such agreement's
initial approval upon each Portfolio's inception. Under the terms of the
Previous Sub-Advisory Agreements, Reich & Tang was authorized to effect
portfolio transactions for the Disciplines, using its own discretion and
without prior consultation with IXIS Advisors. Reich & Tang was also required
to report periodically to IXIS Advisors and the Trustees of the Trust.
The Previous Sub-Advisory Agreements provided for sub-advisory fees payable to
Reich & Tang at an annual rate of 0.45% of the first $250 million of the
average daily net assets of its Disciplines, and 0.40% of its Disciplines'
average daily net assets in excess of $250 million. For the fiscal year ended
December 31, 2005, the sub-advisory fees paid to Reich & Tang for its services
to the Portfolios under the Previous Sub-Advisory Agreements was $11,180 for
IXIS Equity Diversified Portfolio and $54,050 for IXIS Moderate Diversified
Portfolio.
New Sub-Advisory Arrangement for the Disciplines
In determining to recommend the termination of Reich & Tang as subadviser to
the Disciplines of the Portfolios, IXIS Advisors considered that Reich & Tang
had been underperforming relative to its benchmark and also that several senior
personnel had left the firm. After considering a variety of potential
sub-advisers, IXIS Advisors recommended the appointment of Dreman to assume
responsibility for the day-to-day management of the Disciplines, effective
April 3, 2006. The Trustees of the Trust determined that it would be
appropriate to do so. Thus, upon the recommendation of IXIS Advisors and after
considering a variety of factors (as described below under "Consideration of
New Sub-Advisory Agreements by the Trustees"), the Trustees voted on March 10,
2006 to terminate the Previous Sub-Advisory Agreements as of the close of
business on March 31, 2006 and to approve the New Sub-Advisory Agreements
effective April 3, 2006. Copies of the New Sub-Advisory Agreements are set
forth as Appendices A-1 and A-2 to this Information Statement.
The terms of the New Sub-Advisory Agreements are substantially similar to those
of the Previous Sub-Advisory Agreements, except that (a) all references to
Reich & Tang in the Previous Sub-Advisory Agreements have been changed to
Dreman in the New Sub-Advisory Agreements, (b) a provision addressing the use
of a customer's or consumer's non-public personal information in accordance
with the requirements of Regulation S-P has been added to the New Sub-Advisory
Agreements, and (c) the respective dates of the New Sub-Advisory Agreements are
different.
The fee rates payable to Reich & Tang under the Previous Sub-Advisory
Agreements are the same as the fee rates payable to Dreman under the New
Sub-Advisory Agreements. The table below sets forth the sub-advisory fee rates
payable to Reich & Tang under the Previous Sub-Advisory Agreements and the
sub-advisory fee rates payable to Dreman under the New Sub-Advisory Agreements.
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Sub-Advisory Fee Rates Payable Sub-Advisory Fee Rates Payable
to Reich & Tang under the to Dreman under the New
Previous Sub-Advisory Sub-Advisory Agreements (as a
Agreements (as a percentage of percentage of the average
the average daily net daily net assets of each
assets of each Discipline) Discipline)
------------------------------- -------------------------------
0.45% of the first $250 million 0.45% of the first $250 million
0.40% of such assets in excess 0.40% of such assets in excess of
of $250 million $250 million
Consideration of New Sub-Advisory Agreements by the Trustees
The Board of Trustees approved the New Sub-Advisory Agreements at their meeting
held on March 10, 2006. The Trustees considered the New Sub-Advisory Agreements
in connection with a change in the sub-adviser for a discipline of each of the
Portfolios from Reich & Tang to Dreman. In considering whether to approve the
New Sub-Advisory Agreements, the Trustees noted that IXIS Advisors, the entity
that serves as the Portfolio's investment adviser under a "manager of managers"
structure, was recommending the change of sub-adviser and the approval of the
New Sub-Advisory Agreements as in the best interest of the Portfolios. They
also considered information provided by IXIS Advisors and by Dreman. In
considering whether to approve the New Sub-Advisory Agreements, the Board of
Trustees, including the Independent Trustees, did not identify any single
factor as determinative. Matters considered by the Trustees, including the
Independent Trustees, in connection with their approval of the New Sub-Advisory
Agreements included the following:
The nature, extent and quality of the services to be provided to the Portfolios
under the New Sub-Advisory Agreements. The Trustees considered the nature,
extent and quality of the services Dreman is believed to be capable of
providing to the Portfolios and the resources expected to be dedicated to the
Portfolios by Dreman. The Trustees met with senior representatives of Dreman,
who presented extensive information regarding Dreman's experience, capabilities
and investment management process and philosophy. The Trustees noted that
Dreman manages over $10 billion in assets for another mutual fund complex, and
therefore is familiar with the demands of managing mutual fund assets. After
reviewing these and related factors, the Trustees concluded, within the context
of their overall conclusions regarding each of the New Sub-Advisory Agreements,
that the nature, extent and quality of services expected to be provided
supported the approval of the New Sub-Advisory Agreements.
Investment performance of Dreman. The Trustees received information about the
performance of accounts managed by Dreman, including information which compared
the performance of such accounts to the performance of relevant benchmarks. The
performance information provided included data for Dreman's mid-cap value
discipline (which is the style of the segments of the Portfolios to be managed
by Dreman) and for other accounts managed by applying similar value investing
approaches to stocks of different capitalization ranges.
After reviewing the information, the Board concluded that Dreman's performance
in managing other accounts supported the approval of the New Sub-Advisory
Agreements. The Trustees also considered Dreman's performance and reputation
generally.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the New Sub-Advisory
Agreements, that the performance of Dreman supported the approval of the New
Sub-Advisory Agreements.
The costs of the services to be provided and profits to be realized by the
Advisers and their affiliates from their respective relationships with the
Portfolios. The Trustees considered the fees charged to the Portfolios for
advisory services as well as the total expense levels of the Portfolios.
This information included comparisons of the Portfolios' advisory fees and
total expense levels to those of their peer groups of mutual funds and
information about the advisory and sub-advisory fees charged by Dreman to
comparable accounts. The Trustees noted that the sub-advisory fee payable to
Dreman is the same as that paid to
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Reich & Tang under the Previous Sub-Advisory Agreements for the relevant
discipline of each Portfolio. In considering the fees charged to comparable
accounts, the Trustees considered, among other things, management's
representations about the differences between managing mutual funds as compared
to other types of accounts, including the additional resources required to
effectively manage mutual fund assets. The Trustees noted that the fees under
each New Sub-Advisory Agreement payable to Dreman were slightly higher than the
fees received by Dreman as a sub-adviser to a comparable fund of another mutual
fund complex and observed that Dreman manages a significantly greater total
amount for those funds (over $10 billion). The Trustees also noted that no fees
to be charged to the Portfolios would change as a result of retaining Dreman as
sub-adviser. The Trustees also took into account the demands, complexity and
quality of the investment management of the relevant disciplines of each
Portfolio.
The Trustees noted that, in view of the fact that Dreman had not yet begun
providing services to either Portfolio, no historical information was available
relating to the profitability to Dreman of its relationship to the Portfolios.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the New Sub-Advisory
Agreements, that the advisory fees charged to each of the Portfolios (and the
sub-advisory fee to be paid to Dreman) was fair and reasonable, and that the
costs of these services generally supported the approval of the New
Sub-Advisory Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by Dreman and whether those economies will
be shared with the Portfolios through breakpoints in their investment
sub-advisory fees or other means, such as expense waivers. The Trustees noted
that each New Sub-Advisory Agreement and each Portfolio's advisory agreement
with IXIS Advisors included breakpoints.
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding each of the New Sub-Advisory
Agreements, that the extent to which economies of scale will be shared with the
Portfolios supported the approval of the New Sub-Advisory Agreements.
The Trustees also considered other factors, including the fact that the
Portfolios would likely incur expenses including portfolio transaction
expenses, in connection with the change in sub-adviser to Dreman.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that each of the sub-advisory agreements with Dreman should be
approved for an initial two-year term commencing April 3, 2006.
Restructuring Costs
In April 2006, Dreman reviewed the existing portfolio holdings of the
Disciplines to determine what holdings it expected to sell in order to realign
the Disciplines' portfolios to include securities Dreman believed appropriate.
Brokerage costs related to these realignment transactions are estimated to have
been [$ ] for IXIS Equity Diversified Portfolio and [$ ] for IXIS
Moderate Diversified Portfolio.
In addition, these transactions resulted in the realization of approximately
[$ ] and [$ ] of realized capital gains (or approximately [$ ]
and [$ ] per share of the Portfolios) for IXIS Equity Diversified
Portfolio and IXIS Moderate Diversified Portfolio, respectively.
Description of the New Sub-Advisory Agreements
Copies of the New Sub-Advisory Agreements are set forth as Appendix A-1 and A-2
to this Information Statement. The following description of the New
Sub-Advisory Agreements is qualified in its entirety by reference to the full
text of the Agreements as set forth in Appendices A-1 and A-2.
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The New Sub-Advisory Agreements, which took effect on April 3, 2006, require
Dreman to manage the investment and reinvestment of the assets of the
Disciplines, subject to the supervision of IXIS Advisors. Under the terms of
the New Sub-Advisory Agreements, Dreman is authorized to effect portfolio
transactions for the Disciplines, using its own discretion and without prior
consultation with IXIS Advisors. Dreman is required to report periodically to
IXIS Advisors and the Trustees of the Trust. The New Sub-Advisory Agreements
provide that each Portfolio shall compensate Dreman at the annual rate of 0.45%
of the first $250 million of the average daily net assets of the discipline,
for which Dreman serves as a subadviser, and 0.40% of its Disciplines' average
daily net assets in excess of $250 million. As of April 3, 2006, the net assets
of the Disciplines were approximately $5,375,818 for IXIS Equity Diversified
Portfolio and $13,912,715 for IXIS Moderate Diversified Portfolio.
The New Sub-Advisory Agreements provide that they will continue in effect for
two years from their date of execution and thereafter from year to year if
their continuance is approved at least annually (i) by the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of the
Portfolios and (ii) by vote of a majority of the Trustees who are not
"interested persons," as that term is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), of the Trust, IXIS Advisors or Dreman
("Independent Trustees"), cast in person at a meeting called for the purpose of
voting on such approval. Any amendment to the New Sub-Advisory Agreements must
be approved by IXIS Advisors and Dreman and, if required by law, by vote of a
majority of the outstanding voting securities of the Portfolios and by a
majority of the Independent Trustees, cast in person at a meeting called for
the purpose of voting on such approval. The New Sub-Advisory Agreements may be
terminated without penalty by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolios, upon 60 days'
written notice, or by Dreman or IXIS Advisors upon 90 days' written notice, and
will terminate automatically in the event of its "assignment," as defined in
the 1940 Act.
The New Sub-Advisory Agreements will automatically terminate if the Advisory
Agreements are terminated. The New Sub-Advisory Agreements are non-exclusive
with respect to Dreman's services, which means that Dreman can serve as an
adviser to other mutual funds and investment accounts.
The New Sub-Advisory Agreements provide that Dreman shall not be subject to any
liability in connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Fees Paid Under the Previous and New Sub-Advisory Agreements
For the fiscal year ended December 31, 2005, the IXIS Equity Diversified
Portfolio paid aggregate advisory fees of $133,846, $58,554 of such amount was
payable to IXIS Advisors and the remainder ($75,292) was payable to the
Portfolio's sub-advisers. For the fiscal year ended December 31, 2005, the IXIS
Moderate Diversified Portfolio paid aggregate advisory fees of $897,702,
$420,190 of such amount was payable to IXIS Advisors and the remainder
($477,512) was payable to the Portfolio's sub-advisers. Of the amount paid to
the Portfolio's sub-advisers, the IXIS Equity Diversified Portfolio and IXIS
Moderate Diversified Portfolio paid sub-advisory fees of $11,180 and $54,050,
respectively, to Reich & Tang under the Previous Sub-Advisory Agreements.
Because the fee rates are the same under both the Previous Sub-Advisory
Agreements and the New Sub-Advisory Agreements, Dreman would have received the
same amounts had the New Sub-Advisory Agreements been in effect during 2005. In
addition, the aggregate management fees paid by the Portfolios will not be
affected by the change in subadvisers.
II.OTHER INFORMATION
Information About the Trust
IXIS Advisor Funds Trust III is registered with the SEC as an open-end
management investment company and is organized as a Massachusetts business
trust under the laws of Massachusetts pursuant to a Declaration of Trust
6
dated August 22, 1995, as amended. Each series of the Trust (except Harris
Associated Focused Value Fund) is diversified. The name of the Trust has
changed several times since its organization as noted below:
Trust Name Date
---------- ----
New England Funds Trust III August 1995 to January 2000
Nvest Funds Trust III January 2000 to April 2001
CDC Nvest Funds Trust III May 2001 to April 2005
IXIS Advisors Funds Trust III May 2005 to present
IXIS Advisor Funds Trust III has three (3) portfolios. Harris Associates
Focused Value Fund was organized in 2001 and commenced operations March 15,
2001. IXIS Moderate Diversified Portfolio commenced operations on July 15,
2004. Prior to May 1, 2005, IXIS Moderate Diversified Portfolio was named "CDC
IXIS Moderate Diversified Portfolio". IXIS Equity Diversified Portfolio
commenced operations on January 31, 2005.
Information About IXIS Advisors
IXIS Asset Management Advisors, L.P. ("IXIS Advisors"), formed in 1995, is a
limited partnership whose sole general partner, IXIS Asset Management
Distribution Corporation ("IXIS Distribution Corporation"), is a wholly-owned
subsidiary of IXIS Asset Management Holdings, LLC ("IXIS Holdings"), which in
turn is a wholly-owned subsidiary of IXIS Asset Management US Group, L.P.
("IXIS Asset Management US Group"). IXIS Distribution Corporation is also the
sole general partner of IXIS Asset Management Distributors, L.P. ("IXIS
Distributors"), the Portfolios' principal underwriter. IXIS Asset Management US
Group owns the entire limited partnership interest in each of IXIS Advisors and
IXIS Distributors.
IXIS Asset Management US Group is part of IXIS Asset Management Group, an
international asset management group based in Paris, France. IXIS Asset
Management Group is ultimately owned principally, directly or indirectly, by
three large affiliated French financial services entities: the Caisse des
Depots et Consignations ("CDC"), a public sector financial institution created
by the French government in 1816; the Caisse Nationale des Caisses d'Epargne, a
financial institution owned by CDC and by French regional savings banks known
as the Caisses d'Epargne; and by CNP Assurances, a large French life insurance
company. The registered address of CNP Assurances is 4, place Raoul Dautry,
75015 Paris, France. The registered address Caisse Nationale des Caisses
d'Epargne is 5, rue Masseran, 75007 Paris, France. The registered office of CDC
is 56, rue de Lille, 75007 Paris, France.
Information About Dreman
Dreman Value Management, L.L.C. ("Dreman"), located at 520 East Cooper Avenue,
Aspen, Colorado 81611, serves as the subadviser to the Dreman Mid Cap Value
Discipline of each Portfolio. Dreman was founded in 1997, with predecessor
firms dating back to 1977, and is controlled by David Dreman. As of
December 31, 2005, Dreman managed over $14.5 billion in assets, which were
primarily composed of institutional accounts and investment companies.
Below is a table listing the chief executive officers and directors of Dreman
and their position with Dreman:
Name Title
---- -----
David Dreman Chairman
F. James Hutchinson Executive Vice President
Nelson Woodard Managing Director
Lloyd Jagai Chief Executive Officer
Thomas Littauer President
Lee Delaporte Managing Director
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The principal address of Dreman is 520 East Cooper Avenue, Aspen, Colorado
81611. The Dreman Family 1988 Trust and its co-trustees Holly Dreman, Carlyn
McCaffrey and Solomon Dreman collectively own 75% or more of Dreman and are
considered to be control persons of the firm.
Dreman sub-advises a mutual fund that has an investment objective similar to
that of the Portfolios, for compensation at the annual fee rates of the
corresponding average net assets levels of such fund set forth in the table
below. The table also sets forth the net assets of this fund at $11 million as
of December 31, 2005:
Approximate Annual Sub-Advisory Fee Rate
Net Assets (as a percentage of average net
Fund (in millions) assets)
---- ------------- -------------------------------
DWS Dreman Mid Cap Value Fund $11 0.375% $0 - $500 million
0.340% thereafter
Other Sub-Advisers
As described above, IXIS Equity Diversified Portfolio is divided into four
disciplines, one of which is managed by Dreman. Another discipline is managed
by Harris Associates L.P., Two North LaSalle Street, Chicago, Illinois 60602,
one discipline is managed by Loomis, Sayles & Company, L.P., One Financial
Center, Boston, Massachusetts 02111 and the remaining discipline is managed by
Hansberger Global Investors Inc., 401 East Las Olas Boulevard, Suite 1700, Fort
Lauderdale, FL 33301
As described above, IXIS Moderate Diversified Portfolio is divided into five
disciplines, one of which is managed by Dreman. Another discipline is managed
by Harris Associates L.P., Two North LaSalle Street, Chicago, Illinois 60602,
two disciplines are managed by Loomis, Sayles & Company, L.P., One Financial
Center, Boston, Massachusetts 02111 and the remaining discipline is managed by
Hansberger Global Investors Inc., 401 East Las Olas Boulevard, Suite 1700, Fort
Lauderdale, FL 33301
Please see the prospectus and statement of additional of the Portfolios for
more information on these subadvisers.
Portfolio Transactions and Brokerage
Dreman places all orders for purchases and sales of securities for the Mid Cap
Value Disciplines of the IXIS Equity Diversified Portfolio and IXIS Moderate
Diversified Portfolio.
Dreman, in effecting purchases and sales of securities for the account of each
Discipline, will seek best execution of orders. Dreman may be permitted to pay
higher brokerage commissions for research services as described below.
Consistent with this policy, orders for transactions are placed with
broker-dealer firms giving consideration to the quality, quantity and nature of
each firm's professional services, which include execution, financial
responsibility, responsiveness, clearance procedures, wire service quotations
and statistical and other research information provided to the disciplines of
the Portfolio and Dreman. Subject to seeking best execution of an order,
brokerage is allocated on the basis of all services provided. Any research
benefits derived are available for all clients of Dreman. When it can be done
consistently with the policy of obtaining the most favorable net results,
Dreman may place orders with firms that provide market, statistical and other
research information to Dreman, although Dreman is not authorized to pay higher
commissions to firms that provide such services, except as described below.
Dreman may in certain instances be permitted to pay higher brokerage
commissions for receipt of market, statistical and other research services as
defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation and execution equipment and software; and
research or analytical computer software and services. Where products or
services have a
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"mixed use," a good faith effort is made to make a reasonable allocation of the
cost of products or services in accordance with the anticipated research and
non-research uses and the cost attributable to non-research use is paid by
Dreman in cash. Subject to Section 28(e), the Disciplines could pay a firm that
provides research services commissions for effecting a securities transaction
for the Discipline in excess of the amount other firms would have charged for
the transaction if Dreman determines in good faith that the greater commission
is reasonable in relation to the value of the brokerage and research services
provided by the executing firm viewed in terms either of a particular
transaction or Dreman's overall responsibilities to the Discipline and its
other clients. Not all of such research services may be useful or of value in
advising the Disciplines. The subadvisory fees paid to Dreman are not reduced
because these research services are received.
For the fiscal year ended December 31, 2005, brokerage commissions paid to
affiliated broker/dealers by IXIS Equity Diversified Portfolio and IXIS
Moderate Diversified Portfolio were $2,960 and $9,483, respectively. These
amounts represented 0.02% and 0.02% of the overall brokerage commissions of
IXIS Equity Diversified Portfolio and IXIS Moderate Diversified Portfolio,
respectively.
Certain Payments to Affiliates
In addition to advisory fees payable to IXIS Advisors, IXIS Advisors is also
compensated for serving as Administrator of the Portfolios. For the fiscal year
ended December 31, 2005. For Equity Diversified Portfolio these payments to
IXIS Advisors amounted to $94,459. For the fiscal year ended December 31, 2005,
for IXIS Moderate Diversified Portfolio these payments to IXIS Advisors
amounted to &64,343. In addition, the Portfolios compensate IXIS Distributors
for providing various services to the Portfolios. For the fiscal year ended
December 31, 2005, for IXIS Equity Diversified Portfolio these payments to IXIS
Distributors amounted to $18,145 for service (Rule 12b-1) fees for Class A
shares and $94,729 for service and distribution (Rule 12b-1) fees for Class C
shares. For the fiscal year ended December 31, 2005, for IXIS Moderate
Diversified Portfolio these payments to IXIS Distributors amounted to $107,928
for service (Rule 12b-1) fees for Class A shares and $765,226 for service and
distribution (Rule 12b-1) fees for Class C shares. In addition, for the fiscal
year ended December 31, 2005, IXIS Distributors received $119,052 and $460,253
in sales charges (including contingent deferred sales charges on Class C
shares) from the IXIS Equity Diversified Portfolio and IXIS Moderate
Diversified Portfolio shareholders, respectively. These arrangements are not
affected in any way by the New Sub-Advisory Agreements.
Certain Trustees and Officers of the Trust
No Trustees or Officers have any substantial interest, direct or indirect, by
security holdings or otherwise, in the change of subadviser for the disciplines
of the Portfolios.
Outstanding Shares and Significant Shareholders
The number of shares of beneficial interest of each class of the Portfolios
issued and outstanding as of April 7, 2006 were approximately 1,127,550 for
Class A and 1,907,484 for Class C of IXIS Equity Diversified Portfolio; and
approximately 3,352,170 for Class A and 7,802,721 for Class C of IXIS Moderate
Diversified Portfolio. The total number of shares of beneficial interest of the
Portfolios issued and outstanding as of April 7, 2006 was approximately
3,035,034 for IXIS Equity Diversified Portfolio and 11,154,892 for IXIS
Moderate Diversified Portfolio.
9
As of April 7, 2006, the following person owned more than 5% of the outstanding
shares of the noted class of shares of the Portfolios beneficially (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934):
Percentage of
Shares Outstanding
Name and Address of Beneficially Shares of
Portfolio Beneficial Owner Owned Class Owned
--------- --------------------------- ------------ -------------
IXIS Equity Diversified Portfolio
Class A MLPF&S For the Sole Benefit 696,887 61.80%
of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr E, Fl 2
Jacksonville, FL 32246-6484
IXIS IS 304,878 27.03%
16-18 Rue Berthollet
94 113 Arcueil Cedex France
Class C MLPF&S For the Sole Benefit 1,582,560 83.11%
of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr E, Fl 2
Jacksonville, FL 32246-6484
IXIS Moderate Diversified Portfolio
Class A MLPF&S For the Sole Benefit 2,443,433 72.91%
of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr E, Fl 2
Jacksonville, FL 32246-6484
Class C MLPF&S For the Sole Benefit 7,195,445 92.23%
of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr E, Fl 2
Jacksonville, FL 32246-6484
As of April 7, 2006, the officers and Trustees of the Trust as a group owned
less than 1% of the outstanding shares of any class of shares of each Portfolio.
Shareholder Proposals at Future Meetings
The Trust does not hold annual or other regular meetings of shareholders.
Shareholder proposals to be presented at any future meeting of shareholders of
the Trust must be received by the Trust a reasonable time before the Trust's
solicitation of proxies for that meeting in order for such proposals to be
considered for inclusion in the proxy materials relating to that meeting.
Delivery to Shareholders Sharing an Address
The Trustees are delivering one Information Statement to multiple shareholders
sharing an address unless the Trust or IXIS Distributors has received contrary
instructions from one or more of such shareholders. Upon written or oral
request, IXIS Distributors shall deliver a separate copy of this Information
Statement to a shareholder at a shared address to which a single copy of this
Information Statement was previously delivered.
10
To find out how to request a separate copy of this Information Statement or any
future annual report or information statement or to request delivery of a
single copy of annual reports or information statements if they are receiving
multiple copies of such documents, shareholders sharing an address with other
shareholders may contact IXIS Distributors in writing at 399 Boylston Street,
Boston, Massachusetts 02116 or by calling 1-800-225-5478.
Portfolios' Annual Reports
The Portfolios have previously sent their most recent Annual Reports and
Semi-Annual Reports to their shareholders. You can obtain a copy of these
reports without charge by writing to IXIS Distributors at 399 Boylston Street,
Boston, Massachusetts 02116 or by calling (800) 225-5478 or by logging onto
www.ixisadvisorfunds.com.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
11
Appendix A-1
IXIS EQUITY DIVERSIFIED PORTFOLIO
Sub-Advisory Agreement
(Dreman Value Management, L.L.C.)
(Mid Cap Value Discipline)
Sub-Advisory Agreement (this "Agreement") entered into as of 3/rd/ day of
April, 2006, by and among IXIS Advisor Funds Trust III, a Massachusetts
business trust (the "Trust"), with respect to its IXIS Equity Diversified
Portfolio series (the "Series"), IXIS Asset Management Advisors, L.P., a
Delaware limited partnership (the "Manager"), and Dreman Value Management,
L.L.C., a Delaware limited liability company (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated
January 31, 2005 (the "Advisory Agreement") with the Trust, relating to the
provision of portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
1. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the Manager and of
any administrator appointed by the Manager (the "Administrator"), manage the
investment and reinvestment of such portion of the assets of the Series
designated as the "Dreman Mid Cap Value Discipline" as the Manager may from
time to time allocate to the Sub-Adviser for management (the "Segment") and the
Sub-Adviser shall have the authority on behalf of the Series to vote and shall
vote all proxies and exercise all other rights of the Series as a security
holder of companies in which the Segment from time to time invests. The
Sub-Adviser shall manage the Segment in conformity with (1) the investment
objective, policies and restrictions of the Series set forth in the Trust's
prospectus and statement of additional information relating to the Series,
(2) any additional policies or guidelines established by the Manager or by the
Trust's trustees that have been furnished in writing to the Sub-Adviser and
(3) the provisions of the Internal Revenue Code as amended (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of
the Code), all as from time to time in effect (collectively, the "Policies"),
and with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 as amended (the
"1940 Act") and the rules and regulations thereunder. For purposes of
compliance with the Policies, the Sub-Adviser shall be entitled to treat the
Segment as though the Segment constituted the entire Series, and the
Sub-Adviser shall not be responsible in any way for the compliance of any
assets of the Series, other than the Segment, with the Policies, or for the
compliance of the Series, taken as a whole, with the Policies. Subject to the
foregoing, the Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in any
stocks, bonds and other securities and investment instruments on behalf of the
Series, without regard to the length of time the securities have been held and
the resulting rate of portfolio turnover or any tax considerations; and the
majority or the whole of the Segment may be invested in such proportions of
stocks, bonds, other securities or investment instruments, or cash, as the
Sub-Adviser shall determine. Notwithstanding the foregoing provisions of this
Section 1.a; however, the Sub-Adviser shall, upon written instructions from the
Manager, effect such portfolio transactions for the Segment as the Manager
shall determine are necessary in order for the Series to comply with the
Policies.
A1-1
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions and
performance of the Segment in such form as may be mutually agreed upon, and
agrees to review the Segment and discuss the management of it. The Sub-Adviser
shall permit all books and records with respect to the Segment to be inspected
and audited by the Manager and the Administrator at all reasonable times during
normal business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may reasonably
be requested by the Manager from time to time, including without limitation all
material requested by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian (as defined
in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets of the Segment, cash
requirements and cash available for investment in the Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus and
statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any
revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Manager agrees to furnish the
Sub-Adviser with minutes of meetings of the trustees of the Trust applicable to
the Series to the extent they may affect the duties of the Sub-Adviser, and
with copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser
may reasonably request to enable it to perform its functions under this
Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of the
Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is taken solely in reliance upon
instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Dreman Value Management, L.L.C." and
that all use of any designation consisting in whole or part of "Dreman Value
Management, L.L.C." under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Series agrees
not to use any such designation in any advertisement or sales literature or
other materials promoting the Series, except with the prior written consent of
the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Series not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to cease,
all use of any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be paid
by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for any
organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage
commissions and other
A1-2
costs in connection with the purchase or sale of securities or other investment
instruments with respect to the Series, and (c) custodian fees and expenses.
Any reimbursement of advisory fees required by any expense limitation provision
of any law shall be the sole responsibility of the Manager. The Manager and the
Sub-Adviser shall not be considered as partners or participants in a joint
venture. The Sub-Adviser will pay its own expenses incurred in furnishing the
services to be provided by it pursuant to this Agreement. Neither the
Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to the
contrary, the Sub-Adviser shall place all orders for the purchase and sale of
securities for the Segment with brokers or dealers selected by the Sub-Adviser,
which may include brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all respects. To the
extent consistent with applicable law, purchase or sell orders for the Segment
may be aggregated with contemporaneous purchase or sell orders of other clients
of the Sub-Adviser. The Sub-Adviser shall use its best efforts to obtain
execution of transactions for the Segment at prices which are advantageous to
the Series and at commission rates that are reasonable in relation to the
benefits received. However, the Sub-Adviser may select brokers or dealers on
the basis that they provide brokerage, research or other services or products
to the Series and/or other accounts serviced by the Sub-Adviser. To the extent
consistent with applicable law, the Sub-Adviser may pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser
in managing the Segment.
To the extent permitted by applicable law, and in all instances subject to
the foregoing policy of best execution, the Sub-Adviser may allocate brokerage
transactions to broker-dealers (including affiliates of IXIS Asset Management
Distributors, L.P.) that have entered into arrangements in which the
broker-dealer allocates a portion of the commissions paid by a fund toward the
reduction of that fund's expenses, subject to the policy of best execution.
The Manager agrees that, subject to its fiduciary duties to the Series
arising from its position as Manager of the Series, the Manager shall not
dictate brokerage allocation or selection decisions or investment decisions to
or for the Series, either directly or pursuant to directions given to the
Sub-Adviser by the Manager; provided, however, that nothing in this paragraph
shall prohibit officers of the Trust (who may also be officers or employees of
the Manager) from exercising authority conferred upon them as officers of the
Trust by the Board of Trustees of the Trust.
7. Compensation of the Sub-Adviser. As full compensation for all services
rendered, facilities furnished and expenses borne by the Sub-Adviser hereunder,
the Sub-Adviser shall be paid at the annual rate of 0.45% of the first $250
million of the average daily net assets of its Segment, and 0.40% of its
Segment's average daily net assets in excess of $250 million (or such lesser
amount as the Sub-Adviser may from time to time agree to receive). Such
compensation shall be paid by the Trust (except to the extent that the Trust,
the Sub-Adviser and the Manager otherwise agree in writing from time to time).
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Manager is paid by the
Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Trust on behalf of the Series agree
that the services of the Sub-Adviser are not to be deemed exclusive and that
the Sub-Adviser and its affiliates are free to act as
A1-3
investment manager and provide other services to various investment companies
and other managed accounts, except as the Sub-Adviser and the Manager or the
Administrator may otherwise agree from time to time in writing before or after
the date hereof. This Agreement shall not in any way limit or restrict the
Sub-Adviser or any of its directors, officers, employees or agents from buying,
selling or trading any securities or other investment instruments for its or
their own account or for the account of others for whom it or they may be
acting, provided that such activities do not adversely affect or otherwise
impair the performance by the Sub-Adviser of its duties and obligations under
this Agreement. The Manager and the Trust recognize and agree that the
Sub-Adviser may provide advice to or take action with respect to other clients,
which advice or action, including the timing and nature of such action, may
differ from or be identical to advice given or action taken with respect to the
Series. The Sub-Adviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent the Trust or the Manager in any way or
otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed that
the Manager and the Series shall hold harmless and indemnify the Indemnified
Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no
representation or warranty, expressed or implied, that any level of performance
or investment results will be achieved by the Series or the Segment or that the
Series or the Segment will perform comparably with any standard or index,
including other clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter so
long as such continuance is specifically approved at least annually (i) by
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, and (ii) by vote of a majority
of the trustees of the Trust who are not interested persons of the Trust, the
Manager or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval;
b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement; and
d. this Agreement may be terminated by the Sub-Adviser on ninety days'
written notice to the Manager and the Trust, or by the Manager on ninety
days' written notice to the Sub-Adviser.
A1-4
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual consent
of the Manager and the Sub-Adviser, provided that, if required by law, such
amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms "vote
of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any employee, officer
or agent of the Sub-Adviser, and the Manager shall not be entitled to the
advice, recommendation or judgment of any specific person; provided, however,
that the persons identified in the prospectus of the Series shall perform the
day-to-day portfolio management duties described therein until the
Sub-Adviser notifies the Manager that one or more other employees, officers
or agents of the Sub-Adviser, identified in such notice, shall assume such
duties as of a specific date.
b. If any term or provision of this Agreement or the application thereof
to any person or circumstances is held to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
c. In accordance with Regulation S-P, if non-public personal information
regarding either party's customers or consumers is disclosed to the other
party in connection with this Agreement, the party receiving such information
will not disclose or use that information other than as necessary to carry
out the purposes of this Agreement.
d. This Agreement shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Massachusetts.
A1-5
IXIS ASSET MANAGEMENT ADVISORS, L.P.
By IXIS Asset Management Distribution Corporation, its general partner
By: /s/ John T. Hailer
--------------------------
Name: John T. Hailer
Title: Executive Vice President
DREMAN VALUE MANAGEMENT, L.L.C.
By: /s/ Lloyd K. Jagai
--------------------------
Name: Lloyd K. Jagai
Title: Chief Executive Officer
IXIS ADVISOR FUNDS TRUST III
on behalf of its IXIS Equity Diversified Portfolio series
By: /s/ John T. Hailer
--------------------------
Name: John T. Hailer
Title: President and Chief
Executive Officer
NOTICE
A copy of the Agreement and Declaration of Trust establishing IXIS Advisor
Funds Trust III (the "Fund") is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Fund's IXIS Equity Diversified Portfolio series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
A1-7
Appendix A-2
IXIS MODERATE DIVERSIFIED PORTFOLIO
Sub-Advisory Agreement
(Dreman Value Management, L.L.C.)
(Mid Cap Value Discipline)
Sub-Advisory Agreement (this "Agreement") entered into as of 3/rd/ day of
April, 2006, by and among IXIS Advisor Funds Trust III, a Massachusetts
business trust (the "Trust"), with respect to its IXIS Moderate Diversified
Portfolio series (the "Series"), IXIS Asset Management Advisors, L.P., a
Delaware limited partnership (the "Manager"), and Dreman Value Management,
L.L.C., a Delaware limited liability company (the "Sub-Adviser").
WHEREAS, the Manager has entered into an Advisory Agreement dated July 14,
2004 (the "Advisory Agreement") with the Trust, relating to the provision of
portfolio management and administrative services to the Series;
WHEREAS, the Advisory Agreement provides that the Manager may delegate any
or all of its portfolio management responsibilities under the Advisory
Agreement to one or more sub-advisers;
WHEREAS, the Manager and the Trustees of the Trust desire to retain the
Sub-Adviser to render portfolio management services in the manner and on the
terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Trust, the Manager and the Sub-Adviser agree as
follows:
2. Sub-Advisory Services.
a. The Sub-Adviser shall, subject to the supervision of the Manager and of
any administrator appointed by the Manager (the "Administrator"), manage the
investment and reinvestment of such portion of the assets of the Series
designated as the "Dreman Mid Cap Value Discipline" as the Manager may from
time to time allocate to the Sub-Adviser for management (the "Segment") and the
Sub-Adviser shall have the authority on behalf of the Series to vote and shall
vote all proxies and exercise all other rights of the Series as a security
holder of companies in which the Segment from time to time invests. The
Sub-Adviser shall manage the Segment in conformity with (1) the investment
objective, policies and restrictions of the Series set forth in the Trust's
prospectus and statement of additional information relating to the Series,
(2) any additional policies or guidelines established by the Manager or by the
Trust's trustees that have been furnished in writing to the Sub-Adviser and
(3) the provisions of the Internal Revenue Code as amended (the "Code")
applicable to "regulated investment companies" (as defined in Section 851 of
the Code), all as from time to time in effect (collectively, the "Policies"),
and with all applicable provisions of law, including without limitation all
applicable provisions of the Investment Company Act of 1940 as amended (the
"1940 Act") and the rules and regulations thereunder. For purposes of
compliance with the Policies, the Sub-Adviser shall be entitled to treat the
Segment as though the Segment constituted the entire Series, and the
Sub-Adviser shall not be responsible in any way for the compliance of any
assets of the Series, other than the Segment, with the Policies, or for the
compliance of the Series, taken as a whole, with the Policies. Subject to the
foregoing, the Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager, to buy, sell, lend and otherwise trade in any
stocks, bonds and other securities and investment instruments on behalf of the
Series, without regard to the length of time the securities have been held and
the resulting rate of portfolio turnover or any tax considerations; and the
majority or the whole of the Segment may be invested in such proportions of
stocks, bonds, other securities or investment instruments, or cash, as the
Sub-Adviser shall determine. Notwithstanding the foregoing provisions of this
Section 1.a; however, the Sub-Adviser shall, upon written instructions from the
Manager, effect such portfolio transactions for the Segment as the Manager
shall determine are necessary in order for the Series to comply with the
Policies.
A2-1
b. The Sub-Adviser shall furnish the Manager and the Administrator
monthly, quarterly and annual reports concerning portfolio transactions and
performance of the Segment in such form as may be mutually agreed upon, and
agrees to review the Segment and discuss the management of it. The Sub-Adviser
shall permit all books and records with respect to the Segment to be inspected
and audited by the Manager and the Administrator at all reasonable times during
normal business hours, upon reasonable notice. The Sub-Adviser shall also
provide the Manager with such other information and reports as may reasonably
be requested by the Manager from time to time, including without limitation all
material requested by or required to be delivered to the Trustees of the Trust.
c. The Sub-Adviser shall provide to the Manager a copy of the
Sub-Adviser's Form ADV as filed with the Securities and Exchange Commission and
a list of the persons whom the Sub-Adviser wishes to have authorized to give
written and/or oral instructions to custodians of assets of the Series.
2. Obligations of the Manager.
a. The Manager shall provide (or cause the Series' Custodian (as defined
in Section 3 hereof) to provide) timely information to the Sub-Adviser
regarding such matters as the composition of assets of the Segment, cash
requirements and cash available for investment in the Segment, and all other
information as may be reasonably necessary for the Sub-Adviser to perform its
responsibilities hereunder.
b. The Manager has furnished the Sub-Adviser a copy of the prospectus and
statement of additional information of the Series and agrees during the
continuance of this Agreement to furnish the Sub-Adviser copies of any
revisions or supplements thereto at, or, if practicable, before the time the
revisions or supplements become effective. The Manager agrees to furnish the
Sub-Adviser with minutes of meetings of the trustees of the Trust applicable to
the Series to the extent they may affect the duties of the Sub-Adviser, and
with copies of any financial statements or reports made by the Series to its
shareholders, and any further materials or information which the Sub-Adviser
may reasonably request to enable it to perform its functions under this
Agreement.
3. Custodian. The Manager shall provide the Sub-Adviser with a copy of the
Series' agreement with the custodian designated to hold the assets of the
Series (the "Custodian") and any modifications thereto (the "Custody
Agreement"), copies of such modifications to be provided to the Sub-Adviser a
reasonable time in advance of the effectiveness of such modifications. The
assets of the Segment shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement (or any sub-custodian properly appointed as provided in the Custody
Agreement). The Sub-Adviser shall have no liability for the acts or omissions
of the Custodian, unless such act or omission is taken solely in reliance upon
instruction given to the Custodian by a representative of the Sub-Adviser
properly authorized to give such instruction under the Custody Agreement. Any
assets added to the Series shall be delivered directly to the Custodian.
4. Proprietary Rights. The Manager agrees and acknowledges that the
Sub-Adviser is the sole owner of the name "Dreman Value Management, L.L.C." and
that all use of any designation consisting in whole or part of "Dreman Value
Management, L.L.C." under this Agreement shall inure to the benefit of the
Sub-Adviser. The Manager on its own behalf and on behalf of the Series agrees
not to use any such designation in any advertisement or sales literature or
other materials promoting the Series, except with the prior written consent of
the Sub-Adviser. Without the prior written consent of the Sub-Adviser, the
Manager shall not, and the Manager shall use its best efforts to cause the
Series not to, make representations regarding the Sub-Adviser in any disclosure
document, advertisement or sales literature or other materials relating to the
Series. Upon termination of this Agreement for any reason, the Manager shall
cease, and the Manager shall use its best efforts to cause the Series to cease,
all use of any such designation as soon as reasonably practicable.
5. Expenses. Except for expenses specifically assumed or agreed to be paid
by the Sub-Adviser pursuant hereto, the Sub-Adviser shall not be liable for any
organizational, operational or business expenses of the Manager or the Trust
including, without limitation, (a) interest and taxes, (b) brokerage
commissions and other
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costs in connection with the purchase or sale of securities or other investment
instruments with respect to the Series, and (c) custodian fees and expenses.
Any reimbursement of advisory fees required by any expense limitation provision
of any law shall be the sole responsibility of the Manager. The Manager and the
Sub-Adviser shall not be considered as partners or participants in a joint
venture. The Sub-Adviser will pay its own expenses incurred in furnishing the
services to be provided by it pursuant to this Agreement. Neither the
Sub-Adviser nor any affiliated person thereof shall be entitled to any
compensation from the Manager or the Trust with respect to service by any
affiliated person of the Sub-Adviser as an officer or trustee of the Trust
(other than the compensation to the Sub-Adviser payable by the Manager pursuant
to Section 7 hereof).
6. Purchase and Sale of Assets. Absent instructions from the Manager to the
contrary, the Sub-Adviser shall place all orders for the purchase and sale of
securities for the Segment with brokers or dealers selected by the Sub-Adviser,
which may include brokers or dealers affiliated with the Sub-Adviser, provided
such orders comply with Rule 17e-1 under the 1940 Act in all respects. To the
extent consistent with applicable law, purchase or sell orders for the Segment
may be aggregated with contemporaneous purchase or sell orders of other clients
of the Sub-Adviser. The Sub-Adviser shall use its best efforts to obtain
execution of transactions for the Segment at prices which are advantageous to
the Series and at commission rates that are reasonable in relation to the
benefits received. However, the Sub-Adviser may select brokers or dealers on
the basis that they provide brokerage, research or other services or products
to the Series and/or other accounts serviced by the Sub-Adviser. To the extent
consistent with applicable law, the Sub-Adviser may pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Adviser and its affiliates have with
respect to the Series or to accounts over which they exercise investment
discretion. Not all such services or products need be used by the Sub-Adviser
in managing the Segment.
To the extent permitted by applicable law, and in all instances subject to
the foregoing policy of best execution, the Sub-Adviser may allocate brokerage
transactions to broker-dealers (including affiliates of IXIS Asset Management
Distributors, L.P.) that have entered into arrangements in which the
broker-dealer allocates a portion of the commissions paid by a fund toward the
reduction of that fund's expenses, subject to the policy of best execution.
The Manager agrees that, subject to its fiduciary duties to the Series
arising from its position as Manager of the Series, the Manager shall not
dictate brokerage allocation or selection decisions or investment decisions to
or for the Series, either directly or pursuant to directions given to the
Sub-Adviser by the Manager; provided, however, that nothing in this paragraph
shall prohibit officers of the Trust (who may also be officers or employees of
the Manager) from exercising authority conferred upon them as officers of the
Trust by the Board of Trustees of the Trust.
7. Compensation of the Sub-Adviser. As full compensation for all services
rendered, facilities furnished and expenses borne by the Sub-Adviser hereunder,
the Sub-Adviser shall be paid at the annual rate of 0.45% of the first $250
million of the average daily net assets of its Segment, and 0.40% of its
Segment's average daily net assets in excess of $250 million (or such lesser
amount as the Sub-Adviser may from time to time agree to receive). Such
compensation shall be paid by the Trust (except to the extent that the Trust,
the Sub-Adviser and the Manager otherwise agree in writing from time to time).
Such compensation shall be payable monthly in arrears or at such other
intervals, not less frequently than quarterly, as the Manager is paid by the
Series pursuant to the Advisory Agreement.
8. Non-Exclusivity. The Manager and the Trust on behalf of the Series agree
that the services of the Sub-Adviser are not to be deemed exclusive and that
the Sub-Adviser and its affiliates are free to act as
A2-3
investment manager and provide other services to various investment companies
and other managed accounts, except as the Sub-Adviser and the Manager or the
Administrator may otherwise agree from time to time in writing before or after
the date hereof. This Agreement shall not in any way limit or restrict the
Sub-Adviser or any of its directors, officers, employees or agents from buying,
selling or trading any securities or other investment instruments for its or
their own account or for the account of others for whom it or they may be
acting, provided that such activities do not adversely affect or otherwise
impair the performance by the Sub-Adviser of its duties and obligations under
this Agreement. The Manager and the Trust recognize and agree that the
Sub-Adviser may provide advice to or take action with respect to other clients,
which advice or action, including the timing and nature of such action, may
differ from or be identical to advice given or action taken with respect to the
Series. The Sub-Adviser shall for all purposes hereof be deemed to be an
independent contractor and shall, unless otherwise provided or authorized, have
no authority to act for or represent the Trust or the Manager in any way or
otherwise be deemed an agent of the Series or the Manager.
9. Liability. Except as may otherwise be provided by the 1940 Act or other
federal securities laws, neither the Sub-Adviser nor any of its officers,
directors, partners, employees or agents (the "Indemnified Parties") shall be
subject to any liability to the Manager, the Trust, the Series or any
shareholder of the Series for any error of judgment, any mistake of law or any
loss arising out of any investment or other act or omission in the course of,
connected with, or arising out of any service to be rendered under this
Agreement, except by reason of willful misfeasance, bad faith or gross
negligence in the performance of the Sub-Adviser's duties or by reason of
reckless disregard by the Sub-Adviser of its obligations and duties hereunder.
The Manager shall hold harmless and indemnify the Sub-Adviser for any loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) arising from any claim or demand by any past or present shareholder of
the Series that is not based upon the obligations of the Sub-Adviser with
respect to the Segment under this Agreement.
Without limiting the foregoing, it is expressly understood and agreed that
the Manager and the Series shall hold harmless and indemnify the Indemnified
Parties for any loss arising out of any act or omission of any other
sub-adviser to the Series, or for any loss arising out of the failure of the
Series to comply with the Policies, except for losses arising out of the
Sub-Adviser's failure to comply with the Policies with respect to the Segment.
The Manager acknowledges and agrees that the Sub-Adviser makes no
representation or warranty, expressed or implied, that any level of performance
or investment results will be achieved by the Series or the Segment or that the
Series or the Segment will perform comparably with any standard or index,
including other clients of the Sub-Adviser, whether public or private.
10. Effective Date and Termination. This Agreement shall become effective
as of the date of its execution, and
a. unless otherwise terminated, this Agreement shall continue in effect
for two years from the date of execution, and from year to year thereafter so
long as such continuance is specifically approved at least annually (i) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series, and (ii) by vote of a majority of the trustees
of the Trust who are not interested persons of the Trust, the Manager or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval;
b. this Agreement may at any time be terminated on sixty days' written
notice to the Sub-Adviser either by vote of the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of the Series;
c. this Agreement shall automatically terminate in the event of its
assignment or upon the termination of the Advisory Agreement; and
d. this Agreement may be terminated by the Sub-Adviser on ninety days'
written notice to the Manager and the Trust, or by the Manager on ninety days'
written notice to the Sub-Adviser.
A2-4
Termination of this Agreement pursuant to this Section 10 shall be without
the payment of any penalty.
11. Amendment. This Agreement may be amended at any time by mutual consent
of the Manager and the Sub-Adviser, provided that, if required by law, such
amendment shall also have been approved by vote of a majority of the
outstanding voting securities of the Series and by vote of a majority of the
trustees of the Trust who are not interested persons of the Trust, the Manager
or the Sub-Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
12. Certain Definitions. For the purpose of this Agreement, the terms "vote
of a majority of the outstanding voting securities," "interested person,"
"affiliated person" and "assignment" shall have their respective meanings
defined in the 1940 Act, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under the 1940 Act.
13. General.
a. The Sub-Adviser may perform its services through any employee, officer
or agent of the Sub-Adviser, and the Manager shall not be entitled to the
advice, recommendation or judgment of any specific person; provided, however,
that the persons identified in the prospectus of the Series shall perform the
day-to-day portfolio management duties described therein until the Sub-Adviser
notifies the Manager that one or more other employees, officers or agents of
the Sub-Adviser, identified in such notice, shall assume such duties as of a
specific date.
b. If any term or provision of this Agreement or the application thereof
to any person or circumstances is held to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the fullest extent permitted by law.
c. In accordance with Regulation S-P, if non-public personal information
regarding either party's customers or consumers is disclosed to the other party
in connection with this Agreement, the party receiving such information will
not disclose or use that information other than as necessary to carry out the
purposes of this Agreement.
d. This Agreement shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Massachusetts.
A2-5
IXIS ASSET MANAGEMENT ADVISORS, L.P.
By IXIS Asset Management Distribution Corporation, its general partner
By: /s/ John T. Hailer
--------------------------
Name: John T. Hailer
Title: Executive Vice President
DREMAN VALUE MANAGEMENT, L.L.C.
By: /s/ Lloyd K. Jagai
--------------------------
Name: Lloyd K. Jagai
Title: Chief Executive Officer
IXIS ADVISOR FUNDS TRUST III
on behalf of its IXIS Moderate Diversified Portfolio series
By: /s/ John T. Hailer
--------------------------
Name: John T. Hailer
Title: President and Chief
Executive Officer
NOTICE
A copy of the Agreement and Declaration of Trust establishing IXIS Advisor
Funds Trust III (the "Fund") is on file with the Secretary of The Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Fund's IXIS Moderate Diversified Portfolio series (the
"Series") on behalf of the Fund by officers of the Fund as officers and not
individually and that the obligations of or arising out of this Agreement are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property belonging to the Series.
A2-7