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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 2009
REGISTRATION NO. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
o Pre-Effective Amendment No.
o Post-Effective Amendment No.
LAUDUS TRUST
(Exact Name of Registrant as Specified in Charter)
211 Main Street
San Francisco, CA 94105
(Address of Principal Executive Offices) (Zip code)
San Francisco, CA 94105
(Address of Principal Executive Offices) (Zip code)
800.648.5300
(Registrant’s Telephone Number, including Area Code)
Name and Address of Agent for Service:
(Registrant’s Telephone Number, including Area Code)
Name and Address of Agent for Service:
Copies of communications to: | ||||||
KOJI FELTON, ESQ. | TIMOTHY W. LEVIN, ESQ. | |||||
Charles Schwab Investment Management, Inc. | Morgan Lewis & Bockius LLP | |||||
211 Main Street | 1701 Market Street | |||||
San Francisco, CA 94105 | Philadelphia, PA 19103 |
Approximate Date of Proposed Public Offering:
As soon as practicable after the Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on September 11, 2009 pursuant to Rule 488.
No filing fee is due because the Registrant has previously registered an indefinite number of shares under the Securities Act of 1933 pursuant to Section 24(f) under the Investment Company Act of 1940.
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LAUDUS TRUST
211 Main Street
San Francisco, CA 94105
September [__], 2009
211 Main Street
San Francisco, CA 94105
September [__], 2009
Dear Shareholder:
Enclosed is some important information concerning your investment in the Laudus Rosenberg U.S. Small Capitalization Fund (the “Small Cap Fund” or “Acquired Fund”). We wish to inform you that the Board of Trustees of the Laudus Trust (the “Trust”), after careful consideration, has approved the reorganization of the Small Cap Fund into the Laudus Rosenberg U.S. Discovery Fund, another fund of the Trust that has similar investment goals and strategies (the “Surviving Fund” and, together with the Acquired Fund, the “Funds”).
A Meeting of Shareholders of the Small Cap Fund has been scheduled for 8:30 a.m. Pacific Time on November 5, 2009 to vote on the reorganization. If you are a shareholder of record as of the close of business on September 11, 2009, you are entitled to vote at the Meeting and at any adjournment or postponement of the Meeting.
The attached combined prospectus/proxy statement is designed to give you information relating to the proposal upon which you will be asked to vote. The Board of Trustees of the Trust is recommending that you approve the reorganization. We believe that this combination will benefit shareholders as follows:
• | The reorganization will combine two smaller funds into a larger surviving fund. Shareholders could potentially benefit by the growth in assets realized by the combination of the Funds because the Surviving Fund can potentially take advantage of the benefits of any future economies of scale, including the ability to spread certain fixed costs across a larger asset base. | ||
• | The reorganization is intended to be tax-free to the Acquired Fund and the Surviving Fund and to shareholders and will be accomplished in such a manner as to not dilute your investment. | ||
• | The Funds pursue similar investment objectives and possess similar investment strategies and are managed by the same investment adviser and subadviser, providing for continuity of investment management. |
Assuming approval of the reorganization, following the close of business on November 19, 2009, the Acquired Fund will be reorganized into the Surviving Fund such that each shareholder of the Acquired Fund will receive an amount of shares of the Surviving Fund equal in value to the shares of the Acquired Fund owned by such holder at the time of the closing of the reorganization. We encourage you to support the Trustees’ recommendation to approve the proposal. Before you vote, however, please read the full text of the combined prospectus/proxy statement.
While you are, of course, welcome to join us at the Meeting, most shareholders are likely to cast their votes by filling out and signing the enclosed Proxy Card. Please mark, sign, and date the enclosed Proxy Card and return it promptly in the enclosed, postage-paid envelope so that the maximum number of shares may be voted. You may also vote by touch-tone telephone or through the Internet as described on the enclosed Proxy Card.
Your vote is important to us. Please do not hesitate to call 1-800-447-3332 if you have any questions. Thank you for taking the time to consider this important proposal and for your investment in the Laudus Rosenberg U.S. Small Capitalization Fund.
Sincerely,
Jeffrey Mortimer
President of the Laudus Funds
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This Section summarizes the primary features and consequences of the reorganization of the Laudus Rosenberg U.S. Small Capitalization Fund into the Laudus Rosenberg U.S. Discovery Fund (the “Reorganization”). It may not contain all of the information that is important to you. To understand the Reorganization, you should read the accompanying Prospectus/Proxy Statement and Appendix A to the Prospectus/Proxy Statement.
This summary is qualified in its entirety by reference to the additional information contained elsewhere in the accompanying Prospectus/Proxy Statement, the Prospectuses and Statements of Additional Information relating to the Funds and the form of the Agreement and Plan of Reorganization (the “Plan”), which is attached to the accompanying Prospectus/Proxy Statement as Appendix A.
Summary Questions and Answers
Q. | Why am I receiving the Prospectus/Proxy Statement? | |
A. | As more fully explained in the Prospectus/Proxy Statement, the Board of Trustees (the “Trustees”) of the Laudus Rosenberg U.S. Small Capitalization Fund (the “Small Cap Fund” or “Acquired Fund”) is seeking approval of the reorganization of the Small Cap Fund into the Laudus Rosenberg U.S. Discovery Fund (the “Discovery Fund” or “Surviving Fund”). | |
Q. | Who is eligible to vote? | |
A. | Shareholders of record of the Small Cap Fund as of September 11, 2009, the record date, are entitled to notice of and to vote at the shareholder meeting or at any adjournment thereof. Shareholders of record will be entitled to one vote for each full share and a fractional vote for each fractional share that they hold as of the record date. | |
Q. | How will the Reorganization affect my account? | |
Prior to the Reorganization, the Discovery Fund’s multiple share classes will be combined into a single share class. If the Reorganization is approved by shareholders of the Small Cap Fund, all of the existing share classes of the Small Cap Fund (Investor Shares, Select Shares and Adviser Shares) will be reorganized into the sole remaining share class of the Discovery Fund. Your Small Cap Fund shares are expected to be exchanged for an equivalent dollar amount of Discovery Fund shares. Your account registration and account options will remain the same unless you change them. The exchange is intended to be on a tax-free basis for federal income tax purposes and, therefore, it is intended that your aggregate tax basis for federal income tax purposes in the account will remain the same. | ||
Q. | How does the Board of Trustees recommend that I vote on the proposal? | |
A. | The Board recommends that shareholders vote “FOR” the proposed Reorganization. The factors considered by the Board in approving the Reorganization and recommending that you approve the proposal are discussed in more detail in the Prospectus/Proxy Statement. | |
Q. | How do I vote my shares? | |
A. | You can vote in any one of four ways: |
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• | Through the Internet by following the instructions on the enclosed proxy card(s) or the Notice of the shareholder meeting; | ||
• | By telephone by calling the number on the enclosed proxy card(s) or the Notice of the shareholder meeting; | ||
• | By mail, by signing and returning the enclosed proxy card(s) in the prepaid envelope provided if you have received the Prospectus/Proxy Statement by mail; or | ||
• | In person at the shareholder meeting. |
We encourage you to vote over the Internet or by telephone, following the instructions that appear on your proxy card(s). These voting methods will reduce the time and costs associated with this proxy solicitation. Whichever method you choose, please take the time to read the Prospectus/Proxy Statement before you vote. | ||
Proxy cards that are properly signed, dated and received at or prior to the shareholder meeting will be voted as specified. If you specify a vote for the proposal, your proxy will be voted as you indicate. If you simply sign, date and return the proxy card, but do not specify a vote for the proposal, your shares will be voted by the proxies “FOR” the Reorganization. | ||
Q. | Will there be any federal income tax consequences as a result of the Reorganization? | |
A. | The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes. Assuming the Reorganization qualifies for such treatment, shareholders will not recognize taxable gain or loss as a result of the Reorganization for federal income tax purposes. As a condition to the closing of the Reorganization, the Small Cap Fund and the Discovery Fund will receive an opinion of legal counsel to the effect that the Reorganization will qualify as a tax-free reorganization for federal income tax purposes. Such opinion will be subject to receipt of and based on certain representations from the Funds. Opinions of legal counsel are not binding on the Internal Revenue Service or the courts. You should separately consider any state, local and other tax consequences in consultation with your tax advisor. | |
Q. | What happens if the Reorganization is not approved by shareholders? | |
A. | If the Reorganization is not approved by shareholders, then the Small Cap Fund will remain in existence, and the Trustees will consider what, if any, additional steps to take, including consideration of the possibility of liquidating the Small Cap Fund. |
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LAUDUS TRUST
LAUDUS ROSENBERG U.S. SMALL CAPITALIZATION FUND
211 Main Street
San Francisco, CA 94105
LAUDUS ROSENBERG U.S. SMALL CAPITALIZATION FUND
211 Main Street
San Francisco, CA 94105
NOTICE OF A MEETING OF SHAREHOLDERS
September [___], 2009
To the Shareholders:
This is to notify you that a Meeting of Shareholders of the Laudus Rosenberg U.S. Small Capitalization Fund (the “Fund”) will be held on November 5, 2009, at 8:30 a.m. Pacific Time. The Meeting will be held at the offices of Charles Schwab & Co., Inc., [___], San Francisco, California, 94105, for the following purposes:
1. | To approve an Agreement and Plan of Reorganization by and between the Laudus Trust (the “Trust”), on behalf of the Fund, and the Trust, on behalf of the Laudus Rosenberg U.S. Discovery Fund, another series of the Trust, which provides for and contemplates: (1) the transfer of all of the assets and liabilities of the Fund to the Laudus Rosenberg U.S. Discovery Fund in exchange for shares of the Laudus Rosenberg U.S. Discovery Fund; and (2) the distribution of the shares of the Laudus Rosenberg U.S. Discovery Fund to the shareholders of the Fund in liquidation of the Fund, as described in the attached Prospectus/Proxy Statement. | ||
2. | To transact such other business as may properly come before the Meeting. |
Only shareholders of record at the close of business on September 11, 2009, the record date for the Meeting, are entitled to notice of, and to vote at, the Meeting and any adjournment thereof. All record date shareholders are invited to attend the Meeting in-person. However, if you are unable to be present at the Meeting, you are requested to mark, sign, and date the enclosed proxy card(s) and return it promptly in the enclosed envelope so that the Meeting may be held and a maximum number of shares may be voted. You may also vote by telephone or through the Internet. Shareholders are encouraged to vote their shares by telephone or through the Internet to reduce the time and costs associated with this proxy solicitation. Please see your proxy card(s) for more information and instructions on how to vote.
By Order of the Board of Trustees
Jeffrey Mortimer
President of the Laudus Funds
President of the Laudus Funds
YOUR VOTE IS IMPORTANT
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN
THE POSTAGE-PAID ENVELOPE PROVIDED OR VOTE BY TOUCH-TONE TELEPHONE
OR INTERNET SO THAT YOU WILL BE REPRESENTED AT THE MEETING.
THE POSTAGE-PAID ENVELOPE PROVIDED OR VOTE BY TOUCH-TONE TELEPHONE
OR INTERNET SO THAT YOU WILL BE REPRESENTED AT THE MEETING.
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LAUDUS TRUST
211 Main Street
San Francisco, CA 94105
211 Main Street
San Francisco, CA 94105
PROSPECTUS/PROXY STATEMENT
September [___], 2009
September [___], 2009
Acquisition of the assets and liabilities of: | By and in exchange for shares of: | |
Laudus Rosenberg U.S. Small Capitalization Fund | Laudus Rosenberg U.S. Discovery Fund | |
A series of Laudus Trust | A series of Laudus Trust | |
211 Main Street | 211 Main Street | |
San Francisco, CA 94105 | San Francisco, CA 94105 | |
(800) 648-5300 | (800) 648-5300 |
This Prospectus/Proxy Statement is being furnished to shareholders of the Laudus Rosenberg U.S. Small Capitalization Fund (the “Small Cap Fund” or the “Acquired Fund”), a series of Laudus Trust (the “Trust”), in connection with an Agreement and Plan of Reorganization (the “Plan”) that has been approved by the Board of Trustees of the Trust (the “Board”). Under the Plan, shareholders of the Acquired Fund will receive shares of the Laudus Rosenberg U.S. Discovery Fund (the “Discovery Fund” or the “Surviving Fund” and, together with the Acquired Fund, the “Funds”), a series of the Trust, equal in aggregate value to the aggregate value of the assets transferred by the Acquired Fund to the Surviving Fund less the liabilities of the Acquired Fund that are assumed by the Surviving Fund, as of the closing date of the reorganization (the “Reorganization”). After the Reorganization is complete, the Acquired Fund will be terminated. The Reorganization is expected to be completed after market close on or about November 19, 2009, such that shareholders of the Acquired Fund will become shareholders of the Surviving Fund on or about November 20, 2009.
The Board believes that the Reorganization is in the best interest of the Acquired Fund and its shareholders and that the interests of the Acquired Fund’s shareholders will not be diluted as a result of the Reorganization. For federal income tax purposes, the Reorganization is intended to be structured as a tax-free transaction for the Acquired Fund and its shareholders.
The Acquired Fund and the Surviving Fund are each a series of the Trust, which is a Massachusetts business trust registered with the Securities and Exchange Commission (the “SEC”) as an open-end management investment company. The Trust currently consists of 13 separate series, including the Acquired Fund and the Surviving Fund. Charles Schwab Investment Management, Inc. (the “Adviser” or “CSIM”) and AXA Rosenberg Investment Management LLC (the “Subadviser” or “AXA Rosenberg”) serve as the investment adviser and subadviser, respectively, to the Acquired Fund and the Surviving Fund. The investment objective of the Acquired Fund is to seek a return (capital appreciation and current income) greater than that of the Russell 2000® Index. The investment objective of the Surviving Fund is to seek a return (capital appreciation and current income) greater than that of the Russell 2500 TM Index.
This Prospectus/Proxy Statement, which you should read carefully and retain for future reference, sets forth concisely the information that you should know about the Acquired Fund and the Surviving Fund and the Reorganization. This Prospectus/Proxy Statement and the enclosures are being mailed to shareholders on or about September [___], 2009.
A Statement of Additional Information dated September [___], 2009, relating to this
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Prospectus/Proxy Statement and the Reorganization has been filed with the SEC and is incorporated by reference into this Prospectus/Proxy Statement, which means it is considered legally a part of this Prospectus/Proxy Statement. In addition, the prospectus for the Acquired Fund and the Surviving Fund, dated July 29, 2009, as supplemented August 12, 2009, has been filed with the SEC, accompanies this Prospectus/Proxy Statement and is incorporated herein by reference, which means it is considered legally a part of this Prospectus/Proxy Statement.
Additional information relating to the Acquired Fund and Surviving Fund is contained in the Statement of Additional Information for the Funds dated July 29, 2009, and in each Fund’s Annual Report to Shareholders for the fiscal year ended March 31, 2009. The Statement of Additional Information and the Annual Reports have been filed with the SEC.
For a free copy of any of the documents described above, you may call 1-800-447-3332, or you may write to the Funds at the address listed on the cover of this Prospectus/Proxy Statement. You may also obtain these documents by accessing the Internet site for the Trust at www.laudus.com. In addition, these documents may be obtained from the EDGAR database on the SEC’s Internet site at www.sec.gov. You may review and copy documents at the SEC Public Reference Room in Washington, DC or the SEC’s Chicago Regional Office located at 175 W. Jackson Boulevard, Suite 900, Chicago, IL 60604 and the SEC’s New York Regional Office located at 3 World Financial Center, Suite 400, New York, NY 10281-1022 (for information on the operation of the Public Reference Room, call 1-202-551-8090). You may request documents by mail from the SEC, upon payment of a duplication fee, by writing to: Securities and Exchange Commission, Public Reference Section, Washington, DC 20549-0102. You may also obtain this information upon payment of a duplicating fee, by e-mailing the SEC at the following address: publicinfo@sec.gov.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OF ANY BANK AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (“FDIC”) OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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EX-99.16(5) |
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I. SYNOPSIS
The following Synopsis provides a brief overview of the key points the Acquired Fund believes are typically of concern to shareholders considering a proposed transaction such as the Reorganization. For further information and details about the proposed Reorganization, please see the entirety of the Prospectus/Proxy Statement that follows this Synopsis.
A. The Proposed Reorganization.
The Reorganization involves the transfer of all of the assets and liabilities of the Acquired Fund to the Surviving Fund in exchange for shares of the Surviving Fund. Currently, the Surviving Fund offers two separate share classes: Investor Shares and Select Shares. The Acquired Fund offers three separate share classes: Investor Shares, Select Shares and Adviser Shares. Prior to the Reorganization, the two separate share classes of the Surviving Fund will be combined into a single class of shares of the Surviving Fund and the Surviving Fund will no longer offer separate share classes. Accordingly, shareholders of the Investor Shares, Select Shares and Adviser Shares of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization.
This transfer of assets and liabilities is expected to take place after market close on or about November 19, 2009. The transfer of assets by the Acquired Fund will occur at their then-current market value as determined in accordance with the Acquired Fund’s valuation procedures, and shares of the Surviving Fund to be issued to the Acquired Fund will be valued at their then-current net asset value as determined in accordance with the Surviving Fund’s valuation procedures. Shares of the Surviving Fund will be distributed to shareholders of the Acquired Fund at the Effective Time (as defined below) in exchange for their Select Shares, Investor Shares and Adviser Shares of the Acquired Fund. After completion of the Reorganization, each shareholder of the Acquired Fund will own shares of the Surviving Fund equal in value to the current net asset value of such shareholder’s shares of the Acquired Fund. Following the completion of the Reorganization, the Acquired Fund will be liquidated and its registration under the Investment Company Act of 1940 (the “1940 Act”) will be terminated.
The Reorganization is intended to be tax-free for federal income tax purposes. This means that shareholders of the Acquired Fund will become shareholders of the Surviving Fund without realizing any gain or loss for federal income tax purposes. This also means that it is intended that the Reorganization will be tax-free for the Surviving Fund for federal income tax purposes.
The Reorganization will not occur unless approved by a majority of shareholders of the Acquired Fund. In addition, the implementation of the Reorganization is subject to a number of conditions set forth in the Agreement and Plan of Reorganization (the “Plan”). Among the more significant conditions is the receipt by the Funds of an opinion of counsel to the effect that the Reorganization will be treated as a tax-free transaction to the Funds and their shareholders for federal income tax purposes, as described further below. For more information about the Reorganization, see “Information About the Reorganization” below.
The Acquired Fund will bear the costs and pay the expenses related to the preparation and assembly of this Prospectus/Proxy Statement and all mailing and other expenses associated with the proxy solicitation process and the Reorganization, which are expected to be approximately $82,500. The payment of such fees and expenses will be considered an extraordinary fund expense and, therefore, will not be subject to any expense limitation or reimbursement agreement in effect for the Acquired Fund. If the Reorganization is not completed, CSIM will pay all such costs and expenses.
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THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
“FOR” THE PROPOSED REORGANIZATION
“FOR” THE PROPOSED REORGANIZATION
B. Comparison of the Investment Objectives and Strategies of the Acquired Fund and Surviving Fund.
The Acquired Fund and Surviving Fund have similar investment objectives. The investment objective of the Acquired Fund is to seek a return (capital appreciation and current income) greater than that of the Russell 2000® Index, and the investment objective of the Surviving Fund is to seek a return (capital appreciation and current income) greater than that of the Russell 2500 TM Index.
The Acquired Fund and the Surviving Fund pursue similar investment strategies. The primary difference between the two Funds’ investment strategies is that the Acquired Fund invests primarily in the common stocks of small capitalization companies that are traded principally in the markets of the United States. In contrast, the Surviving Fund invests primarily in the common stocks of small and mid capitalization companies that are traded principally in the markets of the United States. A more complete description of the Funds’ investment strategies and policies is set forth below.
The Acquired Fund invests primarily in the common stocks of smaller companies that are traded principally in the markets of the United States (“U.S. Small Capitalization Companies”). In selecting securities for the Acquired Fund, AXA Rosenberg seeks to match the capitalization profile of the Russell 2000® Index, a widely used index of approximately two thousand small capitalization U.S. companies. The definition of U.S. Small Capitalization Companies may change from time to time to include, on an ongoing basis, the market capitalization of every company in the Russell 2000® Index. Under normal circumstances, the Acquired Fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities of U.S. Small Capitalization Companies. The Acquired Fund favors stocks that appear attractive from the perspective of the Valuation and Earnings Forecast Models (described below) while seeking to construct a portfolio that is similar to the Acquired Fund’s Russell 2000® Index benchmark with respect to characteristics such as market capitalization, industry weightings and other risk exposures.
The Surviving Fund invests primarily in the common stocks of small and mid capitalization companies that are traded principally in the markets of the United States (“U.S. Small/Mid Capitalization Companies”). In selecting securities for the Surviving Fund, AXA Rosenberg seeks to match the capitalization profile of the Russell 2500TM Index, a widely used index of small and mid capitalization U.S. companies. The definition of U.S. Small/Mid Capitalization Companies may change from time to time to include, on an ongoing basis, the market capitalization of every company in the Russell 2500 TM Index. Under normal circumstances, the Surviving Fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities of U.S. Small/Mid Capitalization Companies. The Surviving Fund favors stocks that appear attractive from the perspective of the Valuation and Earnings Forecast Models (described below) while seeking to construct a portfolio that is similar to the Surviving Fund’s Russell 2500 TM Index benchmark with respect to characteristics such as market capitalization, industry weightings and other risk exposures.
In managing the Acquired Fund and the Surviving Fund, AXA Rosenberg employs a bottom-up approach to investing by evaluating the financial characteristics of individual stocks rather than forecasting the trends in markets, investment styles or sectors. AXA Rosenberg seeks to identify mispriced stocks across industries, through rigorous analysis of a company’s fundamental data. AXA
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Rosenberg’s stock selection process is driven by proprietary technology known as ‘‘expert systems,’’ which are designed to analyze the fundamentals of the more than 21,000 securities currently in AXA Rosenberg’s global universe. AXA Rosenberg uses two stock selection models to evaluate the relative attractiveness of the stocks in its universe: (1) its Valuation Model estimates the fair value for each company in its database by assessing various fundamental data such as company financial statistics, and (2) its Earnings Forecast Model estimates year-ahead earnings by analyzing fundamental data and investor sentiment data such as analysts’ earnings estimates and broker buy/sell recommendations. AXA Rosenberg compares companies operating in similar businesses to identify those believed to be undervalued in relation to their peers, putting together the valuation and earnings forecast views to gain an overall perspective on the attractiveness of each stock.
For further information about the Funds’ investment objectives and strategies, see “Comparison of the Funds––Investment Objectives and Strategies.”
C. Comparison of Fundamental Investment Policies.
The Acquired Fund and the Surviving Fund have adopted certain fundamental investment policies. Fundamental investment policies cannot be changed as to a Fund without the consent of the holders of a majority of the outstanding voting securities of the Fund, as such term is defined in the 1940 Act; other investment policies can be changed without such consent of shareholders of the Fund. There are no material differences between the Funds’ fundamental investment policies; except that it is a fundamental policy of the Acquired Fund that at least 65% of the Acquired Fund’s total assets will be invested in U.S. Small Capitalization Companies. The Surviving Fund does not have such a fundamental investment policy.
D. Fees and Expenses.
Each Fund currently pays the same management fee to CSIM. The Surviving Fund’s total and net operating expenses are currently lower than the Acquired Fund’s total and net operating expenses and are expected to be lower than the Acquired Fund’s total and net operating expenses on a pro forma combined basis after the Reorganization. As discussed above, prior to the Reorganization, the Surviving Fund’s two existing share classes will be combined into a single class of shares of the Surviving Fund and the Surviving Fund will no longer offer separate share classes. Accordingly, shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization.
The following table sets forth: (i) the fees and expenses of the Select Shares, Investor Shares and Adviser Shares of the Acquired Fund as of March 31, 2009; (ii) the fees and expenses of the Surviving Fund as of March 31, 2009, restated to reflect the fees and expenses of the Surviving Fund as if the combination of the Surviving Fund’s two share classes into a single class shares occurred on March 31, 2009; and (iii) the estimated fees and expenses of the Surviving Fund on a pro forma basis after giving effect to the Reorganization, based on pro-forma combined assets as of March 31, 2009.
As reflected in the footnotes to the fee table, certain fees and expenses of the Surviving Fund have been restated to reflect fund fees and expenses as of August 12, 2009. Specifically, the fees of the Surviving Fund have been restated to show that the Adviser has agreed to waive its management fee and bear certain expenses for the Surviving Fund when the operating expenses reach 0.95%. See footnote (d) below the table for a full description of this expense limitation agreement. “Shareholder Fees” are charged to you directly by a Fund. “Annual Fund Operating Expenses” are paid out of Fund assets, so their effect is included in a Fund’s total return or the total return of each share class of a Fund, as applicable.
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PRO FORMA | ||||||||||||||||||||
COMBINED | ||||||||||||||||||||
DISCOVERY | ||||||||||||||||||||
FUND | ||||||||||||||||||||
SMALL CAP FUND | DISCOVERY | (SURVIVING | ||||||||||||||||||
Select Shares | Investor Shares | Adviser Shares | FUNDc | FUND)c | ||||||||||||||||
SHAREHOLDER FEES (% of transaction amount) | ||||||||||||||||||||
Redemption Fee (charged only to shares redeemed or exchanged within 30 days of purchase)a | 2.00 | 2.00 | 2.00 | 2.00 | 2.00 | |||||||||||||||
ANNUAL FUND OPERATING EXPENSES (% of average net assets) | ||||||||||||||||||||
Management Fees | 0.90 | 0.90 | 0.90 | 0.90 | 0.90 | |||||||||||||||
Distribution and Shareholder Service (12b-1) Fees | None | 0.25 | None | None | None | |||||||||||||||
Other Expenses | ||||||||||||||||||||
Service Fee | None | None | 0.25 | None | None | |||||||||||||||
Remainder of Other Expenses | 0.10 | 0.22 | 0.10 | 0.09 | 0.09 | |||||||||||||||
Total Other Expenses | 0.10 | 0.22 | 0.35 | 0.09 | 0.09 | |||||||||||||||
Total Annual Fund Operating Expenses | 1.00 | b | 1.37 | b | 1.25 | 0.99 | d | 0.99 | d | |||||||||||
Less Fee Waivers/Expense Reimbursements | — | — | — | 0.04 | d | 0.04 | d | |||||||||||||
Net Operating Expenses | 1.00 | 1.37 | 1.25 | 0.95 | 0.95 |
(a) | The Trust reserves the right, in its sole discretion, to waive this fee when, in its judgment, such waiver would be in the best interests of the Trust or a Fund. The Fund charges no other redemption fees. | |
(b) | Fees are not currently being waived. Pursuant to the Adviser’s contractual undertaking (the “Expense Limitation Agreement”) the Adviser has agreed to waive its management fee and bear certain expenses for the Select and Investor classes of the Small Cap Fund when the operating expenses reach 1.14% and 1.44%, respectively (exclusive of nonrecurring account fees, fees on securities transactions such as exchange fees, dividends and interest on securities sold short, service fees, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Acquired Fund’s business). The Expense Limitation Agreement will be in place until at least July 30, 2011. The Adviser may, but is not required to, extend the Agreement for additional years. Any amounts waived or reimbursed in a particular fiscal year will be subject to reimbursement by the Small Cap Fund to CSIM during the next two fiscal years to the extent that the repayment will not cause the Small Cap Fund’s Net Operating Expenses to exceed the current limit (as stated in the Expense Limitation Agreement) during the respective year. | |
(c) | Currently, the Discovery Fund offers two separate share classes: Investor Shares and Select Shares. Prior to the Reorganization, these two separate share classes will be combined into a single share class of the Surviving Fund and the Discovery Fund will no longer offer separate shares classes. Accordingly, the shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Discovery Fund in connection with the Reorganization. The fees and expenses of the Discovery Fund have been restated to reflect the fees and expenses of the Discovery Fund as if the combination of the Discovery Fund’s two share classes into a single class of shares occurred on March 31, 2009. | |
(d) | Effective August 12, 2009, pursuant to the Adviser’s contractual undertaking (the “Expense Limitation Agreement”) the Adviser has agreed to waive its management fee and bear certain expenses for the Discovery Fund when the operating expenses reach 0.95% (exclusive of nonrecurring account fees, fees on securities transactions such as exchange fees, dividends and interest on securities sold short, service fees, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Discovery Fund’s business). The Expense Limitation Agreement will be in place until at least July 30, 2011. The Adviser may, but is not required to, extend the Agreement for additional years. Any amounts waived or reimbursed in a particular fiscal year will be subject to reimbursement by the Discovery Fund to CSIM during the next two fiscal years to the extent that the repayment will not cause the Discovery Fund’s Net Operating Expenses to exceed the current limit (as stated in the Expense Limitation Agreement) during the respective year. |
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Example: This Example is intended to help you compare the current cost of investing in the Acquired Fund and the Surviving Fund, and also allows you to compare these costs with the cost of investing in other mutual funds. Your actual costs may be higher or lower.
The Example assumes that you invest $10,000 in a Fund for the time periods indicated and that you sell your shares at the end of the period. In addition, the Example assumes that each year your investment has a 5% return, a Fund’s operating expenses remain the same and you reinvest all dividends and distributions. The expenses would be the same whether you stayed in the Funds or sold your shares at the end of the period. The one-year figures for the Discovery Fund and Pro Forma Combined Discovery Fund are based on “Net Operating Expenses.”
1 | 3 | 5 | 10 | |||||||||||||
Year | Years | Years | Years | |||||||||||||
SMALL CAP FUND | ||||||||||||||||
Select Shares | $ | 102 | $ | 318 | $ | 552 | $ | 1,225 | ||||||||
Investor Shares | $ | 139 | $ | 434 | $ | 750 | $ | 1,645 | ||||||||
Adviser Shares | $ | 127 | $ | 397 | $ | 686 | $ | 1,511 | ||||||||
DISCOVERY FUND* | $ | 97 | $ | 307 | $ | 539 | $ | 1,206 | ||||||||
PRO FORMA COMBINED DISCOVERY FUND* | $ | 97 | $ | 307 | $ | 539 | $ | 1,206 |
* | Currently, the Discovery Fund offers two separate share classes: Investor Shares and Select Shares. Prior to the Reorganization, these two separate share classes will be combined into a single share class of the Discovery Fund and the Discovery Fund will no longer offer separate shares classes. Accordingly, the shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Discovery Fund in connection with the Reorganization. The fees and expenses of the Discovery Fund have been restated to reflect the fees and expenses of the Discovery Fund as if the combination of the Surviving Fund’s two share classes into a single class of shares occurred on March 31, 2009. |
The projected post-Reorganization pro forma Annual Fund Operating Expenses and Example Expenses presented above are based on numerous material assumptions, including (1) that the current contractual agreements will remain in place and (2) that certain fixed costs involved in operating the Acquired Fund will be eliminated. Although these projections represent good faith estimates, there can be no assurance that any particular level of expenses or expense savings will be achieved because expenses depend on a variety of factors, including the future level of the Surviving Fund’s assets, many of which are beyond the control of the Surviving Fund and the Adviser.
E. Purchase and Redemption Procedures; Exchange Procedures; Dividends, Distributions and Pricing.
Except as set forth in this section, the procedures for purchasing, redeeming and exchanging shares of the Surviving Fund are generally the same as those procedures for the share classes of the Acquired Fund.
• | The Acquired Fund is currently closed to new investors. Only existing shareholders can purchase additional shares of the Acquired Fund. The Surviving Fund is open to new investors for purchase. | ||
• | On August 12, 2009, the investment minimum of the Select Shares of the Surviving Fund was lowered to $100 to match the existing investment minimum of the Surviving Fund’s Investor Shares. This action was taken in preparation for the Surviving Fund’s share class combination, which will occur prior to the Reorganization. At the time of the Reorganization, shares of the Surviving Fund will have an investment minimum of $100 and no minimum subsequent investment requirement or minimum balance requirement. Investment minimums and minimum balances amounts for each class of the Acquired Fund will not change. |
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Shareholders of the Acquired Fund may continue to redeem Fund shares and existing investors of the Acquired Fund may continue to purchase Fund shares at any time prior to the close of business on November 18, 2009. The holding period for purposes of calculating any applicable redemption fee in shares of the Acquired Fund will carry over to the shares of the Surviving Fund received in connection with the Reorganization.
Each Fund intends to pay out as dividends substantially all of its net income and net short-term and long-term capital gains (after reduction by any available capital loss carry-forwards). Each Fund’s policy is to (i) declare and pay distributions of its dividends and interest annually and (ii) distribute net short-term capital gains and net long-term gains annually although, in each case, it may do so more frequently as determined by the Trustees of the Trust.
The Funds determine their net asset value per share as of the close of regular trading hours on the New York Stock Exchange (normally 4:00 p.m., Eastern time). A Fund’s share price is its net asset value per share, or NAV, which is the Fund’s net assets divided by the number of its shares outstanding. Orders to buy, sell or exchange shares that are received by a Fund in good order on or prior to the close of the Fund (generally 4 p.m. Eastern time) will be executed at the next share price calculated that day.
In valuing their securities, the Funds use market quotes or official closing prices if they are readily available. In cases where quotes are not readily available, a Fund may value securities based on fair values developed using methods approved by the Trustees of the Trust. The Funds’ procedures for valuing their assets are the same.
II. PRINCIPAL RISK FACTORS.
The principal risks of investments in the Acquired Fund and Surviving Fund are similar. As with any stock mutual fund, you may lose money if you invest in a Fund. Among the principal risks that could adversely affect the value of the Acquired Fund’s and the Surviving Fund’s shares and cause you to lose money on your investment are:
Risks Applicable to Acquired Fund and Surviving Fund
Investment Risk An investment in the Funds involves risks similar to those of investing in common stocks directly. Just as with common stocks, the value of Fund shares may increase or decrease depending on market, economic, political, regulatory and other conditions affecting a Fund’s portfolio. These types of risks may be greater with respect to investments in securities of foreign issuers. Investment in shares of the Funds is, like an investment in common stocks, more volatile and risky than some other forms of investment. This risk is significant for both Funds.
Management Risk Each Fund is subject to management risk because it is an actively managed investment portfolio. This is the risk that AXA Rosenberg will make poor stock selections. AXA Rosenberg will apply its investment techniques and risk analyses in making investment decisions for each Fund, but there can be no guarantee that they will produce the desired results. In some cases, certain investments may be unavailable or AXA Rosenberg may not choose certain investments under market conditions when, in retrospect, their use would have been beneficial to a Fund or both Funds.
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Risk of Investments in Exchange-Traded Funds (ETFs) The Funds may purchase shares of ETFs to gain exposure to a particular portion of the market while awaiting an opportunity to purchase securities directly. When a Fund invests in an ETF, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses. The risks of owning shares of an ETF generally reflect the risks of owning the underlying securities the ETF is designed to track, although lack of liquidity in an ETF can result in its value being more volatile than the underlying portfolio of securities. In addition, because of ETF expenses, compared to owning the underlying securities directly, it may be more costly to own an ETF.
Securities Lending Risk Each Fund may lend its portfolio securities to brokers, dealers and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. When a Fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the Fund also will receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent. The Funds will also bear the risk of any decline in value of securities acquired with cash collateral. A Fund may pay lending fees to a party arranging the loan.
Each Fund has an additional principal risk to which an investment in the other Fund is not exposed, as shown below.
Risk Applicable to the Acquired Fund
Small Company Risk. The Fund is subject to additional risk because it invests primarily in the stocks of companies with relatively small market capitalizations, which tend to be less liquid and more volatile than stocks of companies with larger market capitalizations. In addition, the absolute values of changes in the prices of the securities of these companies tend to be greater than those of larger, more established companies. These companies may also be dependent upon a single proprietary product or market niche, have limited product lines, markets or financial resources or may depend on a few key employees. In addition, small cap stocks tend to go in and out of favor based on market and economic conditions. As a result, during a period when these stocks fall behind other types of investments—bonds or large or mid cap stocks, for instance—the Fund’s performance also will lag those investments.
Risk Applicable to the Surviving Fund
Small and Mid-Size Company Risk. The Fund is subject to additional risk because it invests primarily in the stocks of companies with small and mid-sized market capitalizations, which tend to be less liquid and more volatile than stocks of companies with larger market capitalizations. In addition, the absolute values of changes in the prices of the securities of these companies tend to be greater than those of larger, more established companies. These companies may also be dependent upon a single proprietary product or market niche, have limited product lines, markets or financial resources or may depend on a few key employees. In addition, small and mid-cap stocks tend to go in and out of favor based on market and economic conditions. As a result, during a period when these stocks fall behind other types of investments—bonds or stocks of large-size companies, for instance—the Fund’s performance also will lag those investments.
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III. INFORMATION ABOUT THE REORGANIZATION
A. Material Features of the Plan.
The Plan sets forth the terms and conditions of the Reorganization. Material provisions of the Plan are summarized below; however, this summary is qualified in its entirety by reference to the Plan, a form of which is attached as Appendix A to this Prospectus/Proxy Statement.
At the consummation of the Reorganization, which is expected to occur at the close of business on or about November 19, 2009 (the “Effective Time”), all of the assets and liabilities of the Acquired Fund will be transferred to the Surviving Fund in exchange for shares of the Surviving Fund, such that at and after the Effective Time, the assets and liabilities of the Acquired Fund will become the assets and liabilities of the Surviving Fund. The transfer of assets by the Acquired Fund will occur at their then-current market value as determined in accordance with the Acquired Fund’s valuation procedures and shares of the Surviving Fund to be issued to the Acquired Fund shall be valued at their then-current net asset value determined in accordance with the Surviving Fund’s valuation procedures. Shares of the Surviving Fund will be distributed to shareholders of the Acquired Fund in exchange for their shares of the Acquired Fund. After completion of the Reorganization, each shareholder of the Acquired Fund will own shares of the Surviving Fund equal in value to the current net asset value of such shareholder’s shares of the Acquired Fund. Following the completion of the Reorganization, the Acquired Fund will be liquidated and its registration under the 1940 Act will be terminated.
The Plan provides that the Board will declare a dividend or dividends with respect to the Acquired Fund prior to the Effective Time. This dividend, together with all previous dividends, will have the effect of distributing to the shareholders of the Acquired Fund all undistributed ordinary income earned and net capital gains recognized up to and including the Effective Time. The shareholders of the Acquired Fund will recognize ordinary income and capital gain with respect to this distribution and such income and gain may be subject to federal, state and/or local taxes.
Prior to the Effective Time, the Adviser reserves the right to sell portfolio securities and/or purchase other securities for the Acquired Fund, to the extent necessary so that the asset composition of the Acquired Fund is consistent with the investment policies and restrictions of the Surviving Fund. To the extent the Acquired Fund sells securities at a gain, current shareholders may receive a capital gain dividend. Transaction costs associated with any such purchases and sales would be borne by the Acquired Fund, which would result in a decrease in the Acquired Fund’s net asset value.
The stock transfer books of the Trust with respect to the Acquired Fund will be permanently closed as of the close of business on the day immediately preceding the Effective Time. Redemption requests received thereafter by the Trust with respect to the Acquired Fund will be deemed to be redemption requests for shares of the Surviving Fund issued pursuant to the Plan. If any shares of the Acquired Fund are represented by a share certificate, the certificate must be surrendered to the Trust’s transfer agent for cancellation before the Surviving Fund shares issuable to the shareholder pursuant to the Plan will be redeemed. The Surviving Fund does not expect to issue share certificates with respect to the Surviving Fund. Any special options relating to a shareholder’s account in the Acquired Fund will transfer over to the Surviving Fund without the need for the shareholder to take any action.
The Reorganization is subject to a number of conditions as set forth in the Plan, a form of which is attached hereto as Appendix A. Except as set forth below, the Trust, by consent of its Board or an officer authorized by the Board, may waive any condition to the obligations of the Acquired Fund or the Surviving Fund under the Plan if, in its or such officer’s judgment, such waiver will not have a material adverse effect on the interests of the shareholders of the Acquired Fund or the shareholders of the Surviving Fund. Certain conditions under the Plan cannot be waived by the Trust, including the conditions that the Reorganization be approved by the shareholders of the Acquired Fund and that the Funds receive a favorable tax opinion from Morgan, Lewis & Bockius LLP. The Board may abandon the Plan and the Reorganization at any time for any reason prior to the Effective Time. The Plan provides
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further that at any time prior to the Reorganization the Funds may amend any of the provisions of the Plan; provided, however, that (i) no such amendment may have the effect of changing the provisions for determining the number of the Surviving Fund shares to be issued to the Acquired Fund shareholders under the Plan to the detriment of such Acquired Fund shareholders; and (ii) the Board determines that such amendment is in the best interest of shareholders of the Acquired Fund and the Surviving Fund.
The Acquired Fund will bear the expenses incurred in connection with the Reorganization, including the costs of the proxy solicitation and tabulation. The estimated costs are $82,500. The payment of such fees and expenses will be considered an extraordinary fund expense and, therefore, will not be subject to any expense limitation or reimbursement agreement in effect for the Acquired Fund.
The Trustees of the Acquired Fund have voted to approve the proposed Reorganization. The Trustees recommend that shareholders of the Acquired Fund also approve the proposed Reorganization. The actions contemplated by the Plan and the related matters described therein will be consummated only if approved by the affirmative vote of the majority of the outstanding voting securities of the Acquired Fund.
B. Description of Reorganization Shares.
Shares of the Surviving Fund will be issued to the Acquired Fund’s shareholders in accordance with the Plan. Currently, the Surviving Fund offers two separate share classes: Investor Shares and Select Shares. Prior to the Reorganization, these two separate share classes will be combined into a single class of shares of the Surviving Fund and shareholders of Investor Shares, Select Shares and Adviser Shares of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The following summarizes some key information about the shares of the Surviving Fund that will be received by shareholders of the Acquired Fund:
• | The initial minimum investment of the Surviving Fund is $100. There is no minimum balance requirement or subsequent investment minimum. | ||
• | Similar to the Acquired Fund, the Surviving Fund imposes a 2.00% redemption fee for shares that are sold or exchanged 30 days or less after buying them. This redemption fee is paid directly to the Surviving Fund. The Surviving Fund reserves the right to waive this redemption fee if it believes that such a waiver is in the best interests of the Fund and its long-term shareholders. | ||
• | Unlike the Investor Shares of the Acquired Fund, shares of the Surviving Fund will not be subject to any distribution and shareholder service fee (Rule 12b-1 fee). | ||
• | Unlike the Adviser Shares of the Acquired Fund, shares of the Surviving Fund will not be subject to any service fee. |
For additional information about the Surviving Fund’s shares, see “Additional Information about the Funds—Shareholder Information.”
C. Reasons for the Reorganization.
The Board considered the Reorganization at a meeting held on July 30, 2009, and the Board, including a majority of the Trustees who are not “interested persons” of the Trust as that term is defined in the 1940 Act, approved the Plan. In approving the Reorganization, the Board determined that (i) participation in the Reorganization is in the best interest of the Acquired Fund and its shareholders; and (ii) the interests of the Acquired Fund’s shareholders will not be diluted as a result of the Reorganization.
In making this determination, the Board considered a number of factors, including:
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• | the similarity of the investment objective and investment strategies of the Acquired Fund to those of the Surviving Fund, and the resulting overlap in underlying portfolio holdings; | ||
• | the outperformance of the Surviving Fund relative to the performance of the Acquired Fund over the 1-, 3- and 5-year periods ending December 31, 2008, and since the inception of the Surviving Fund; | ||
• | the possibility that greater aggregate assets upon consummation of the Reorganization would allow the Surviving Fund to take advantage of the possible benefits of a larger asset base, including future economies of scale and spreading costs across a larger asset base to the potential benefit of all shareholders; | ||
• | that the current management fee rate paid by the Acquired Fund is the same as that paid by the Surviving Fund; | ||
• | that the Adviser has agreed to limit the “net operating expenses” of the Surviving Fund to 0.95% (exclusive of nonrecurring account fees, fees on securities transactions such as exchange fees, dividends and interest on securities sold short, service fees, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Surviving Fund’s business) until at least July 30, 2011; | ||
• | the future prospects of the Acquired Fund if the Reorganization was not effected, including the Acquired Fund’s continuing viability as a stand-alone series of the Trust; | ||
• | the reasonableness of the terms of the Plan; and | ||
• | that the Reorganization is intended to be tax-free for U.S. Federal income tax purposes for shareholders of the Acquired Fund. |
The Board of the Surviving Fund has also determined that (i) participation in the Reorganization is in the best interest of the Surviving Fund and its shareholders; and (ii) the interests of the Surviving Fund’s shareholders will not be diluted as a result of the Reorganization.
D. Federal Income Tax Consequences.
Each Fund intends to qualify as of the Effective Time as a “regulated investment company” under the Internal Revenue Code of 1986, as amended (the “Code”). Accordingly, each of the Funds has been, and expects to continue to be, relieved of all or substantially all federal income taxes. Consummation of the transaction is subject to the condition that the Trust receive an opinion from Morgan, Lewis & Bockius LLP, subject to appropriate factual assumption and customary representations, to the effect that for federal income tax purposes:
(1) | The transfer of all of the assets and liabilities of the Acquired Fund to the Surviving Fund in exchange for shares of the Surviving Fund and the distribution to shareholders of the Acquired Fund of shares of the Surviving Fund, as described in the Plan, will constitute a tax-free “reorganization” within the meaning of Section 368(a) of the Code, and the Acquired Fund and the Surviving Fund each will be considered “a party to a reorganization” within the meaning of Section 368(b) of the Code; |
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(2) | No gain or loss will be recognized by the Acquired Fund upon the transfer of all of its assets to the Surviving Fund solely in exchange for the issuance of shares of the Surviving Fund and the assumption by the Surviving Fund of the Acquired Fund’s liabilities, if any, or upon the distribution by the Acquired Fund to its shareholders of shares of the Surviving Fund received as a result of the Reorganization; | ||
(3) | No gain or loss will be recognized by the Surviving Fund upon the receipt by it of all of the assets of the Acquired Fund in exchange solely for the issuance of shares of the Surviving Fund and the assumption by the Surviving Fund of the Acquired Fund’s liabilities, if any; | ||
(4) | The aggregate adjusted tax basis of the Surviving Fund shares received by a shareholder of the Acquired Fund will be the same as the tax basis of the shareholder’s Acquired Fund shares immediately prior to the Reorganization; | ||
(5) | The adjusted tax basis of the assets received by the Surviving Fund pursuant to the Reorganization will be the same as the tax basis of the assets in the hands of the Acquired Fund immediately before the Reorganization; | ||
(6) | The holding period for the shares of the Surviving Fund received by the Acquired Fund’s shareholders will include the holding period of the Acquired Fund shares surrendered in exchange therefor, provided that the shareholder held such shares of the Acquired Fund as capital assets; and | ||
(7) | The holding period for the Surviving Fund with respect to the assets of the Acquired Fund received in the Reorganization will include the period for which such assets were held by the Acquired Fund. |
No opinion will be expressed as to the effect of the Reorganization on (i) the Acquired Fund or the Surviving Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting and (ii) any Acquired Fund or the Surviving Fund shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting.
As of March 31, 2009, the Acquired Fund did not have any unutilized capital loss carryforwards. The final amount of the Acquired Fund’s unutilized capital loss carryforwards, however, is subject to change and will not be finally determined until the Effective Time of the Reorganization. Under Section 382 of the Code, the ability of the Surviving Fund to fully utilize the capital loss carryforwards of the Acquired Fund may be limited because the Reorganization will result in a change in control of the Acquired Fund. Therefore, the capital loss carryforwards that may be utilized as tax deductions by the Surviving Fund will be limited each taxable year to an amount equal to the value of the capital stock of the Acquired Fund at the time of the Reorganization multiplied by an interest rate set monthly by the Internal Revenue Service (“IRS”) that approximates a tax-exempt bond yield.
The Funds have not sought a tax ruling on the federal tax consequences of the Reorganization from the IRS. The opinion to be received from Morgan, Lewis & Bockius LLP, with respect to the federal income tax consequences of the Reorganization described in this section is not binding on the IRS and does not preclude the IRS from adopting a contrary position.
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Shareholders should consult their own advisors concerning the potential tax consequences to them, including state and local income tax consequences.
E. Shareholder Rights, Description of the Securities to be Issued.
The Trust is organized as a Massachusetts business trust. The Acquired Fund and the Surviving Fund are both series of the Trust and, therefore, shareholders of the Acquired Fund and the Surviving Trust are shareholders of the same legal entity, the Trust. The Trust’s Third Amended and Restated Declaration of Trust (“Declaration of Trust”), the Trust’s governing document, does not afford any rights to the shareholders of the Surviving Fund that differ in any material respect from the rights afforded to the shareholders of the Acquired Fund.
Each share in the Surviving Fund represents an equal proportionate interest in the Surviving Fund with other shares of the same class, and is entitled to such dividends and distributions out of the income earned on the assets belonging to the Surviving Fund as are declared in the discretion of the Trust’s Board. When sold in accordance with the Declaration of Trust, and for the consideration described in its registration statement, shares of the Surviving Fund will be fully paid and non-assessable.
Surviving Fund shares have no preemptive rights and only such conversion or exchange rights as the Board may grant in its discretion. In the event of a liquidation or dissolution of the Surviving Fund, its shareholders are entitled to receive the assets available for distribution belonging to the Surviving Fund and a proportionate distribution, based upon the relative asset values of the Trust’s portfolios, of any general assets of the Trust not belonging to any particular portfolio of the Trust which are available for distribution. In the event of a liquidation or dissolution of the Trust, its shareholders will be entitled to the same distribution process.
The Declaration of Trust does not prescribe any rights or privileges to the shares of the Surviving Fund that differ in any material respect from the rights or privileges prescribed to the shares of the Acquired Fund.
F. Capitalization.
As discussed above, prior to the Reorganization, the Surviving Fund’s existing share classes will be combined into a single class of shares of the Surviving Fund and the shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The following table sets forth:
(1) | the capitalization of each share class of the Acquired Fund as of March 31, 2009 (audited); | ||
(2) | the capitalization of each share class of the Surviving Fund as of March 31, 2009 (audited); and | ||
(3) | the pro forma capitalization of the Surviving Fund as adjusted to give effect to the Reorganization and the combination of the Surviving Fund’s two share classes into a single class of shares as if such combination occurred on March 31, 2009 (unaudited). |
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PRO FORMA | ||||||||||||||||
COMBINED DISCOVERY | ||||||||||||||||
DISCOVERY | FUND | |||||||||||||||
SMALL CAP FUND | FUND(a) | ADJUSTMENTS | (SURVIVING FUND)a | |||||||||||||
Net Assets | ||||||||||||||||
Investor Shares | $ | 77,226,801 | $ | 81,980,662 | ||||||||||||
Select Shares | $ | 156,272,017 | $ | 295,568,275 | $ | (82,500 | ) | $ | 619,729,487 | b | ||||||
Adviser Shares | $ | 8,760,232 | ||||||||||||||
Shares Outstanding | ||||||||||||||||
Investor Shares | 17,858,068 | 8,814,915 | ||||||||||||||
Select Shares | 34,730,188 | 31,310,355 | 34,347,598 | 65,657,953 | c | |||||||||||
Adviser Shares | 1,995,401 | |||||||||||||||
Net Asset Value Per Share | ||||||||||||||||
Investor Shares | $ | 4.32 | $ | 9.30 | ||||||||||||
Select Shares | $ | 4.50 | $ | 9.44 | $ | 9.44 | ||||||||||
Adviser Shares | $ | 4.39 |
(a) | Currently, the Surviving Fund offers two separate share classes: Investor Shares and Select Shares. Prior to the Reorganization, these two separate share classes will be combined into a single class of shares of the Surviving Fund and the Surviving Fund will no longer offer separate share classes. Accordingly, shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The capitalization of the Pro Forma Combined Discovery Fund (Surviving Fund) has been calculated as if the combination of the Surviving Fund’s two share classes into a single class of shares occurred on March 31, 2009. | |
(b) | Figure reflects the costs associated with the proposed Reorganization (estimated to be approximately $82,500) which will be borne by the shareholders of the Acquired Fund if the Reorganization is approved and completed. These costs are allocated pro rata to the Acquired Fund’s Select Shares, Investor Shares and Adviser Shares in the amounts of $53,218, $26,299 and $2,983, respectively. | |
(c) | Figure reflects the issuance by the Discovery Fund of approximately 25,663,163 shares to the Acquired Fund’s shareholders in connection with the proposed Reorganization |
This information is for informational purposes only. There is, of course, no assurance that the Reorganization will be consummated. Moreover, if consummated, the capitalization of the Acquired Fund and the Surviving Fund is likely to be different at the Effective Time as a result of market movements and daily share purchase and redemption activity in the Funds. Accordingly, the foregoing should not be relied upon to reflect the number of shares of the Surviving Fund that actually will be received on or after such date.
IV. ADDITIONAL INFORMATION ABOUT THE SURVIVING
FUND AND THE ACQUIRED FUND
FUND AND THE ACQUIRED FUND
A. Performance History.
Set forth below is past performance information for the Acquired Fund and the Surviving Fund. As discussed above, prior to the Reorganization, the Surviving Fund’s existing share classes will be combined into a single class of shares of the Surviving Fund and the shareholders of Investor Shares, Select Shares and Adviser Shares of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The performance and financial history of the sole remaining share class of the Surviving Fund will be that of the Surviving Fund’s current Select Shares. Accordingly, the past performance information of the Surviving Fund’s Select Shares is shown below. Because the Investor Shares of the Surviving Fund invest in the same portfolio of securities as the Select Shares of the Fund, returns for the Investor Shares class were substantially similar to those of the Select Shares. Performance (both before and after taxes) was different only to the extent
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that the Investor Shares incurred higher expenses than the Select Shares of the Surviving Fund prior to August 12, 2009.
The following total returns information shows the returns of the Acquired Fund’s Select Shares, Investor Shares and Adviser Shares and the Surviving Fund’s Select Shares before and after taxes, and compares the performance (which varies over time) of the Funds to that of an index. The index is unmanaged and does not include expenses or taxes. All figures assume distributions were reinvested.
Keep in mind that future performance (both before and after taxes) may differ from past performance.
Small Cap Fund
Yearly performance (%) — Select Shares†
This chart provides some indication of the risks of investing in the Small Cap Fund by showing changes in the Fund’s performance from year to year for the past ten calendar years.
† | For the period December 31, 2008 through June 30, 2009, the aggregate (non-annualized) total pre-tax return of the Select Shares was -0.19%. |
During all periods shown in the bar graph, the Small Cap Fund’s highest quarterly return was 17.26%, for the quarter ended June 30, 2003, and its lowest quarterly return was -32.29%, for the quarter ended December 31, 2008.
Average annual total Returns (for periods ending December 31, 2008)
Past one year | Past five years | Past ten years | ||||||||||
Select Shares* | ||||||||||||
Return before taxes | -41.53 | % | -4.46 | % | 3.54 | % | ||||||
Return after taxes on distributions | -42.56 | % | -6.29 | % | 2.24 | % | ||||||
Return after taxes on distributions and sale of fund shares | -25.68 | % | -3.01 | % | 3.39 | % | ||||||
Investor Shares | -41.77 | % | -4.80 | % | 3.22 | % | ||||||
Adviser Shares | -41.69 | % | -4.71 | % | 3.29 | % | ||||||
Russell 2000® Index** | -33.79 | % | -0.93 | % | 3.02 | % |
* | After-tax returns are shown for Select Shares only and will vary for shares of the other classes of the Small Cap Fund because those classes have higher expense ratios. After-tax returns are estimates based on the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes; an investor’s actual after-tax returns will depend on his or her tax situation and are likely to differ from those shown. After-tax returns are not relevant to investors who hold Small Cap Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. | |
** | Reflects no deduction for fees, expenses or taxes. |
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Discovery Fund
Yearly performance (%) — Select Shares†
This chart provides some indication of the risks of investing in the Discovery Fund by showing changes in the Discovery Fund’s performance from year to year for the past seven calendar years.
† | For the period December 31, 2008 through June 30, 2009, the aggregate (non-annualized) total pre-tax return of the Select Shares was 3.38%. |
During all periods shown in the bar graph, the Discovery Fund’s highest quarterly return was 18.32%, for the quarter ended June 30, 2003, and its lowest quarterly return was -31.30%, for the quarter ended December 31, 2008.
Average annual total Returns (for periods ending December 31, 2008)
Since inception of | ||||||||||||
Select Shares | ||||||||||||
Past one year | Past five years | (9/4/01) | ||||||||||
Select Shares* | ||||||||||||
Return before taxes | -41.20 | % | -2.51 | % | 2.84 | % | ||||||
Return after taxes on distributions | -41.32 | % | -2.97 | % | 2.45 | % | ||||||
Return after taxes on distributions and sale of shares | -26.62 | % | -1.94 | % | 2.56 | % | ||||||
Russell 2500TM Index** | -36.76 | % | -0.98 | % | 2.43 | % |
* | After-tax returns are estimates based on the highest historical individual federal marginal income tax rates, and do not reflect the impact of state and local taxes; an investor’s actual after-tax returns will depend on his or her tax situation and are likely to differ from those shown. After-tax returns are not relevant to investors who hold Discovery Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. | |
** | Reflects no deduction for fees, expenses or taxes. |
B. Comparison of the Investment Objectives and Principal Investment Strategies of the Funds.
The following is a comparison of the investment objectives and principal investment strategies of the Funds. As stated above, the Acquired Fund and the Surviving Fund have similar investment objectives, and they pursue similar principal investment strategies. The primary differences between the Funds are noted in italics.
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SMALL CAP FUND | DISCOVERY FUND | |
(the Acquired Fund) | (the Surviving Fund) | |
Investment Objective | Investment Objective | |
The Acquired Fund seeks a return (capital appreciation and current income) greater than that of the Russell 2000® Index. In doing so, the Acquired Fund will place relatively greater emphasis on capital appreciation than on current income. | The Surviving Fund seeks a return (capital appreciation and current income) greater than that of the Russell 2500TM Index. In doing so, the Surviving Fund will place relatively greater emphasis on capital appreciation than on current income. | |
Principal Investment Strategies | Principal Investment Strategies | |
The Fund invests primarily in the common stocks of smaller companies that are traded principally in the markets of the United States (“U.S. Small Capitalization Companies”). In selecting securities for the Fund, AXA Rosenberg seeks to match the capitalization profile of the Russell 2000® Index, a widely used index of approximately two thousand small capitalization U.S. companies. The definition of U.S. Small Capitalization Companies may change from time to time to include, on an ongoing basis, the market capitalization of every company in the Russell 2000® Index. | The Fund invests primarily in the common stocks of small and mid capitalization companies that are traded principally in the markets of the United States (“U.S. Small/Mid Capitalization Companies”). In selecting securities for the Fund, AXA Rosenberg seeks to match the capitalization profile of the Russell 2500TM Index, a widely used index of small- and mid-capitalization U.S. companies. The definition of U.S. Small/Mid Capitalization Companies may change from time to time to include, on an ongoing basis, the market capitalization of every company in the Russell 2500TM Index. | |
Under normal circumstances, the Fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities of U.S. Small Capitalization Companies. | Under normal circumstances, the Fund will invest at least 80% of its net assets (including, for this purpose, any borrowings for investment purposes) in securities of U.S. Small/Mid Capitalization Companies. | |
Total return is a combination of capital appreciation and current income (dividend or interest). Because the companies in which AXA Rosenberg seeks to invest typically do not distribute significant amounts of company earnings to shareholders, AXA Rosenberg will place relatively greater emphasis on capital appreciation than on current income. As compared to investments in the securities of relatively larger companies, investments in securities of U.S. Small Capitalization Companies may present greater opportunities for capital appreciation because of high potential earnings growth, but may also involve greater risk. | Total return is a combination of capital appreciation and current income (dividend or interest). Because the companies in which AXA Rosenberg seeks to invest typically do not distribute significant amounts of company earnings to shareholders, AXA Rosenberg will place relatively greater emphasis on capital appreciation than on current income. As compared to investments in the securities of relatively larger companies, investments in securities of U.S. Small/Mid Capitalization Companies may present greater opportunities for capital appreciation because of high potential earnings growth, but may also involve greater risk. | |
AXA Rosenberg employs a bottom-up approach to investing by evaluating the financial characteristics of individual stocks rather than forecasting the trends in markets, investment styles or sectors. AXA Rosenberg seeks to identify mispriced stocks across industries, through rigorous analysis of a company’s fundamental data. AXA Rosenberg’s stock selection process is driven by proprietary technology known as “expert systems,” which are | AXA Rosenberg employs a bottom-up approach to investing by evaluating the financial characteristics of individual stocks rather than forecasting the trends in markets, investment styles or sectors. AXA Rosenberg seeks to identify mispriced stocks across industries, through rigorous analysis of a company’s fundamental data. AXA Rosenberg’s stock selection process is driven by proprietary technology known as “expert systems,” which are |
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designed to analyze the fundamentals of the more than 21,000 securities currently in AXA Rosenberg’s global universe. AXA Rosenberg uses two stock selection models to evaluate the relative attractiveness of the stocks in its universe: (1) its Valuation Model estimates the fair value for each company in its database by assessing various fundamental data such as company financial statistics, and (2) its Earnings Forecast Model estimates year-ahead earnings by analyzing fundamental data and investor sentiment data such as analysts’ earnings estimates and broker buy/sell recommendations. AXA Rosenberg compares companies operating in similar businesses to identify those believed to be undervalued in relation to their peers, putting together the valuation and earnings forecast views to gain an overall perspective on the attractiveness of each stock. | designed to analyze the fundamentals of the more than 21,000 securities currently in AXA Rosenberg’s global universe. AXA Rosenberg uses two stock selection models to evaluate the relative attractiveness of the stocks in its universe: (1) its Valuation Model estimates the fair value for each company in its database by assessing various fundamental data such as company financial statistics, and (2) its Earnings Forecast Model estimates year-ahead earnings by analyzing fundamental data and investor sentiment data such as analysts’ earnings estimates and broker buy/sell recommendations. AXA Rosenberg compares companies operating in similar businesses to identify those believed to be undervalued in relation to their peers, putting together the valuation and earnings forecast views to gain an overall perspective on the attractiveness of each stock. | |
The Fund favors stocks that appear attractive from the perspective of the Valuation and Earnings Forecast Models while seeking to construct a portfolio that is similar to the Fund’s Russell 2000® Index benchmark with respect to characteristics such as market capitalization, industry weightings and other risk exposures. The Valuation Model tends to identify stocks as attractive for purchase that have ratios of stock price-to-per share earnings and stock price-to-per share book value that are lower than those of other companies in the same industry. As these opportunities identified by the Valuation Model are typically strong among small cap stocks, the Fund will tend to show a “value” style or orientation. In addition, although, as noted above, AXA Rosenberg’s stock selection models may, from time to time, produce a value style of investment, other factors, such as the Fund’s industry weightings and the risks associated with specific individual stock selections, also affect the Fund’s performance. | The Fund favors stocks that appear attractive from the perspective of the Valuation and Earnings Forecast Models while seeking to construct a portfolio that is similar to the Fund’s Russell 2500TM Index benchmark with respect to characteristics such as market capitalization, industry weightings and other risk exposures. The Valuation Model tends to identify stocks as attractive for purchase that have ratios of stock price-to-per share earnings and stock price-to-per share book value that are lower than those of other companies in the same industry. As these opportunities identified by the Valuation Model are typically strong among small cap stocks, the Fund will tend to show a “value” style or orientation. In addition, although, as noted above, AXA Rosenberg’s stock selection models may, from time to time, produce a value style of investment, other factors, such as the Fund’s industry weightings and the risks associated with specific individual stock selections, also affect the Fund’s performance. | |
The Fund may engage in active and frequent trading of the securities in its portfolio (e.g., greater than 100% turnover), which would increase transaction costs incurred by the Fund. In addition, when a fund engages in active and frequent trading, a larger portion of the distributions investors receive from such fund may reflect short-term capital gains, which are taxed like ordinary income, rather than long-term capital gain distributions. | The Fund may engage in active and frequent trading of the securities in its portfolio (e.g., greater than 100% turnover), which would increase transaction costs incurred by the Fund. In addition, when a fund engages in active and frequent trading, a larger portion of the distributions investors receive from such fund may reflect short-term capital gains, which are taxed like ordinary income, rather than long-term capital gain distributions. |
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For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. When the Fund engages in such activities, it may not achieve its investment objective. | For temporary defensive purposes during unusual economic or market conditions or for liquidity purposes, the Fund may invest up to 100% of its assets in cash, money market instruments, repurchase agreements and other short-term obligations. When the Fund engages in such activities, it may not achieve its investment objective. |
C. Management of the Funds
1. Investment Adviser
CSIM, a wholly owned subsidiary of The Charles Schwab Corporation located at 211 Main Street, San Francisco CA 94105, serves as the investment adviser of the Acquired Fund and the Surviving Fund. For managing the Acquired Fund, CSIM is entitled to receive a monthly management fee at an annual percentage rate equal to 0.90% of the Acquired Fund’s average daily net assets. For managing the Surviving Fund, CSIM is entitled to receive a monthly management fee at an annual percentage rate equal to 0.90% of the first $1 billion of the Surviving Fund’s average daily net assets and 0.85% of the Surviving Fund’s average daily net assets over $1 billion. The effective management fee rate currently paid by the Funds is the same (0.90%). Upon consummation of the Reorganization, the investment advisory fee paid to CSIM with respect to the Surviving Fund will remain the same.
2. Subadviser
AXA Rosenberg is the Funds’ subadviser. AXA Rosenberg’s address is 4 Orinda Way, Orinda, CA 94563.
Investment decisions arise from AXA Rosenberg’s disciplined, systematic process, which combines proprietary expert systems and comprehensive databases to replicate the decisions financial experts might make in a perfect world. AXA Rosenberg’s portfolio engineers research and monitor the portfolio’s performance against the relevant benchmark and ensure compliance with the portfolio’s objectives. The team of portfolio engineers, who are employed by AXA Rosenberg and an affiliated entity, the Barr Rosenberg Research Center LLC, are jointly and primarily responsible for monitoring the recommendations for all accounts that are generated by AXA Rosenberg’s investment models and for the day-to-day portfolio management operations of the Funds.
3. Portfolio Management
Dr. William Ricks has been with AXA Rosenberg since 1989, where he has been the Chief Executive Officer and Chief Investment Officer for the past five years. He is responsible for overseeing the implementation of AXA Rosenberg’s investment strategies, which are primarily driven by stock selection and portfolio construction models. To that end, he has overall responsibility for the implementation of AXA Rosenberg’s investment strategies and the various aspects of AXA Rosenberg’s investment process, including trading, operations, portfolio engineering and portfolio construction.
Additional information about CSIM and AXA Rosenberg is contained in the prospectus dated July 29, 2009, as supplemented August 12, 2009, for the Acquired Fund and Surviving Fund, a copy of which accompanies this Prospectus/Proxy Statement and is incorporated herein by reference. The Statement of Additional Information, dated July 29, 2009, for the Acquired Fund and Surviving Fund also
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contains additional information about CSIM and AXA Rosenberg. A free copy of these documents is available upon request as described on the second page of this Prospectus/Proxy Statement.
D. Other Service Providers.
The Funds’ other service providers are the same. These entities are listed below.
Boston Financial Data Services, Inc. | Transfer and Shareholder Service Agent | |
P.O. Box 8032 | ||
Boston, Massachusetts 02266 | ||
State Street Bank and Trust Company | Custodian | |
Boston, Massachusetts 02102 | Administrator | |
Fund Accountant | ||
ALPS Distributors, Inc. | Distributor | |
1290 Broadway, Suite 1100 | ||
Denver, Colorado 80203 |
E. Shareholder Information
Shareholder information, such as pricing of Fund shares, purchase and redemption of Fund shares, dividends and distributions, frequent purchases and redemption of Fund shares, and tax consequences of buying and selling shares, are generally the same between the Funds, except as set forth below. A summary of this information is included below. More detailed shareholder information is contained in the Funds’ prospectus, dated July 29, 2009, as supplemented August 12, 2009, which is incorporated herein by reference and accompanies this Prospectus/Proxy Statement. The Funds’ Statement of Additional Information, dated July 29, 2009, also contains additional information concerning these matters. A free copy of these documents is available upon request as described on the second page of this Prospectus/Proxy Statement.
1. Pricing of Fund Shares
The Funds are open for business each day that the NYSE is open. The Funds calculate their share price each business day as of the close of the NYSE (generally 4:00 p.m. Eastern time). A Fund’s share price is its net asset value per share, or NAV, which is the Fund’s net assets divided by the number of its outstanding shares. Purchases and redemptions will be effected at the NAV next determined after a Fund receives a purchase or redemption request in good order.
In valuing its securities, the Trust uses the current market value if one is readily available. Securities held by a Fund for which market prices are not readily available or for which the Adviser deems the market price to be unreliable are valued in accordance with fair value procedures established by the Board of Trustees. Some of the more common reasons that may necessitate that a security be valued using fair value procedures include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; or the security’s primary pricing source is not able or willing to provide a price. A Fund’s determination of a security’s fair value price often involves the consideration of a number of subjective factors, and is therefore subject to the unavoidable risk that the value that the Fund assigns to a security may be higher or lower than the security’s value would be if a reliable market quotation for the security was readily available.
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2. Purchase and Redemption of Fund Shares
Except as set out in this section, the procedures for purchasing and redeeming shares of the Funds are generally the same.
The Small Cap Fund was closed to new investors effective October 15, 2003. Existing shareholders of the Small Cap Fund (“Existing Shareholders”) may continue to purchase additional shares in existing or new accounts and receive dividends and/or distributions in the form of additional shares of the Fund. Existing Shareholders may include retirement plans that held shares of the Fund at the time of the Fund’s closing, as well as the participants of those retirement plans even if such participants have joined the retirement plan since the time of the Fund’s closing. Existing Shareholders also may include retirement plans sponsored by a sponsor of a retirement plan currently invested in the Fund, even if the retirement plan was not an investor at the time of the Fund’s closing. In addition, investment advisers and wrap accounts may be considered Existing Shareholders if they held shares, on behalf of their clients, of the Small Cap Fund at the time of the Fund’s closing. The clients of investment advisers and wrap accounts may also be considered Existing Shareholders if they held shares of the Small Cap Fund at the time of the Fund’s closing.
As discussed above, the Investor Share class and the Select Share class of the Discovery Fund will be combined prior to the Reorganization. In preparation for that combination, the investment minimum of the Select Shares of the Discovery Fund was lowered to $100 to match the existing investment minimum of the Discovery Fund’s Investor Shares, effective August 12, 2009. The Discovery Fund does not have any minimum balance requirement or minimum subsequent investment requirement. The minimum investment amounts for each share class of the Small Cap Fund will remain at their current levels: Investor ($100), Select ($50,000) and Adviser ($100,000). The minimum subsequent investment requirement for the Adviser Shares of the Small Cap Fund ($1,000) will also remain at its current level.
Each Fund is intended for long-term investment and not for short-term or excessive trading (collectively “market timing”). Market timing may adversely impact a Fund’s performance by disrupting the efficient management of the Fund, increasing Fund transaction costs and taxes, causing the Fund to maintain higher cash balances, and diluting the value of the Fund’s shares.
In order to discourage market timing, each Fund’s Board of Trustees has adopted policies and procedures that are reasonably designed to reduce the risk of market timing by Fund shareholders. Each Fund seeks to deter market timing through several methods. These methods may include: fair value pricing, imposition of redemption fees and trade activity monitoring.
Shares of the Funds redeemed or exchanged within 30 days of purchase, which shall be calculated to include the 30th day, will be subject to a fee of 2%, which is intended to limit short-term trading in the Funds, or to the extent that short-term trading persists, to impose the costs of that type of activity on the shareholders who engage in it. Such fee will be paid to the Funds. Each Fund treats shares that have been held the longest as being redeemed first. Fund shares purchased with reinvested dividends are not subject to redemption fees. The Trust reserves the right, in its sole discretion, to waive such fee when, in its judgment, such waiver would be in the best interests of the Trust or a Fund. The Trust may waive the redemption fee for retirement plans, wrap or fee-based programs, charitable giving funds, unregistered separate accounts, redemptions pursuant to rebalancing programs or systematic withdrawal plans established by the Fund or financial intermediaries, and registered investment companies and redemptions initiated by the Trust. In addition, certain financial intermediaries may use criteria and methods for tracking, applying and calculating the fees that are different from the Funds but which the Trust, in its discretion, may determine are in the best interests of the Trust or the Fund. While the Funds discourage mutual fund market timing and maintain procedures designed to provide reasonable assurances that such
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activity will be identified and terminated, including the imposition of the redemption fee described above, no policy or procedure can guarantee that all such activity will in fact be identified or that such activity can be completely eliminated.
3. Dividends and Distributions
Each Fund intends to pay out as dividends substantially all of its net income and net short-term and long-term capital gains (after reduction by any available capital loss carry-forwards). Each Fund’s policy is to declare and pay distributions of its dividends and interest annually although it may do so more frequently as determined by the Trustees of the Trust. During the fourth quarter of the year, typically in early November, an estimate of each Fund’s year-end distribution, if any, may be made available on the Fund’s website: www.laudus.com. Each Fund’s policy is to distribute net short-term capital gains and net long-term gains annually, although it may do so more frequently as determined by the Trustees of the Trust to the extent permitted by applicable regulations.
All dividends and/or distributions will be paid out in the form of additional shares of the relevant Fund to which the dividends and/or distributions relate at net asset value unless the shareholder elects to receive cash. Your current dividend and distribution election will not change at the consummation of the Reorganization.
F. Distribution Arrangements
Shares of the Funds are offered on a continuous basis through the Trust’s principal underwriter, ALPS Distributors, Inc. (the “Distributor”).
Prior to August 12, 2009, Investor Shares of the Discovery Fund were subject to an annual distribution and shareholder service fee (a “Distribution and Shareholder Service Fee”) of up to 0.25% of Investor Shares’ average daily net assets attributable thereto in accordance with a distribution and shareholder service plan (a “Distribution and Shareholder Service Plan”) adopted by the Trustees pursuant to Rule 12b-1 under the 1940 Act. Effective August 12, 2009, no further fees are being assessed under the Distribution and Shareholder Service Plan with respect to the Investor Shares of the Discovery Fund. Select Shares of the Discovery Fund are not subject to an annual distribution and shareholder service fee.
Investor Shares of the Small Cap Fund are subject to an annual Distribution and Shareholder Service Fee of up to 0.25% of Investor Shares’ average daily net assets attributable thereto in accordance with the Distribution and Shareholder Service Plan. This Distribution and Shareholder Service Fee will continue to be accrued by the Small Cap Fund up until the time that the Reorganization is consummated. The Distribution and Shareholder Service Fee is intended to compensate the Distributor for services and expenses primarily intended to result in the sale of Investor Shares of the Small Cap Fund and/or in connection with the provision of direct client service, personal services, maintenance of shareholder accounts and reporting services to holders of Investor Shares of the Small Cap Fund. The Distribution and Shareholder Service Fee will not be retained by the Distributor but will instead be reallowed to financial intermediaries who provide these services.
Although the Distributor acts as principal underwriter for the Select and Adviser Shares of the Small Cap Fund, no fees are paid to the Distributor in connection with such shares under the Distribution and Shareholder Service Plan. However, the Adviser Shares of the Small Cap Fund are subject to an annual servicing fee under a separate servicing plan described below.
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Under a service plan (the “Service Plan”) adopted by the Trustees, the Distributor may also provide (or arrange for another intermediary or agent to provide) personal and/or account maintenance services to holders of Adviser Shares of the Small Cap Fund (the Distributor or such other entity is referred to herein as a “Servicing Agent” when acting in such capacity). The Service Plan provides for compensation of up to 0.25% of the Adviser Shares’ average daily net assets on an annual basis to be paid to Servicing Agents (the “Servicing Fees”). The Servicing Fees will continue to be accrued by the Adviser Shares of the Small Cap Fund up until the time that the Reorganization is consummated.
Additional information about distribution arrangements of the Funds is contained in the Funds’ prospectus, dated July 29, 2009, as supplemented August 12, 2009, which is incorporated herein by reference and accompanies this Prospectus/Proxy Statement. The Funds’ Statement of Additional Information, dated July 29, 2009, also contains additional information concerning these matters. A free copy of these documents is available upon request as described on the second page of this Prospectus/Proxy Statement.
V. FINANCIAL HIGHLIGHTS
The financial highlights tables that follow are intended to help you understand each Fund’s financial performance for the periods shown. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the particular Fund (assuming reinvestment of all dividends and distributions). The information for the past five years has been audited by PricewaterhouseCoopers LLP, whose reports, along with the Funds’ financial statements, are included in each Fund’s Annual Report to shareholders dated March 31, 2009. A free copy of these Annual Reports is available upon request as described on the second page of this Prospectus/Proxy Statement.
As discussed above, prior to the Reorganization, the Surviving Fund’s two share classes will be combined into a single class of shares of the Fund and the shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The performance and financial history of the sole remaining share class of the Surviving Fund will be that of the Surviving Fund’s current Select Shares. Accordingly, the financial highlights of the Surviving Fund’s Select Shares are shown below.
Small Cap Fund
4/1/08- | 4/1/07- | 4/1/06- | 4/1/05- | 4/1/04- | ||||||||||||||||||
Investor Shares | 3/31/09 | 3/31/08 | 3/31/07 | 3/31/06 | 3/31/05 | |||||||||||||||||
Per-Share Data ($) | ||||||||||||||||||||||
Net asset value at beginning of period | 8.70 | 12.22 | 13.77 | 13.30 | 13.65 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.02 | 1 | (0.03 | ) | (0.03 | ) | (0.04 | ) | (0.02 | )1 | ||||||||||||
Net realized and unrealized gains (losses) | (3.76 | ) | (1.49 | ) | 0.11 | 2.37 | 1.26 | |||||||||||||||
Total from investment operations | (3.74 | ) | (1.52 | ) | 0.08 | 2.33 | 1.24 | |||||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net investment income | (0.02 | ) | — | — | — | — | ||||||||||||||||
Distributions from net realized gains | (0.62 | ) | (2.00 | ) | (1.63 | ) | (1.86 | ) | (1.59 | ) | ||||||||||||
Total distributions | (0.64 | ) | (2.00 | ) | (1.63 | ) | (1.86 | ) | (1.59 | ) | ||||||||||||
Net asset value at end of period | 4.32 | 8.70 | 12.22 | 13.77 | 13.30 | |||||||||||||||||
Total return (%) | (43.79 | ) | (13.57 | ) | 0.75 | 18.98 | 9.00 | |||||||||||||||
Ratios/Supplemental Data (%) | ||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||
Net operating expenses | 1.34 | 1.30 | 1.30 | 1.39 | 1.43 | |||||||||||||||||
Gross operating expenses | 1.37 | 1.32 | 1.30 | 1.39 | 1.43 | |||||||||||||||||
Net investment income (loss) | 0.21 | (0.22 | ) | (0.25 | ) | (0.33 | ) | (0.15 | ) | |||||||||||||
Portfolio turnover rate | 114 | 68 | 76 | 69 | 68 | |||||||||||||||||
Net assets, end of period ($ × 1,000) | 77,227 | 183,980 | 269,185 | 311,822 | 297,927 |
4/1/08- | 4/1/07- | 4/1/06- | 4/1/05- | 4/1/04- | ||||||||||||||||||
Select Shares | 3/31/092 | 3/31/08 | 3/31/07 | 3/31/06 | 3/31/05 | |||||||||||||||||
Per-Share Data ($) | ||||||||||||||||||||||
Net asset value at beginning of period | 9.03 | 12.57 | 14.07 | 13.50 | 13.82 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.04 | 1 | 0.03 | 0.02 | 0.00 | 3 | 0.03 | 1 | ||||||||||||||
Net realized and unrealized gains (losses) | (3.90 | ) | (1.57 | ) | 0.11 | 2.43 | 1.27 | |||||||||||||||
Total from investment operations | (3.86 | ) | (1.54 | ) | 0.13 | 2.43 | 1.30 | |||||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net investment income | (0.05 | ) | — | — | — | (0.03 | ) | |||||||||||||||
Distributions from net realized gains | (0.62 | ) | (2.00 | ) | (1.63 | ) | (1.86 | ) | (1.59 | ) | ||||||||||||
Total distributions | (0.67 | ) | (2.00 | ) | (1.63 | ) | (1.86 | ) | (1.62 | ) | ||||||||||||
Net asset value at end of period | 4.50 | 9.03 | 12.57 | 14.07 | 13.50 | |||||||||||||||||
Total return (%) | (43.52 | ) | (13.34 | ) | 1.11 | 19.46 | 9.36 | |||||||||||||||
Ratios/Supplemental Data (%) | ||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||
Net operating expenses | 1.00 | 0.96 | 0.95 | 1.04 | 1.09 | |||||||||||||||||
Gross operating expenses | 1.00 | 0.96 | 0.95 | 1.04 | 1.09 | |||||||||||||||||
Net investment income (loss) | 0.56 | 0.13 | 0.10 | 0.02 | 0.20 | |||||||||||||||||
Portfolio turnover rate | 114 | 68 | 76 | 69 | 68 | |||||||||||||||||
Net assets, end of period ($ × 1,000) | 156,272 | 393,939 | 699,921 | 918,813 | 948,225 |
1 Calculated based on the average shares outstanding during the period.
2 Effective July 31, 2008, the Institutional Shares were redesignated as Select Shares.
3 Amount is less than $0.005.
4/1/08- | 4/1/07- | 4/1/06- | 4/1/05- | 4/1/04- | ||||||||||||||||||
Adviser Shares | 3/31/09 | 3/31/08 | 3/31/07 | 3/31/06 | 3/31/05 | |||||||||||||||||
Per-Share Data ($) | ||||||||||||||||||||||
Net asset value at beginning of period | 8.82 | 12.35 | 13.88 | 13.38 | 13.71 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.02 | 1 | (0.01 | ) | (0.02 | ) | (0.02 | ) | 0.00 | 1,2 | ||||||||||||
Net realized and unrealized gains (losses) | (3.80 | ) | (1.52 | ) | 0.12 | 2.38 | 1.26 | |||||||||||||||
Total from investment operations | (3.78 | ) | (1.53 | ) | 0.10 | 2.36 | 1.26 | |||||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net investment income | (0.03 | ) | — | — | — | — | ||||||||||||||||
Distributions from net realized gains | (0.62 | ) | (2.00 | ) | (1.63 | ) | (1.86 | ) | (1.59 | ) | ||||||||||||
Total distributions | (0.65 | ) | (2.00 | ) | (1.63 | ) | (1.86 | ) | (1.59 | ) | ||||||||||||
Net asset value at end of period | 4.39 | 8.82 | 12.35 | 13.88 | 13.38 | |||||||||||||||||
Total return (%) | (43.68 | ) | (13.50 | ) | 0.90 | 19.09 | 9.12 | |||||||||||||||
Ratios/Supplemental Data (%) | ||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||
Net operating expenses | 1.22 | 1.20 | 1.20 | 1.32 | 1.31 | |||||||||||||||||
Gross operating expenses | 1.25 | 1.21 | 1.20 | 1.32 | 1.31 | |||||||||||||||||
Net investment income (loss) | 0.32 | (0.12 | ) | (0.14 | ) | (0.24 | ) | (0.01 | ) | |||||||||||||
Portfolio turnover rate | 114 | 68 | 76 | 69 | 68 | |||||||||||||||||
Net assets, end of period ($ × 1,000) | 8,760 | 34,799 | 48,923 | 49,952 | 41,104 |
1 Calculated based on the average shares outstanding during the period.
2 Amount is less than $0.005.
Discovery Fund
4/1/08- | 4/1/07- | 4/1/06- | 4/1/05- | 4/1/04- | ||||||||||||||||||
Select Shares | 3/31/092 | 3/31/08 | 3/31/07 | 3/31/06 | 3/31/05 | |||||||||||||||||
Per-Share Data ($) | ||||||||||||||||||||||
Net asset value at beginning of period | 16.23 | 19.80 | 19.23 | 15.96 | 14.71 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income (loss) | 0.07 | 1 | 0.04 | 0.03 | 0.02 | 0.03 | 1 | |||||||||||||||
Net realized and unrealized gains (losses) | (6.71 | ) | (2.13 | ) | 1.05 | 3.58 | 1.44 | |||||||||||||||
Total from investment operations | (6.64 | ) | (2.09 | ) | 1.08 | 3.60 | 1.47 | |||||||||||||||
Less distributions: | ||||||||||||||||||||||
Distributions from net investment income | (0.08 | ) | 0.00 | 3 | (0.03 | ) | — | (0.04 | ) | |||||||||||||
Distributions from net realized gains | (0.07 | ) | (1.48 | ) | (0.48 | ) | (0.16 | ) | (0.18 | ) | ||||||||||||
Return of Capital | — | — | — | (0.17 | ) | — | ||||||||||||||||
Total distributions | (0.15 | ) | (1.48 | ) | (0.51 | ) | (0.33 | ) | (0.22 | ) | ||||||||||||
Net asset value at end of period | 9.44 | 16.23 | 19.80 | 19.23 | 15.96 | |||||||||||||||||
Total return (%) | (40.99 | ) | (10.98 | ) | 5.71 | 22.80 | 9.98 | |||||||||||||||
Ratios/Supplemental Data (%) | ||||||||||||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||
Net operating expenses | 0.99 | 0.96 | 0.97 | 1.09 | 1.14 | |||||||||||||||||
Gross operating expenses | 0.99 | 0.96 | 0.97 | 1.09 | 1.20 | |||||||||||||||||
Net investment income (loss) | 0.53 | 0.18 | 0.17 | 0.15 | 0.23 | |||||||||||||||||
Portfolio turnover rate | 115 | 74 | 86 | 89 | 63 | |||||||||||||||||
Net assets, end of period ($ x 1,000) | 295,568 | 566,055 | 718,185 | 673,599 | 256,444 |
1 Calculated based on the average shares outstanding during the period. 2 Effective July 31, 2008, the Institutional Shares were redesignated as Select Shares. 3 Amount less than $0.005.
VI. VOTING INFORMATION
This section provides information on a number of topics relating to proxy voting and the shareholder meeting.
A. Record Date
Shareholders of the Acquired Fund as of September 11, 2009 (the “Record Date”) will be entitled to notice of and to vote at the Meeting or any adjournment thereof.
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B. Proxy Solicitation.
The Board is furnishing this Prospectus/Proxy Statement in connection with the solicitation of proxies. The Acquired Fund has retained D.F. King & Co., Inc., (the “Proxy Solicitor”), 48 Wall Street, 22nd Floor, New York, NY 10005 to aid in the solicitation of proxies. Proxies may be solicited by mail, electronically, by telephone, fax, in person or by other means, and representatives of the Proxy Solicitor, the Trust, CSIM, AXA Rosenberg and each of their affiliates may participate in the solicitation of proxies.
You may vote in several ways, listed below.
• | In person at the Meeting; | ||
• | By mail by returning the attached proxy card(s); | ||
• | Through the Internet by going to www.proxyweb.com; or | ||
• | Over the telephone by calling 1-888- . A representative of the Proxy Solicitor will answer your call. When receiving your instructions by telephone, the Proxy Solicitor representative is required to ask you for your full name, address, the last four digits of your social security number or employer identification number, title (if the person giving the proxy is authorized to act for an entity, such as a corporation), the number of shares of the Acquired Fund, and to confirm that you have received the Prospectus/Proxy Statement in the mail. If the information you provided matches the information provided to the Proxy Solicitor by the Acquired Fund, the Proxy Solicitor representative will explain the voting process. The Proxy Solicitor is not permitted to recommend to you how to vote, other than to read any recommendation included in the Prospectus/Proxy statement. |
The Proxy Solicitor will record your instructions and transmit them to the official tabulator and send you a letter or mailgram to confirm your vote. That letter will also ask you to call the Proxy Solicitor immediately if the confirmation does not reflect your instruction correctly. You may receive a call from a representative of the Proxy Solicitor, the Trust, CSIM, AXA Rosenberg or each of their affiliates if the Proxy Solicitor has not yet received your vote. The Proxy Solicitor may ask you for authority by telephone to permit the Proxy Solicitor to sign a proxy on your behalf. The Proxy Solicitor will record all instructions, in accordance with the procedures set forth above. The Acquired Fund believes those procedures are reasonably designed to determine accurately the shareholder’s identity and voting instructions.
Shareholders may revoke a proxy at any time up until voting results are announced at the Meeting. You can do this by writing to the Clerk of the Laudus Trust, c/o CSIM Legal, 211 Main Street, San Francisco, California 94105, by voting in person at the Meeting or submitting a later-dated proxy.
C. Proxy Solicitation Costs.
The Acquired Fund will bear the costs of soliciting proxies, including costs related to the preparation, printing, mailing and tabulation of proxies. The anticipated cost associated with the solicitation of proxies by the Proxy Solicitor is $27,500 plus any reasonable out-of-pocket expenses incurred by the Proxy Solicitor. The payment of such fees and expenses will be considered an extraordinary fund expense and, therefore, will not be subject to any expense limitation or reimbursement agreement in effect for the Acquired Fund. Voting immediately can help the Acquired Fund avoid the considerable expense of a second solicitation.
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D. Quorum and Required Vote for the Proposal.
Quorum.
In order to transact business at the Meeting, the Acquired Fund must achieve a quorum. This means that at least forty percent (40.0%) of the Acquired Fund’s shares entitled to vote must be represented at the Meeting – either in person or by proxy. Any lesser number of shares, however, is sufficient for adjournments. All returned proxies count towards a quorum regardless of how they are voted (“For,” “Against,” or “Abstain”). As discussed more fully below in the section entitled “Tabulation of Votes,” broker non-votes are considered present for purposes of determining the presence of a quorum.
Required Vote.
Proceeding with the Reorganization requires the affirmative vote of a “majority of the outstanding voting securities” of the Acquired Fund, as defined in the 1940 Act, which means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Acquired Fund or (2) 67% or more of the shares of the Acquired Fund present at the Meeting if more than 50% of the outstanding shares of the Acquired Fund are represented at the Meeting in person or by proxy. A vote of shareholders of the Surviving Fund is not needed to approve the Reorganization. Shareholders holding Select Shares, Investor Shares or Adviser Shares of the Acquired Fund will vote together as a single class.
If the Reorganization is not approved by shareholders, then the Acquired Fund will remain in existence, and the Board of Trustees of the Acquired Fund will consider what, if any, additional steps to take, including consideration of the possibility of liquidating the Acquired Fund. The Board recommends that shareholders approve the Reorganization.
E. Other Voting Information.
Adjournment. If a quorum is not present at the Meeting, or if a quorum is present but sufficient votes in favor of the Reorganization are not received by the time scheduled for the Meeting, the persons named as proxies may propose one or more adjournments or postponements of the Meeting for a reasonable time after the date set for the original Meeting to permit further solicitation of proxies. In addition, if, in the judgment of the persons named as proxies, subsequent developments make it advisable to defer action on the proposal, the persons named as proxies may propose one or more adjournments or postponements of the Meeting for a reasonable time in order to defer action on the proposal. Any such adjournments or postponements will require the affirmative vote of a majority of the votes cast on the question in person or by proxy, whether or not a quorum is present, at the session of the Meeting to be adjourned, as required by the Trust’s Declaration of Trust. The persons named as proxies will abstain from voting on adjournment all shares represented by proxies that abstain from voting on such proposal. Any adjournment does not require notice to shareholders other than an announcement at the Meeting being adjourned. The Board may postpone the Meeting prior to the Meeting with notice to the shareholders entitled to vote at the Meeting. The costs of any additional solicitation of proxies and of any adjourned or postponed session with regard to the proposal will be borne by the Acquired Fund.
Tabulation of Votes. Shareholders are entitled to one vote for each share held, and each fractional share shall be entitled to a proportional fractional vote. Votes cast by proxy or in person at the Meeting will be counted by persons appointed by the Acquired Fund to tabulate such votes. Abstentions and “broker non-votes” (i.e., proxies received from brokers indicating that they have not received instructions from the beneficial owner or other person entitled to vote shares) will be counted for purposes of determining whether a quorum is present at the Meeting. Abstentions and “broker non-votes” will have the same effect as a vote “Against” the Proposal. Pursuant to certain rules promulgated by the New York Stock Exchange, Inc. that govern the voting by such broker-dealers, a broker-dealer holding shares of record for a beneficial owner may not exercise discretionary voting power with respect to certain non-
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routine matters. It is anticipated that such broker-dealers will not have discretionary authority to vote on the proposal. The absence of instructions from the beneficial owner will result in a “broker non-vote” with respect to the proposal.
Proxy cards that are properly signed, dated and received at or prior to the Meeting will be voted as specified. If you specify a vote for the proposal, your proxy will be voted as you indicate. If you simply sign, date and return the proxy card, but do not specify a vote for the proposal, your shares will be voted by the proxies “FOR” the Reorganization.
Shareholder Proposals. The Acquired Fund does not intend to hold meetings of its shareholders except to the extent that such meetings are required under the 1940 Act or state law. Acquired Fund shareholders who wish to submit proposals for inclusion in the proxy statement for a subsequent Acquired Fund shareholder meeting should send their written proposals to the Clerk of the Laudus Trust, c/o CSIM Legal, 211 Main Street, San Francisco, California 94105 within a reasonable time before such meeting. If the Reorganization is consummated, there will be no further meeting of shareholders of the Acquired Fund.
Communications with the Board. Shareholders wishing to submit written communications to the Board should send their communications to the Clerk of the Laudus Trust, c/o CSIM Legal, 211 Main Street, San Francisco, California 94105. Any such communications received will be reviewed by the Board at its next regularly scheduled meeting.
Other Matters. The Board knows of no other business to be brought before the Meeting. However, if additional matters do arise, it is the Trustees’ intention that proxies will be voted on such matters in accordance with the judgment of the persons named on the enclosed proxy. If you object to our voting other matters on your behalf, please tell us in writing before the Meeting.
F. Control Persons and Principal Holders of Securities
The table below sets forth the names, addresses and percentage ownership of those shareholders owning beneficially or of record 5% or more of the outstanding shares of each class of each respective Fund as of September 11, 2009. Those persons who beneficially own more than 25% of a particular class of shares in a particular Fund may be deemed to control such class. As a result, it may not be possible for matters subject to a vote of a majority of the outstanding voting securities of such Fund to be approved without the affirmative vote of such shareholder, and it may be possible for such matters to be approved by such shareholder without the affirmative vote of any other shareholder.
As of September 11, 2009, the net assets of the Acquired Fund’s Select Shares, Investor Shares and Adviser Shares was $[___], $[___] and $[___], respectively, and the total number of outstanding Select Shares, Investor Shares and Adviser Shares was [___], [___] and [___], respectively. As of September 11, 2009, the net assets of the Surviving Fund’s Select Shares and Investor Shares was $[___] and $[___], respectively, and the total number of outstanding Select Shares and Investor was [___] and [___], respectively.
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As of September 11, 2009, the following shareholders owned, of record, or to the knowledge of the Funds, beneficially, 5% or more of the outstanding shares of the Funds.
Percentage of | ||||||||||||
Small Cap Fund – | Outstanding Shares | |||||||||||
Investor Shares | Name and address | Owned | Nature of Ownership | |||||||||
Percentage of | ||||||||||||
Small Cap Fund – | Outstanding Shares | |||||||||||
Select Shares | Name and address | Owned | Nature of Ownership | |||||||||
Percentage of | ||||||||||||
Small Cap Fund – | Outstanding Shares | |||||||||||
Adviser Shares | Name and address | Owned | Nature of Ownership | |||||||||
Percentage of | ||||||||||||
Discovery Fund – | Outstanding Shares | |||||||||||
Investor Shares | Name and address | Owned | Nature of Ownership | |||||||||
Percentage of | ||||||||||||
Discovery Fund – | Outstanding Shares | |||||||||||
Select Shares | Name and address | Owned | Nature of Ownership | |||||||||
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On the basis of the share holdings information presented above, the following persons will own the following percentage of the outstanding shares of the Surviving Fund upon consummation of the Reorganization. This table assumes that the value of the shareholder’s interest in a Fund on the date of the consummation of the Reorganization is the same as on September 11, 2009.
Percentage of | ||||||||||||
Discovery Fund | Outstanding Shares | |||||||||||
Shares* | Name and address | Owned | Nature of Ownership | |||||||||
* | Prior to the Reorganization, the Surviving Fund’s two separate share classes will be combined into a single class of shares of the Surviving Fund and the Surviving Fund will no longer offer separate share classes. Accordingly, shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. |
As of September 11, 2009, CSIM and its affiliates held of record approximately [ ]% of the outstanding shares of the Acquired Fund — Investor Shares, as agent or custodian for their customers, but did not own such shares beneficially because they did not have voting or investment discretion with respect to such shares.
As of September 11, 2009, CSIM and its affiliates held of record approximately [ ]% of the outstanding shares of the Acquired Fund — Select Shares, as agent or custodian for their customers, but did not own such shares beneficially because they did not have voting or investment discretion with respect to such shares.
As of September 11, 2009, CSIM and its affiliates held of record approximately [ ]% of the outstanding shares of the Acquired Fund — Adviser Shares, as agent or custodian for their customers, but did not own such shares beneficially because they did not have voting or investment discretion with respect to such shares.
As of September 11, 2009, CSIM and its affiliates held of record approximately [ ]% of the outstanding shares of the Surviving Fund — Select Shares, as agent or custodian for their customers, but did not own such shares beneficially because they did not have voting or investment discretion with respect to such shares.
As of September 11, 2009, CSIM and its affiliates held of record approximately [ ]% of the outstanding shares of the Surviving Fund — Investor Shares, as agent or custodian for their customers, but did not own such shares beneficially because they did not have voting or investment discretion with respect to such shares.
As of September 11, 2009, the Trustees and officers as a group owned less than 1% of the outstanding shares of each share class of the Acquired Fund and each share class of the Surviving Fund, and less than 1% of the outstanding shares of all funds of the Trust in the aggregate.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. SHAREHOLDERS ARE ENCOURAGED TO VOTE BY TELEPHONE OR THROUGH THE INTERNET. NO POSTAGE IS REQUIRED IF MAILED IN
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THE UNITED STATES. PLEASE FOLLOW THE ENCLOSED INSTRUCTIONS TO UTILIZE THESE METHODS OF VOTING.
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APPENDIX A FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this day of , 2009, by and between Laudus Trust, a Massachusetts business trust (the “Trust”), on behalf of its Laudus Rosenberg U.S. Small Capitalization Fund (the “Acquired Fund”), and the Trust, on behalf of its Laudus Rosenberg U.S. Discovery Fund (the “Surviving Fund” and, together with the Acquired Fund, the “Funds”). Charles Schwab Investment Management, Inc. (“CSIM”) joins this Agreement solely for purposes of Sections 14(b) and 18(b). Except for the Acquired Fund and Surviving Fund, no other series of the Trust are parties to this Agreement. The Trust has its principal place of business at 211 Main Street, San Francisco CA, 94105.
WHEREAS, the Trust was established on April 1, 1988 under the laws of the Commonwealth of Massachusetts as a business trust under a Declaration of Trust, as amended and restated from time to time, and the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, the Acquired Fund and the Surviving Fund are each a separate investment series of the Trust and the Acquired Fund owns securities that generally are assets of the character in which the Surviving Fund is permitted to invest;
WHEREAS, each of the Acquired Fund and the Surviving Fund is authorized to issue shares of beneficial interest;
WHEREAS, the Funds intend this Agreement to be, and adopt it as, a plan of reorganization within the meaning of the regulations under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”); and
WHEREAS, the Trustees of the Trust, including a majority of Trustees that are not “interested persons,” as such term is defined in section 2(a)(19) of the 1940 Act, of the Trust have determined that the transactions contemplated herein are in the best interests of the Funds and that the interests of the Funds’ respective existing shareholders will not be diluted as a result;
NOW, THEREFORE, in consideration of the mutual promises herein contained and intending to be legally bound hereby, the parties hereto hereby agree to effect the transfer of all of the assets of the Acquired Fund solely in exchange for the assumption by the Surviving Fund of all of the liabilities of the Acquired Fund and shares of beneficial interest of the Surviving Fund (“Surviving Fund Shares”) followed by the distribution, at the Closing Date (as defined in Section 13 of this Agreement), of such Surviving Fund Shares to the holders of shares of the Acquired Fund (“Acquired Fund Shares”) on the terms and conditions hereinafter set forth in liquidation of the Acquired Fund. The parties hereto hereby covenant and agree as follows:
1. Plan of Reorganization. At the Closing Date, the Acquired Fund shall assign, deliver and otherwise transfer all of its assets and good and marketable title thereto, and assign all of the liabilities as are set forth in a statement of assets and liabilities, to be prepared as of the Valuation Time (as defined in Section 5 of this Agreement) (the “Statement of Assets and Liabilities”), to the Surviving Fund, free and clear of all liens, encumbrances and adverse claims except as provided in this Agreement, and the Surviving Fund shall acquire all assets, and shall assume all liabilities of the Acquired Fund, and the Surviving Fund shall deliver to the Acquired Fund a number of Surviving Fund Shares (both full and fractional) equivalent in value to the Acquired Fund Shares outstanding immediately prior to the Closing
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Date. Shareholders of record of Select Shares, Investor Shares and Adviser Shares of the Acquired Fund at the Closing Date shall be credited with full and fractional shares of the Surviving Fund. The assets and liabilities of the Acquired Fund shall be exclusively assigned to and assumed by the Surviving Fund. All debts, liabilities, obligations and duties of the Acquired Fund, to the extent that they exist at or after the Closing Date, shall after the Closing Date attach to the Surviving Fund and may be enforced against the Surviving Fund to the same extent as if the same had been incurred by the Surviving Fund. The events outlined in this Section 1 are referred to herein collectively as the “Reorganization.”
2. Transfer of Assets.
(a) The assets of the Acquired Fund to be acquired by the Surviving Fund and allocated thereto shall include, without limitation, all cash, cash equivalents, securities, receivables (including interest and dividends receivable) as set forth in the Statement of Assets and Liabilities, as well as any claims or rights of action or rights to register shares under applicable securities laws, any books or records of the Acquired Fund and other property owned by the Acquired Fund at the Closing Date.
(b) The Surviving Fund will, within a reasonable time prior to the Closing Date, furnish the Acquired Fund with a list of the securities, if any, on the Acquired Fund’s list referred to in the second sentence of this paragraph that do not conform to the Surviving Fund’s investment objectives, policies, and restrictions. The Acquired Fund will, within a reasonable period of time (not less than 30 days) prior to the Closing Date, furnish the Surviving Fund with a list of its portfolio securities and other investments. In the event that the Acquired Fund holds any investments that the Surviving Fund may not hold, the Acquired Fund, if requested by the Surviving Fund, will dispose of such securities prior to the Closing Date. In addition, if it is determined that the Acquired Fund and the Surviving Fund portfolios, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Surviving Fund with respect to such investments, the Acquired Fund, if requested by the Surviving Fund, will dispose of a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require the Acquired Fund to dispose of any investments or securities if, in the reasonable judgment of the Acquired Fund, such disposition would either violate the Acquired Fund’s fiduciary duty to its shareholders or adversely affect the tax-free nature of the Reorganization.
(c) The Acquired Fund shall direct State Street Bank and Trust Company, as custodian for the Acquired Fund (the “Custodian”), to deliver, at or prior to the Closing Date, a certificate of an authorized officer stating that: (i) assets have been delivered in proper form to the Surviving Fund at the Closing Date, and (ii) all necessary taxes in connection with the delivery of the assets, including all applicable foreign, federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. The Acquired Fund’s portfolio securities represented by a certificate or other written instrument shall be transferred and delivered by the Acquired Fund as of the Closing Date for the account of the Surviving Fund duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof. The Custodian shall deliver prior to or as of the Closing Date by book entry, in accordance with the customary practices of any securities depository, as defined in Rule 17f-4 under the 1940 Act, in which the Acquired Fund’s assets are deposited, the Acquired Fund’s assets deposited with such depositories. The cash to be transferred by the Acquired Fund shall be delivered by wire transfer of federal funds prior to or as of the Closing Date.
(d) The Acquired Fund shall direct Boston Financial Data Services, Inc. (the “Transfer Agent”), on behalf of the Acquired Fund, to deliver prior to or as of the Closing Date a certificate of an authorized officer stating that its records contain the names and addresses of the holders of the Acquired Fund Shares and the number and percentage ownership of outstanding Select Shares, Investor Shares and Adviser Shares owned by each shareholder immediately prior to the Closing Date. The Surviving Fund
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shall issue and deliver a confirmation evidencing the Surviving Fund Shares to be credited at the Closing Date to the Secretary of the Acquired Fund, or provide evidence that the Surviving Fund Shares have been credited to the Acquired Fund’s account on the books of the Surviving Fund. No later than the Closing Date, each party shall deliver to the other such bill of sale, checks, assignments, share certificates, if any, receipts or other documents as such other party or its counsel may reasonably request.
3. Calculations.
(a) The number of full and fractional Surviving Fund Shares to be issued in exchange for the Acquired Fund’s assets pursuant to Section 1 hereof shall be determined by multiplying the outstanding shares of the Acquired Fund by the ratio computed by dividing the net asset value per share of the Acquired Fund for each class by the net asset value per share of the Surviving Fund on the Valuation Date, determined in accordance with Section 3(b). Shareholders of record of Select Shares, Investor Shares or Adviser Shares of the Acquired Fund at the Closing Date shall be credited with full and fractional Surviving Fund Shares.
(b) The net asset value per share of the Surviving Fund Shares shall be the net asset value per share computed as of the time at which the Surviving Fund’s net asset value is calculated at the Valuation Time, in accordance with the pricing policies and procedures adopted by the Trust as described in the then current prospectus and statement of additional information of the Funds under the Securities Act of 1933 (the “1933 Act”).
4. Valuation of Assets. The value of the assets of the Acquired Fund shall be the value of such assets computed as of the time at which the Acquired Fund’s net asset value is calculated at the Valuation Time. The net asset value of the assets of the Acquired Fund to be transferred to the Surviving Fund shall be computed by the Acquired Fund. In determining the value of the securities transferred by the Acquired Fund to the Surviving Fund, each security shall be priced in accordance with the pricing policies and procedures adopted by the Trust as described in the then current prospectus and statement of additional information of the Funds under the 1933 Act. For such purposes, price quotations and the security characteristics relating to establishing such quotations shall be determined by the Acquired Fund, provided that such determination shall be subject to the approval of the Surviving Fund. The Acquired Fund and the Surviving Fund agree to use all commercially reasonable efforts to resolve, prior to the Valuation Time, any material pricing differences.
5. Valuation Time. The valuation time shall be 4:00 p.m., Eastern Time, on November 19, 2009, or such earlier or later date and time as may be mutually agreed in writing by an authorized officer of the Funds (the “Valuation Time”). Notwithstanding anything herein to the contrary, in the event that at the Valuation Time, (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted, or (b) trading or the reporting of trading on such exchange or elsewhere shall be disrupted so that, in the judgment of the Trust, accurate appraisal of the value of the net assets of the Acquired Fund is impracticable, the Valuation Time shall be postponed until the first business day after the day when trading shall have been fully resumed without restriction or disruption, reporting shall have been restored and accurate appraisal of the value of the net assets of the Acquired Fund is practicable.
6. Liquidation of the Acquired Fund and Cancellation of Shares. At the Closing Date, the Acquired Fund will liquidate and the Surviving Fund Shares (both full and fractional) received by the Acquired Fund will be distributed to the shareholders of record of the Acquired Fund as of the Closing Date in exchange for their Acquired Fund Shares and in complete liquidation of the Acquired Fund. Such liquidation and distribution will be accompanied by the establishment of an open account on the share records of the Surviving Fund in the name of each shareholder of the Acquired Fund that represents the respective number of Surviving Fund Shares due such shareholder. All of the issued and outstanding
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shares of the Acquired Fund shall be cancelled on the books of the Trust at the Closing Date and shall thereafter represent only the right to receive Surviving Fund Shares. The Acquired Fund’s transfer books shall be closed permanently. The Trust also shall take any and all other steps as shall be necessary and proper to effect a complete termination of the Acquired Fund.
7. Representations and Warranties of the Surviving Fund. The Surviving Fund represents and warrants to the Acquired Fund as follows:
(a) The Surviving Fund has been duly established as a separate investment series of the Trust, which is a business trust duly organized and validly existing under the Commonwealth of Massachusetts.
(b) The Trust is registered as an investment company classified as a management company of the open-end type, and its registration with the Securities and Exchange Commission (the “Commission”) as an investment company under the 1940 Act is in full force and effect.
(c) The authorized capital of the Trust consists of an unlimited number of shares of beneficial interest. The shares of the Surviving Fund have been duly established and represent a fractional undivided interest in the Surviving Fund. The issued and outstanding shares of the Surviving Fund are duly authorized, validly issued, fully paid and non-assessable. There are no outstanding options, warrants or other rights of any kind to acquire from the Trust any shares of any class or equity interests of the Surviving Fund or securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire, any such additional shares, nor is the Trust committed to issue any share appreciation or similar rights or options, warrants, rights or securities in connection with the Surviving Fund. The Surviving Fund Shares to be issued and delivered to the Acquired Fund, for the account of the Acquired Fund’s shareholders, pursuant to the terms of this Agreement will, at the Closing Date, have been duly authorized and, when so issued and delivered, will be duly and validly issued Surviving Fund Shares, and will be fully paid and non-assessable.
(d) The execution, delivery and performance of this Agreement by the Trust, on behalf of the Surviving Fund, and the consummation of the transactions contemplated herein have been duly and validly authorized by the Trust’s Board of Trustees and no other proceedings by the Surviving Fund are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Trust, on behalf of the Surviving Fund, and assuming due authorization, execution and delivery by the Trust, on behalf of the Acquired Fund, is a legal, valid and binding obligation of the Trust, as it relates to the Surviving Fund, enforceable in accordance with its terms subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles. The Surviving Fund is not a party to or obligated under any charter, by-law, indenture or contract provision or any other commitment or obligation, or subject to any order or decree, which would be violated by its executing and carrying out this Agreement.
(e) The audited financial statements of the Surviving Fund as of March 31, 2009 are in accordance with generally accepted accounting principles consistently applied, and such statements (copies of which have been furnished to the Acquired Fund) fairly reflect the financial condition of the Surviving Fund as of such date, and there are no known contingent liabilities of the Surviving Fund as of such date not disclosed therein.
(f) Since March 31, 2009, there has not been any material adverse change in the Surviving Fund’s financial condition, assets, liabilities, or business other than changes occurring in the ordinary course of business, or any incurrence by the Surviving Fund of indebtedness maturing more than one year
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from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquired Fund. For purposes of this paragraph (f), a decline in the net asset value of the Surviving Fund shall not constitute a material adverse change.
(g) The current prospectus and statement of additional information of the Surviving Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(h) Except as otherwise disclosed in writing and accepted by the Acquired Fund, no litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Surviving Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition and the conduct of its business or the ability of the Surviving Fund to carry out the transactions contemplated by this Agreement. The Surviving Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(i) Except for contracts and agreements disclosed to the Acquired Fund, under which no default exists, the Surviving Fund is not a party to or subject to any material contract, debt instrument, plan, lease, franchise, license or permit of any kind or nature whatsoever with respect to the Surviving Fund.
(j) As of the Closing Date, all Federal and other tax returns, information returns and other tax-related reports of the Surviving Fund required by law to have been filed by such date (including extensions) shall have been filed, and all other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of the Surviving Fund’s knowledge, no such return is currently under audit by the Internal Revenue Service or any state or local tax authority, and no assessment has been asserted with respect to any of such returns.
(k) For each taxable year of its operation, the Surviving Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, and has been eligible to and has computed its federal income tax under Section 852 of the Code. The Surviving Fund currently qualifies, and shall continue to qualify, as a regulated investment company under the Code.
(l) The Surviving Fund agrees to use all reasonable efforts to obtain any necessary approvals and authorizations required by the 1933 Act, the Securities Exchange Act of 1934 (the “1934 Act”), the 1940 Act, and such of the state Blue Sky or securities laws as it may deem appropriate in order to continue its operations after the Closing Date.
(m) The prospectus/proxy statement and statement of additional information (collectively, the “Prospectus/Proxy Statement”) to be included in the Surviving Fund’s registration statement on Form N-14 (the “Registration Statement”) and filed in connection with this Agreement, and the documents incorporated therein by reference and any amendment or supplement thereto insofar as they relate to the Surviving Fund, each comply or will comply in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the Commission thereunder on the effective date of such Registration Statement. Each of the Prospectus/Proxy Statement, Registration Statement and the documents incorporated therein by reference and any amendment or
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supplement thereto, insofar as it relates to the Surviving Fund, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not materially misleading on the effective date of such Registration Statement; provided, however, that the Surviving Fund makes no representations or warranties as to the information contained in the Prospectus/Proxy Statement, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto in reliance upon and in conformity with information relating to the Acquired Fund and furnished by the Acquired Fund to the Surviving Fund specifically for use in connection with the Prospectus/Proxy Statement, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto.
8. Representations and Warranties of the Acquired Fund. The Acquired Fund represents and warrants to the Surviving Fund as follows:
(a) The Acquired Fund has been duly established as a separate investment series of the Trust, which is a business trust duly organized and validly existing under the Commonwealth of Massachusetts.
(b) The Trust is registered as an investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect.
(c) The authorized capital of the Trust consists of an unlimited number of shares of beneficial interest. The Select Shares, Investor Shares and Adviser Shares of the Acquired Fund have been duly established and represent a fractional undivided interest in the Acquired Fund. The issued and outstanding Select Shares, Investor Shares and Adviser Shares of the Acquired Fund are, and at the Closing Date will be, duly authorized, validly issued, fully paid and non-assessable. All of the issued and outstanding shares of the Acquired Fund will, at the time of the Closing Date, be held by the persons and in the amounts set forth in the records of the Transfer Agent as provided in Section 2(d). There are no outstanding options, warrants or other rights of any kind to acquire from the Trust any shares of any class or equity interests of the Acquired Fund or securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire, any such additional shares, nor is the Trust committed to issue any share appreciation or similar rights or options, warrants, rights or securities in connection with the Acquired Fund.
(d) The audited financial statements of the Acquired Fund as of March 31, 2009 are in accordance with generally accepted accounting principles consistently applied, and such statements (copies of which have been furnished to the Surviving Fund) fairly reflect the financial condition of the Acquired Fund as of such date, and there are no known contingent liabilities of the Acquired Fund as of such date not disclosed therein.
(e) Since March 31, 2009, there has not been any material adverse change in the Acquired Fund’s financial condition, assets, liabilities, or business other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Surviving Fund. For purposes of this paragraph (e), a decline in the net asset value of the Acquired Fund shall not constitute a material adverse change.
(f) The Acquired Fund will have, at the Closing Date, good and marketable title to, and full right, power and authority to sell, assign, transfer and deliver, the assets to be transferred to the Surviving Fund pursuant to Section 1. Upon delivery and payment for such assets, the Surviving Fund will have good and marketable title to such assets without restriction on the transfer thereof free and clear of all
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liens, encumbrances and adverse claims other than as disclosed to the Surviving Fund and accepted by the Surviving Fund.
(g) The execution, delivery and performance of this Agreement by the Trust, on behalf of the Acquired Fund, and the consummation of the transactions contemplated herein have been duly and validly authorized by the Trust’s Board of Trustees and no other proceedings by the Acquired Fund are necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Trust, on behalf of the Acquired Fund, and assuming due authorization, execution and delivery by the Trust, on behalf of the Surviving Fund, is a legal, valid and binding obligation of the Trust, as it relates to the Acquired Fund, enforceable in accordance with its terms subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles. The Acquired Fund is not a party to or obligated under any charter, by-law, indenture or contract provision or any other commitment or obligation, or subject to any order or decree, which would be violated by its executing and carrying out this Agreement.
(h) The current prospectus and statement of additional information of the Acquired Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(i) Except as otherwise disclosed in writing and accepted by the Surviving Fund, no litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against the Acquired Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition and the conduct of its business or the ability of the Acquired Fund to carry out the transactions contemplated by this Agreement. The Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(j) Except for contracts and agreements disclosed to the Surviving Fund, under which no default exists, the Acquired Fund is not a party to or subject to any material contract, debt instrument, plan, lease, franchise, license or permit of any kind or nature whatsoever with respect to the Acquired Fund.
(k) As of the Closing Date, all Federal and other tax returns, information returns and other tax-related reports of the Acquired Fund required by law to have been filed by such date (including extensions) shall have been filed, and all other taxes shall have been paid so far as due, or provision shall have been made for the payment thereof, and to the best of the Acquired Fund’s knowledge, no such return is currently under audit by the Internal Revenue Service or any state or local tax authority, and no assessment has been asserted with respect to any of such returns.
(l) For each taxable year of its operation, the Acquired Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, and has been eligible to and has computed its federal income tax under Section 852 of the Code. The Acquired Fund currently qualifies, and shall continue to qualify, as a regulated investment company under the Code.
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(m) The Prospectus/Proxy Statement to be included in the Registration Statement and filed in connection with this Agreement, and the documents incorporated therein by reference and any amendment or supplement thereto insofar as they relate to the Acquired Fund, each comply or will comply in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the Commission thereunder on the effective date of such Registration Statement. Each of the Prospectus/Proxy Statement, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto, insofar as it relates to the Acquired Fund, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not materially misleading on the effective date of such Registration Statement; provided, however, that the Acquired Fund makes no representations or warranties as to the information contained in the Prospectus/Proxy Statement, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto in reliance upon and in conformity with information relating to the Surviving Fund and furnished by the Surviving Fund to the Acquired Fund specifically for use in connection with the Prospectus/Proxy Statement, Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto.
9. Covenants of the Surviving Fund and the Acquired Fund.
(a) The Surviving Fund and the Acquired Fund each will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include customary dividends and distributions.
(b) The Acquired Fund will assist the Surviving Fund in obtaining such information as the Surviving Fund reasonably requests concerning the beneficial ownership of the Acquired Fund shares.
(c) Subject to the provisions of this Agreement, the Surviving Fund and the Acquired Fund will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date.
(d) As promptly as practicable, but in any case within sixty days after the Closing Date, the Acquired Fund shall furnish the Surviving Fund, in such form as is reasonably satisfactory to the Surviving Fund, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes that will be carried over by the Surviving Fund as a result of Section 381 of the Code, and certified by the Acquired Fund’s President, Vice President or Treasurer.
(e) On or before the Closing Date, the Acquired Fund shall declare and pay a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders all of the Acquired Fund’s investment company taxable income (computed without regard to any deduction for dividends paid), if any, plus the excess, if any, of its interest income excludible from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for all taxable periods or years ending on or before the Closing Date, and all of its net capital gains realized (after reduction for any capital loss carry forward), if any, in all taxable periods or years ending on or before the Closing Date.
10. Conditions Precedent to Obligations of the Surviving Fund. The obligations of the Surviving Fund to complete the transactions provided for herein shall be subject, at its election, to the performance by the Acquired Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions:
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(a) All representations and warranties of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. On the Closing Date, the Surviving Fund shall have received a certificate from the President or Vice President of the Acquired Fund, dated as of such date, certifying on behalf of the Acquired Fund that as of such date that the conditions set forth in this clause (a) have been met.
(b) The Surviving Fund shall have received an opinion of Morgan, Lewis & Bockius LLP, dated as of the Closing Date, in a form reasonably satisfactory to the Surviving Fund, covering the following points:
(i) The Acquired Fund is a separate investment series of the Trust, which is duly organized and validly existing under the laws of the Commonwealth of Massachusetts and has the trust power to own all of its properties and assets and, to the knowledge of such counsel, to carry on its business as presently conducted.
(ii) The Trust is registered as an investment company under the 1940 Act, and, to such counsel’s knowledge, such registration with the Commission as an investment company under the 1940 Act is in full force and effect.
(iii) This Agreement has been duly authorized, executed and delivered by the Acquired Fund and, assuming due authorization, execution, and delivery of this Agreement by the Surviving Fund, is a valid and binding obligation of the Acquired Fund enforceable against the Acquired Fund in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and to general equity principles.
(iv) The execution and delivery of the Agreement did not, and the consummation of the transactions contemplated in the Agreement will not, conflict with or result in a material breach of the terms or provisions of, or constitute a material default under, the then-current declaration of trust or by-laws of the Acquired Fund, or, to the knowledge of such counsel (without any independent investigation), any material agreement or instrument to which the Acquired Fund is a party or by which any properties belonging to the Acquired Fund may be bound.
(v) To the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or the Commonwealth of Massachusetts is required for consummation by the Acquired Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, 1934 Act and the 1940 Act, and as may be required under state securities laws or where the failure to obtain any such consent, approval, order or authorization would not have a material adverse effect on the operations of the Acquired Fund or the consummation of the transactions contemplated by this Agreement.
(vi) To the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Acquired Fund or any of its respective properties or assets and the Acquired Fund is not a party to nor subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business other than as previously disclosed in the Registration Statement.
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(vii) Assuming that a consideration therefor of not less than the net asset value thereof has been paid, and assuming that such shares were issued in accordance with the terms of the Acquired Fund’s registration statement, or any amendment or supplement thereto, in effect at the time of such issuance, all issued and outstanding shares of the Acquired Fund are legally issued and fully paid and non-assessable (except that shareholders of the Acquired Fund may under certain circumstances be held personally liable for its obligations).
Such opinion may contain such assumptions and limitations as shall be in the opinion of such counsel appropriate to render the opinions expressed therein. In addition, such counsel shall be entitled to state that they have relied upon officers’ certificates and certificates of public officials in rendering their opinion.
(c) The Acquired Fund shall have delivered to the Surviving Fund at the Closing Date the Acquired Fund’s Statement of Assets and Liabilities, prepared in accordance with generally accepted accounting principles consistently applied, together with a certificate of the Treasurer or Assistant Treasurer of the Acquired Fund as to the aggregate asset value of the Acquired Fund’s portfolio securities.
(d) On the Closing Date, the Acquired Fund shall have performed and complied in all material respects with each of its agreements and covenants required by this Agreement to be performed or complied with by the Acquired Fund prior to or at the Closing Date and the Surviving Fund shall have received a certificate from the President or Vice President of the Acquired Fund, dated as of such date, certifying on behalf of the Acquired Fund that the conditions set forth in this clause (d) have been and continue to be, satisfied.
11. Conditions Precedent to Obligations of the Acquired Fund. The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Surviving Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions:
(a) All representations and warranties of the Surviving Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date. On the Closing Date, the Acquired Fund shall have received a certificate from the President or Vice President of the Surviving Fund, dated as of such date, certifying on behalf of Surviving Fund that as of such date that the conditions set forth in this clause (a) have been met.
(b) The Acquired Fund shall have received an opinion of Morgan, Lewis & Bockius LLP, dated as of the Closing Date, in a form reasonably satisfactory to the Acquired Fund, covering the following points:
(i) The Surviving Fund is a separate investment series of the Trust, which is duly organized and validly existing under the laws of the Commonwealth of Massachusetts and has the trust power to own all of its properties and assets and, to the knowledge of such counsel, to carry on its business as presently conducted.
(ii) The Trust is registered as an investment company under the 1940 Act, and, to such counsel’s knowledge, such registration with the Commission as an investment company under the 1940 Act is in full force and effect.
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(iii) This Agreement has been duly authorized, executed and delivered by the Surviving Fund and, assuming due authorization, execution, and delivery of this Agreement by the Acquired Fund, is a valid and binding obligation of the Surviving Fund enforceable against the Surviving Fund in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and to general equity principles.
(iv) The execution and delivery of the Agreement did not, and the consummation of the transactions contemplated in the Agreement will not, conflict with or result in a material breach of the terms or provisions of, or constitute a material default under, the then-current declaration of trust or by-laws of the Surviving Fund, or, to the knowledge of such counsel (without any independent investigation), any material agreement or instrument to which the Surviving Fund is a party or by which any properties belonging to the Surviving Fund may be bound.
(v) To the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or the Commonwealth of Massachusetts is required for consummation by the Surviving Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, 1934 Act and the 1940 Act, and as may be required under state securities laws or where the failure to obtain any such consent, approval, order or authorization would not have a material adverse effect on the operations of the Surviving Fund or the consummation of the transactions contemplated by this Agreement.
(vi) To the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Surviving Fund or any of its respective properties or assets and the Surviving Fund is not a party to nor subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business other than as previously disclosed in the Registration Statement.
(vii) Assuming that a consideration therefor not less than the net asset value thereof has been paid, the Surviving Fund Shares to be issued and delivered to the Acquired Fund on behalf of the Acquired Fund shareholders as provided by this Agreement are duly authorized and upon such delivery will be legally issued and outstanding and fully paid and non-assessable, and no shareholder of the Surviving Fund has any statutory preemptive rights in respect thereof (except that shareholders of the Surviving Fund may under certain circumstances be held personally liable for its obligations).
(viii) The Registration Statement, to the knowledge of such counsel, has been declared effective by the Commission and no stop order under the 1933 Act pertaining thereto has been issued.
Such opinion may contain such assumptions and limitations as shall be in the opinion of such counsel appropriate to render the opinions expressed therein. In addition, such counsel shall be entitled to state that they have relied upon officers’ certificates and certificates of public officials in rendering their opinion.
(c) On the Closing Date, the Surviving Fund shall have performed and complied in all material respects with each of its agreements and covenants required by this Agreement to be performed or complied with by the Surviving Fund prior to or at the Closing Date and the Acquired Fund shall have received a certificate from the President or Vice President of the Surviving Fund, dated as of such date, certifying on behalf of the Surviving Fund that the conditions set forth in this clause (c) have been, and continue to be, satisfied.
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12. Further Conditions Precedent to Obligations of the Acquired Fund and the Surviving Fund. If any of the conditions set forth below do not exist on or before the Closing Date with respect to the Funds, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement.
(a) The Trust’s Board of Trustees, on behalf of each of the Acquired Fund and Surviving Fund, shall have approved this Agreement.
(b) This Agreement and the transactions contemplated in this Agreement will have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with the provisions of the Trust’s Declaration of Trust and applicable law.
(c) On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, nor instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act and no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein.
(d) All required consents of other parties and all other consents, orders, and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky securities authorities, including any necessary “no-action” positions of and exemptive orders from such federal and state authorities) to permit consummation of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order, or permit would not involve a risk of a material adverse effect on the assets or properties of the Surviving Fund or the Acquired Fund, provided that either party hereto may for itself waive any of such conditions.
(e) The Registration Statement shall have become effective under the 1933 Act, and no stop orders suspending the effectiveness of the Registration Statement shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
(f) The Funds shall have received a favorable opinion of Morgan, Lewis & Bockius LLP addressed to the Surviving Fund and the Acquired Fund substantially to the effect that with respect to the Acquired Fund and the Surviving Fund for Federal income tax purposes:
(i) The Reorganization will constitute a tax-free reorganization within the meaning of Section 368(a) of the Code, and the Acquired Fund and the Surviving Fund will each be a “party to the reorganization” within the meaning of Section 368(b) of the Code.
(ii) No gain or loss will be recognized by the Acquired Fund upon the transfer of all of its assets to the Surviving Fund solely in exchange for Surviving Fund Shares and the assumption by the Surviving Fund of all of the liabilities of the Acquired Fund or upon the distribution of Surviving Fund Shares to shareholders of the Acquired Fund.
(iii) No gain or loss will be recognized by the Surviving Fund upon the receipt of the assets of the Acquired Fund solely in exchange for Surviving Fund Shares and the assumption by the Surviving Fund of the liabilities of the Acquired Fund.
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(iv) The tax basis of the assets of the Acquired Fund received by the Surviving Fund will be the same as the tax basis of such assets to the Acquired Fund immediately prior to the exchange.
(v) The holding period of the assets of the Acquired Fund received by the Surviving Fund will include the period during which such assets were held by the Acquired Fund.
(vi) No gain or loss will be recognized by the shareholders of the Acquired Fund upon the exchange of their shares of the Acquired Fund for Surviving Fund Shares (including fractional shares to which they may be entitled).
(vii) The aggregate tax basis of Surviving Fund Shares received by each shareholder of the Acquired Fund (including fractional shares to which they may be entitled) will be the same as the aggregate tax basis of the Acquired Fund shares exchanged therefor.
(viii) The holding period of the Surviving Fund Shares received by the shareholders of the Acquired Fund (including fractional shares to which they may be entitled) will include the holding period of the Acquired Fund shares surrendered in exchange therefor, provided that the Acquired Fund shares were held as a capital asset as of the Closing Date of the Reorganization.
No opinion will be expressed as to the effect of the Reorganization on (i) the Acquired Fund or the Surviving Fund with respect to any asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting and (ii) any Acquired Fund or the Surviving Fund shareholder that is required to recognize unrealized gains and losses for federal income tax purposes under a mark-to-market system of accounting.
Such opinion shall be based on customary assumptions, limitations and such representations as Morgan, Lewis & Bockius LLP may reasonably request, and the Acquired Fund and Surviving Fund will cooperate to make and certify the accuracy of such representations. Such opinion may contain such assumptions and limitations as shall be in the opinion of such counsel appropriate to render the opinions expressed therein. Notwithstanding anything herein to the contrary, neither the Surviving Fund nor the Acquired Fund may waive the conditions set forth in this Section 12(e).
(g) This Agreement and the transactions contemplated in this Agreement will have been approved by the requisite vote of the holders of the outstanding shares of the Acquired Fund in accordance with the provisions of the Trust’s Declaration of Trust and applicable law.
13. Closing Date of the Reorganization. The exchange of the Acquired Fund’s assets for the Surviving Fund Shares shall be effective as of opening of business on November 19, 2009, or at such other time and date as fixed by the mutual consent of the parties (the “Closing Date”).
14. Termination.
(a) This Agreement may be terminated by the mutual agreement of the Surviving Fund and the Acquired Fund. In addition, either the Surviving Fund or the Acquired Fund may at its option terminate this Agreement at or prior to the Closing Date:
(i) because of a material breach by the other party of any representation, warranty, covenant or agreement contained herein to be performed at or prior to the Closing Date;
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(ii) because of a condition herein expressed to be precedent to the obligations of the terminating party which has not been met and which reasonably appears will not or cannot be met;
(iii) by resolution of the Trust’s Board of Trustees if circumstances should develop that, in the good faith opinion of the Board, make proceeding with the Agreement not in the best interests of either of the Acquired Fund’s or Surviving Fund’s shareholders;
(b) In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of the Acquired Fund, the Surviving Fund, the Trust, or their Trustees or officers, to the other party. In such event, CSIM shall bear the expenses incurred by the Acquired Fund and the Surviving Fund incidental to the preparation and carrying out of this Agreement as provided in Section 18.
15. Amendment. This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Funds; provided, however, that no such amendment may have the effect of changing the provisions for determining the number of the Surviving Fund shares to be issued to the Acquired Fund shareholders under the Plan to the detriment of such Acquired Fund shareholders.
16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the conflicts of laws provisions thereof.
17. Notices. Any notice, report, statement or demand required or permitted by any provision of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy, certified mail or overnight express courier addressed as follows:
Acquired Fund: | Surviving Fund: | |
Jeffrey Mortimer | Jeffrey Mortimer | |
Laudus Trust | Laudus Trust | |
211 Main Street | 211 Main Street | |
San Francisco, CA 94105 | San Francisco, CA 94105 | |
with a copy to: | with a copy to: | |
Timothy W. Levin, Esq. | Timothy W. Levin, Esq. | |
Morgan, Lewis & Bockius LLP | Morgan, Lewis & Bockius LLP | |
1701 Market Street | 1701 Market Street | |
Philadelphia, PA 19103 | Philadelphia, PA 19103 |
18. Fees and Expenses.
(a) Each of the Surviving Fund and the Acquired Fund represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein.
(b) Except as otherwise provided for herein, all expenses that are solely and directly related to the Reorganization contemplated by this Agreement will be borne and paid by the Acquired Fund. Such expenses include, without limitation, to the extent solely and directly related to the Reorganization contemplated by this Agreement: (i) expenses incurred in connection with the entering into and the carrying out of the provisions of this Agreement; (ii) expenses associated with the preparation and filing
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of the Registration Statement under the 1933 Act covering the Surviving Fund Shares to be issued pursuant to the provisions of this Agreement; (iii) registration or qualification fees and expenses of preparing and filing such forms as are necessary under applicable state securities laws to qualify the Surviving Fund Shares to be issued in connection herewith in each state in which the Acquired Fund’s shareholders are resident as of the date of the mailing of the Prospectus/Information Statement to such shareholders; (iv) postage; (v) printing; (vi) accounting fees; and (vii) legal fees. Acquired Fund agrees that all such fees and expenses so borne and paid, shall be paid directly by Acquired Fund to the relevant providers of services or other payees in accordance with the principles set forth in the Internal Revenue Service Rev. Ruling 73-54, 1973-1 C.B. 187. Fees and expenses not incurred directly in connection with the consummation of the transactions contemplated by this Agreement will be borne by the party incurring such fees and expenses. Notwithstanding the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by the other party of such expenses would result in the disqualification of the Acquired Fund or the Surviving Fund, as the case may be, as a “regulated investment company” within the meaning of Section 851 of the Code. Acquired Fund shareholders will pay their respective expenses, if any, incurred in connection with the transactions contemplated by this Agreement. Neither the Acquired Fund nor the Surviving Fund will pay the Surviving Fund shareholders’ expenses, if any. In the event this Agreement is terminated at or prior to the Closing Date in accordance with Section 14 hereto, CSIM will bear the costs incurred by the Acquired Fund under this Section 18(b).
19. Headings, Counterparts, Assignment.
(a) The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(b) This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
(c) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation other than the parties hereto and their respective successors and assigns any rights or remedies under or by reason of this Agreement.
(d) The Surviving Fund and Acquired Fund agree that neither party has made any representation, warranty or covenant not set forth herein and that this Agreement constitutes the entire agreement between the parties. The representations, warranties and covenants contained herein or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder.
(e) A copy of the Trust’s Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Trust by officers of such Trust as officers and not individually and that the obligations of or arising out of this Agreement with respect to the Surviving Fund and the Acquired Fund are not binding upon any of the trustees, officers or shareholders of the Trust individually but are binding only upon the assets and property belonging to the Surviving Fund and the Acquired Fund.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
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LAUDUS TRUST, ON BEHALF OF ITS SERIES, LAUDUS ROSENBERG U.S. SMALL CAPITALIZATION FUND | ||||
By: | ||||
Name: | ||||
Title: | ||||
LAUDUS TRUST, ON BEHALF OF ITS SERIES, LAUDUS ROSENBERG U.S DISCOVERY FUND | ||||
By: | ||||
Name: | ||||
Title: | ||||
SOLELY FOR PURPOSES OF SECTIONS 14(b) AND 18(b), CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
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LAUDUS TRUST
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
THE LAUDUS ROSENBERG U.S. SMALL CAPITALIZATION FUND
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
THE LAUDUS ROSENBERG U.S. SMALL CAPITALIZATION FUND
September [ ], 2009
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
OF THE LAUDUS TRUST
OF THE LAUDUS TRUST
This proxy is for your use in voting on various matters relating to the Laudus Rosenberg U.S. Small Capitalization Fund (the “Fund”), a portfolio of the Laudus Trust (the “Trust”). The undersigned shareholder(s) of the Fund, revoking previous proxies, hereby appoint(s) Catherine MacGregor, Bessie Mistkaris and Christine Pierangeli, and each of them (with full power of substitution), the proxies of the undersigned to attend the Special Meeting of Shareholders of the Fund to be held on November 5, 2009, at the offices of Charles Schwab & Co., Inc., , San Francisco, California, 94105 commencing at 8:30 a.m. Pacific time and any adjournments thereof (the “Special Meeting”), and to vote all of the shares of the Fund that the signer(s) would be entitled to vote at the Special Meeting and on any matter incident to the conduct of the Special Meeting, all as set forth in the Notice of Special Meeting of Shareholders and the Prospectus/Proxy Statement dated September , 2009.
This proxy, when properly executed, will be voted as indicated below. If you sign without otherwise indicating a vote on the proposal, this proxy will be voted FOR the proposal. As to any other matter that may properly come before the Special Meeting, the shares will be voted by said proxies in accordance with their judgment. The undersigned hereby acknowledges receipt of the Notice of Special Meeting of Shareholders and the Prospectus/Proxy Statement dated September , 2009.
PROXY TABULATOR | 3 EASY WAYS TO VOTE YOUR PROXY | |
D.F. King, Inc. 48 Wall Street 22nd Floor New York, NY 10005 | Vote by Mail: Check the appropriate box on the reverse side of this proxy card, date and sign below and return in the postage-paid envelope provided. Vote by Phone: Call toll free 1-888- . Follow the recorded instructions. Vote via the Internet: Log on to www.proxyvote.com. Follow the on-screen instructions. |
Dated:
Please sign exactly as your name(s) appear on this card. When signing as attorney or executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person. For joint accounts, each joint owner must sign.
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Please fill in boxes as shown using black or blue ink or number 2 pencil. [X]
PLEASE DO NOT USE FINE POINT PEN
The Board of Trustees recommends that you vote FOR the Proposal.
Proposal: | To approve an Agreement and Plan of Reorganization by and between the Trust, on behalf of the Fund, and the Trust, on behalf of the Laudus Rosenberg U.S. Discovery Fund, another series of the Trust, which provides for and contemplates: (1) the transfer of all of the assets and stated liabilities of the Fund to the Laudus Rosenberg U.S. Discovery Fund in exchange for shares of the Laudus Rosenberg U.S. Discovery Fund; and (2) the distribution of the shares of the Laudus Rosenberg U.S. Discovery Fund to the shareholders of the Fund in liquidation of the Fund. |
FOR | AGAINST | ABSTAIN | ||
o | o | o |
Discretionary authority is hereby conferred as to all other matters as may properly come before the Special Meeting. |
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
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LAUDUS TRUST
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets and Liabilities of
LAUDUS ROSENBERG U.S. SMALL CAPITALIZATION FUND
a series of
Laudus Trust
211 Main Street
San Francisco, CA 94105
a series of
Laudus Trust
211 Main Street
San Francisco, CA 94105
By and in Exchange for Shares of
LAUDUS ROSENBERG U.S. DISCOVERY FUND
a series of
Laudus Trust
211 Main Street
San Francisco, CA 94105
a series of
Laudus Trust
211 Main Street
San Francisco, CA 94105
September [ ], 2009
This Statement of Additional Information (the “SAI”), which is not a prospectus, relating specifically to the proposed transfer of assets and liabilities of the Laudus Rosenberg U.S. Small Capitalization Fund (the “Small Cap Fund” or the “Acquired Fund”) to the Laudus Rosenberg U.S. Discovery Fund (the “Discovery Fund” or the “Surviving Fund” and, together with the Acquired Fund, the “Funds”), each a series of Laudus Trust ( the “Trust”) (the “Reorganization”), should be read in conjunction with the Prospectus/Proxy Statement dated September [ ], 2009, relating specifically to the Reorganization (the “Prospectus”). The Reorganization will be considered by shareholders of the Small Cap Fund on November 5, 2009, at 8:30 a.m. Pacific Time, at the offices of Charles Schwab & Co., Inc., [ ], San Francisco, California, 94105. Copies of the Prospectus may be obtained at no charge by calling the Trust at 1-800-447-3332.
The following documents are incorporated herein by reference:
1. The Statement of Additional Information of the Trust relating to the Acquired Fund and the Surviving Fund dated July 29, 2009.
2. The Report of the Independent Registered Public Accounting Firm and audited financial statements of the Acquired Fund included in the Fund’s Annual Report for the period ended March 31, 2009 (the “Acquired Fund Annual Report”). No other parts of the Acquired Fund Annual Report are incorporated herein by reference.
3. The Report of the Independent Registered Public Accounting Firm and audited financial statements of the Surviving Fund included in the Fund’s Annual Report for the period ended March 31, 2009 (the “Surviving Fund Annual Report”). No other parts of the Surviving Fund Annual Report are incorporated herein by reference.
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A. General Information
The Board of Trustees of the Trust has approved an Agreement and Plan of Reorganization (the “Plan”), which contemplates the transfer of all the assets and liabilities of the Acquired Fund to the Surviving Fund in exchange for shares of the Surviving Fund. Currently, the Surviving Fund offers two separate share classes: Investor Shares and Select Shares. Prior to the Reorganization, these two separate share classes will be combined into a single class of shares of the Surviving Fund and the Surviving Fund will no longer offer separate share classes. Accordingly, shareholders of Investor Shares, Select Shares and Adviser Shares of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization.
After the transfer of all its assets and liabilities in exchange for shares of the Surviving Fund, the Acquired Fund will distribute the shares to its shareholders in liquidation of the Acquired Fund. Each shareholder owning shares of any share class of the Acquired Fund at the closing of the Reorganization will receive shares of the Surviving Fund equal in aggregate value to his or her interest in the Acquired Fund, and will receive any unpaid dividends or distributions on shares of the Acquired Fund that were declared at or before the closing of the Reorganization. The Surviving Fund will establish an account for each former shareholder of the Acquired Fund reflecting the appropriate number of shares distributed to the shareholder. These accounts will be substantially identical to the accounts currently maintained by the Acquired Fund for each shareholder. In connection with the Reorganization, all outstanding shares of the Acquired Fund will be cancelled, and the Acquired Fund will wind up its affairs and be terminated. For further information about the Reorganization, see the Prospectus.
B. Additional Information about the Acquired Fund and the Surviving Fund
The Statement of Additional Information of the Trust relating to the Acquired Fund and the Surviving Fund dated July 29, 2009, is hereby incorporated herein by reference.
C. Financial Statements
The following historical financial information regarding the Acquired Fund and Surviving Fund is incorporated herein by reference as follows:
1. the Report of the Independent Registered Public Accounting Firm and audited financial statements of the Acquired Fund included in the Acquired Fund Annual Report are hereby incorporated herein by reference to such Annual Report. No other parts of the Acquired Fund Annual Report are incorporated herein by reference; and
2. the Report of the Independent Registered Public Accounting Firm and audited financial statements of the Surviving Fund included in the Surviving Fund Annual Report are hereby incorporated herein by reference to such Annual Report. No other parts of the Surviving Fund Annual Report are incorporated herein by reference.
D. Pro Forma Financial Information (Unaudited)
The unaudited pro forma combined financial statements are presented for the information of the reader and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred on March 31, 2009.
The unaudited pro forma combined schedule of investments and statement of assets and liabilities reflect the combined financial position of the Acquired Fund and Surviving Fund as of March 31, 2009.
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The unaudited pro forma combined statement of operations for the period ended March 31, 2009, presents the combined results of operations of the Acquired Fund and Surviving Fund for the period ended March 31, 2009. The pro forma results of operations are not necessarily indicative of future operations or the actual results that would have occurred had the combination been consummated at March 31, 2009. These historical statements have been derived from the respective books of the Acquired Fund and Surviving Fund and records utilized in calculating daily net asset value at March 31, 2009, and for the twelve-month period then ended under auditing principles generally accepted in the United States of America in the investment company industry.
Under generally accepted accounting principles, the historical cost of investment securities will be carried forward to the surviving entity and the results of operations of the Surviving Fund for pre-combination periods will not be restated. The unaudited pro forma combined financial statements should be read in conjunction with the separate financial statements of the Acquired Fund and Surviving Fund incorporated by reference into this SAI.
As discussed in the Prospectus, prior to the Reorganization, the Surviving Fund’s two share classes will be combined into a single class of shares of the Fund and the shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The pro forma financial information of the Surviving Fund in the following tables has been restated to reflect the capitalization of the Surviving Fund as if the combination of the Surviving Fund’s two share classes into a single class of shares occurred on March 31, 2009.
Pro Forma Schedule of Investments (Unaudited)
Small Cap Fund, Discovery Fund and Pro Forma Combined Discovery Fund (Surviving Fund)
March 31, 2009
Small Cap Fund, Discovery Fund and Pro Forma Combined Discovery Fund (Surviving Fund)
March 31, 2009
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
COMMON STOCK 98.3% of combined net assets | ||||||||||||||||||||||||
Automobiles & Components 0.0% | ||||||||||||||||||||||||
Exide Technologies* | 18,420 | 55,260 | 46,152 | 138,456 | 64,572 | 193,716 | ||||||||||||||||||
Banks 6.5% | ||||||||||||||||||||||||
Alliance Financial Corp. | 810 | 14,531 | 810 | 14,531 | ||||||||||||||||||||
Ameriana Bancorp | 505 | 1,429 | 505 | 1,429 | ||||||||||||||||||||
Astoria Financial Corp. | 42,349 | 389,187 | 87,288 | 802,177 | 129,637 | 1,191,364 | ||||||||||||||||||
Banco Latinoamericano de Exportaciones, S.A., Class E | 84,479 | 791,568 | 52,640 | 493,237 | 137,119 | 1,284,805 | ||||||||||||||||||
BancorpSouth, Inc. | 61,727 | 1,286,391 | 61,727 | 1,286,391 | ||||||||||||||||||||
Bank Mutual Corp. | 3,066 | 27,778 | 3,066 | 27,778 | ||||||||||||||||||||
Bank of Hawaii Corp. | 17,500 | 577,150 | 28,200 | 930,036 | 45,700 | 1,507,186 | ||||||||||||||||||
Berkshire Hills Bancorp, Inc. | 6,923 | 158,675 | 6,923 | 158,675 | ||||||||||||||||||||
BOK Financial Corp. | 7,699 | 266,000 | 7,699 | 266,000 | ||||||||||||||||||||
Brookline Bancorp, Inc. | 19,800 | 188,100 | 15,300 | 145,350 | 35,100 | 333,450 | ||||||||||||||||||
Capitol Federal Financial | 5,700 | 215,517 | 5,700 | 215,517 | ||||||||||||||||||||
Carolina Bank Holdings, Inc.* | 6,600 | 27,720 | 6,600 | 27,720 | ||||||||||||||||||||
Carver Bancorp, Inc. | 300 | 1,023 | 300 | 1,023 |
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Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Central Valley Community Bancorp* | 2,380 | 11,115 | 2,488 | 11,619 | 4,868 | 22,734 | ||||||||||||||||||
Centrue Financial Corp. | 11,892 | 67,487 | 11,892 | 67,487 | ||||||||||||||||||||
Citizens South Banking Corp. | 4,180 | 21,903 | 4,180 | 21,903 | ||||||||||||||||||||
City National Corp. | 24,580 | 830,067 | 24,580 | 830,067 | ||||||||||||||||||||
Commerce Bancshares, Inc. | 20,895 | 758,488 | 59,455 | 2,158,216 | 80,350 | 2,916,704 | ||||||||||||||||||
Community Bank System, Inc. | 12,460 | 208,705 | 8,470 | 141,872 | 20,930 | 350,577 | ||||||||||||||||||
Community Capital Corp. | 2,969 | 15,350 | 2,969 | 15,350 | ||||||||||||||||||||
Cullen/Frost Bankers, Inc. | 16,200 | 760,428 | 35,600 | 1,671,064 | 51,800 | 2,431,492 | ||||||||||||||||||
ESB Financial Corp. | 10,246 | 112,604 | 1,250 | 13,737 | 11,496 | 126,341 | ||||||||||||||||||
First Citizens BancShares, Inc., Class A | 7,561 | 996,540 | 10,404 | 1,371,247 | 17,965 | 2,367,787 | ||||||||||||||||||
First Defiance Financial Corp. | 25,226 | 152,365 | 13,339 | 80,568 | 38,565 | 232,933 | ||||||||||||||||||
First Federal Bancshares of Arkansas, Inc. | 16,226 | 76,262 | 3,002 | 14,109 | 19,228 | 90,371 | ||||||||||||||||||
First Financial Bankshares, Inc. | 7,700 | 370,909 | 5,100 | 245,667 | 12,800 | 616,576 | ||||||||||||||||||
First United Corp. | 1,333 | 11,171 | 1,333 | 11,171 | ||||||||||||||||||||
FirstMerit Corp. | 44,800 | 815,360 | 27,632 | 502,902 | 72,432 | 1,318,262 | ||||||||||||||||||
Flushing Financial Corp. | 6,852 | 41,249 | 6,852 | 41,249 | ||||||||||||||||||||
Glacier Bancorp, Inc. | 34,563 | 542,985 | 34,563 | 542,985 | ||||||||||||||||||||
GS Financial Corp. | 2,648 | 35,086 | 2,648 | 35,086 | ||||||||||||||||||||
Hancock Holding Co. | 32,300 | 1,010,344 | 32,300 | 1,010,344 | ||||||||||||||||||||
Hawthorn Bancshares, Inc. | 4,602 | 52,233 | 4,602 | 52,233 | ||||||||||||||||||||
HF Financial Corp. | 16,200 | 206,550 | 7,361 | 93,853 | 23,561 | 300,403 | ||||||||||||||||||
Hopfed Bancorp, Inc. | 6,431 | 60,934 | 1,310 | 12,412 | 7,741 | 73,346 | ||||||||||||||||||
Horizon Bancorp | 7,598 | 84,338 | 4,409 | 48,940 | 12,007 | 133,278 | ||||||||||||||||||
International Bancshares Corp. | 22,100 | 172,380 | 10,428 | 81,338 | 32,528 | 253,718 | ||||||||||||||||||
Intervest Bancshares Corp., Class A | 399 | 858 | 399 | 858 | ||||||||||||||||||||
Liberty Bancorp, Inc. | 3,380 | 23,508 | 3,380 | 23,508 | ||||||||||||||||||||
LSB Financial Corp. | 1,500 | 16,500 | 2,483 | 27,313 | 3,983 | 43,813 | ||||||||||||||||||
National Penn Bancshares, Inc. | 101,350 | 841,205 | 101,350 | 841,205 | ||||||||||||||||||||
New York Community Bancorp, Inc. | 29,570 | 330,297 | 29,570 | 330,297 | ||||||||||||||||||||
NewAlliance Bancshares, Inc. | 369,351 | 4,336,181 | 177,520 | 2,084,085 | 546,871 | 6,420,266 | ||||||||||||||||||
OceanFirst Financial Corp. | 5,249 | 53,645 | 5,249 | 53,645 | ||||||||||||||||||||
Parkvale Financial Corp. | 28,120 | 308,758 | 10,562 | 115,971 | 38,682 | 424,729 | ||||||||||||||||||
Peoples Bancorp of North Carolina | 11,844 | 68,103 | 11,844 | 68,103 | ||||||||||||||||||||
People’s United Financial, Inc. | 157,109 | 2,823,249 | 157,109 | 2,823,249 | ||||||||||||||||||||
Premier Financial Bancorp, Inc. | 4,440 | 23,976 | 7,195 | 38,853 | 11,635 | 62,829 | ||||||||||||||||||
Prosperity Bancshares, Inc. | 45,031 | 1,231,598 | 33,020 | 903,097 | 78,051 | 2,134,695 | ||||||||||||||||||
QCR Holdings, Inc. | 4,762 | 38,286 | 3,320 | 26,693 | 8,082 | 64,979 | ||||||||||||||||||
Renasant Corp. | 11,272 | 141,576 | 11,272 | 141,576 | ||||||||||||||||||||
Republic Bancorp, Inc., Class A | 3,900 | 72,813 | 2,100 | 39,207 | 6,000 | 112,020 | ||||||||||||||||||
Rurban Financial Corp. | 9,236 | 72,964 | 9,236 | 72,964 | ||||||||||||||||||||
Southern Missouri Bancorp, Inc. | 8,300 | 88,976 | 5,141 | 55,111 | 13,441 | 144,087 | ||||||||||||||||||
Southside Bancshares, Inc. | 8,850 | 167,265 | 8,850 | 167,265 | ||||||||||||||||||||
Southwest Bancorp, Inc. | 23,128 | 216,941 | 23,128 | 216,941 | ||||||||||||||||||||
Sun Bancorp, Inc.* | 9,235 | 47,930 | 9,235 | 47,930 | ||||||||||||||||||||
SVB Financial Group* | 32,635 | 653,026 | 16,900 | 338,169 | 49,535 | 991,195 | ||||||||||||||||||
Tamalpais Bancorp | 1,958 | 10,769 | 3,556 | 19,558 | 5,514 | 30,327 | ||||||||||||||||||
TCF Financial Corp. | 17,086 | 200,931 | 17,086 | 200,931 | ||||||||||||||||||||
Teche Holding Co. | 3,320 | 101,260 | 3,320 | 101,260 | ||||||||||||||||||||
TF Financial Corp. | 10,476 | 190,558 | 6,010 | 109,322 | 16,486 | 299,880 |
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Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Tompkins Financial Corp. | 2,100 | 90,300 | 1,700 | 73,100 | 3,800 | 163,400 | ||||||||||||||||||
UMB Financial Corp. | 10,300 | 437,647 | 8,010 | 340,345 | 18,310 | 777,992 | ||||||||||||||||||
United Bancshares, Inc. | 10,998 | 98,982 | 10,998 | 98,982 | ||||||||||||||||||||
United Western Bancorp, Inc. | 24,325 | 118,706 | 13,615 | 66,441 | 37,940 | 185,147 | ||||||||||||||||||
Valley National Bancorp | 43,025 | 532,219 | 95,650 | 1,183,190 | 138,675 | 1,715,409 | ||||||||||||||||||
Wainwright Bank & Trust Co. | 7,588 | 50,764 | 7,588 | 50,764 | ||||||||||||||||||||
Westamerica Bancorp | 15,912 | 724,951 | 15,912 | 724,951 | ||||||||||||||||||||
Wilmington Trust Corp. | 39,927 | 386,893 | 39,927 | 386,893 | ||||||||||||||||||||
Wintrust Financial Corp. | 23,645 | 290,834 | 8,280 | 101,844 | 31,925 | 392,678 | ||||||||||||||||||
17,990,909 | 22,502,125 | 40,493,034 | ||||||||||||||||||||||
Capital Goods 3.6% | ||||||||||||||||||||||||
Aecom Technology Corp.* | 189,000 | 4,929,120 | 189,000 | 4,929,120 | ||||||||||||||||||||
Aircastle Ltd. | 191,262 | 889,368 | 105,347 | 489,864 | 296,609 | 1,379,232 | ||||||||||||||||||
Albany International Corp., Class A | 9,740 | 88,147 | 18,670 | 168,963 | 28,410 | 257,110 | ||||||||||||||||||
A-Power Energy Generation Systems Ltd.* | 1,583 | 6,870 | 1,583 | 6,870 | ||||||||||||||||||||
Applied Industrial Technologies, Inc. | 11,210 | 189,113 | 11,210 | 189,113 | ||||||||||||||||||||
Beacon Roofing Supply, Inc.* | 86,172 | 1,153,843 | 99,300 | 1,329,627 | 185,472 | 2,483,470 | ||||||||||||||||||
Esterline Technologies Corp.* | 72,618 | 1,466,157 | 24,890 | 502,529 | 97,508 | 1,968,686 | ||||||||||||||||||
Federal Signal Corp. | 124,113 | 654,076 | 59,350 | 312,774 | 183,463 | 966,850 | ||||||||||||||||||
Force Protection, Inc.* | 15,077 | 72,370 | 25,459 | 122,203 | 40,536 | 194,573 | ||||||||||||||||||
Griffon Corp.* | 56,009 | 420,067 | 56,009 | 420,067 | ||||||||||||||||||||
H&E Equipment Services, Inc.* | 52,205 | 341,943 | 36,996 | 242,324 | 89,201 | 584,267 | ||||||||||||||||||
Interline Brands, Inc.* | 11,690 | 98,547 | 11,690 | 98,547 | ||||||||||||||||||||
KBR, Inc. | 183,811 | 2,538,430 | 183,811 | 2,538,430 | ||||||||||||||||||||
K-Tron International, Inc.* | �� | 3,313 | 201,000 | 190 | 11,527 | 3,503 | 212,527 | |||||||||||||||||
Lawson Products, Inc. | 6,954 | 84,630 | 6,686 | 81,369 | 13,640 | 165,999 | ||||||||||||||||||
Michael Baker Corp.* | 23,600 | 613,600 | 17,100 | 444,600 | 40,700 | 1,058,200 | ||||||||||||||||||
Preformed Line Products Co. | 139 | 5,232 | 139 | 5,232 | ||||||||||||||||||||
Rush Enterprises, Inc., Class A* | 11,618 | 103,633 | 47,826 | 426,608 | 59,444 | 530,241 | ||||||||||||||||||
Seaboard Corp. | 240 | 242,400 | 462 | 466,620 | 702 | 709,020 | ||||||||||||||||||
SL Industries, Inc.* | 24,994 | 115,472 | 24,994 | 115,472 | ||||||||||||||||||||
Teledyne Technologies, Inc.* | 2,500 | 66,700 | 2,500 | 66,700 | ||||||||||||||||||||
The L.S. Starrett Co., Class A | 24,546 | 153,412 | 8,051 | 50,319 | 32,597 | 203,731 | ||||||||||||||||||
Triumph Group, Inc. | 53,440 | 2,041,408 | 15,663 | 598,327 | 69,103 | 2,639,735 | ||||||||||||||||||
Universal Forest Products, Inc. | 2,500 | 66,525 | 2,500 | 66,525 | ||||||||||||||||||||
Willis Lease Finance Corp.* | 45,921 | 485,844 | 21,670 | 229,269 | 67,591 | 715,113 | ||||||||||||||||||
8,779,060 | 13,725,770 | 22,504,830 | ||||||||||||||||||||||
Commercial & Professional Supplies 2.9% | ||||||||||||||||||||||||
ABM Industries, Inc. | 7,275 | 119,310 | 7,275 | 119,310 | ||||||||||||||||||||
Administaff, Inc. | 32,440 | 685,457 | 45,800 | 967,754 | 78,240 | 1,653,211 | ||||||||||||||||||
CDI Corp. | 10,171 | 98,862 | 1,554 | 15,105 | 11,725 | 113,967 | ||||||||||||||||||
Comfort Systems USA, Inc. | 105,238 | 1,091,318 | 59,364 | 615,605 | 164,602 | 1,706,923 | ||||||||||||||||||
Deluxe Corp. | 166,779 | 1,606,082 | 110,084 | 1,060,109 | 276,863 | 2,666,191 | ||||||||||||||||||
Ecology & Environment, Inc., Class A | 15,800 | 198,764 | 4,252 | 53,490 | 20,052 | 252,254 | ||||||||||||||||||
G & K Services, Inc., Class A | 2,509 | 47,445 | 2,509 | 47,445 | ||||||||||||||||||||
GeoEye, Inc.* | 59,355 | 1,172,261 | 240 | 4,740 | 59,595 | 1,177,001 | ||||||||||||||||||
GP Strategies Corp.* | 22,050 | 78,498 | 35,012 | 124,643 | 57,062 | 203,141 |
6
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Heidrick & Struggles International, Inc. | 51,512 | 913,823 | 10,823 | 192,000 | 62,335 | 1,105,823 | ||||||||||||||||||
Industrial Services of America, Inc. | 10,256 | 47,075 | 7,500 | 34,425 | 17,756 | 81,500 | ||||||||||||||||||
Intersections, Inc.* | 18,379 | 97,960 | 6,380 | 34,005 | 24,759 | 131,965 | ||||||||||||||||||
Kelly Services, Inc., Class A | 142,600 | 1,147,930 | 79,330 | 638,607 | 221,930 | 1,786,537 | ||||||||||||||||||
LECG Corp.* | 2,836 | 7,203 | 2,836 | 7,203 | ||||||||||||||||||||
Mine Safety Appliances Co. | 30,841 | 617,437 | 30,841 | 617,437 | ||||||||||||||||||||
National Technical Systems, Inc. | 10,376 | 30,713 | 16,403 | 48,553 | 26,779 | 79,266 | ||||||||||||||||||
Sykes Enterprises, Inc.* | 60,998 | 1,014,397 | 83,840 | 1,394,259 | 144,838 | 2,408,656 | ||||||||||||||||||
United Stationers, Inc.* | 60,516 | 1,699,289 | 50,716 | 1,424,105 | 111,232 | 3,123,394 | ||||||||||||||||||
Volt Information Sciences, Inc.* | 18,363 | 122,114 | 29,941 | 199,108 | 48,304 | 321,222 | ||||||||||||||||||
VSE Corp. | 9,975 | 266,333 | 6,631 | 177,048 | 16,606 | 443,381 | ||||||||||||||||||
10,888,313 | 7,157,514 | 18,045,827 | ||||||||||||||||||||||
Consumer Durables & Apparel 0.2% | ||||||||||||||||||||||||
CSS Industries, Inc. | 3,456 | 58,752 | 6,381 | 108,477 | 9,837 | 167,229 | ||||||||||||||||||
Flexsteel Industries, Inc. | 7,001 | 36,125 | 7,001 | 36,125 | ||||||||||||||||||||
Iconix Brand Group, Inc.* | 590 | 5,222 | 590 | 5,222 | ||||||||||||||||||||
Liz Claiborne, Inc. | 3,592 | 8,872 | 79,176 | 195,565 | 82,768 | 204,437 | ||||||||||||||||||
M.D.C. Holdings, Inc. | 12,102 | 376,856 | 12,102 | 376,856 | ||||||||||||||||||||
Rocky Brands, Inc.* | 1,128 | 3,948 | 1,128 | 3,948 | ||||||||||||||||||||
Steven Madden Ltd.* | 1,875 | 35,212 | 1,875 | 35,212 | ||||||||||||||||||||
Tupperware Brands Corp. | 3,500 | 59,465 | 3,500 | 59,465 | ||||||||||||||||||||
489,775 | 398,719 | 888,494 | ||||||||||||||||||||||
Consumer Services 4.0% | ||||||||||||||||||||||||
Ark Restaurants Corp. | 14,652 | 135,677 | 6,840 | 63,338 | 21,492 | 199,015 | ||||||||||||||||||
Bally Technologies, Inc.* | 29,960 | 551,863 | 29,960 | 551,863 | ||||||||||||||||||||
Bob Evans Farms, Inc. | 152,716 | 3,423,893 | 79,762 | 1,788,264 | 232,478 | 5,212,157 | ||||||||||||||||||
CEC Entertainment, Inc.* | 54,857 | 1,419,699 | 44,100 | 1,141,308 | 98,957 | 2,561,007 | ||||||||||||||||||
Coinstar, Inc. | 111,397 | 3,649,366 | 24,707 | 809,401 | 136,104 | 4,458,767 | ||||||||||||||||||
Cracker Barrel Old Country Store, Inc. | 95,354 | 2,730,938 | 64,094 | 1,835,652 | 159,448 | 4,566,590 | ||||||||||||||||||
Domino’s Pizza, Inc.* | 11,820 | 77,421 | 11,820 | 77,421 | ||||||||||||||||||||
Frisch’s Restaurants, Inc. | 14,820 | 300,105 | 4,580 | 92,745 | 19,400 | 392,850 | ||||||||||||||||||
International Speedway Corp., Class A | 17,650 | 389,359 | 17,650 | 389,359 | ||||||||||||||||||||
ITT Educational Services, Inc.* | 9,500 | 1,153,490 | 9,500 | 1,153,490 | ||||||||||||||||||||
Jack in the Box, Inc.* | 39,670 | 923,914 | 4,340 | 101,079 | 44,010 | 1,024,993 | ||||||||||||||||||
LIFE TIME FITNESS, Inc.* | 4,960 | 62,298 | 50,545 | 634,845 | 55,505 | 697,143 | ||||||||||||||||||
Red Lion Hotels Corp.* | 9,400 | 27,542 | 9,400 | 27,542 | ||||||||||||||||||||
Red Robin Gourmet Burgers, Inc.* | 10,220 | 180,179 | 10,220 | 180,179 | ||||||||||||||||||||
Regis Corp. | 55,980 | 808,911 | 48,550 | 701,547 | 104,530 | 1,510,458 | ||||||||||||||||||
Sonic Corp.* | 2,880 | 28,858 | 70,878 | 710,198 | 73,758 | 739,056 | ||||||||||||||||||
Speedway Motorsports, Inc. | 57,201 | 676,116 | 37,440 | 442,541 | 94,641 | 1,118,657 | ||||||||||||||||||
14,549,134 | 10,311,413 | 24,860,547 | ||||||||||||||||||||||
Diversified Financials 0.5% | ||||||||||||||||||||||||
California First National Bancorp | 35,441 | 265,808 | 8,630 | 64,725 | 44,071 | 330,533 | ||||||||||||||||||
Cash America International, Inc. | 8,590 | 134,519 | 49,170 | 770,002 | 57,760 | 904,521 | ||||||||||||||||||
EZCORP, Inc., Class A* | 23,630 | 273,399 | 81,199 | 939,473 | 104,829 | 1,212,872 |
7
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Interactive Brokers Group, Inc., Class A* | 3,125 | 50,406 | 3,125 | 50,406 | ||||||||||||||||||||
QC Holdings, Inc. | 9,812 | 57,989 | 9,812 | 57,989 | ||||||||||||||||||||
Raymond James Financial, Inc. | 26,700 | 525,990 | 26,700 | 525,990 | ||||||||||||||||||||
673,726 | 2,408,585 | 3,082,311 | ||||||||||||||||||||||
Energy 2.2% | ||||||||||||||||||||||||
Atlas America, Inc. | 9,236 | 80,815 | 47,450 | 415,188 | 56,686 | 496,003 | ||||||||||||||||||
Hornbeck Offshore Services, Inc.* | 530 | 8,077 | 530 | 8,077 | ||||||||||||||||||||
Massey Energy Co. | 106,002 | 1,072,740 | 106,002 | 1,072,740 | ||||||||||||||||||||
Mitcham Industries, Inc.* | 27,006 | 102,893 | 22,556 | 85,938 | 49,562 | 188,831 | ||||||||||||||||||
SEACOR Holdings, Inc.* | 42,950 | 2,504,414 | 42,950 | 2,504,414 | ||||||||||||||||||||
Southern Union Co. | 221,600 | 3,372,752 | 221,600 | 3,372,752 | ||||||||||||||||||||
Swift Energy Co.* | 83,600 | 610,280 | 71,200 | 519,760 | 154,800 | 1,130,040 | ||||||||||||||||||
Tesoro Corp. | 7,615 | 102,574 | 7,615 | 102,574 | ||||||||||||||||||||
Tidewater, Inc. | 130,158 | 4,832,767 | 130,158 | 4,832,767 | ||||||||||||||||||||
793,988 | 12,914,210 | 13,708,198 | ||||||||||||||||||||||
Food & Staples Retailing 1.3% | ||||||||||||||||||||||||
Nash Finch Co. | 49,112 | 1,379,556 | 33,263 | 934,357 | 82,375 | 2,313,913 | ||||||||||||||||||
Susser Holdings Corp.* | 16,268 | 218,642 | 4,670 | 62,765 | 20,938 | 281,407 | ||||||||||||||||||
The Andersons, Inc. | 7,036 | 99,489 | 7,036 | 99,489 | ||||||||||||||||||||
The Pantry, Inc.* | 22,970 | 404,502 | 52,600 | 926,286 | 75,570 | 1,330,788 | ||||||||||||||||||
Weis Markets, Inc. | 23,619 | 733,134 | 15,545 | 482,517 | 39,164 | 1,215,651 | ||||||||||||||||||
Winn-Dixie Stores, Inc.* | 162,429 | 1,552,821 | 109,080 | 1,042,805 | 271,509 | 2,595,626 | ||||||||||||||||||
4,288,655 | 3,548,219 | 7,836,874 | ||||||||||||||||||||||
Food, Beverage & Tobacco 4.1% | ||||||||||||||||||||||||
B&G Foods, Inc., Class A | 12,260 | 63,752 | 10,490 | 54,548 | 22,750 | 118,300 | ||||||||||||||||||
Cal-Maine Foods, Inc. | 64,375 | 1,441,356 | 36,900 | 826,191 | 101,275 | 2,267,547 | ||||||||||||||||||
Constellation Brands, Inc., Class A* | 527,776 | 6,280,534 | 527,776 | 6,280,534 | ||||||||||||||||||||
Corn Products International, Inc. | 165,177 | 3,501,752 | 165,177 | 3,501,752 | ||||||||||||||||||||
Dean Foods Co.* | 107,991 | 1,952,477 | 107,991 | 1,952,477 | ||||||||||||||||||||
Flowers Foods, Inc. | 202,331 | 4,750,732 | 157,768 | 3,704,393 | 360,099 | 8,455,125 | ||||||||||||||||||
HQ Sustainable Maritime Industries, Inc.* | 12,993 | 99,396 | 10,880 | 83,232 | 23,873 | 182,628 | ||||||||||||||||||
J & J Snack Foods Corp. | 6,059 | 209,581 | 6,059 | 209,581 | ||||||||||||||||||||
John B. Sanfilippo & Son, Inc.* | 25,070 | 133,874 | 25,070 | 133,874 | ||||||||||||||||||||
Lance, Inc. | 17,345 | 361,123 | 17,345 | 361,123 | ||||||||||||||||||||
Omega Protein Corp.* | 59,008 | 155,781 | 41,440 | 109,402 | 100,448 | 265,183 | ||||||||||||||||||
Overhill Farms, Inc.* | 43,090 | 164,604 | 31,380 | 119,872 | 74,470 | 284,476 | ||||||||||||||||||
Seneca Foods Corp., Class B* | 6,692 | 144,447 | 6,692 | 144,447 | ||||||||||||||||||||
Tasty Baking Co. | 33,007 | 139,290 | 22,514 | 95,009 | 55,521 | 234,299 | ||||||||||||||||||
The Boston Beer Co., Inc., Class A* | 21,692 | 452,495 | 10,721 | 223,640 | 32,413 | 676,135 | ||||||||||||||||||
Tyson Foods, Inc., Class A | 18,483 | 173,555 | 18,483 | 173,555 | ||||||||||||||||||||
7,906,850 | 17,334,186 | 25,241,036 | ||||||||||||||||||||||
Health Care Equipment & Services 7.9% | ||||||||||||||||||||||||
Allied Healthcare Products, Inc.* | 29,000 | 96,280 | 11,835 | 39,292 | 40,835 | 135,572 | ||||||||||||||||||
Amedisys, Inc.* | 41,189 | 1,132,286 | 17,762 | 488,278 | 58,951 | 1,620,564 | ||||||||||||||||||
American Dental Partners, Inc.* | 8,230 | 54,483 | 11,878 | 78,632 | 20,108 | 133,115 | ||||||||||||||||||
American Medical Systems Holdings, Inc.* | 40,760 | 454,474 | 6,453 | 71,951 | 47,213 | 526,425 |
8
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
AMERIGROUP Corp.* | 52,468 | 1,444,969 | 48,995 | 1,349,322 | 101,463 | 2,794,291 | ||||||||||||||||||
Anika Therapeutics, Inc.* | 18,357 | 83,891 | 10,781 | 49,269 | 29,138 | 133,160 | ||||||||||||||||||
Atrion Corp. | 579 | 51,091 | 579 | 51,091 | ||||||||||||||||||||
Capital Senior Living Corp.* | 10,257 | 25,027 | 10,257 | 25,027 | ||||||||||||||||||||
Cardiac Science Corp.* | 109,630 | 329,986 | 59,815 | 180,043 | 169,445 | 510,029 | ||||||||||||||||||
CONMED Corp.* | 43,890 | 632,455 | 73,087 | 1,053,184 | 116,977 | 1,685,639 | ||||||||||||||||||
Coventry Health Care, Inc.* | 157,770 | 2,041,544 | 157,770 | 2,041,544 | ||||||||||||||||||||
Daxor Corp. | 1,250 | 19,250 | 608 | 9,363 | 1,858 | 28,613 | ||||||||||||||||||
Dynacq Healthcare, Inc.* | 19,644 | 68,558 | 2,270 | 7,922 | 21,914 | 76,480 | ||||||||||||||||||
ev3, Inc.* | 10,879 | 77,241 | 60,425 | 429,018 | 71,304 | 506,259 | ||||||||||||||||||
Gen-Probe, Inc.* | 4,660 | 212,403 | 4,660 | 212,403 | ||||||||||||||||||||
Healthways, Inc.* | 36,512 | 320,210 | 72,780 | 638,281 | 109,292 | 958,491 | ||||||||||||||||||
Hologic, Inc.* | 237,954 | 3,114,818 | 237,954 | 3,114,818 | ||||||||||||||||||||
Integra LifeSciences Holdings* | 25,000 | 618,250 | 25,000 | 618,250 | ||||||||||||||||||||
Invacare Corp. | 123,662 | 1,982,302 | 73,331 | 1,175,496 | 196,993 | 3,157,798 | ||||||||||||||||||
Inverness Medical Innovations, Inc.* | 196,125 | 5,222,809 | 196,125 | 5,222,809 | ||||||||||||||||||||
Kewaunee Scientific Corp. | 13,581 | 125,624 | 5,900 | 54,575 | 19,481 | 180,199 | ||||||||||||||||||
Kindred Healthcare, Inc.* | 55,803 | 834,255 | 81,167 | 1,213,447 | 136,970 | 2,047,702 | ||||||||||||||||||
Kinetic Concepts, Inc.* | 66,593 | 1,406,444 | 66,593 | 1,406,444 | ||||||||||||||||||||
Lincare Holdings, Inc.* | 7,370 | 160,666 | 7,370 | 160,666 | ||||||||||||||||||||
MedCath Corp.* | 53,200 | 386,764 | 33,516 | 243,661 | 86,716 | 630,425 | ||||||||||||||||||
Molina Healthcare, Inc.* | 5,130 | 97,573 | 12,600 | 239,652 | 17,730 | 337,225 | ||||||||||||||||||
Omnicare, Inc. | 69,730 | 1,707,688 | 69,730 | 1,707,688 | ||||||||||||||||||||
Orthofix International N.V.* | 69,572 | 1,288,473 | 46,310 | 857,661 | 115,882 | 2,146,134 | ||||||||||||||||||
SonoSite, Inc.* | 69,400 | 1,240,872 | 16,397 | 293,179 | 85,797 | 1,534,051 | ||||||||||||||||||
Span-America Medical Systems, Inc. | 11,100 | 96,514 | 7,600 | 66,082 | 18,700 | 162,596 | ||||||||||||||||||
SurModics, Inc.* | 48,762 | 889,906 | 27,853 | 508,317 | 76,615 | 1,398,223 | ||||||||||||||||||
Symmetry Medical, Inc.* | 135,990 | 858,097 | 135,990 | 858,097 | ||||||||||||||||||||
Teleflex, Inc. | 128,880 | 5,037,919 | 128,880 | 5,037,919 | ||||||||||||||||||||
The Cooper Cos., Inc. | 100,314 | 2,652,302 | 100,314 | 2,652,302 | ||||||||||||||||||||
Universal American Financial Corp.* | 131,716 | 1,115,634 | 108,460 | 918,656 | 240,176 | 2,034,290 | ||||||||||||||||||
Wright Medical Group, Inc.* | 11,173 | 145,584 | 46,975 | 612,084 | 58,148 | 757,668 | ||||||||||||||||||
Zoll Medical Corp.* | 100,088 | 1,437,264 | 60,998 | 875,931 | 161,086 | 2,313,195 | ||||||||||||||||||
15,882,286 | 33,034,916 | 48,917,202 | ||||||||||||||||||||||
Household & Personal Products 2.2% | ||||||||||||||||||||||||
American Oriental Bioengineering, Inc.* | 200,491 | 773,895 | 142,328 | 549,386 | 342,819 | 1,323,281 | ||||||||||||||||||
China Sky One Medical, Inc.* | 5,090 | 58,535 | 2,698 | 31,027 | 7,788 | 89,562 | ||||||||||||||||||
Church & Dwight Co., Inc. | 129,500 | 6,763,785 | 129,500 | 6,763,785 | ||||||||||||||||||||
Elizabeth Arden, Inc.* | 98,409 | 573,725 | 66,407 | 387,153 | 164,816 | 960,878 | ||||||||||||||||||
Inter Parfums, Inc. | 60,008 | 349,847 | 33,740 | 196,704 | 93,748 | 546,551 | ||||||||||||||||||
Medifast, Inc.* | 32,285 | 133,983 | 15,330 | 63,620 | 47,615 | 197,603 | ||||||||||||||||||
Natural Alternative International, Inc.* | 34,822 | 215,548 | 16,941 | 104,865 | 51,763 | 320,413 | ||||||||||||||||||
NBTY, Inc.* | 49,500 | 696,960 | 49,500 | 696,960 | ||||||||||||||||||||
Nu Skin Enterprises, Inc., Class A | 74,860 | 785,281 | 21,733 | 227,979 | 96,593 | 1,013,260 | ||||||||||||||||||
Nutraceutical International Corp.* | 24,743 | 165,778 | 15,190 | 101,773 | 39,933 | 267,551 | ||||||||||||||||||
Oil-Dri Corp. of America | 1,383 | 20,399 | 1,383 | 20,399 | ||||||||||||||||||||
Prestige Brands Holdings, Inc.* | 108,613 | 562,615 | 75,323 | 390,173 | 183,936 | 952,788 | ||||||||||||||||||
Revlon, Inc., Class A* | 46,849 | 116,186 | 79,162 | 196,322 | 126,011 | 312,508 | ||||||||||||||||||
Schiff Nutrition International, Inc.* | 57,190 | 257,355 | 20,320 | 91,440 | 77,510 | 348,795 | ||||||||||||||||||
4,689,708 | 9,124,626 | 13,814,334 |
9
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Insurance 3.9% | ||||||||||||||||||||||||
Allied World Assurance Co. Holdings Ltd. | 63,460 | 2,413,384 | 63,460 | 2,413,384 | ||||||||||||||||||||
American Financial Group, Inc. | 216,693 | 3,477,923 | 216,693 | 3,477,923 | ||||||||||||||||||||
American Physicians Service Group, Inc. | 24,102 | 462,035 | 13,885 | 266,175 | 37,987 | 728,210 | ||||||||||||||||||
American Safety Insurance Holdings Ltd.* | 19,716 | 226,931 | 19,716 | 226,931 | ||||||||||||||||||||
Argo Group International Holdings Ltd.* | 101,194 | 3,048,975 | 62,423 | 1,880,805 | 163,617 | 4,929,780 | ||||||||||||||||||
Aspen Insurance Holdings Ltd. | 217,775 | 4,891,227 | 163,170 | 3,664,798 | 380,945 | 8,556,025 | ||||||||||||||||||
Endurance Specialty Holdings Ltd. | 31,500 | 785,610 | 31,500 | 785,610 | ||||||||||||||||||||
Mercer Insurance Group, Inc. | 2,560 | 36,583 | 2,560 | 36,583 | ||||||||||||||||||||
National Western Life Insurance Co., Class A | 12,442 | 1,405,946 | 200 | 22,600 | 12,642 | 1,428,546 | ||||||||||||||||||
PMA Capital Corp., Class A* | 51,148 | 213,287 | 8,789 | 36,650 | 59,937 | 249,937 | ||||||||||||||||||
Presidential Life Corp. | 40,346 | 314,295 | 40,346 | 314,295 | ||||||||||||||||||||
RenaissanceRe Holdings Ltd. | 1,568 | 77,522 | 1,568 | 77,522 | ||||||||||||||||||||
Seabright Insurance Holdings* | 17,588 | 183,971 | 17,588 | 183,971 | ||||||||||||||||||||
Unico American Corp.* | 29,995 | 233,061 | 11,830 | 91,919 | 41,825 | 324,980 | ||||||||||||||||||
Universal Insurance Holdings, Inc. | 78,584 | 295,476 | 48,416 | 182,044 | 127,000 | 477,520 | ||||||||||||||||||
Wesco Financial Corp. | 338 | 93,288 | 338 | 93,288 | ||||||||||||||||||||
11,311,787 | 12,992,718 | 24,304,505 | ||||||||||||||||||||||
Materials 2.5% | ||||||||||||||||||||||||
A. Schulman, Inc. | 97,722 | 1,324,133 | 4,661 | 63,157 | 102,383 | 1,387,290 | ||||||||||||||||||
Arch Chemicals, Inc. | 2,377 | 45,068 | 2,377 | 45,068 | ||||||||||||||||||||
Continental Materials Corp.* | 5,249 | 73,486 | 5,249 | 73,486 | ||||||||||||||||||||
Friedman Industries, Inc. | 23,084 | 114,266 | 15,410 | 76,279 | 38,494 | 190,545 | ||||||||||||||||||
Glatfelter | 23,400 | 146,016 | 23,400 | 146,016 | ||||||||||||||||||||
Innospec, Inc. | 60,986 | 229,917 | 25,177 | 94,917 | 86,163 | 324,834 | ||||||||||||||||||
International Flavors & Fragrances, Inc. | 14,010 | 426,745 | 14,010 | 426,745 | ||||||||||||||||||||
NewMarket Corp. | 2,700 | 119,610 | 16,110 | 713,673 | 18,810 | 833,283 | ||||||||||||||||||
Olin Corp. | 3,530 | 50,373 | 90,162 | 1,286,612 | 93,692 | 1,336,985 | ||||||||||||||||||
Rock-Tenn Co., Class A | 25,779 | 697,322 | 75,606 | 2,045,142 | 101,385 | 2,742,464 | ||||||||||||||||||
RPM International, Inc. | 225,390 | 2,869,215 | 225,390 | 2,869,215 | ||||||||||||||||||||
Schweitzer-Mauduit International, Inc. | 61,920 | 1,143,043 | 35,298 | 651,601 | 97,218 | 1,794,644 | ||||||||||||||||||
The Scotts Miracle-Gro Co., Class A | 4 | 139 | 95,458 | 3,312,393 | 95,462 | 3,312,532 | ||||||||||||||||||
Wausau Paper Corp. | 25,666 | 135,003 | 25,666 | 135,003 | ||||||||||||||||||||
3,797,357 | 11,820,753 | 15,618,110 | ||||||||||||||||||||||
Media 0.2% | ||||||||||||||||||||||||
Live Nation, Inc.* | 204,669 | 546,466 | 154,936 | 413,679 | 359,605 | 960,145 | ||||||||||||||||||
Mediacom Communications Corp., Class A* | 13,551 | 54,611 | 13,551 | 54,611 | ||||||||||||||||||||
546,466 | 468,290 | 1,014,756 | ||||||||||||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences 9.7% | ||||||||||||||||||||||||
Albany Molecular Research, Inc.* | 31,600 | 297,988 | 9,565 | 90,198 | 41,165 | 388,186 | ||||||||||||||||||
Alexion Pharmaceuticals, Inc.* | 88,648 | 3,338,484 | 88,648 | 3,338,484 |
10
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Alkermes, Inc.* | 316,529 | 3,839,497 | 211,450 | 2,564,889 | 527,979 | 6,404,386 | ||||||||||||||||||
Bio-Rad Laboratories, Inc., Class A* | 2,476 | 163,168 | 2,476 | 163,168 | ||||||||||||||||||||
Cambrex Corp.* | 1,374 | 3,133 | 1,374 | 3,133 | ||||||||||||||||||||
Caraco Pharmaceutical Laboratories Ltd.* | 28,950 | 101,904 | 24,580 | 86,522 | 53,530 | 188,426 | ||||||||||||||||||
Celera Corp.* | 230,190 | 1,756,350 | 25,030 | 190,979 | 255,220 | 1,947,329 | ||||||||||||||||||
Cypress Bioscience, Inc.* | 8,140 | 57,875 | 8,140 | 57,875 | ||||||||||||||||||||
Endo Pharmaceutical Holdings, Inc.* | 268,230 | 4,742,306 | 268,230 | 4,742,306 | ||||||||||||||||||||
Harvard Bioscience, Inc.* | 72,019 | 214,617 | 60,908 | 181,506 | 132,927 | 396,123 | ||||||||||||||||||
Kendle International, Inc.* | 2,940 | 61,622 | 2,940 | 61,622 | ||||||||||||||||||||
King Pharmaceuticals, Inc.* | 546,100 | 3,860,927 | 546,100 | 3,860,927 | ||||||||||||||||||||
Life Technologies Corp.* | 228,715 | 7,428,663 | 228,715 | 7,428,663 | ||||||||||||||||||||
Martek Biosciences Corp.* | 119,508 | 2,181,021 | 76,075 | 1,388,369 | 195,583 | 3,569,390 | ||||||||||||||||||
Medicis Pharmaceutical Corp., Class A | 187,998 | 2,325,535 | 8,060 | 99,702 | 196,058 | 2,425,237 | ||||||||||||||||||
Mylan, Inc.* | 249,154 | 3,341,155 | 249,154 | 3,341,155 | ||||||||||||||||||||
Nabi Biopharmaceuticals* | 26,774 | 99,064 | 26,774 | 99,064 | ||||||||||||||||||||
Neurocrine Biosciences, Inc.* | 97,727 | 346,931 | 89,746 | 318,598 | 187,473 | 665,529 | ||||||||||||||||||
Noven Pharmaceuticals, Inc.* | 7,040 | 66,739 | 21,430 | 203,156 | 28,470 | 269,895 | ||||||||||||||||||
OSI Pharmaceuticals, Inc.* | 66,600 | 2,548,116 | 11,948 | 457,131 | 78,548 | 3,005,247 | ||||||||||||||||||
Pain Therapeutics, Inc.* | 119,100 | 500,220 | 40,167 | 168,701 | 159,267 | 668,921 | ||||||||||||||||||
Par Pharmaceutical Cos., Inc.* | 105,390 | 998,043 | 54,540 | 516,494 | 159,930 | 1,514,537 | ||||||||||||||||||
PAREXEL International Corp.* | 33,120 | 322,258 | 114,526 | 1,114,338 | 147,646 | 1,436,596 | ||||||||||||||||||
PDL BioPharma, Inc. | 242,916 | 1,719,845 | 156,034 | 1,104,721 | 398,950 | 2,824,566 | ||||||||||||||||||
PerkinElmer, Inc. | 288,214 | 3,680,493 | 288,214 | 3,680,493 | ||||||||||||||||||||
Repligen Corp.* | 102,955 | 493,154 | 68,591 | 328,551 | 171,546 | 821,705 | ||||||||||||||||||
Salix Pharmaceuticals Ltd.* | 14,870 | 141,265 | 14,870 | 141,265 | ||||||||||||||||||||
Varian, Inc.* | 40,149 | 953,137 | 35,430 | 841,108 | 75,579 | 1,794,245 | ||||||||||||||||||
Warner Chilcott Ltd., Class A* | 180,043 | 1,894,052 | 180,043 | 1,894,052 | ||||||||||||||||||||
Watson Pharmaceuticals, Inc.* | 98,274 | 3,057,304 | 98,274 | 3,057,304 | ||||||||||||||||||||
18,966,692 | 41,223,137 | 60,189,829 | ||||||||||||||||||||||
Real Estate 1.6% | ||||||||||||||||||||||||
CBL & Associates Properties, Inc. | 35,873 | 84,660 | 35,873 | 84,660 | ||||||||||||||||||||
Cedar Shopping Centers, Inc. | 98,988 | 172,239 | 63,966 | 111,301 | 162,954 | 283,540 | ||||||||||||||||||
DiamondRock Hospitality Co. | 8,110 | 32,521 | 8,110 | 32,521 | ||||||||||||||||||||
Entertainment Properties Trust | 49,042 | 772,902 | 60,500 | 953,480 | 109,542 | 1,726,382 | ||||||||||||||||||
First Potomac Realty Trust | 15,489 | 113,844 | 28,440 | 209,034 | 43,929 | 322,878 | ||||||||||||||||||
Hospitality Properties Trust | 164,140 | 1,969,680 | 164,140 | 1,969,680 | ||||||||||||||||||||
HRPT Properties Trust | 649,943 | 2,073,318 | 489,174 | 1,560,465 | 1,139,117 | 3,633,783 | ||||||||||||||||||
Medical Properties Trust, Inc. | 52,592 | 191,961 | 21,200 | 77,380 | 73,792 | 269,341 | ||||||||||||||||||
Mission West Properties, Inc. | 60,831 | 389,319 | 47,049 | 301,113 | 107,880 | 690,432 | ||||||||||||||||||
One Liberty Properties, Inc. | 28,848 | 101,545 | 26,650 | 93,808 | 55,498 | 195,353 | ||||||||||||||||||
Ramco-Gershenson Properties Trust | 54,300 | 350,235 | 36,600 | 236,070 | 90,900 | 586,305 | ||||||||||||||||||
Transcontinental Realty Investors, Inc.* | 1,273 | 14,016 | 1,273 | 14,016 | ||||||||||||||||||||
4,250,023 | 5,558,868 | 9,808,891 | ||||||||||||||||||||||
Retailing 10.0% | ||||||||||||||||||||||||
99 Cents Only Stores* | 55,930 | 516,793 | 55,930 | 516,793 | ||||||||||||||||||||
Aeropostale, Inc.* | 153,650 | 4,080,944 | 145,100 | 3,853,856 | 298,750 | 7,934,800 |
11
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
AMCON Distributing Co. | 2,400 | 61,212 | 2,400 | 61,212 | ||||||||||||||||||||
AutoNation, Inc.* | 258,800 | 3,592,144 | 258,800 | 3,592,144 | ||||||||||||||||||||
Barnes & Noble, Inc. | 96,630 | 2,065,949 | 80,080 | 1,712,110 | 176,710 | 3,778,059 | ||||||||||||||||||
Big Lots, Inc.* | 208,846 | 4,339,820 | 208,846 | 4,339,820 | ||||||||||||||||||||
Books-A-Million, Inc. | 86 | 396 | 22,713 | 104,480 | 22,799 | 104,876 | ||||||||||||||||||
Collective Brands, Inc.* | 15,478 | 150,756 | 15,478 | 150,756 | ||||||||||||||||||||
Conn’s, Inc.* | 32,200 | 452,088 | 32,200 | 452,088 | ||||||||||||||||||||
Dollar Tree, Inc.* | 183,145 | 8,159,110 | 183,145 | 8,159,110 | ||||||||||||||||||||
Expedia, Inc.* | 253,105 | 2,298,193 | 253,105 | 2,298,193 | ||||||||||||||||||||
Family Dollar Stores, Inc. | 15,642 | 521,973 | 15,642 | 521,973 | ||||||||||||||||||||
Fred’s, Inc., Class A | 82,370 | 929,134 | 82,370 | 929,134 | ||||||||||||||||||||
Genesco, Inc.* | 4,800 | 90,384 | 4,800 | 90,384 | ||||||||||||||||||||
Haverty Furniture Cos., Inc. | 16,299 | 171,628 | 44,031 | 463,646 | 60,330 | 635,274 | ||||||||||||||||||
Jo-Ann Stores, Inc.* | 96,779 | 1,581,369 | 65,809 | 1,075,319 | 162,588 | 2,656,688 | ||||||||||||||||||
Jos. A. Bank Clothiers, Inc.* | 57,982 | 1,612,479 | 43,572 | 1,211,737 | 101,554 | 2,824,216 | ||||||||||||||||||
Kirkland’s, Inc.* | 55,200 | 269,376 | 55,200 | 269,376 | ||||||||||||||||||||
Monro Muffler Brake, Inc. | 23,423 | 640,151 | 2,781 | 76,005 | 26,204 | 716,156 | ||||||||||||||||||
Netflix, Inc.* | 115,000 | 4,935,800 | 95,068 | 4,080,319 | 210,068 | 9,016,119 | ||||||||||||||||||
RadioShack Corp. | 317,000 | 2,716,690 | 317,000 | 2,716,690 | ||||||||||||||||||||
Rent-A-Center, Inc.* | 25,276 | 489,596 | 25,276 | 489,596 | ||||||||||||||||||||
REX Stores Corp.* | 43,669 | 468,132 | 24,448 | 262,083 | 68,117 | 730,215 | ||||||||||||||||||
Stage Stores, Inc. | 12,613 | 127,139 | 16,278 | 164,082 | 28,891 | 291,221 | ||||||||||||||||||
Systemax, Inc.* | 43,916 | 567,395 | 25,435 | 328,620 | 69,351 | 896,015 | ||||||||||||||||||
The Children’s Place Retail Stores, Inc.* | 96,900 | 2,121,141 | 65,530 | 1,434,452 | 162,430 | 3,555,593 | ||||||||||||||||||
The Dress Barn, Inc.* | 21,970 | 270,011 | 21,970 | 270,011 | ||||||||||||||||||||
The Finish Line, Inc., Class A | 22,910 | 151,664 | 44,142 | 292,220 | 67,052 | 443,884 | ||||||||||||||||||
The Pep Boys — Manny, Moe & Jack | 160,796 | 709,110 | 115,870 | 510,987 | 276,666 | 1,220,097 | ||||||||||||||||||
Tractor Supply Co.* | 45,600 | 1,644,336 | 8,945 | 322,557 | 54,545 | 1,966,893 | ||||||||||||||||||
West Marine, Inc.* | 25,020 | 133,857 | 25,020 | 133,857 | ||||||||||||||||||||
26,761,567 | 34,999,676 | 61,761,243 | ||||||||||||||||||||||
Semiconductors & Semiconductor Equipment 3.4% | ||||||||||||||||||||||||
Actel Corp.* | 107,282 | 1,085,694 | 67,495 | 683,050 | 174,777 | 1,768,744 | ||||||||||||||||||
CEVA, Inc.* | 72,811 | 530,064 | 33,440 | 243,443 | 106,251 | 773,507 | ||||||||||||||||||
Cirrus Logic, Inc.* | 159,564 | 599,961 | 177,932 | 669,024 | 337,496 | 1,268,985 | ||||||||||||||||||
FEI Co.* | 131,912 | 2,035,402 | 90,663 | 1,398,930 | 222,575 | 3,434,332 | ||||||||||||||||||
Integrated Device Technology, Inc.* | 10,600 | 48,230 | 517,000 | 2,352,350 | 527,600 | 2,400,580 | ||||||||||||||||||
IXYS Corp. | 3,440 | 27,726 | 2,814 | 22,681 | 6,254 | 50,407 | ||||||||||||||||||
LSI Corp.* | 14,156 | 43,034 | 14,156 | 43,034 | ||||||||||||||||||||
Skyworks Solutions, Inc.* | 645,887 | 5,205,849 | 454,433 | 3,662,730 | 1,100,320 | 8,868,579 | ||||||||||||||||||
Standard Microsystems Corp.* | 70,529 | 1,311,840 | 47,441 | 882,403 | 117,970 | 2,194,243 | ||||||||||||||||||
TriQuint Semiconductor, Inc.* | 32,715 | 80,806 | 166,634 | 411,586 | 199,349 | 492,392 | ||||||||||||||||||
10,925,572 | 10,369,231 | 21,294,803 | ||||||||||||||||||||||
Software & Services 19.0% | ||||||||||||||||||||||||
AsiaInfo Holdings, Inc.* | 3,138 | 52,875 | 3,138 | 52,875 | ||||||||||||||||||||
CACI International, Inc., Class A* | 22,602 | 824,747 | 22,602 | 824,747 | ||||||||||||||||||||
CIBER, Inc.* | 272,306 | 743,395 | 163,269 | 445,724 | 435,575 | 1,189,119 | ||||||||||||||||||
Computer Task Group, Inc.* | 68,846 | 237,519 | 29,411 | 101,468 | 98,257 | 338,987 | ||||||||||||||||||
Compuware Corp.* | 348,942 | 2,299,528 | 348,942 | 2,299,528 |
12
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Convergys Corp.* | 326,157 | 2,635,349 | 326,157 | 2,635,349 | ||||||||||||||||||||
CSG Systems International, Inc.* | 99,977 | 1,427,672 | 78,900 | 1,126,692 | 178,877 | 2,554,364 | ||||||||||||||||||
CSP, Inc.* | 19,112 | 54,469 | 19,112 | 54,469 | ||||||||||||||||||||
Dynamics Research Corp.* | 18,374 | 133,028 | 18,374 | 133,028 | ||||||||||||||||||||
EarthLink, Inc.* | 484,492 | 3,183,113 | 302,752 | 1,989,081 | 787,244 | 5,172,194 | ||||||||||||||||||
Edgewater Technology, Inc.* | 24,668 | 69,070 | 23,273 | 65,164 | 47,941 | 134,234 | ||||||||||||||||||
Fair Isaac Corp. | 18,590 | 261,561 | 38,075 | 535,715 | 56,665 | 797,276 | ||||||||||||||||||
GSI Commerce, Inc.* | 91,100 | 1,193,410 | 54,600 | 715,260 | 145,700 | 1,908,670 | ||||||||||||||||||
Hewitt Associates, Inc., Class A* | 224,574 | 6,683,322 | 224,574 | 6,683,322 | ||||||||||||||||||||
IAC/InterActiveCorp.* | 178,379 | 2,716,712 | 186,487 | 2,840,197 | 364,866 | 5,556,909 | ||||||||||||||||||
INX, Inc.* | 13,001 | 31,202 | 13,001 | 31,202 | ||||||||||||||||||||
JDA Software Group, Inc.* | 136,075 | 1,571,666 | 75,752 | 874,936 | 211,827 | 2,446,602 | ||||||||||||||||||
Keynote Systems, Inc.* | 29,014 | 230,081 | 29,014 | 230,081 | ||||||||||||||||||||
Lawson Software, Inc.* | 543,563 | 2,310,143 | 378,901 | 1,610,329 | 922,464 | 3,920,472 | ||||||||||||||||||
Manhattan Associates, Inc.* | 810 | 14,029 | 810 | 14,029 | ||||||||||||||||||||
MAXIMUS, Inc. | 79,096 | 3,152,767 | 54,634 | 2,177,711 | 133,730 | 5,330,478 | ||||||||||||||||||
Mentor Graphics Corp.* | 400,600 | 1,778,664 | 195,063 | 866,080 | 595,663 | 2,644,744 | ||||||||||||||||||
Metavante Technologies, Inc.* | 7,910 | 157,884 | 7,910 | 157,884 | ||||||||||||||||||||
Ness Technologies, Inc.* | 160,026 | 472,077 | 98,791 | 291,433 | 258,817 | 763,510 | ||||||||||||||||||
NetScout Systems, Inc.* | 82,784 | 592,733 | 70,816 | 507,043 | 153,600 | 1,099,776 | ||||||||||||||||||
Novell, Inc.* | 953,564 | 4,062,183 | 953,564 | 4,062,183 | ||||||||||||||||||||
OPNET Technologies, Inc.* | 976 | 8,462 | 976 | 8,462 | ||||||||||||||||||||
Parametric Technology Corp.* | 194,759 | 1,943,695 | 246,000 | 2,455,080 | 440,759 | 4,398,775 | ||||||||||||||||||
Perot Systems Corp., Class A* | 424,966 | 5,473,562 | 227,578 | 2,931,205 | 652,544 | 8,404,767 | ||||||||||||||||||
Pervasive Software, Inc.* | 19,310 | 75,309 | 19,310 | 75,309 | ||||||||||||||||||||
Progress Software Corp.* | 12,582 | 218,423 | 12,582 | 218,423 | ||||||||||||||||||||
QAD, Inc. | 48,331 | 122,277 | 39,060 | 98,822 | 87,391 | 221,099 | ||||||||||||||||||
Quest Software, Inc.* | 88,004 | 1,115,891 | 131,900 | 1,672,492 | 219,904 | 2,788,383 | ||||||||||||||||||
Radiant Systems, Inc.* | 58,793 | 259,277 | 58,793 | 259,277 | ||||||||||||||||||||
S1 Corp.* | 102,521 | 527,983 | 102,521 | 527,983 | ||||||||||||||||||||
Sohu.com, Inc.* | 60,340 | 2,492,645 | 60,340 | 2,492,645 | ||||||||||||||||||||
Solera Holdings, Inc.* | 208,550 | 5,167,869 | 157,857 | 3,911,696 | 366,407 | 9,079,565 | ||||||||||||||||||
SonicWALL, Inc.* | 33,768 | 150,605 | 46,860 | 208,996 | 80,628 | 359,601 | ||||||||||||||||||
SPSS, Inc.* | 111,700 | 3,175,631 | 51,700 | 1,469,831 | 163,400 | 4,645,462 | ||||||||||||||||||
Sybase, Inc.* | 107,204 | 3,247,209 | 256,161 | 7,759,117 | 363,365 | 11,006,326 | ||||||||||||||||||
Synopsys, Inc.* | 353,755 | 7,333,341 | 353,755 | 7,333,341 | ||||||||||||||||||||
TechTeam Global, Inc.* | 53,045 | 258,860 | 26,600 | 129,808 | 79,645 | 388,668 | ||||||||||||||||||
TIBCO Software, Inc.* | 8,870 | 52,067 | 163,479 | 959,622 | 172,349 | 1,011,689 | ||||||||||||||||||
United Online, Inc.* | 468,752 | 2,090,634 | 183,353 | 817,754 | 652,105 | 2,908,388 | ||||||||||||||||||
Web.com Group, Inc.* | 58,391 | 193,858 | 58,391 | 193,858 | ||||||||||||||||||||
Websense, Inc.* | 193,200 | 2,318,400 | 124,851 | 1,498,212 | 318,051 | 3,816,612 | ||||||||||||||||||
Wind River Systems, Inc.* | 290,633 | 1,860,051 | 213,034 | 1,363,418 | 503,667 | 3,223,469 | ||||||||||||||||||
Wright Express Corp.* | 76,100 | 1,386,542 | 89,546 | 1,631,528 | 165,646 | 3,018,070 | ||||||||||||||||||
48,257,266 | 69,158,938 | 117,416,204 | ||||||||||||||||||||||
Technology Hardware & Equipment 3.2% | ||||||||||||||||||||||||
Arris Group, Inc.* | 26,020 | 191,767 | 72,110 | 531,451 | 98,130 | 723,218 | ||||||||||||||||||
Astro-Med, Inc. | 25,734 | 139,993 | 15,610 | 84,918 | 41,344 | 224,911 | ||||||||||||||||||
Avocent Corp.* | 1,830 | 22,216 | 17,617 | 213,870 | 19,447 | 236,086 | ||||||||||||||||||
Black Box Corp. | 95,300 | 2,250,033 | 47,851 | 1,129,762 | 143,151 | 3,379,795 | ||||||||||||||||||
Coherent, Inc.* | 109,851 | 1,894,930 | 59,892 | 1,033,137 | 169,743 | 2,928,067 |
13
Table of Contents
Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Concurrent Computer Corp.* | 1,130 | 4,091 | 1,130 | 4,091 | ||||||||||||||||||||
CPI International, Inc.* | 17,524 | 164,726 | 22,200 | 208,680 | 39,724 | 373,406 | ||||||||||||||||||
CTS Corp. | 10,441 | 37,692 | 36,364 | 131,274 | 46,805 | 168,966 | ||||||||||||||||||
Electro Rent Corp. | 10,097 | 97,335 | 10,097 | 97,335 | ||||||||||||||||||||
Electronics for Imaging, Inc. | 9,426 | 92,375 | 9,426 | 92,375 | ||||||||||||||||||||
EMS Technologies, Inc.* | 1,120 | 19,555 | 1,120 | 19,555 | ||||||||||||||||||||
Emulex Corp.* | 391,190 | 1,967,686 | 268,530 | 1,350,706 | 659,720 | 3,318,392 | ||||||||||||||||||
Gerber Scientific, Inc.* | 20,276 | 48,460 | 20,276 | 48,460 | ||||||||||||||||||||
Image Sensing Systems, Inc.* | 2,860 | 25,454 | 1,720 | 15,308 | 4,580 | 40,762 | ||||||||||||||||||
Insight Enterprises, Inc.* | 246,729 | 754,991 | 124,171 | 379,963 | 370,900 | 1,134,954 | ||||||||||||||||||
IntriCon Corp.* | 17,880 | 57,395 | 5,930 | 19,035 | 23,810 | 76,430 | ||||||||||||||||||
Measurement Specialties, Inc.* | 64,900 | 265,441 | 38,491 | 157,428 | 103,391 | �� | 422,869 | |||||||||||||||||
Mercury Computer Systems, Inc.* | 15,510 | 85,770 | 11,991 | 66,310 | 27,501 | 152,080 | ||||||||||||||||||
O.I. Corp. | 11,700 | 95,004 | 4,685 | 38,042 | 16,385 | 133,046 | ||||||||||||||||||
Oplink Communications, Inc.* | 3,589 | 27,635 | 10,045 | 77,347 | 13,634 | 104,982 | ||||||||||||||||||
OSI Systems, Inc.* | 68,578 | 1,046,500 | 41,620 | 635,121 | 110,198 | 1,681,621 | ||||||||||||||||||
PC Mall, Inc.* | 38,000 | 172,520 | 25,291 | 114,821 | 63,291 | 287,341 | ||||||||||||||||||
Perceptron, Inc.* | 26,405 | 93,738 | 16,078 | 57,077 | 42,483 | 150,815 | ||||||||||||||||||
Richardson Electronics Ltd. | 14,033 | 47,431 | 4,323 | 14,612 | 18,356 | 62,043 | ||||||||||||||||||
Schmitt Industries, Inc.* | 8,703 | 24,107 | 8,703 | 24,107 | ||||||||||||||||||||
Super Micro Computer, Inc.* | 4,751 | 23,375 | 404 | 1,988 | 5,155 | 25,363 | ||||||||||||||||||
SYNNEX Corp.* | 43,288 | 851,475 | 36,469 | 717,345 | 79,757 | 1,568,820 | ||||||||||||||||||
Tekelec* | 68,490 | 906,123 | 33,702 | 445,878 | 102,192 | 1,352,001 | ||||||||||||||||||
TESSCO Technologies, Inc.* | 12,892 | 100,042 | 11,080 | 85,981 | 23,972 | 186,023 | ||||||||||||||||||
Tollgrade Communications, Inc.* | 46,880 | 271,904 | 31,971 | 185,432 | 78,851 | 457,336 | ||||||||||||||||||
Vicon Industries, Inc.* | 24,940 | 132,681 | 9,292 | 49,433 | 34,232 | 182,114 | ||||||||||||||||||
Vishay Intertechnology, Inc.* | 67,607 | 235,272 | 67,607 | 235,272 | ||||||||||||||||||||
11,771,610 | 8,121,026 | 19,892,636 | ||||||||||||||||||||||
Telecommunication Services 1.7% | ||||||||||||||||||||||||
CenturyTel, Inc. | 246,468 | 6,930,680 | 246,468 | 6,930,680 | ||||||||||||||||||||
Consolidated Communications Holdings, Inc. | 12,735 | 130,661 | 12,735 | 130,661 | ||||||||||||||||||||
D&E Communications, Inc. | 39,000 | 209,430 | 39,000 | 209,430 | ||||||||||||||||||||
Invitel Holdings A/S* | 1,940 | 7,275 | 1,940 | 7,275 | ||||||||||||||||||||
NII Holdings, Inc.* | 51,614 | 774,210 | 51,614 | 774,210 | ||||||||||||||||||||
Premiere Global Services, Inc.* | 73,085 | 644,610 | 94,195 | 830,800 | 167,280 | 1,475,410 | ||||||||||||||||||
SureWest Communications | 28,799 | 224,632 | 24,932 | 194,470 | 53,731 | 419,102 | ||||||||||||||||||
USA Mobility, Inc. | 39,677 | 365,425 | 39,380 | 362,690 | 79,057 | 728,115 | ||||||||||||||||||
1,582,033 | 9,092,850 | 10,674,883 | ||||||||||||||||||||||
Transportation 1.0% | ||||||||||||||||||||||||
Air T., Inc. | 1,350 | 7,722 | 1,350 | 7,722 | ||||||||||||||||||||
International Shipholding Corp. | 14,642 | 288,008 | 8,179 | 160,881 | 22,821 | 448,889 | ||||||||||||||||||
Ryder System, Inc. | 49,285 | 1,395,258 | 49,285 | 1,395,258 | ||||||||||||||||||||
Saia, Inc.* | 5 | 60 | 14,773 | 176,537 | 14,778 | 176,597 | ||||||||||||||||||
SkyWest, Inc. | 53,694 | 667,953 | 97,331 | 1,210,798 | 151,025 | 1,878,751 | ||||||||||||||||||
TBS International Ltd., Class A* | 45,300 | 332,955 | 25,645 | 188,491 | 70,945 | 521,446 | ||||||||||||||||||
USA Truck, Inc.* | 3,210 | 41,505 | 3,210 | 41,505 | ||||||||||||||||||||
UTI Worldwide, Inc. | 18,050 | 215,698 | 119,020 | 1,422,289 | 137,070 | 1,637,987 | ||||||||||||||||||
1,553,901 | 4,554,254 | 6,108,155 |
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Pro Forma Combined | ||||||||||||||||||||||||
Small Cap Fund | Discovery Fund | Discovery Fund (Surviving Fund) | ||||||||||||||||||||||
Number | Market | Number of | Market | Number of | Market | |||||||||||||||||||
of Shares | Value ($) | Shares | Value ($) | Shares | Value ($) | |||||||||||||||||||
Utilities 6.7% | ||||||||||||||||||||||||
AGL Resources, Inc. | 13,190 | 349,931 | 13,190 | 349,931 | ||||||||||||||||||||
Alliant Energy Corp. | 273,302 | 6,747,826 | 273,302 | 6,747,826 | ||||||||||||||||||||
Artesian Resources Corp., Class A | 17,204 | 241,200 | 11,103 | 155,664 | 28,307 | 396,864 | ||||||||||||||||||
CMS Energy Corp. | 537,689 | 6,366,238 | 537,689 | 6,366,238 | ||||||||||||||||||||
Delta Natural Gas Co., Inc. | 7,246 | 155,137 | 7,105 | 152,118 | 14,351 | 307,255 | ||||||||||||||||||
El Paso Electric Co.* | 194,846 | 2,745,380 | 67,820 | 955,584 | 262,666 | 3,700,964 | ||||||||||||||||||
Energy West, Inc. | 5,329 | 43,591 | 5,329 | 43,591 | ||||||||||||||||||||
IDACORP, Inc. | 29,327 | 685,079 | 3,140 | 73,350 | 32,467 | 758,429 | ||||||||||||||||||
New Jersey Resources Corp. | 78,652 | 2,672,595 | 78,652 | 2,672,595 | ||||||||||||||||||||
Northeast Utilities | 68,858 | 1,486,644 | 68,858 | 1,486,644 | ||||||||||||||||||||
NorthWestern Corp. | 168,224 | 3,613,452 | 109,205 | 2,345,724 | 277,429 | 5,959,176 | ||||||||||||||||||
NV Energy, Inc. | 491,430 | 4,614,528 | 491,430 | 4,614,528 | ||||||||||||||||||||
OGE Energy Corp. | 20,627 | 491,335 | 20,627 | 491,335 | ||||||||||||||||||||
Pennichuck Corp. | 2,440 | 49,898 | 2,440 | 49,898 | ||||||||||||||||||||
Pepco Holdings, Inc. | 101,152 | 1,262,377 | 101,152 | 1,262,377 | ||||||||||||||||||||
PNM Resources, Inc. | 7,250 | 59,885 | 7,250 | 59,885 | ||||||||||||||||||||
Portland General Electric Co. | 22,221 | 390,867 | 10,529 | 185,205 | 32,750 | 576,072 | ||||||||||||||||||
RGC Resources, Inc. | 3,210 | 77,249 | 412 | 9,915 | 3,622 | 87,164 | ||||||||||||||||||
Southwest Gas Corp. | 18,150 | 382,420 | 1,890 | 39,822 | 20,040 | 422,242 | ||||||||||||||||||
UIL Holdings Corp. | 6,234 | 139,143 | 2,060 | 45,979 | 8,294 | 185,122 | ||||||||||||||||||
Unisource Energy Corp. | 110,323 | 3,110,005 | 49,190 | 1,386,666 | 159,513 | 4,496,671 | ||||||||||||||||||
WGL Holdings, Inc. | 12,753 | 418,298 | 12,753 | 418,298 | ||||||||||||||||||||
11,693,306 | 29,759,799 | 41,453,105 | ||||||||||||||||||||||
Total Common Stock (Cost $803,906,771) | ||||||||||||||||||||||||
Other Investment Company 2.0% | ||||||||||||||||||||||||
State Street Institutional Liquid | ||||||||||||||||||||||||
Reserves Fund-Institutional Class | 5,198,135 | 5,198,135 | 7,395,243 | 7,395,243 | 12,593,378 | 12,593,378 | ||||||||||||||||||
Total Other Investment Company (Cost $12,593,378) |
At 03/31/09, the tax basis cost of the fund’s investments was $818,005,088 and the unrealized appreciation and depreciation were $22,805,129 and ($219,093,316), respectively, with a net unrealized depreciation of ($196,288,187).
* Non-income producing security.
* Non-income producing security.
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Pro Forma Statement of Assets and Liabilities (Unaudited)
Small Cap Fund, Discovery Fund and Pro Forma Combined Discovery Fund (Surviving Fund)
March 31, 2009
Small Cap Fund, Discovery Fund and Pro Forma Combined Discovery Fund (Surviving Fund)
March 31, 2009
Pro Forma Combined | ||||||||||||||||
Small Cap | Pro Forma | Discovery Fund | ||||||||||||||
Fund | Discovery Fund | Adjustments | (Surviving Fund) | |||||||||||||
Assets | ||||||||||||||||
Investments, at value (cost $816,500,149) | $ | 243,603,379 | $ | 378,113,522 | $ | 621,716,901 | ||||||||||
Cash | 49,596 | 49,225 | 98,821 | |||||||||||||
Receivables: | ||||||||||||||||
Investments sold | 1,076,181 | 953,556 | 2,029,737 | |||||||||||||
Fund shares sold | 317,878 | 1,847,716 | 2,165,594 | |||||||||||||
Dividends | 319,451 | 373,006 | 692,457 | |||||||||||||
Interest | 1,068 | 1,577 | 2,645 | |||||||||||||
Prepaid expenses | 12,878 | 10,806 | 23,684 | |||||||||||||
Total assets | $ | 245,380,431 | $ | 381,349,408 | $ | 626,729,839 | ||||||||||
Liabilities | ||||||||||||||||
Payables: | ||||||||||||||||
Investments bought | 2,571,242 | 2,945,331 | 5,516,573 | |||||||||||||
Investment adviser fees | 20,183 | 30,950 | 51,133 | |||||||||||||
Fund shares redeemed | 151,999 | 642,280 | 794,279 | |||||||||||||
Trustee’s retirement plan | 98,864 | 14,155 | 113,019 | |||||||||||||
Distribution and shareholder services fees | 141,848 | 42,353 | 184,201 | |||||||||||||
Accrued expenses | 137,245 | 125,402 | 262,647 | |||||||||||||
Total liabilities | $ | 3,121,381 | $ | 3,800,471 | $ | 6,921,852 | ||||||||||
Net Assets | ||||||||||||||||
Total assets | 245,380,431 | 381,349,408 | 626,729,839 | |||||||||||||
Total liabilities | 3,121,381 | 3,800,471 | 6,921,852 | |||||||||||||
Net assets | $ | 242,259,050 | $ | 377,548,937 | (82,500) | † | $ | 619,725,487 | ||||||||
Net Assets by Source | ||||||||||||||||
Capital received from investors | 445,005,117 | 644,924,225 | 1,089,929,342 | |||||||||||||
Distribution in excess of net investment income/Net investment income not yet distributed | (98,864 | ) | 1,052,127 | (82,500) | † | 870,763 | ||||||||||
Net realized capital losses | (121,089,315 | ) | (155,202,055 | ) | (276,291,370 | ) | ||||||||||
Net unrealized capital losses | (81,557,888 | ) | (113,225,360 | ) | (194,783,248 | ) | ||||||||||
Net Asset Value (NAV) by Shares Class | ||||||||||||||||
Investor Shares: | ||||||||||||||||
Net Assets | $ | 77,226,801 | $ | 81,980,662 | ||||||||||||
Shares Outstanding | 17,858,068 | 8,814,915 | ||||||||||||||
Net Asset Value | $ | 4.32 | $ | 9.30 | ||||||||||||
Select Shares: | ||||||||||||||||
Net Assets | $ | 156,272,017 | $ | 295,568,275 | $ | 167,885,195 | * | $ | 619,725,487 | |||||||
Shares Outstanding | 34,730,188 | 31,310,355 | 34,347,598 | ** | 65,657,953 | |||||||||||
Net Asset Value | $ | 4.50 | $ | 9.44 | $ | 9.44 | ||||||||||
Adviser Shares: | ||||||||||||||||
Net Assets | $ | 8,760,232 | ||||||||||||||
Shares Outstanding | 1,995,401 | |||||||||||||||
Net Asset Value | $ | 4.39 | ||||||||||||||
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† | Represents expenses related to the preparation and assembly of the Prospectus/Proxy Statement and all mailing and other expenses, including solicitation costs, associated with the Reorganization. These expenses will be borne by the shareholders of the Small Cap Fund. | |
* | Adjustment includes the total value of Investor Shares ($81,980,662) in the Discovery Fund that will be combined into Select Shares prior to the Reorganization as if the combination of the share classes into a single class of shares occurred on March 31, 2009, and the value of the Investor Shares ($77,226,801) and Adviser Shares ($8,760,232) of the Small Cap Fund as if the Reorganization occurred on March 31, 2009. | |
** | Represents 25,663,163 shares issued to shareholders of Investor, Select and Adviser Shares of the Small Cap Fund, and 8,684,435 shares issued to shareholders of Investor Shares of the Discovery Fund. |
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Pro Forma Statement of Operations (Unaudited)
Small Cap Fund, Discovery Fund and Pro Forma Combined Discovery Fund (Surviving Fund)
For April 1, 2008 through March 31, 2009
Small Cap Fund, Discovery Fund and Pro Forma Combined Discovery Fund (Surviving Fund)
For April 1, 2008 through March 31, 2009
Pro Forma | ||||||||||||||||
Combined | ||||||||||||||||
Discovery Fund | ||||||||||||||||
Small Cap | Discovery | Pro Forma | (Surviving | |||||||||||||
Fund | Fund | Adjustments* | Fund) | |||||||||||||
Investment Income | ||||||||||||||||
Dividends (net of foreign withholding tax of $165) | $ | 6,254,564 | $ | 8,451,853 | $ | 14,706,417 | ||||||||||
Interest | 62,589 | 76,082 | 138,671 | |||||||||||||
Securities on loan | 562,013 | 510,200 | 1,072,213 | |||||||||||||
Total investment income | 6,879,166 | 9,038,135 | 15,917,301 | |||||||||||||
Net Realized Gains and Losses | ||||||||||||||||
Net realized losses on investments | (86,082,931 | ) | (143,102,701 | ) | (229,185,632 | ) | ||||||||||
Net Unrealized Gains and Losses | ||||||||||||||||
Net unrealized losses on investments | (134,259,839 | ) | (148,676,585 | ) | (282,936,424 | ) | ||||||||||
Expenses | ||||||||||||||||
Investment adviser fees | 3,977,818 | 5,346,648 | 9,324,466 | |||||||||||||
Distribution and shareholder service fees | 410,830 | 334,602 | 745,432 | |||||||||||||
Sub-Accounting fees | 164,696 | 201,838 | 366,534 | |||||||||||||
Transfer agent fees | 91,242 | 145,362 | 236,604 | |||||||||||||
Reorganization costs | — | — | 82,500 | a | 82,500 | |||||||||||
Shareholder reports | 65,679 | 99,422 | 165,101 | |||||||||||||
Custodian fees | 47,287 | 78,303 | 125,590 | |||||||||||||
Accounting and administration fees | 56,474 | 64,491 | (2,700 | ) b | 118,265 | |||||||||||
Professional fees | 55,558 | 60,601 | (40,000 | ) c | 76,159 | |||||||||||
Registration fees | 35,229 | 30,345 | 65,574 | |||||||||||||
Interest expense | 19,609 | 9,209 | 28,818 | |||||||||||||
Trustees’ fees | 750 | — | 750 | |||||||||||||
Other expenses | 87,801 | 73,027 | 160,828 | |||||||||||||
Total expenses | 5,012,973 | 6,443,848 | 39,800 | 11,496,621 | ||||||||||||
Expense reduction by adviser and Schwab | (49,300 | ) | (39,800 | )d | (89,100 | ) | ||||||||||
Custody credits | (3,816 | ) | (1,159 | ) | (4,975 | ) | ||||||||||
Net expenses | $ | 4,959,857 | $ | 6,442,689 | $ | 11,402,546 | ||||||||||
Increase (Decrease) in Net Assets from Operations | ||||||||||||||||
Total investment income | 6,879,166 | 9,038,135 | 15,917,301 | |||||||||||||
Net expenses | (4,959,857 | ) | (6,442,689 | ) | 11,402,546 | |||||||||||
Net investment income | 1,919,309 | 2,595,446 | 4,514,755 | |||||||||||||
Net realized losses | (86,082,931 | ) | (143,102,701 | ) | (229,185,632 | ) | ||||||||||
Net unrealized losses | (134,259,839 | ) | (148,676,585 | ) | (282,936,424 | ) | ||||||||||
Decrease in net assets from operations | ($218,423,461 | ) | ($289,183,840 | ) | ($507,607,301 | ) | ||||||||||
* | See “Notes to the Unaudited Pro Forma Combined Financial Statements” on the following page for a description of these adjustments. |
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Notes to the Unaudited Pro Forma Combined Financial Statements
March 31, 2009
March 31, 2009
1. BASIS OF COMBINATION
The unaudited Pro Forma Combined Statement of Assets and Liabilities, including the Pro Forma Schedule of Investments (“Pro Forma Statements”) as of March 31, 2009, and the related Pro Forma Combined Statement of Operations for the annual period ended March 31, 2009, reflect the accounts of the Laudus Rosenberg U.S. Small Capitalization Fund (the “Small Cap Fund” or the “Acquired Fund”) and the Laudus Rosenberg U.S. Discovery Fund (the “Discovery Fund” or the “Surviving Fund” and, together with the Acquired Fund, the “Funds”), each a series of Laudus Trust (the “Trust”). The Pro Forma Combined Statement of Assets and Liabilities has been restated to reflect a tax free exchange of the Acquired Fund’s shares as of the close of business on March 31, 2009.
The Pro Forma Statements give effect to the proposed transfer of all the assets and liabilities of the Acquired Fund in exchange for shares of the Surviving Fund (the “Reorganization”). In conjunction with the Reorganization, the Surviving Fund will be the accounting survivor. Prior to the Reorganization, the Surviving Fund’s two share classes will be combined into a single class of shares of the Surviving Fund and the shareholders of the Acquired Fund will receive shares of the sole remaining share class of the Surviving Fund in connection with the Reorganization. The pro forma financial information of the Surviving Fund has been restated to reflect the capitalization of the Surviving Fund as if the combination of the Surviving Fund’s two share classes into a single class of shares occurred on March 31, 2009.
The Pro Forma Statements should be read in conjunction with the historical financial statements of the Surviving Fund and the Acquired Fund included in their respective Annual Reports.
2. SIGNIFICANT ACCOUNTING POLICIES
General—The accounting policies are in conformity with accounting principles generally accepted in the United States of America.
Security Valuation—The Funds value the securities in their portfolios every business day. The Funds use the following policies to value various types of securities:
• | Securities traded on an exchange or over-the-counter: valued at the closing value for the day, or, on days when no closing value has been reported, halfway between the most recent bid and asked quotes. Securities that are primarily traded on foreign exchanges are valued at the closing values of such securities on their respective exchanges with these values then translated into U.S. dollars at the valuation date exchange rate. | ||
• | Securities for which no quoted value is available or when a significant event has occurred between the time of the security’s last close and the time the Funds calculate net asset value: valued at fair value, as determined in good faith by the Funds’ investment adviser using guidelines adopted by the Funds’ Board of Trustees and the Pricing Committee. Some of the more common reasons that may necessitate that a security be valued at fair value include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; the security’s primary pricing source is not able or willing to provide a price, or certain foreign securities’ closing market values adjusted for changes in value that may occur between the close of foreign exchange and the time at which Funds’ shares are priced. The Board of Trustees regularly reviews fair value determinations made by the Funds pursuant to the procedures. |
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• | Short-term debt securities (60 days or less to maturity): valued at amortized cost, when it approximates market value. | ||
• | Underlying funds: valued at their respective net asset values as determined by those Funds in accordance with the 1940 Act for a given day. |
3. CAPITAL SHARES
The Pro Forma Combined net asset value per share assumes the issuance of additional shares of the Surviving Fund which would have been issued at March 31, 2009, in connection with the proposed reorganization. Assuming a merger date of March 31, 2009, shareholders of the Acquired Fund would have received 0.4767 shares of the Surviving Fund in exchange for 1 Select Share of the Acquired Fund, 0.4576 shares of the Surviving Fund in exchange for 1 Investor Share of the Acquired Fund and 0.4650 shares of the Surviving Fund in exchange for 1 Adviser Share of the Acquired Fund. The Pro Forma Statements assume that all shares of the Acquired Fund outstanding on March 31, 2009, were exchanged, tax free, for shares of the Surviving Fund.
4. PRO FORMA OPERATING EXPENSES
The pro forma adjustments to these pro forma financial statements are comprised of:
(a) | Expenses related to the preparation and assembly of the Prospectus/Proxy Statement and all mailing and other expenses, including solicitation costs, associated with the Reorganization. These expenses will be borne by the shareholders of the Acquired Fund. | |
(b) | Adjustment to eliminate certain duplicated accounting/administration fees; | |
(c) | Adjustment to eliminate duplicated audit fees; | |
(d) | Adjustment to reflect the contractual expense limitation in effect for the Surviving Fund. |
5. TAX MATTERS
The Funds intend to meet federal income and excise tax requirements for regulated investment companies. Accordingly, the Funds distribute substantially all of their net investment income and realized net capital gains (if any) to their respective shareholders each year. As long as a Fund meets the tax requirements, it is not required to pay federal income tax. Under the terms of the Agreement and Plan of Reorganization, this Reorganization should be treated as a tax-free business combination.
6. FUND EXPENSES
Effective August 12, 2009, the Surviving Fund’s investment adviser has contractually undertaken (the ''Expense Limitation Agreement’’) to waive its management fee and bear certain expenses for the Surviving Fund when the operating expenses reach 0.95% (exclusive of nonrecurring account fees, fees on securities transactions such as exchange fees, dividends and interest on securities sold short, service fees, interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Surviving Fund’s business). The Expense Limitation Agreement will be in place until at least July 30, 2011. The Adviser may, but is not required to, extend the Agreement for additional years. Any amounts waived or reimbursed in a particular fiscal year will be subject to reimbursement by the Surviving Fund to the Surviving Fund’s investment adviser during the next two fiscal years to the extent that the repayment will not cause the Surviving Fund’s Net Expenses to exceed the current limit (as stated
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in the Expense Limitation Agreement) during the respective year. As of March 31, 2009, the Surviving Fund did not maintain a balance of recoupable expenses.
7. NEW ACCOUNTING STANDARDS
The Funds adopted Financial Accounting Standard Board (“FASB”) Statement of Financial Accounting Standards No. 157 (“SFAS No. 157”), Fair Value Measurements, effective April 1, 2008. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
SFAS No. 157 establishes a three-tier hierarchy of inputs to establish a classification of fair value measurements for disclosure purposes. These inputs are summarized in the three broad levels listed below:
• | Level 1—quoted prices in active markets for identical securities | ||
• | Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | ||
• | Level 3—significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments) |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Funds’ investments as of March 31, 2009:
Small Cap Fund | Discovery Fund | Pro Forma Combined Discovery Fund | ||||||||||||||||||||||
Investments | Other Financial | Investments | Other Financial | Investments | Other Financial | |||||||||||||||||||
in Securities | Instruments* | in Securities | Instruments* | in Securities | Instruments* | |||||||||||||||||||
Level 1 | $ | 243,603,379 | — | $ | 378,113,522 | — | $ | 621,716,901 | — | |||||||||||||||
Level 2 | — | — | — | — | — | — | ||||||||||||||||||
Level 3 | — | — | — | — | — | — | ||||||||||||||||||
$ | 243,603,379 | — | $ | 378,113,522 | — | $ | 621,716,901 | — | ||||||||||||||||
* | The Funds have no Other Financial Instruments at the end of the period. |
On April 9, 2009, FASB issued FASB Staff position (“FSP”) No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. Management is currently evaluating the impact of the adoption of FSP 157-4 on the Funds’ financial statement disclosures.
In March 2008, FASB issued Statements of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS No. 161 requires enhanced disclosures about Funds’ derivative and hedging activities. Management is currently evaluating the impact of the adoption of SFAS No. 161 on the Funds’ financial statement disclosures.
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E. MISCELLANEOUS
Independent Registered Public Accounting Firm
The audited financial statements of the Funds incorporated by reference into this SAI have been audited by PricewaterhouseCoopers LLP, the Funds’ independent registered public accounting firm, to the extent indicated in their report thereon, which are included in the Annual Reports.
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PART C
OTHER INFORMATION
OTHER INFORMATION
Item 15 Indemnification
Article VIII of the Registrant’s Third Amended and Restated Agreement and Declaration of Trust reads as follows (referring to the Registrant as the “Trust”):
“ARTICLE VIII
Indemnification
Indemnification
SECTION 1. TRUSTEES, OFFICERS, ETC. The Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust’s request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a “Covered Person”) against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such Covered Person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Covered Person except with respect to any matter as to which such Covered Person shall have been finally adjudicated in any such action, suit or other proceeding to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person’s office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided, however, that either (a) such Covered Person shall have provided appropriate security for such undertaking, (b) the Trust shall be insured against losses arising from any such advance payments or (c) either a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as opposed to a full trial type inquiry) that there is reason to believe that such Covered Person will be found entitled to indemnification under this Article.
SECTION 2. COMPROMISE PAYMENT. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Covered Person is liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, indemnification shall be provided if (a) approved, after notice that it involves such indemnification, by at least a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter) upon a determination, based upon a review of readily available facts (as opposed to a full trial type inquiry) that such Covered Person is not liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (as opposed to a full trial type inquiry) to the effect that
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such indemnification would not protect such Person against any liability to the Trust to which he 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 office. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person of any amount paid to such Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a court of competent jurisdiction to have been liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person’s office.
SECTION 3. INDEMNIFICATION NOT EXCLUSIVE. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which such Covered Person may be entitled. As used in this Article VIII, the term “Covered Person” shall include such person’s heirs, executors and administrators and a “disinterested Trustee” is a Trustee who is not an “interested person” of the Trust as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, (or who has been exempted from being an “interested person” by any rule, regulation or order of the Commission) and against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees or officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person; provided, however, that the Trust shall not purchase or maintain any such liability insurance in contravention of applicable law, including without limitation the 1940 Act.
SECTION 4. SHAREHOLDERS. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability, but only out of the assets of the particular series of Shares of which he or she is or was a Shareholder.”
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Item 16 Exhibits
(1) | Articles of Incorporation | Third Amended and Restated Agreement and Declaration of Trust of the Registrant — incorporated herein by reference to Exhibit (a)(14) to Post-Effective Amendment No. 60 to the Registration Statement on Form N-1A filed with the SEC on October 23, 2007 (referred to herein as “PEA No. 60”); | ||
(2) | By-Laws | Amended and Restated By-Laws of the Registrant — incorporated herein by reference to Exhibit (b)(2) to Post-Effective Amendment No. 61 to the Registration Statement on Form N-1A filed with the SEC on December 17, 2007; | ||
(3) | Voting Trust Agreements | Not Applicable; | ||
(4) | Reorganization Agreement | Form of Agreement and Plan of Reorganization is filed herewith as Appendix A to Part A of this Registration Statement on Form N-14; | ||
(5) | Instruments Defining Rights of Security Holders | Reference is made to Article 5 of the Third Amended and Restated Agreement and Declaration of Trust of the Registrant; | ||
(6)(a)(1) | Investment Advisory Contracts | Management Contract between the Registrant on behalf of its Laudus Rosenberg U.S. Small Capitalization Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(1) to Post-Effective Amendment No. 46 to the Registration Statement on Form N-1A filed with the SEC on March 12, 2004 (referred to herein as “PEA No. 46”); | ||
(6)(a)(2) | Management Contract between the Registrant on behalf of its Laudus Rosenberg International Small Capitalization Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(2) to PEA No. 46; | |||
(6)(a)(3) | Management Contract between the Registrant on behalf of its Laudus Rosenberg Long/Short Equity Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(3) to PEA No. 46; | |||
(6)(a)(4) | Management Contract between the Registrant on |
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behalf of its Laudus Rosenberg International Equity Fund and Charles Schwab Investment Management, Inc. — incorporated herein by reference to Exhibit (d)(6) to PEA No. 46; | ||||
(6)(a)(5) | Management Contract between the Registrant on behalf of its Laudus Rosenberg U.S. Discovery Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(8) to PEA No. 46; | |||
(6)(a)(6) | Management Contract between the Registrant on behalf of its Laudus Rosenberg U.S. Large Capitalization Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(10) to PEA No. 46; | |||
(6)(a)(7) | Management Contract between the Registrant on behalf of its Laudus Rosenberg U.S. Large Capitalization Value Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(11) to Post-Effective Amendment No. 56 to the Registration Statement on Form N-1A filed with the SEC on April 14, 2006 (referred to herein as “PEA No. 56”); | |||
(6)(a)(8) | Management Contract between the Registrant on behalf of its Laudus Rosenberg International Discovery Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(12) to Post-Effective Amendment No. 57 to the Registration Statement on Form N-1A filed with the SEC on July 28, 2006 (referred to herein as “PEA No. 57”); | |||
(6)(a)(9) | Management Contract between the Registrant on behalf of its Laudus Mondrian Emerging Markets Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(13) to PEA No. 60; | |||
(6)(a)(10) | Management Contract between the Registrant on behalf of its Laudus Mondrian International Fixed Income Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(14) to PEA No. 60; | |||
(6)(a)(11) | Management Contract between the Registrant on |
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behalf of its Laudus Mondrian International Equity Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(12) to Post-Effective Amendment No. 65 to the Registration Statement on Form N-1A filed with the SEC on July 30, 2008 (referred to herein as “PEA No. 65”); | ||||
(6)(a)(12) | Management Contract between the Registrant on behalf of its Laudus Mondrian Global Equity Fund and Charles Schwab Investment Management, Inc.— incorporated herein by reference to Exhibit (d)(13) to PEA No. 65; | |||
(6)(a)(13) | Form of Management Contract between the Registrant on behalf of its Laudus Growth Investors U.S. Large Cap Growth Fund and Charles Schwab Investment Management, Inc. — incorporated herein by reference to Exhibit (d)(13) to Post-Effective Amendment No. 67 to the Registration Statement on Form N-1A filed with the SEC on May 21, 2009 (referred to herein as “PEA No. 67”); | |||
(6)(b)(1) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg U.S. Small Capitalization Fund, Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(12) to PEA No. 46; | |||
(6)(b)(2) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg International Small Capitalization Fund, Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(13) to PEA No. 46; | |||
(6)(b)(3) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg Long/Short Equity Fund (formerly, Laudus Rosenberg Value Long/Short Equity Fund), Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(14) to PEA No. 46; | |||
(6)(b)(4) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg International |
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Equity Fund, Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(17) to PEA No. 46; | ||||
(6)(b)(5) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg U.S. Discovery Fund, Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(19) to PEA No. 46; | |||
(6)(b)(6) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg U.S. Large Capitalization Fund, Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(21) to PEA No. 46; | |||
(6)(b)(7) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg U.S. Large Capitalization Value Fund, Charles Schwab Investment Management, Inc. and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(22) to Post-Effective Amendment No. 53 to the Registration Statement on Form N-1A filed with the SEC on December 22, 2005; | |||
(6)(b)(8) | Subadviser Agreement among the Registrant on behalf of its Laudus Rosenberg International Discovery Fund, Charles Schwab Investment Management, Inc., and AXA Rosenberg Investment Management LLC — incorporated herein by reference to Exhibit (d)(24) to PEA No. 57; | |||
(6)(b)(9) | Subadviser Agreement between Charles Schwab Investment Management, Inc., and Mondrian Investment Partners Limited with regard to Laudus Mondrian Emerging Markets Fund and Laudus Mondrian International Fixed Income Fund— incorporated herein by reference to Exhibit (d)(27) to PEA No. 60; | |||
(6)(b)(10) | Amendment to the Subadviser Agreement between Charles Schwab Investment Management, Inc., and Mondrian |
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Investment Partners Limited with regard to Laudus Mondrian International Equity Fund and Laudus Mondrian Global Equity Fund — incorporated herein by reference to Exhibit (d)(22) to PEA No. 65; | ||||
(6)(b)(11) | Subadviser Agreement between Charles Schwab Investment Management, Inc. and UBS Global Asset Management (Americas) Inc. with regard to Laudus Growth Investors U.S. Large Cap Growth Fund — incorporated herein by reference to Exhibit (d)(24) to PEA No. 67; | |||
(7)(a)(1) | Underwriting Contracts | Distribution Agreement by and among the Registrant, Laudus Institutional Trust, Charles Schwab Investment Management, Inc. and ALPS Distributors, Inc., — incorporated herein by reference to Exhibit (e) to PEA No. 56; | ||
(7)(a)(2) | Amendment to the Distribution Agreement — incorporated herein by reference to Exhibit (e)(2) to PEA No. 65; | |||
(8) | Bonus or Profit Sharing Contracts | Amended and Restated Laudus Funds Retirement Plan for Trustees —incorporated herein by reference to Exhibit (f)(1) to PEA No. 65; | ||
(9)(a)(1) | Custodian Agreements | Amended and Restated Master Custodian Agreement by and between the Registrant and State Street Bank and Trust Company — incorporated herein by reference to Exhibit (g) to PEA No. 56; | ||
(9)(a)(2) | Amendment to the Amended and Restated Master Custodian Agreement — incorporated herein by reference to Exhibit (g)(2) to PEA No. 65; | |||
(9)(a)(3) | Custody Agreement between the Registrant and Custodial Trust Company— incorporated herein by reference to Exhibit (g)(1) of Post-Effective Amendment No. 45 to the Registration Statement on Form N-1A electronically filed with the SEC on July 31, 2003 (referred to herein as “PEA No. 45”); | |||
(9)(a)(4) | Schedule of remuneration to Custody Agreement between the Registrant and Custodial Trust Company — incorporated herein by reference to Exhibit (g)(4) of PEA No. 45; | |||
(9)(a)(5) | Assignment of Custody Accounts from Custodial Trust Company to JP Morgan Chase Bank — |
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incorporated herein by reference to Exhibit (g)(5) of Post-Effective Amendment No. 68 to the Registration Statement on Form N-1A filed with the SEC on July 29, 2009 (referred to herein as “PEA No. 68”); | ||||
(10)(a) | Rule 12b-1 Plan | Amended and Restated Distribution and Shareholder Service Plan for Investor Shares —incorporated herein by reference to Exhibit 23(m) of Post-Effective Amendment No. 24 to the Registration Statement on Form N-1A filed with the SEC on May 28, 1999; | ||
(10)(b) | Multiple-Class Plan | Further Amended and Restated Rule 18f-3 Multiple Class Plan — incorporated herein by reference to Exhibit (n) to PEA No. 67; | ||
(11) | Legal Opinion | Opinion and Consent of Morgan, Lewis & Bockius LLP regarding the validity of the shares to be issued by the Registrant is filed herewith; | ||
(12) | Tax Opinion | Form of Opinion and Consent of Morgan, Lewis & Bockius LLP regarding certain tax matters is filed herewith; | ||
(13)(a)(1) | Other Material Contracts | Administration Agreement by and between State Street Bank and Trust Company and the Registrant — incorporated herein by reference to Exhibit (h)(3) to PEA No. 56; | ||
(13)(a)(2) | Amendment to the Administration Agreement — incorporated herein by reference to Exhibit (h)(5) to PEA No. 65; | |||
(13)(b)(1) | Master Fund Accounting and Services Agreement between the Registrant and State Street Bank and Trust Company — incorporated herein by reference to Exhibit (h)(4) to PEA No. 56; | |||
(13)(b)(2) | Amendment to the Master Fund Accounting and Services Agreement — incorporated herein by reference to Exhibit (h)(7) to PEA No. 65; | |||
(13)(c)(1) | Transfer Agency and Service Agreement between the Registrant and Boston Financial Data Services, Inc. — incorporated herein by reference to Exhibit (h)(1) to PEA No. 56; | |||
(13)(c)(2) | Amendment to the Transfer Agency and Service Agreement — incorporated herein by reference to |
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Exhibit (h)(2) to PEA No. 65; | ||||
(13)(d) | Amended and Restated Expense Limitation Agreement dated August 12, 2009 between Charles Schwab Investment Management, Inc. and the Registrant is filed herewith; | |||
(14)(1) | Other Opinions and Consents | Consent of PricewaterhouseCoopers LLP is filed herewith; | ||
(14)(2) | Consent of Morgan, Lewis & Bockius LLP is filed herewith; | |||
(15) | Omitted Financial Statements | Not Applicable; | ||
(16)(1) | Powers of Attorney | Power of Attorney of Nils H. Hakansson is filed herewith; | ||
(16)(2) | Power of Attorney of Mariann Byerwalter is filed herewith; | |||
(16)(3) | Power of Attorney of William A. Hasler is filed herewith; | |||
(16)(4) | Power of Attorney of George Pereira is filed herewith; | |||
(16)(5) | Power of Attorney of Jeffrey Mortimer is filed herewith; | |||
(17)(a)(1) | Code of Ethics | Code of Ethics of the Registrant and Charles Schwab Investment Management, Inc., investment adviser to the Laudus Funds — incorporated herein by reference to Exhibit (p)(1) to PEA No. 67; | ||
(17)(a)(2) | Code of Ethics of AXA Rosenberg Investment Management LLC, investment subadviser to certain of the Laudus Funds — incorporated herein by reference to Exhibit (p)(2) to PEA No. 67; | |||
(17)(a)(3) | Code of Ethics of ALPS Distributors, Inc., principal underwriter to the Laudus Funds — incorporated herein by reference to Exhibit (n)(3) to PEA No. 56; | |||
(17)(a)(4) | Code of Ethics of Mondrian Investment Partners LLP, investment subadviser to certain of the Laudus Funds — incorporated herein by |
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reference to Exhibit (p)(4) to PEA No. 67; | ||||
(17)(a)(5) | Code of Ethics of UBS Global Asset Management (Americas) Inc., investment subadviser to certain of the Laudus Funds — incorporated herein by reference to Exhibit (p)(5) to PEA No. 67; | |||
(17)(b) | Proxy Card | Form of Proxy Card is filed herewith and appears following Part A of this Registration Statement on Form N-14; | ||
(17)(c)(1) | Additional Materials | Prospectus dated July 29, 2009, with respect to the Laudus Rosenberg U.S. Equity Funds and Laudus Rosenberg International Equity Funds is incorporated herein by reference to Part A of PEA No. 68; | ||
(17)(c)(2) | Supplement dated August 12, 2009 to the Prospectus dated July 29, 2009 with respect to the Laudus Rosenberg U.S. Equity Funds and Laudus Rosenberg International Equity Funds is incorporated herein by reference to definitive materials electronically filed with the SEC on August 12, 2009 pursuant to Rule 497 under the Securities Act of 1933, as amended (SEC Accession No. 0000950123-09-033640); | |||
(17)(c)(3) | Statement of Additional Information dated July 29, 2009 with respect to the Laudus Rosenberg U.S. Equity Funds and Laudus Rosenberg International Equity Funds is incorporated herein by reference to Part B of PEA No. 68; | |||
(17)(c)(4) | The Reports of the Independent Registered Public Accounting Firm and audited financial statements of the Laudus Rosenberg U.S. Small Capitalization Fund and the Laudus Rosenberg U.S. Discovery Fund included in the Funds’ Annual Reports to Shareholders for the period ended March 31, 2009 — incorporated herein by reference to the Laudus Rosenberg Funds’ Annual Report on Form N-CSR filed with the SEC on June 3, 2009 (SEC Accession No. 0000950123-09-010608); |
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Item 17 Undertakings
(1) The undersigned Registrant agrees that, prior to any public reoffering of the securities registered through the use of a prospectus which is part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, an opinion of counsel supporting the tax consequences of the Reorganization within a reasonably prompt time after receipt of such opinion.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form N-14 to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on this 12th day of August, 2009.
LAUDUS TRUST | ||||
By: | Jeffrey Mortimer* | |||
Jeffrey Mortimer | ||||
Chief Executive Officer, Chief Investment Officer & President | ||||
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form N-14 has been signed by the following persons in the capacities indicated on this 12th day of August, 2009.
Signature | Title | |||
Jeffrey Mortimer* | Chief Executive Officer, Chief Investment Officer & President | |||
George Pereira* | Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) | |||
Mariann Byerwalter* | Trustee | |||
Nils H. Hakansson* | Trustee | |||
William A. Hasler* | Trustee |
*By: | /s/ Timothy W. Levin | |||
Timothy W. Levin, Attorney-in-Fact | ||||
Pursuant to Power of Attorney | ||||
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Exhibit Index
(11) | Opinion and Consent of Morgan, Lewis & Bockius LLP regarding the validity of the shares to be issued by the Registrant; | |
(12) | Form of Opinion and Consent of Morgan, Lewis & Bockius LLP regarding certain tax matters; | |
(13)(d) | Amended and Restated Expense Limitation Agreement; | |
(14)(1) | Consent of PricewaterhouseCoopers LLP; | |
(14)(2) | Consent of Morgan, Lewis & Bockius LLP; | |
(16)(1) | Power of Attorney of Nils H. Hakansson; | |
(16)(2) | Power of Attorney of Mariann Byerwalter; | |
(16)(3) | Power of Attorney of William A. Hasler; | |
(16)(4) | Power of Attorney of George Pereira; | |
(16)(5) | Power of Attorney of Jeffrey Mortimer. |