AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 2009
REGISTRATION NO. 33-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
LAUDUS TRUST
(Exact Name of Registrant as Specified in Charter)
101 Montgomery Street
San Francisco, CA 94104
(Address of Principal Executive Offices) (Zip code)
800.648.5300
(Registrant's Telephone Number, including Area Code)
NAME AND ADDRESS OF AGENT FOR SERVICE: COPIES TO:
-------------------------------------- -----------------------------------
KOJI E. FELTON TIMOTHY W. LEVIN, ESQ.
Charles Schwab Investment Management, Inc. Morgan, Lewis & Bockius LLP
101 Montgomery Street 1701 Market Street
San Francisco, CA 94104 Philadelphia, PA 19103
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 February 13, 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
101 Montgomery Street
San Francisco, CA 94104
(888) 517-9900
February ___, 2009
Dear Shareholder:
We wish to provide you with some important information concerning your
investment. As a shareholder of the Laudus Rosenberg U.S. Large Capitalization
Growth Fund (the "Large Cap Growth Fund" or the "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 Large Cap Growth
Fund into the Laudus Rosenberg U.S. Large Capitalization Fund (the "Surviving
Fund" and, together with the Large Cap Growth Fund, the "Funds"). The Acquired
Fund and the Surviving Fund pursue substantially similar investment objectives
and possess similar policies and are managed by the same portfolio managers.
We believe that this combination will provide substantial benefits to
shareholders. The reorganization will combine a small fund into a larger 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. Further, the
reorganization will 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.
Shareholder approval is NOT required to effect the reorganization. At the
close of business on March ___, 2009, the Acquired Fund will transfer its assets
to the Surviving Fund. On that date, you will receive Select Shares and Investor
Shares of the Surviving Fund equal in aggregate net asset value to your Select
Shares and Investor Shares of the Acquired Fund. We have enclosed a
Prospectus/Information Statement that describes the reorganization in greater
detail and contains important information about the Surviving Fund.
THE TRANSACTION WILL NOT REQUIRE ANY ACTION ON YOUR PART. You will
automatically receive Select Shares and Investor Shares of the Surviving Fund in
exchange for your Select Shares and Investor Shares of the Acquired Fund as of
the closing date. If you have questions or would like to discuss alternatives,
you may contact us at (800)-. If you invest through another financial
institution, such as a brokerage firm, please contact your financial institution
should you have any questions. You are a valued investor and we thank you for
your continued investment in the Trust.
Sincerely,
----------------------------------------
Jeffrey Mortimer
President
LAUDUS TRUST
101 Montgomery Street
San Francisco, CA 94104
(888) 517-9900
PROSPECTUS/INFORMATION STATEMENT
February ___, 2009
This Prospectus/Information Statement is being furnished to shareholders of
the Laudus Rosenberg U.S. Large Capitalization Growth Fund (the "Large Cap
Growth 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 Select Shares and Investor Shares of the Acquired Fund
will receive Select Shares and Investor Shares of the Laudus Rosenberg U.S.
Large Capitalization Fund (the "Large Cap 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 net 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 effective
on or about March __, 2009.
The Board believes that the Reorganization is in the best interest of the
Acquired Fund 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. Shareholders of the
Acquired Fund are not being asked to vote on the Plan or approve the
Reorganization.
The Acquired Fund and the Surviving Fund are each a series of the Trust, 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 and the Surviving Fund is to seek long-term capital appreciation.
This Prospectus/Information 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 Surviving Fund and the Reorganization.
The prospectus for the Acquired Fund and the Surviving Fund, dated July 31,
2008, as supplemented on December 15, 2008, is included with this
Prospectus/Information Statement and is incorporated herein by reference.
A Statement of Additional Information dated February ___, 2009 relating to
this Prospectus/Information Statement and the Reorganization has been filed with
the SEC and is incorporated by reference into this Prospectus/Information
Statement. Additional information relating to the Acquired Fund and Surviving
Fund is contained in the Statement of Additional Information dated July 31,
2008, which has been filed with the SEC.
For a free copy of any of the documents described above, you may call
1-800-881-9358, or you may write to the Laudus Funds at the address listed on
the cover of this Prospectus/Information Statement. You may also obtain these
documents by accessing the Internet site for Laudus Trust at
www.laudusfunds.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 (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.
This Prospectus/Information Statement and the enclosures are expected to be
available to shareholders on or about February __, 2009. WE ARE NOT ASKING YOU
FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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.
2
TABLE OF CONTENTS
SYNOPSIS .............................................................................................. 4
The Reorganization.................................................................................. 4
Comparison of the Investment Objectives and Policies of the Funds................................... 4
Fees and Expenses................................................................................... 5
Purchase and Redemption Procedures; Exchange Procedures; Dividends, Distributions and Pricing....... 7
PRINCIPAL RISK FACTORS ................................................................................ 7
INFORMATION ABOUT THE REORGANIZATION .................................................................. 8
Material Features of the Agreement and Plan of Reorganization ...................................... 8
Reasons For the Reorganization...................................................................... 9
Federal Income Tax Consequences..................................................................... 10
Shareholder Rights, Description of the Securities to be Issued...................................... 11
Capitalization...................................................................................... 12
ADDITIONAL INFORMATION ABOUT THE SURVIVING FUND AND THE ACQUIRED FUND.................................. 13
COMPARISON OF THE FUNDS................................................................................ 13
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.................................................... 16
Control Persons..................................................................................... 16
Principal Shareholders.............................................................................. 17
ADDITIONAL INFORMATION................................................................................. 18
Investment Adviser.................................................................................. 18
FINANCIAL HIGHLIGHTS................................................................................... 19
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION................................................................... A-1
3
SYNOPSIS
The Reorganization.
The Reorganization involves the transfer of all of the assets and
liabilities of the Acquired Fund to the Surviving Fund in exchange for Select
Shares and Investor Shares of the Surviving Fund. The transfer of assets by the
Acquired Fund will occur at its 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. Select Shares and Investor Shares of the Surviving
Fund will be distributed, respectively, to shareholders of Select Shares and
Investor Shares of the Acquired Fund in exchange for their Select Shares and
Investor Shares of the Acquired Fund. After completion of the Reorganization,
each shareholder of Select Shares and Investor Shares of the Acquired Fund will
own, respectively, Select Shares and Investor 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 U.S. 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 the Reorganization will be
tax-free for the Surviving Fund.
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 Adviser has undertaken to bear and pay the expenses related to the
preparation and assembly of this Prospectus/Information Statement and all
mailing and other expenses associated with the Reorganization.
Comparison of the Investment Objectives and Policies of the Acquired Fund
and Surviving Fund.
The Acquired Fund and Surviving Fund have identical investment objectives:
to seek long-term capital appreciation.
The Acquired Fund and the Surviving Fund pursue substantially similar
investment strategies. Both Funds invest primarily in the common stocks of the
largest 1000 companies that are traded principally in the markets of the United
States. The primary difference between the two Funds' investment strategies is
that the Acquired Fund generally exhibits a "growth" style of investing due to
the fact that the Subadviser seeks to construct the Acquired Fund's portfolio
similar to that of the Russell 1000 Growth Index. In contrast, the Surviving
Fund generally exhibits a "core" or "blend" style of investing and seeks to
construct a portfolio similar to that of the Russell 1000 Index. 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 the largest
1000 companies that are traded principally in the markets of the United States
("U.S. Large Capitalization Companies") and will generally exhibit a "growth"
style of investing. In selecting securities for the Fund, AXA
4
Rosenberg seeks to match the capitalization profile of the Russell 1000 Growth
Index, a widely used index of approximately one thousand large- and
mid-capitalization U.S. companies. The definition of U.S. Large Capitalization
Companies may change from time to time to include, on an ongoing basis, the
market capitalization of every company in the Russell 1000 Growth 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 the
securities of U.S. Large Capitalization Companies. The 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 its Russell 1000 Growth 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 the largest
1000 companies that are traded principally in the markets of the United States
("U.S. Large Capitalization Companies") and will generally exhibit a "core" or
"blend" style of investing. In selecting securities for the Fund, AXA Rosenberg
seeks to match the capitalization profile of the Russell 1000 Index, a widely
used index of approximately one thousand large- and mid-capitalization U.S.
companies. The definition of U.S. Large Capitalization Companies may change from
time to time to include, on an ongoing basis, the market capitalization of every
company in the Russell 1000 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 the securities of U.S. Large
Capitalization Companies. The 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 its Russell 1000 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
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
policies, see "Comparison of the Funds--Investment Objectives and Strategies."
Fees and Expenses.
The following table sets forth: (i) the fees and expenses of the Select
Shares and Investor Shares of the Large Cap Growth Fund as of September 30,
2008; (ii) the fees and expenses of the Select Shares and Investor Shares of the
Large Cap Fund as of September 30, 2008; and (iii) the estimated fees and
expenses of the Select Shares and Investor Shares of the Large Cap Fund on a pro
forma basis after giving effect to the Reorganization, based on pro-forma
combined assets as of September 30, 2008.
5
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets)
PRO FORMA
COMBINED LARGE
LARGE CAP LARGE CAP CAP FUND
GROWTH FUND FUND (SURVIVING FUND)
----------------- ----------------- -----------------
Select Investor Select Investor Select Investor
Shares Shares Shares Shares Shares Shares
------ -------- ------ -------- ------ --------
SHAREHOLDER FEES
(paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases N/A N/A N/A N/A N/A N/A
Maximum Deferred Sales Charge (Load) N/A N/A N/A N/A N/A N/A
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends N/A N/A N/A N/A N/A N/A
Redemption Fee (charged only to shares redeemed or
exchanged within 30 days of purchase) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Exchange Fee N/A N/A N/A N/A N/A N/A
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees....................................... 0.75 0.75 0.75 0.75 0.75 0.75
Distribution and Shareholder Service
(12b-1) Fees.......................................... -- 0.25 -- 0.25 -- 0.25
Other Expenses........................................ 0.29 0.41 0.19 0.32 0.17 0.27
Total Annual Fund Operating Expenses.................. 1.04 1.41 0.94 1.32 0.92 1.27
Less Fee Waiver/Expense Reimbursement(1) ............. (0.18) (0.26) (0.09) (0.17) (0.07) (0.12)
Net Expenses.......................................... 0.86 1.15 0.85 1.15 0.85 1.15
----------
1 Pursuant to the Adviser's contractual undertaking (the "Expense Limitation
Agreement") to waive its management fee and bear certain expenses for the
Select and Investor classes when the operating expenses reach 0.84% and
1.14%, 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 Fund's business). The Expense
Limitation Agreement will be in place until at least July 30, 2010. 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 Funds to CSIM during the next two fiscal
years to the extent that the repayment will not cause a Fund's Net Expenses
to exceed the current limit (as stated in the Expense Limitation Agreement)
during the respective year.
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.
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- ------
LARGE CAP GROWTH FUND
Select Shares.................... $ 88 $313 $ 557 $1,255
Investor Shares.................. $117 $421 $ 746 $1,668
LARGE CAP FUND
Select Shares.................... $ 87 $291 $ 511 $1,146
Investor Shares.................. $117 $402 $ 707 $1,575
6
PRO FORMA COMBINED LARGE CAP FUND
Select Shares.................... $ 87 $286 $ 502 $1,125
Investor Shares.................. $117 $391 $ 685 $1,523
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 Surviving Fund's, many of which are beyond the control of the Surviving
Fund and the Adviser.
Purchase and Redemption Procedures; Exchange Procedures; Dividends,
Distributions and Pricing.
Procedures for purchasing, redeeming and exchanging shares of the Surviving
Fund are the same as those of the Acquired Fund. Additionally, 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). The Funds' procedures
for valuing their assets are the same.
PRINCIPAL RISK FACTORS.
The principal risks of investments in the Acquired Fund and Surviving Fund
are identical.
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
7
market conditions when, in retrospect, their use would have been beneficial
to a Fund or both Funds.
Large- and Mid-Size Company Risk Stocks of both large- and mid-size companies tend to go in and out of
favor based on market and economic conditions. However, stocks of mid
cap companies tend to be more volatile than those of large cap
companies because mid cap companies tend to be more susceptible to
adverse business or economic events than larger, more established
companies. During a period when large and mid cap U.S. stocks fall
behind other types of investments--bonds or stocks of small-size
companies--a Fund's performance also will lag those investments. This
risk is particularly significant for both Funds.
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.
INFORMATION ABOUT THE REORGANIZATION
Material Features of the Plan.
The Plan sets forth the terms and conditions of the Reorganization.
Significant provisions of the Plan are summarized below; however, this summary
is qualified in its entirety by reference to the Plan, a copy of which is
attached as Appendix A to this Prospectus/Information Statement.
At the consummation of the Reorganization, which is expected to occur at
the close of business on or about March __, 2009, (the "Effective Time"), all of
the assets and liabilities of the Acquired Fund will be transferred to the
Surviving Fund in exchange for Select Shares and Investor 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 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. Select Shares and
Investor Shares of the Surviving Fund will be distributed, respectively, to
shareholders of Select Shares and
8
Investor Shares of the Acquired Fund in exchange for their Select Shares and
Investor Shares. After completion of the Reorganization, each shareholder of
Select Shares and Investor Shares of the Acquired Fund will own, respectively,
Select Shares and Investor 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 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.
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 Trust's transfer agent for cancellation before the Surviving
Fund shares issuable to the shareholder pursuant to this Plan will be redeemed.
Any special options relating to a shareholders 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 attached hereto as Appendix A. 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. The Board may abandon the Plan and the Reorganization at any
time for any reason prior to the Effective Time. The Plan provides further that
at any time prior to the Reorganization the Funds may amend any of the
provisions of the Plan; 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.
The Adviser will bear the expenses incurred in connection with the
Reorganization. The Adviser estimates that these expenses will be $_________.
Reasons For Reorganization.
The Board considered the Reorganization at a meeting held on December 1,
2008, and approved the Plan. In approving the Reorganization, the Board of the
Acquired Fund determined that it is in the best interests of the Acquired Fund
and its shareholders to reorganize the Acquired Fund into the Surviving Fund. In
making this determination, the Board of the Acquired Fund considered a number of
factors, including:
- the interests of the Acquired Fund's shareholders and the
Surviving Fund's shareholders would not be diluted as a result of
the proposed reorganization;
- the similarity of the investment strategies of the Acquired Fund
to those of the Surviving Fund;
9
- the greater asset size of the Surviving Fund relative to that of
the Acquired Fund and 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 economies of scale and spreading
costs across a larger asset base to the potential benefit of all
shareholders;
- 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;
- that the Reorganization is intended to be tax-free for U.S.
Federal income tax purposes for shareholders of the Acquired
Fund;
- that the management fee with respect to the Acquired Fund is
identical to that of the Surviving Fund; and
- that the expenses of the Reorganization would not be borne by the
Funds' shareholders.
The Board of the Surviving Fund has also determined that the consummation
of the Reorganization is in the best interests of the shareholders of the
Surviving Fund.
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;
(2) No gain or loss will be recognized by the Acquired Fund upon (a) the
transfer of its assets and liabilities to the Surviving Fund in exchange for the
issuance of shares of the Surviving Fund to the Acquired Fund and the assumption
by the Surviving Fund of the Acquired Fund's liabilities, if any, and (b) the
distribution by the Acquired Fund to its shareholders of shares of the Surviving
Fund received as a result of the Reorganization (Sections 361(a), 354(a) and
357(a) of the Code);
(3) No gain or loss will be recognized by the Surviving Fund upon it
receipt of the assets and liabilities of the Acquired Fund in exchange for the
issuance of shares of the Surviving Fund to the Acquired Fund and the assumption
by the Surviving Fund of the Acquired Fund's liabilities, if any (Section
1032(a) of the Code);
(4) The 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 (Section 358(a)(i)
of the Code);
10
(5) The tax basis of the Surviving Fund in the assets and liabilities of
the Acquired Fund received pursuant to the Reorganization will be the same as
the tax basis of the assets and liabilities in the hands of the Acquired Fund
immediately before the Reorganization (Section 362(b) of the Code);
(6) The tax holding period for the shares of the Surviving Fund issued in
connection with the Reorganization will be determined by including the period
for which the shareholder held shares of the Acquired Fund exchanged therefore,
provided that the shareholder held such shares of the Acquired Fund as capital
assets;
(7) The tax holding period for the Surviving Fund with respect to the
assets and liabilities of the Acquired Fund received in the Reorganization will
include the period for which such assets and liabilities were held by the
Acquired Fund (Section 1223(2) of the Code); and
(8) The Acquired Fund's shareholders will not recognize gain or loss upon
the exchange of their shares of the Acquired Fund for shares of the Surviving
Fund as part 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 U.S. 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 U.S. federal income tax purposes under a mark-to-market system of
accounting.
As of September 30, 2008, the Acquired Fund had unutilized capital loss
carryfowards of approximately $0. The final amount of unutilized capital
loss carryfowards for the Acquired Fund 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 carryfowards 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 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 Internal Revenue Service ("IRS"). The opinion 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.
Shareholders should consult their own advisors concerning the potential tax
consequences to them, including state and local income tax consequences.
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.
11
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 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.
Capitalization.
The Surviving Fund's total capitalization after the Reorganization will be
greater than the current capitalization of the Acquired Fund as a result of the
combination of the Acquired Fund with the Surviving Fund. The following table
sets forth as of September 30, 2008, on an unaudited basis::
(1) the capitalization of the Large Cap Growth Fund;
(2) the capitalization of the Large Cap Fund; and
(3) the pro forma capitalization of the Large Cap Fund as adjusted to give
effect to the Reorganization
PRO FORMA
COMBINED LARGE
LARGE CAP LARGE CAP CAP FUND
GROWTH FUND FUND (SURVIVING FUND)
----------- ---------- ----------------
Total Net Assets ..............
Select Shares 46,209,350 78,727,327 124,936,677
Investor Shares 2,904,271 7,767,089 10,671,360
Shares Outstanding ............
Select Shares 5,728,009 8,440,414 13,393,185
Investor Shares 358,738 833,417 1,145,034
Net Asset Value Per Share .....
Select Shares 8.07 9.33 9.33
Investor Shares 8.10 9.32 9.32
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 daily share
12
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.
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 shall result in a
decrease in the Acquired Fund's Net Asset Value.
ADDITIONAL INFORMATION ABOUT THE
SURVIVING FUND AND THE ACQUIRED FUND
Comparison of the Surviving Fund and the Acquired Fund
The following is a comparison of the investment objectives, principal
investment strategies and portfolio management of the Funds. The primary
differences between the Funds are noted in italics.
LARGE CAP FUND LARGE CAP GROWTH FUND
(the Surviving Fund) (the Acquired Fund)
----------------------------------------------------------- ------------------------------------------------------
INVESTMENT OBJECTIVE INVESTMENT OBJECTIVE
The Large Cap Fund seeks long-term capital appreciation. The Large Cap Growth Fund seeks long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL INVESTMENT STRATEGIES
The Large Cap Fund invests primarily in the common stocks The Large Cap Growth Fund invests primarily in the
of the largest 1000 companies that are traded principally common stocks of the largest 1000 companies that are
in the markets of the United States ("U.S. Large traded principally in the markets of the United States
Capitalization Companies") and will generally exhibit a ("U.S. Large Capitalization Companies") and will
"core" or "blend" style of investing. In selecting generally exhibit a "growth" style of investing. In
securities for the Fund, AXA Rosenberg seeks to match the selecting securities for the Fund, AXA Rosenberg seeks
capitalization profile of the Russell 1000 Index, a widely to match the capitalization profile of the Russell
used index of approximately one thousand large- and 1000 Growth Index, a widely used index of
mid-capitalization U.S. companies. The definition of U.S. approximately one thousand large- and
Large Capitalization Companies may change from time to time mid-capitalization U.S. companies. The definition of
to include, on an ongoing basis, the market capitalization U.S. Large Capitalization Companies may change from
of every company in the Russell 1000 Index. time to time to include, on an ongoing basis, the
market capitalization of every company in the Russell
1000 Growth Index.
Under normal circumstances, the Fund will invest at least Under normal circumstances, the Fund will invest at
80% of its net assets (including, for this purpose, any least 80% of its net assets (including, for this
borrowings for investment purposes) in the securities of purpose, any borrowings for investment purposes) in
U.S. Large Capitalization Companies. the securities of U.S. Large Capitalization Companies.
AXA Rosenberg employs a bottom-up approach to investing by AXA Rosenberg employs a bottom-up approach to
evaluating the financial characteristics of individual investing by evaluating the financial characteristics
stocks rather than forecasting the of individual stocks rather than forecasting the
13
trends in markets, investment styles or sectors. AXA trends in markets, investment styles or sectors. AXA
Rosenberg seeks to identify mispriced stocks across Rosenberg seeks to identify mispriced stocks across
industries, through rigorous analysis of a company's industries, through rigorous analysis of a company's
fundamental data. AXA Rosenberg's stock selection process fundamental data. AXA Rosenberg's stock selection
is driven by proprietary technology known as "expert process is driven by proprietary technology known as
systems," which are designed to analyze the fundamentals of "expert systems," which are designed to analyze the
the more than 21,000 securities currently in AXA fundamentals of the more than 21,000 securities
Rosenberg's global universe. AXA Rosenberg uses two stock currently in AXA Rosenberg's global universe. AXA
selection models to evaluate the relative attractiveness of Rosenberg uses two stock selection models to evaluate
the stocks in its universe: (1) its Valuation Model the relative attractiveness of the stocks in its
estimates the fair value for each company in its database universe: (1) its Valuation Model estimates the fair
by assessing various fundamental data such as company value for each company in its database by assessing
financial statistics, and (2) its Earnings Forecast Model various fundamental data such as company financial
estimates year-ahead earnings by analyzing fundamental data statistics, and (2) its Earnings Forecast Model
and investor sentiment data such as analysts' earnings estimates year-ahead earnings by analyzing fundamental
estimates and broker buy/sell recommendations. AXA data and investor sentiment data such as analysts'
Rosenberg compares companies operating in similar earnings estimates and broker buy/sell
businesses to identify those believed to be undervalued in recommendations. AXA Rosenberg compares companies
relation to their peers, putting together the valuation and operating in similar businesses to identify those
earnings forecast views to gain an overall perspective on believed to be undervalued in relation to their peers,
the attractiveness of each stock. putting together the valuation and earnings forecast
views to gain an overall perspective on the
attractiveness of each stock.
The Large Cap Fund favors stocks that appear attractive The Large Cap Growth Fund favors stocks that appear
from the perspective of the Valuation and Earnings Forecast attractive from the perspective of the Valuation and
Models while seeking to construct a portfolio that is Earnings Forecast Models while seeking to construct a
similar to its Russell 1000 Index benchmark with respect to portfolio that is similar to its Russell 1000 Growth
characteristics such as market capitalization, industry Index benchmark with respect to characteristics such
weightings and other risk exposures. While the success of as market capitalization, industry weightings and
the Fund relative to its benchmark will derive from the other risk exposures. Since the benchmark Russell 1000
accuracy of AXA Rosenberg's stock selection models, other Growth Index has a "growth" style or orientation,
factors, such as the Fund's industry weightings and the the Fund will also exhibit this "growth" style or
risks associated with specific individual stock selections, orientation. In addition, while the success of the
also affect the Fund's performance. Fund relative to its benchmark will derive from the
accuracy of AXA Rosenberg's stock selection models,
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 Large Cap Fund may engage in active and frequent The Large Cap Growth Fund may engage in active and
trading of the securities in its portfolio (e.g., greater frequent trading of the securities in its portfolio
than 100% turnover), which would increase transaction costs (e.g., greater than 100% turnover), which would
incurred by the Fund. In addition, when a fund engages in increase transaction costs incurred by the Fund. In
active and frequent trading, a larger portion of the addition, when a fund engages in active and frequent
distributions investors receive from such fund may trading, a larger portion of the distributions
investors receive from such fund may
14
reflect short-term capital gains which are taxed like reflect short-term capital gains which are taxed like
ordinary income, rather than long-term capital gain ordinary income, rather than long-term capital gain
distributions. distributions.
For temporary defensive purposes during unusual economic or For temporary defensive purposes during unusual
market conditions or for liquidity purposes, the Fund may economic or market conditions or for liquidity
invest up to 100% of its assets in cash, money market purposes, the Fund may invest up to 100% of its assets
instruments, repurchase agreements and other short-term in cash, money market instruments, repurchase
obligations. When the Fund engages in such activities, it agreements and other short-term obligations. When the
may not achieve its investment objective. Fund engages in such activities, it may not achieve
its investment objective.
PORTFOLIO MANAGEMENT PORTFOLIO MANAGEMENT
Investment decisions arise from AXA Rosenberg's Investment decisions arise from AXA Rosenberg's
disciplined, systematic process, which combines proprietary disciplined, systematic process, which combines
expert systems and comprehensive databases to replicate the proprietary expert systems and comprehensive databases
decisions financial experts might make in a perfect world. to replicate the decisions financial experts might
AXA Rosenberg's portfolio engineers research and monitor make in a perfect world. AXA Rosenberg's portfolio
the portfolio's performance against the relevant benchmark engineers research and monitor the portfolio's
and ensure compliance with the portfolio's objectives. The performance against the relevant benchmark and ensure
team of portfolio engineers, who are employed by AXA compliance with the portfolio's objectives. The team
Rosenberg and an affiliated entity, the Barr Rosenberg of portfolio engineers, who are employed by AXA
Research Center LLC, are jointly and primarily responsible Rosenberg and an affiliated entity, the Barr Rosenberg
for monitoring the recommendations for all accounts that Research Center LLC, are jointly and primarily
are generated by AXA Rosenberg's investment models and for responsible for monitoring the recommendations for all
the day-to-day portfolio management operations of the Fund. accounts that are generated by AXA Rosenberg's
investment models and for the day-to-day portfolio
management operations of the Fund.
Dr. William Ricks has been with AXA Rosenberg since 1989, Dr. William Ricks has been with AXA Rosenberg since
where he has been the Chief Executive Officer and Chief 1989, where he has been the Chief Executive Officer
Investment Officer for the past five years. He is and Chief Investment Officer for the past five years.
responsible for overseeing the implementation of AXA He is responsible for overseeing the implementation of
Rosenberg's investment strategies, which are primarily AXA Rosenberg's investment strategies, which are
driven by stock selection and portfolio construction primarily driven by stock selection and portfolio
models. To that end, he has overall responsibility for the construction models. To that end, he has overall
implementation of AXA Rosenberg's investment strategies and responsibility for the implementation of AXA
the various aspects of AXA Rosenberg's investment process, Rosenberg's investment strategies and the various
including trading, operations, portfolio engineering and aspects of AXA Rosenberg's investment process,
portfolio construction. including trading, operations, portfolio engineering
and portfolio construction.
Additional information about the Funds, including risks associated with an
investment in the Funds, performance, management, organization and capital
structure, disclosure of portfolio holdings, shareholding information (including
information as to the pricing of shares), and distribution arrangements are
contained in the Funds' prospectus, a copy of which is included with this
15
Prospectus/Information Statement and is incorporated herein by reference. A
Statement of Additional Information, dated July 31, 2008, for each of the Funds
also contains additional information concerning these matters. A free copy of
these documents is available upon request as described on the first page of this
Prospectus/Information Statement.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons. As of February 1, 2009, CSIM and its affiliates held of
record approximately ____% of the outstanding shares of the Large Cap Growth
Fund, 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 February 1, 2009, the Trustees and officers as a group owned less
than 1% of the outstanding shares of each share class of the Large Cap Growth
Fund, and less than 1% of the outstanding shares of all funds of the Trust in
the aggregate.
As of February 1, 2009, CSIM and its affiliates held of record
approximately _____% of the Large Cap Fund's outstanding 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 February 1, 2009, the Trustees and officer as a group owned less than
1% of the outstanding shares of each share class of the Large Cap Fund, and less
than 1% of the outstanding shares of all funds of the Trust in the aggregate.
16
Principal Shareholders. As of February 1, 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
LARGE CAP GROWTH FUND OUTSTANDING
- SELECT SHARES NAME AND ADDRESS SHARES OWNED
--------------------- ---------------- -------------
PERCENTAGE OF
LARGE CAP GROWTH FUND OUTSTANDING
- INVESTOR SHARES NAME AND ADDRESS SHARES OWNED
--------------------- ---------------- -------------
PERCENTAGE OF
LARGE CAP FUND OUTSTANDING
- SELECT SHARES NAME AND ADDRESS SHARES OWNED
--------------- ---------------- -------------
PERCENTAGE OF
LARGE CAP FUND OUTSTANDING
- INVESTOR SHARES NAME AND ADDRESS SHARES OWNED
----------------- ---------------- -------------
On the basis of the share holdings information presented above, the
following persons will own in excess of 5% of the outstanding shares of the
Large Cap Fund upon consummation of the Reorganization. These tables assume 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 February 1, 2009.
17
PERCENTAGE OF
LARGE CAP FUND OUTSTANDING
- SELECT SHARES NAME AND ADDRESS SHARES OWNED
--------------- ---------------- -------------
PERCENTAGE OF
LARGE CAP FUND OUTSTANDING
- INVESTOR SHARES NAME AND ADDRESS SHARES OWNED
----------------- ---------------- -------------
ADDITIONAL INFORMATION
Investment Adviser.
CSIM, a wholly owned subsidiary of The Charles Schwab Corporation located
at 101 Montgomery Street, San Francisco CA 94104, serves as the investment
adviser of the Acquired Fund and the Surviving Fund. For managing each of the
Acquired Fund and the Surviving Fund, CSIM is entitled to receive 0.75% of the
first $1 billion of average daily net assets under management, 0.70% of average
daily net asset over $1 billion and 0.675% of average daily net assets over $2
billion. Upon consummation of the Reorganization, the investment advisory fee
paid to CSIM with respect to the Surviving Fund will remain the same.
Subadviser.
AXA Rosenberg is the Funds' subadviser. AXA Rosenberg's address is 4 Orinda
Way, Orinda, CA 94563.
Additional information about CSIM and the Subadviser is contained in the
prospectus for the Acquired Fund and Surviving Fund, a copy of which is included
with this Prospectus/Information Statement and is incorporated herein by
reference. A Statement of Additional Information, dated July 31, 2008, for each
of the Funds also contains additional information about CSIM and the Subadviser.
A free copy of these documents is available upon request as described on the
first page of this Prospectus/Information Statement.
Other Service Providers. The Funds' other service providers are also 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
1625 Broadway, Suite 2200
Denver, Colorado 80202
18
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 (but
excluding the information for the six months ended September 30, 2008) has been
audited by PriceWaterhouseCoopers LLP, whose report, along with the Funds'
financial statements, is included in the Funds' Annual Report, which is
incorporated herein by reference.
Laudus Rosenberg U.S. Large Capitalization Growth Fund
Financial Statements
FINANCIAL HIGHLIGHTS
4/1/08- 4/1/07 4/1/06- 4/1/05- 4/1/04- 8/15/03(1)-
INVESTOR SHARES 9/30/08* 3/31/08 3/31/07 3/31/06 3/31/05 3/31/04
--------------- -------- ------- ------- ------- ------- -----------
PER--SHARE DATA ($)
Net asset value at beginning of period 9.18 9.83 9.33 8.15 7.92 6.95
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) 0.00(2, 3) (0.02)(2) 0.00(2, 3) (0.01)(2) 0.02(2) 0.09(2)
Net realized and unrealized gains
(losses) (1.08) (0.05) 0.50 1.19 0.23 0.92
------ ------ ------ ------ ------ ------
Total from investment operations (1.08) (0.07) 0.50 1.18 0.25 1.01
Less distributions:
Distributions from net investment income -- -- -- -- (0.02) (0.04)
Distributions from net realized gains -- (0.58) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions -- (0.58) -- -- (0.02) (0.04)
------ ------ ------ ------ ------ ------
Net asset value at end of period 8.10 9.18 9.83 9.33 8.15 7.92
------ ------ ------ ------ ------ ------
Total return (%) (11.76)(4) (1.25) 5.36 14.48 3.14 14.50(4)
RATIOS/SUPPLEMENTAL DATA (%)
Ratios to average net assets:
Net operating expenses 1.15(5) 1.30(6) 1.29 1.33 1.32 1.11(5)
Gross operating expenses 1.41(5) 1.40 1.43 1.91 2.68 2.72(5)
Net investment income (loss) 0.05(5) (0.17) (0.01) (0.12) 0.21 1.12(5)
Portfolio turnover rate 36(4) 85 71 79 78 177(4)
Net assets, end of period ($ x 1,000) 2,904 2,804 2,242 1,810 1,894 1,479
4/1/08- 4/1/07 4/1/06- 4/1/05- 4/1/04- 4/1/03-
SELECT SHARES 9/30/08(*, 7) 3/31/08 3/31/07 3/31/06 3/31/05 3/31/04
------------- ------------- ------- ------- ------- ------- -------
PER--SHARE DATA ($)
Net asset value at beginning of period 9.14 9.76 9.26 8.07 7.84 5.95
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) 0.02(2) 0.01(2) 0.03(2) 0.02(2) 0.04(2) 0.06(2)
Net realized and unrealized gains (losses) (1.09) (0.03) 0.49 1.18 0.23 1.89
------ ------ ------ ------ ------ ------
Total from investment operations (1.07) (0.02) 0.52 1.20 0.27 1.95
Less distributions:
Distributions from net investment income -- (0.02) (0.02) (0.01) (0.04) (0.06)
Distributions from net realized gains -- (0.58) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions -- (0.60) (0.02) (0.01) (0.04) (0.06)
------ ------ ------ ------ ------ ------
Net asset value at end of period 8.07 9.14 9.76 9.26 8.07 7.84
------ ------ ------ ------ ------ ------
Total return (%) (11.71)(4) (0.78) 5.62 14.85 3.42 32.84
RATIOS/SUPPLEMENTAL DATA (%)
Ratios to average net assets:
Net operating expenses 0.86(5, 8) 1.00(8) 0.99 0.99 0.99 0.80
Gross operating expenses 1.04(5) 1.02 1.05 1.34 2.34 2.59
Net investment income (loss) 0.34(5) 0.10 0.30 0.27 0.53 0.80
Portfolio turnover rate 36(4) 85 71 79 78 177
Net assets, end of period ($ x 1,000) 46,209 52,681 75,481 44,426 5,056 5,006
* Unaudited.
(1) Commencement of operations.
(2) Calculated based on the average shares outstanding during the period.
(3) Amount less than $0.005
(4) Not annualized.
(5) Annualized.
(6) The ratio of net operating expenses for period ending 03/31/08 would have
been 1.29% if interest expense had not been included.
(7) Effective July 31,2008, the Institutional Shares became Select Shares.
(8) The ratio of net operating expenses for period ending 03/31/08 and
09/30/08 would have been 0.99% and 0.85% respectively, if interest
expense had not been included.
19
Laudus Rosenberg U.S. Large Capitalization Fund
Financial Statements
FINANCIAL HIGHLIGHTS
4/1/08- 4/1/07- 4/1/06- 4/1/05- 4/1/04- 4/1/03-
INVESTOR SHARES 9/30/08* 3/31/08 3/31/07 3/31/06 3/31/05 3/31/04
--------------- -------- ------- ------- ------- ------- -------
PER--SHARE DATA ($)
Net asset value at beginning of period 10.38 13.21 12.36 11.81 10.96 8.31
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) 0.04(1) 0.06(1) 0.07(1) 0.06(1) 0.08(1) 0.02(1)
Net realized and unrealized gains (losses) (1.10) (0.72) 1.25 1.63 0.93 2.63
------ ------ ------ ------ ------ ------
Total from investment operations (1.06) (0.66) 1.32 1.69 1.01 2.65
Less distributions:
Distributions from net investment income -- (0.06) (0.05) (0.07) (0.07) --
Distributions from net realized gains -- (2.11) (0.42) (1.07) (0.09) --
------ ------ ------ ------ ------ ------
Total distributions -- (2.17) (0.47) (1.14) (0.16) --
------ ------ ------ ------ ------ ------
Net asset value at end of period 9.32 10.38 13.21 12.36 11.81 10.96
------ ------ ------ ------ ------ ------
Total return (%) (10.21)(2) (6.61) 10.69 14.57 9.22 31.89
RATIOS/SUPPLEMENTAL DATA (%)
Ratios to average net assets:
Net operating expenses 1.15(3) 1.31(4) 1.30(4) 1.33 1.35 1.25
Gross operating expenses 1.32(3) 1.40 1.38 1.52 1.58 1.51
Net investment income (loss) 0.81(3) 0.45 0.52 0.50 0.69 0.24
Portfolio turnover rate 71(2) 166 144 144 128 142
Net assets, end of period ($ x 1,000) 7,767 9,017 10,074 10,026 2,786 590
4/1/08- 4/1/07- 4/1/06- 4/1/05- 4/1/04- 4/1/03-
SELECT SHARES 9/30/08(*, 5) 3/31/08 3/31/07 3/31/06 3/31/05 3/31/04
------------- ------------- ------- ------- ------- ------- -------
PER--SHARE DATA ($)
Net asset value at beginning of period 10.38 13.21 12.35 11.79 10.92 8.28
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) 0.06(1) 0.10(1) 0.10(1) 0.10(1) 0.11(1) (0.06)(1)
Net realized and unrealized gains (losses) (1.11) (0.71) 1.27 1.62 0.94 2.62
------ ------ ------ ------ ------ ------
Total from investment operations (1.05) (0.61) 1.37 1.72 1.05 2.68
Less distributions:
Distributions from net investment income -- (0.11) (0.09) (0.09) (0.09) (0.04)
Distributions from net realized gains -- (2.11) (0.42) (1.07) (0.09) --
------ ------ ------ ------ ------ ------
Total distributions -- (2.22) (0.51) (1.16) (0.18) (0.04)
------ ------ ------ ------ ------ ------
Net asset value at end of period 9.33 10.38 13.21 12.35 11.79 10.92
------ ------ ------ ------ ------ ------
Total return (%) (10.12)(2) (6.30) 11.10 14.90 9.66 32.33
RATIOS/SUPPLEMENTAL DATA (%)
Ratios to average net assets:
Net operating expenses 0.85(3) 1.00(6) 1.00(6) 1.01 0.99 1.00
Gross operating expenses 0.94(3) 1.01 1.01 1.14 1.23 1.47
Net investment income (loss) 1.12(3) 0.77 0.81 0.80 0.96 0.62
Portfolio turnover rate 71(2) 166 144 144 128 142
Net assets, end of period ($ x 1,000) 78,727 83,783 94,921 54,296 44,559 44,301
* Unaudited
(1) Calculated based on the average shares outstanding during the period.
(2) Not annualized.
(3) Annualized.
(4) The ratio of net operating expenses would have been 1.29%, if interest
expenses had not been included.
(5) Effective July 31, 2008, the Institutional Shares became Select Shares.
(6) The ratio of net operating expenses would have been .99%, if interest
expenses had not been included.
20
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ___ day of February, 2009, by and between Laudus Trust, a Massachusetts
business trust (the "Trust"), on behalf of its Laudus Rosenberg U.S. Large
Capitalization Growth Fund (the "Acquired Fund"), and the Trust, on behalf of
its Laudus Rosenberg U.S. Large Capitalization 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 101 Montgomery Street, San Francisco CA, 94104.
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,
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 its 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
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fractional) equivalent in value to the Acquired Fund Shares outstanding
immediately prior to the Closing Date. Shareholders of record of Select Shares
of the Acquired Fund at the Closing Date shall be credited with full and
fractional Select Shares of the Surviving Fund. Shareholders of record of
Investor Shares of the Acquired Fund at the Closing Date shall be credited with
full and fractional Investor 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
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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 and Investor Shares s owned by each shareholder
immediately prior to the Closing Date. The Surviving Fund 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 Select Shares and Investor Shares of
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 for each class on the Valuation Date, determined in
accordance with Section 3(b). Shareholders of record of Select Shares of the
Acquired Fund at the Closing Date shall be credited with full and fractional
Select Shares of the Surviving Fund. Shareholders of record of Investor Shares
of the Acquired Fund at the Closing Date shall be credited with full and
fractional Investor Shares of the Surviving Fund.
(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
_______ __, 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
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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 and class of Surviving Fund Shares due such
shareholder. All of the issued and outstanding 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 Select Shares and Investor Shares of the
Surviving Fund have been duly established and represent a fractional undivided
interest in the Surviving Fund. The issued and outstanding Select Shares and
Investor Shares of the Surviving Fund are duly authorized, validly issued, fully
paid and nonassessable. 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 nonassessable.
(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,
2008 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
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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, 2008, 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 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 information statement and prospectus and statement of additional
information (collectively, the "Information Statement/Prospectus") to be
included in the Surviving Fund's registration
A-5
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 Information Statement/Prospectus,
Registration Statement and the documents incorporated therein by reference and
any amendment or 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 Information Statement/Prospectus, 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 Information Statement/Prospectus,
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 and Investor 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 and
Investor Shares of the Acquired Fund are, and at the Closing Date will be, duly
authorized, validly issued, fully paid and nonassessable. 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,
2008 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, 2008, 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
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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 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.
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(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.
(m) The Information Statement/Prospectus 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
Information Statement/Prospectus, 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 Information
Statement/Prospectus, 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 Information Statement/Prospectus, 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.
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:
(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
A-8
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.
(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
A-9
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.
(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,
A-10
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 nonassessable, 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.
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-11
(a) The Trust's Board of Trustees, on behalf of each of the Acquired Fund
and Surviving Fund, shall have approved this Agreement.
(b) 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.
(c) 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.
(d) 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.
(e) 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 in exchange solely for the
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 the 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.
(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.
A-12
(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 U.S. 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 U.S. 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).
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 [_____ __, 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;
(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
A-13
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 this Agreement 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:
Jeffrey Mortimer
Laudus Trust
101 Montgomery Street
San Francisco CA, 94104
with a copy to:
Timothy W. Levin, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Surviving Fund:
Jeffrey Mortimer
Laudus Trust
101 Montgomery Street
San Francisco CA, 94104
with a copy to:
Timothy W. Levin, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
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 CSIM. 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 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 Information Statement/Prospectus to such
shareholders; (iv) postage; (v) printing; (vi) accounting fees; and (vii) legal
fees. CSIM agrees that all such fees and expenses so borne and paid, shall be
paid directly by CSIM (or an affiliate thereof) 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.
A-14
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.
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.
LAUDUS TRUST, ON BEHALF OF ITS SERIES,
THE U.S. LARGE CAPITALIZATION GROWTH
FUND
By:
------------------------------------
Name:
Title:
LAUDUS TRUST, ON BEHALF OF ITS SERIES,
THE LAUDUS ROSENBERG U.S LARGE
CAPITALIZATION FUND
By:
------------------------------------
Name:
Title:
SOLELY FOR PURPOSES OF SECTIONS 14(b)
AND 18(b), CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
By:
------------------------------------
Name:
Title:
A-15
LAUDUS TRUST
101 Montgomery Street
San Francisco, CA 94104
888.517.9900
STATEMENT OF ADDITIONAL INFORMATION
Acquisition of the Assets of
LAUDUS ROSENBERG U.S. LARGE CAPITALIZATION GROWTH FUND
a series of
Laudus Trust
101 Montgomery Street
San Francisco, CA 94104
By and in Exchange for Shares of
LAUDUS ROSENBERG U.S. LARGE CAPITALIZATION FUND
a series of
Laudus Trust
101 Montgomery Street
San Francisco, CA 94104
[February __], 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. Large Capitalization Growth Fund (the
"Large Cap Growth Fund" or the "Acquired Fund") to the Laudus Rosenberg U.S.
Large Capitalization Fund (the "Large Cap Fund" or the "Surviving Fund" and,
together with the Large Cap Growth Fund, the "Funds") (the "Reorganization"),
should be read in conjunction with the Prospectus/Information Statement dated
February______, 2009 relating specifically to the Reorganization (the
"Prospectus"). Copies of the Prospectus may be obtained at no charge by calling
the Trust at (800) 447-3332.
This SAI, relating specifically to the Reorganization, consists of this
cover page and the following described documents, each of which is incorporated
by reference herein:
1. The Statement of Additional Information of the Trust relating to the
Acquired Fund and the Surviving Fund dated July 31, 2008.
2. The Report of the Independent Registered Public Accounting Firm and
audited financial statements of the Acquired Fund and Surviving Fund included in
the Funds' Annual Reports for the period ended March 31, 2008 (together, the
"Annual Reports"). No other parts of the Annual Reports are incorporated herein
by reference.
3. The unaudited financial statements of the Acquired Fund and Surviving
Fund included in the Funds' Semi-Annual Reports for the period ended September
30, 2008 (together, the "Semi-Annual Reports"). No other parts of the
Semi-Annual Reports are incorporated herein by reference.
2
TABLE OF CONTENTS - UPDATE PAGE NUMBERS
A. General Information..................................................... 3
B. Additional Information About the Acquired Fund and the Surviving Fund... 3
C. Financial Statements.................................................... 3
D. Pro Forma Financial Statements (Unaudited).............................. 4
E. Miscellaneous........................................................... 17
3
A. GENERAL INFORMATION
The Board of Trustees of the Acquired Fund has approved an Agreement and
Plan of Reorganization (the "Plan") which contemplates the transfer of
substantially all the assets and liabilities of the Acquired Fund to the
Surviving Fund in exchange for Select Shares and Investor Shares of the
Surviving Fund.
After the transfer of substantially all its assets and liabilities in
exchange for Select Shares and Investor Shares of the Surviving Fund, the
Acquired Fund will distribute the shares to its shareholders in liquidation of
the Acquired Fund. Each shareholder owning Select Shares and Investor Shares of
the Acquired Fund at the closing of the Reorganization will receive Select
Shares and Investor Shares, respectively, 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
Surviving Fund for each shareholder. In connection with the Reorganization, all
outstanding Select Shares and Investor 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
This SAI incorporates by reference the Statement of Additional Information
of the Trust relating to the Acquired Fund and the Surviving Fund dated July 31,
2008.
C. FINANCIAL STATEMENTS
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 and Surviving Fund
included in the Funds' Annual Reports are incorporated herein by reference
to such Annual Reports. No other parts of the Annual Reports are
incorporated herein by reference; and
2. The unaudited financial statements of the Acquired Fund and
Surviving Fund included in the Funds' Semi-Annual Reports are incorporated
herein by reference to such Semi-Annual Reports. No other parts of the
Semi-Annual Reports 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 October 1, 2008.
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 September 30, 2008. The unaudited pro forma
combined statement of operations for the period ended September 30, 2008,
presents the combined results of operations of the Acquired Fund and Surviving
Fund for the period
4
ended September 30, 2008. 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 October 1, 2008. 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 September 30, 2008, 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 Large Cap Fund for pre-combination periods will not
be combined/consolidated or included with the results of the Surviving Fund.
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.
Pro Forma Schedule of Investments (Unaudited)
Large Cap Growth Fund, Large Cap Fund and Pro Forma Large Cap Fund
September 30, 2008
PRO FORMA COMBINED LARGE
LARGE CAP LARGE CAP CAP FUND
GROWTH FUND FUND (SURVIVING FUND)
---------------------- --------------------- ------------------------
SECURITY DESCRIPTION SHARES/ MARKET SHARES/ MARKET SHARES/ MARKET
AND PERCENTAGE OF NET ASSETS (PRO FORMA) PRINCIPAL VALUE PRINCIPAL VALUE PRINCIPAL VALUE
------------------------------------------- -- --------- ---------- --------- --------- --------- ------------
AUTOMOBILES & COMPONENTS 0.1%
Johnson Controls, Inc. 3,000 90,990 50 1,516 3,050 92,506
90,990 1,516 92,506
BANKS 1.7%
Hudson City Bancorp, Inc. (a) 4,700 86,715 11,300 208,485 16,000 295,200
M&T Bank Corp. 510 45,518 510 45,518
Regions Financial Corp. 32,962 316,435 32,962 316,435
SunTrust Banks, Inc. 708 31,853 708 31,853
U.S. Bancorp 22,260 801,805 22,260 801,805
Wells Fargo & Co. 22,500 844,425 22,500 844,425
86,715 2,248,521 2,335,236
CAPITAL GOODS 10.0%
3M Co. (a) 4,660 318,325 320 21,859 4,980 340,184
Aecom Technology Corp. * 2,800 68,432 2,800 68,432
AGCO Corp. * (a) 2,510 106,951 2,510 106,951
Alliant Techsystems, Inc. * (a) 770 72,334 770 72,334
AMETEK, Inc. 2,860 116,602 2,860 116,602
Armstrong World Industries, Inc. 690 19,941 690 19,941
Caterpillar, Inc. (a) 4,000 238,400 4,000 238,400
Cooper Industries Ltd., Class A (a) 210 8,390 210 8,390
Crane Co. 3,790 112,601 3,790 112,601
Cummins, Inc. 4,600 201,112 15,612 682,557 20,212 883,669
Danaher Corp. 1,300 90,220 1,300 90,220
Deere & Co. 6,128 303,336 6,128 303,336
5
Donaldson Co., Inc. (a) 1,780 74,600 1,780 74,600
Dover Corp. 3,200 129,760 14,100 571,755 17,300 701,515
Emerson Electric Co. 7,960 324,688 7,960 324,688
First Solar, Inc. * 819 154,717 2,920 551,617 3,739 706,334
Flowserve Corp. 140 12,428 140 12,428
Fluor Corp. 3,000 167,100 3,000 167,100
General Dynamics Corp. (a) 1,100 80,982 80 5,890 1,180 86,872
General Electric Co. 20,300 517,650 20,300 517,650
Honeywell International, Inc. 8,730 362,731 25,463 1,057,988 34,193 1,420,719
Jacobs Engineering Group, Inc. * (a) 2,070 112,422 2,070 112,422
Joy Global, Inc. (a) 1,747 78,860 1,747 78,860
Kennametal, Inc. 700 18,984 700 18,984
L-3 Communications Holdings, Inc. 1,700 167,144 1,700 167,144
Lennox International, Inc. 1,800 59,886 1,800 59,886
Lockheed Martin Corp. 5,950 652,536 17,158 1,881,718 23,108 2,534,254
Northrop Grumman Corp. 1,550 93,837 20,700 1,253,178 22,250 1,347,015
PACCAR, Inc. (a) 2,340 89,365 2,340 89,365
Pall Corp. 90 3,095 90 3,095
Parker Hannifin Corp. 1,620 85,860 1,620 85,860
Precision Castparts Corp. 900 70,902 900 70,902
Raytheon Co. (a) 2,800 149,828 2,800 149,828
Rockwell Automation, Inc. (a) 2,670 99,698 2,670 99,698
SPX Corp. (a) 1,100 84,700 4,160 320,320 5,260 405,020
SunPower Corp., Class B * 959 66,219 1,072 74,022 2,031 140,241
The Boeing Co. 4,600 263,810 4,600 263,810
The Manitowoc Co., Inc. (a) 4,000 62,200 9,350 145,392 13,350 207,592
The Shaw Group, Inc. * 1,800 55,314 5,409 166,218 7,209 221,532
The Timken Co. 107 3,033 6,949 197,004 7,056 200,037
The Toro Co. (a) 1,700 70,210 1,700 70,210
Tyco International Ltd. 3,500 161,092 3,500 161,092
United Technologies Corp. 3,500 210,210 3,500 210,210
W.W. Grainger, Inc. 1,390 120,888 4,051 352,315 5,441 473,203
5,611,201 7,932,025 13,543,226
COMMERCIAL & PROFESSIONAL SUPPLIES 0.6%
Allied Waste Industries, Inc. * 4,000 44,440 20,530 228,088 24,530 272,528
Manpower, Inc. (a) 200 8,632 1,280 55,245 1,480 63,877
R.R. Donnelley & Sons Co. 17,100 419,463 17,100 419,463
Waste Management, Inc. 2,700 85,023 2,700 85,023
138,095 702,796 840,891
CONSUMER DURABLES & APPAREL 0.4%
NIKE, Inc., Class B 5,210 348,549 5,210 348,549
The Stanley Works (a) 900 37,566 900 37,566
The Warnaco Group, Inc. * 2,110 95,562 2,110 95,562
386,115 95,562 481,677
CONSUMER SERVICES 1.0%
CBRL Group, Inc. (a) 800 21,040 800 21,040
H&R Block, Inc. (a) 2,112 48,048 21,900 498,225 24,012 546,273
McDonald's Corp. 6,600 407,220 6,600 407,220
Yum! Brands, Inc. 10,600 345,666 10,600 345,666
821,974 498,225 1,320,199
6
DIVERSIFIED FINANCIALS 3.8%
American Express Co. 5,700 201,951 7,520 266,434 13,220 468,385
Bank of America Corp. 36,750 1,286,250 36,750 1,286,250
BlackRock, Inc. (a) 660 128,370 660 128,370
Citigroup, Inc. 41,300 847,063 41,300 847,063
JPMorgan Chase & Co. 30,573 1,427,759 30,573 1,427,759
Morgan Stanley 6,870 158,010 6,870 158,010
Northern Trust Corp. 3,381 244,108 3,381 244,108
State Street Corp. 2,090 118,879 2,090 118,879
T. Rowe Price Group, Inc. (a) 1,500 80,565 1,500 80,565
The Goldman Sachs Group, Inc. 2,730 349,440 2,730 349,440
773,873 4,334,956 5,108,829
ENERGY 16.3%
Apache Corp. 20 2,086 20 2,086
Arch Coal, Inc. (a) 2,530 83,212 2,530 83,212
Atwood Oceanics, Inc. * (a) 1,900 69,160 1,900 69,160
Baker Hughes, Inc. 4,520 273,641 4,520 273,641
Cabot Oil & Gas Corp. 1,800 65,052 1,800 65,052
Cameron International Corp. * 4,540 174,972 110 4,239 4,650 179,211
Chevron Corp. 30,670 2,529,662 30,670 2,529,662
Cimarex Energy Co. 6,300 308,133 6,300 308,133
ConocoPhillips 33,300 2,439,225 33,300 2,439,225
Continental Resources, Inc. * (a) 1,800 70,614 1,800 70,614
Denbury Resources, Inc. * (a) 4,700 89,488 4,700 89,488
Devon Energy Corp. 3,588 327,226 3,588 327,226
Diamond Offshore Drilling, Inc. (a) 1,650 170,049 2,360 243,222 4,010 413,271
Encore Acquisition Co. * 600 25,068 600 25,068
ENSCO International, Inc. 3,220 185,569 4,000 230,520 7,220 416,089
EOG Resources, Inc. 1,200 107,352 1,200 107,352
Exxon Mobil Corp. 10,980 852,707 41,870 3,251,624 52,850 4,104,331
FMC Technologies, Inc. * 2,500 116,375 2,500 116,375
Forest Oil Corp. * 5,980 296,608 5,980 296,608
Foundation Coal Holdings, Inc. 1,500 53,370 1,160 41,273 2,660 94,643
Global Industries Ltd. * (a) 3,200 22,208 3,200 22,208
Halliburton Co. 11,600 375,724 11,600 375,724
Helix Energy Solutions Group, Inc. * (a) 200 4,856 3,030 73,568 3,230 78,424
Hess Corp. (a) 2,000 164,160 2,000 164,160
International Coal Group, Inc. * 8,720 54,413 8,720 54,413
Mariner Energy, Inc. * (a) 2,500 51,250 6,320 129,560 8,820 180,810
Massey Energy Co. (a) 2,310 82,398 3,880 138,400 6,190 220,798
Murphy Oil Corp. (a) 3,400 218,076 10,000 641,400 13,400 859,476
National-Oilwell Varco, Inc. * 2,500 125,575 2,500 125,575
Newfield Exploration Co. * 2,360 75,496 2,360 75,496
Noble Corp. 5,380 236,182 7,425 325,957 12,805 562,139
Noble Energy (a) 480 26,683 480 26,683
Occidental Petroleum Corp. (a) 8,461 596,077 16,630 1,171,583 25,091 1,767,660
Oil States International, Inc. * (a) 1,250 44,188 3,840 135,744 5,090 179,932
Overseas Shipholding Group, Inc. 250 14,578 250 14,578
Patterson-UTI Energy, Inc. (a) 3,075 61,562 3,075 61,562
Peabody Energy Corp. (a) 1,600 72,000 1,600 72,000
7
Penn Virginia Corp. 830 44,355 830 44,355
Petrohawk Energy Corp. * (a) 4,000 86,520 4,000 86,520
Pioneer Natural Resources Co. 4,340 226,895 4,340 226,895
Plains Exploration & Production Co. * 2,496 87,759 5,750 202,170 8,246 289,929
Pride International, Inc. * 3,530 104,523 1,320 39,085 4,850 143,608
Rowan Cos., Inc. (a) 2,720 83,096 8,340 254,787 11,060 337,883
SandRidge Energy, Inc. * (a) 3,000 58,800 3,000 58,800
Schlumberger Ltd. (a) 14,800 1,155,732 9,124 712,493 23,924 1,868,225
SEACOR Holdings, Inc. * (a) 200 15,790 200 15,790
Smith International, Inc. (a) 4,700 275,608 4,000 234,560 8,700 510,168
Southwestern Energy Co. * 5,800 177,132 5,800 177,132
St. Mary Land & Exploration Co. (a) 1,100 39,215 1,100 39,215
Stone Energy Corp. * 1,806 76,448 1,806 76,448
Superior Energy Services, Inc. * 2,246 69,940 2,246 69,940
Swift Energy Co. * 2,030 78,541 2,030 78,541
Teekay Corp. 3,200 84,416 3,200 84,416
TETRA Technologies, Inc. * 3,000 41,550 3,000 41,550
The Williams Cos., Inc. 6,550 154,907 6,550 154,907
Tidewater, Inc. 200 11,072 3,800 210,368 4,000 221,440
Transocean, Inc. * (a) 1,979 217,373 1,979 217,373
Unit Corp. * 1,200 59,784 2,350 117,077 3,550 176,861
W&T Offshore, Inc. (a) 1,170 31,929 2,300 62,767 3,470 94,696
Walter Industries, Inc. 1,400 66,430 1,400 66,430
Weatherford International Ltd. * (a) 4,200 105,588 4,200 105,588
Whiting Petroleum Corp. * 1,080 76,961 1,080 76,961
7,337,277 14,778,479 22,115,756
FOOD & STAPLES RETAILING 1.2%
Costco Wholesale Corp. (a) 2,330 151,287 2,330 151,287
CVS Caremark Corp. 10,320 347,371 1,954 65,772 12,274 413,143
Sysco Corp. (a) 3,400 104,822 3,400 104,822
Walgreen Co. 5,300 164,088 5,300 164,088
Wal-Mart Stores, Inc. 12,190 730,059 12,190 730,059
1,497,627 65,772 1,563,399
FOOD, BEVERAGE & TOBACCO 3.5%
Altria Group, Inc. 10,100 200,384 14,960 296,806 25,060 497,190
Bunge Ltd. 8,069 509,799 8,069 509,799
Campbell Soup Co. 260 10,036 20 772 280 10,808
Constellation Brands, Inc., Class A * 25,934 556,544 25,934 556,544
Dean Foods Co. * (a) 1,650 38,544 1,650 38,544
H.J. Heinz Co. 3,200 159,904 3,200 159,904
Kellogg Co. (a) 2,800 157,080 2,800 157,080
PepsiCo, Inc. 9,600 684,192 9,600 684,192
Philip Morris International, Inc. 7,700 370,370 12,740 612,794 20,440 983,164
The Coca-Cola Co. 15,023 794,416 15,023 794,416
The Pepsi Bottling Group, Inc. 1,700 49,589 1,700 49,589
Tyson Foods, Inc., Class A 19,590 233,905 19,590 233,905
UST, Inc. (a) 1,700 113,118 1,700 113,118
2,577,633 2,210,620 4,788,253
HEALTH CARE EQUIPMENT & SERVICES 3.3%
Aetna, Inc. 2,300 83,053 2,300 83,053
8
Baxter International, Inc. 7,000 459,410 7,000 459,410
Beckman Coulter, Inc. 1,260 89,447 1,260 89,447
Becton, Dickinson & Co. 3,900 313,014 3,900 313,014
Cardinal Health, Inc. 1,978 97,476 1,978 97,476
Edwards Lifesciences Corp. * (a) 1,700 98,192 1,700 98,192
Express Scripts, Inc. * (a) 4,400 324,808 14,400 1,063,008 18,800 1,387,816
Health Net, Inc. * 180 4,248 7,498 176,953 7,678 181,201
Hologic, Inc. * 19,500 376,935 19,500 376,935
Intuitive Surgical, Inc. * 900 216,882 900 216,882
Inverness Medical Innovations, Inc. * 5,425 162,750 5,425 162,750
Medco Health Solutions, Inc. * 3,100 139,500 3,100 139,500
Medtronic, Inc. 7,100 355,710 7,100 355,710
St. Jude Medical, Inc. * 3,100 134,819 3,100 134,819
Stryker Corp. (a) 1,700 105,910 1,700 105,910
Teleflex, Inc. 2,912 184,883 2,912 184,883
Varian Medical Systems, Inc. * 2,400 137,112 2,400 137,112
2,559,581 1,964,529 4,524,110
HOUSEHOLD & PERSONAL PRODUCTS 3.1%
Avon Products, Inc. 6,900 286,833 26,285 1,092,667 33,185 1,379,500
Church & Dwight Co., Inc. (a) 1,600 99,344 90 5,588 1,690 104,932
Colgate-Palmolive Co. 6,120 461,142 4,920 370,722 11,040 831,864
Energizer Holdings, Inc. * (a) 1,130 91,022 1,200 96,660 2,330 187,682
Herbalife Ltd. (a) 2,000 79,040 2,000 79,040
The Clorox Co. (a) 1,300 81,497 5,427 340,219 6,727 421,716
The Estee Lauder Cos., Inc., Class A 2,000 99,820 8,100 404,271 10,100 504,091
The Procter & Gamble Co. 7,500 522,675 3,500 243,915 11,000 766,590
1,721,373 2,554,042 4,275,415
INSURANCE 4.8%
Aflac, Inc. 2,800 164,500 2,800 164,500
Aon Corp. 18,761 843,494 18,761 843,494
Assurant, Inc. 8,180 449,900 8,180 449,900
CNA Financial Corp. 1,000 26,240 4,690 123,066 5,690 149,306
Everest Re Group Ltd. 4,700 406,691 4,700 406,691
MetLife, Inc. 25,978 1,454,768 25,978 1,454,768
Prudential Financial, Inc. 2,333 167,976 22,646 1,630,512 24,979 1,798,488
Reinsurance Group of America, Inc., Class A 1,410 76,140 1,410 76,140
The Hartford Financial Services Group, Inc. 13,285 544,552 13,285 544,552
Unum Group 25,540 641,054 25,540 641,054
358,716 6,170,177 6,528,893
MATERIALS 7.8%
Air Products & Chemicals, Inc. 1,130 77,394 1,130 77,394
Albemarle Corp. 2,340 72,166 2,340 72,166
Alcoa, Inc. 3,900 88,062 3,900 88,062
Ashland, Inc. 4,460 130,410 4,460 130,410
Cabot Corp. (a) 1,700 54,026 4,870 154,769 6,570 208,795
Carpenter Technology Corp. 76 1,949 76 1,949
Celanese Corp., Series A 2,554 71,282 6,530 182,252 9,084 253,534
CF Industries Holdings, Inc. 1,100 100,606 4,300 393,278 5,400 493,884
Chemtura Corp. 300 1,368 7,243 33,028 7,543 34,396
9
Cleveland-Cliffs, Inc. 2,800 148,232 6,527 345,539 9,327 493,771
Cytec Industries, Inc. 3,350 130,349 3,350 130,349
Domtar Corp. * (a) 790 3,634 790 3,634
Eastman Chemical Co. 5,800 319,348 5,800 319,348
FMC Corp. 1,100 56,529 4,267 219,281 5,367 275,810
Hercules, Inc. 7,527 148,959 7,527 148,959
International Flavors & Fragrances, Inc. (a) 2,300 90,758 2,300 90,758
International Paper Co. 28,951 757,937 28,951 757,937
Monsanto Co. 6,500 643,370 23,100 2,286,438 29,600 2,929,808
Nalco Holding Co. 4,200 77,868 10,308 191,110 14,508 268,978
Newmont Mining Corp. 2,800 108,528 2,800 108,528
Nucor Corp. (a) 1,880 74,260 1,880 74,260
Olin Corp. 4,780 92,732 4,780 92,732
PPG Industries, Inc. 900 52,488 11,290 658,433 12,190 710,921
Praxair, Inc. 4,500 322,830 4,500 322,830
Rockwood Holdings, Inc. * 2,277 58,428 2,277 58,428
RPM International, Inc. (a) 4,300 83,162 8,420 162,843 12,720 246,005
Sigma-Aldrich Corp. (a) 550 28,831 550 28,831
Steel Dynamics, Inc. 1 17 1 17
Terra Industries, Inc. (a) 1,980 58,212 7,392 217,325 9,372 275,537
The Lubrizol Corp. (a) 800 34,512 800 34,512
The Mosaic Co. 2,691 183,042 10,697 727,610 13,388 910,652
The Scotts Miracle-Gro Co., Class A 1,200 28,368 1,240 29,314 2,440 57,682
The Valspar Corp. (a) 200 4,458 7,520 167,621 7,720 172,079
United States Steel Corp. 1,920 149,011 7,900 613,119 9,820 762,130
2,614,963 8,020,123 10,635,086
MEDIA 2.6%
CBS Corp., Class B 55,900 815,022 55,900 815,022
Comcast Corp., Class A (a) 5,000 98,150 5,000 98,150
DISH Network Corp., Class A * 3,635 76,335 15,245 320,145 18,880 396,480
The DIRECTV Group, Inc. * (a) 7,163 187,456 7,163 187,456
Time Warner, Inc. 151,400 1,984,854 151,400 1,984,854
Viacom, Inc., Class B * 3,400 84,456 3,400 84,456
446,397 3,120,021 3,566,418
PHARMACEUTICALS & BIOTECHNOLOGY 8.7%
Abbott Laboratories 10,100 581,558 10,100 581,558
Allergan, Inc. 1,800 92,700 1,800 92,700
Amgen, Inc. * 1,300 77,051 4,832 286,393 6,132 363,444
Applied Biosystems, Inc. 1,900 65,075 1,900 65,075
Biogen Idec, Inc. * 4,144 208,402 2,390 120,193 6,534 328,595
Bristol-Myers Squibb Co. 22,300 464,955 88,800 1,851,480 111,100 2,316,435
Celgene Corp. * 2,800 177,184 2,800 177,184
Cephalon, Inc. * 5,041 390,627 5,041 390,627
Charles River Laboratories International, Inc. * (a) 1,000 55,530 1,000 55,530
Eli Lilly & Co. 50 2,202 50 2,202
Forest Laboratories, Inc. * 1,600 45,248 1,600 45,248
Genentech, Inc. * 2,700 239,436 2,700 239,436
Genzyme Corp. * (a) 4,000 323,560 4,000 323,560
Gilead Sciences, Inc. * 9,735 443,721 16,900 770,302 26,635 1,214,023
ImClone Systems, Inc. * 1,780 111,143 1,780 111,143
10
Invitrogen Corp. * (a) 1,480 55,944 7,000 264,600 8,480 320,544
Johnson & Johnson 7,700 533,456 2,270 157,266 9,970 690,722
Merck & Co., Inc. 3,900 123,084 3,900 123,084
Mylan, Inc. * 2,000 22,840 1,210 13,818 3,210 36,658
PerkinElmer, Inc. (a) 2,000 49,940 2,000 49,940
Pfizer, Inc. 190,110 3,505,628 190,110 3,505,628
Schering-Plough Corp. (a) 9,160 169,185 9,160 169,185
Waters Corp. * 1,800 104,724 6,966 405,282 8,766 510,006
Watson Pharmaceuticals, Inc. * 2,000 57,000 2,000 57,000
4,003,938 7,765,589 11,769,527
REAL ESTATE 0.7%
Boston Properties, Inc. 900 84,294 900 84,294
Douglas Emmett, Inc. 8,200 189,174 8,200 189,174
Health Care REIT, Inc. 1,100 58,553 1,100 58,553
HRPT Properties Trust 16,600 114,374 16,600 114,374
ProLogis 2,200 90,794 2,200 90,794
Public Storage 900 89,109 900 89,109
Simon Property Group, Inc. (a) 1,190 115,430 1,680 162,960 2,870 278,390
Vornado Realty Trust 1,000 90,950 1,000 90,950
173,983 821,655 995,638
RETAILING 1.7%
Amazon.com, Inc. * 2,150 156,434 2,150 156,434
AutoZone, Inc. * 880 108,539 3,368 415,409 4,248 523,948
Best Buy Co., Inc. (a) 2,200 82,500 2,200 82,500
Big Lots, Inc. * (a) 3,100 86,273 3,100 86,273
Dollar Tree, Inc. * 2,700 98,172 2,700 98,172
Expedia, Inc. * 15,600 235,716 15,600 235,716
Family Dollar Stores, Inc. (a) 200 4,740 200 4,740
Limited Brands, Inc. 4,550 78,806 10,840 187,749 15,390 266,555
RadioShack Corp. (a) 3,300 57,024 3,300 57,024
Staples, Inc. (a) 4,633 104,243 4,633 104,243
Target Corp. (a) 4,800 235,440 4,800 235,440
The Sherwin-Williams Co. (a) 1,900 108,604 1,900 108,604
The TJX Cos., Inc. (a) 7,300 222,796 480 14,650 7,780 237,446
Urban Outfitters, Inc. * (a) 2,700 86,049 2,700 86,049
1,429,620 853,524 2,283,144
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 1.2%
Applied Materials, Inc. (a) 8,400 127,092 8,400 127,092
Broadcom Corp., Class A * (a) 3,200 59,616 3,200 59,616
Cypress Semiconductor Corp. * 3,500 18,270 3,910 20,410 7,410 38,680
Fairchild Semiconductor International, Inc. * 1,900 16,891 1,900 16,891
Integrated Device Technology, Inc. * 2,720 21,162 2,720 21,162
Intel Corp. (a) 31,500 589,995 31,500 589,995
LSI Corp. * (a) 11,600 62,176 48,600 260,496 60,200 322,672
Micron Technology, Inc. * 1,500 6,075 59,600 241,380 61,100 247,455
Teradyne, Inc. * 4,120 32,177 4,120 32,177
Texas Instruments, Inc. 7,800 167,700 7,800 167,700
1,101,154 522,286 1,623,440
SOFTWARE & SERVICES 8.6%
Accenture Ltd., Class A 8,900 338,200 14,690 558,220 23,590 896,420
11
Activision Blizzard, Inc. * (a) 11,000 169,730 11,000 169,730
Adobe Systems, Inc. * 3,200 126,304 3,200 126,304
Affiliated Computer Services, Inc., Class A * (a) 1,400 70,882 100 5,063 1,500 75,945
Akamai Technologies, Inc. * 4,900 85,456 4,900 85,456
Amdocs Ltd. * 13,821 378,419 13,821 378,419
Automatic Data Processing, Inc. 3,000 128,250 3,000 128,250
BMC Software, Inc. * (a) 3,600 103,068 510 14,601 4,110 117,669
CA, Inc. 4,718 94,171 28,300 564,868 33,018 659,039
Computer Sciences Corp. * 12,100 486,299 12,100 486,299
Compuware Corp. * (a) 7,165 69,429 7,165 69,429
eBay, Inc. * 6,000 134,280 6,000 134,280
Electronic Arts, Inc. * 1,700 62,883 1,700 62,883
Google, Inc., Class A * 1,560 624,811 1,560 624,811
Hewitt Associates, Inc., Class A * 2,580 94,015 7,050 256,902 9,630 350,917
IAC/InterActiveCorp * 1,500 25,950 7,250 125,425 8,750 151,375
Intuit, Inc. * 5,745 181,599 23,230 734,300 28,975 915,899
MasterCard, Inc., Class A (a) 1,300 230,529 1,300 230,529
McAfee, Inc. * 2,854 96,922 2,854 96,922
Microsoft Corp. 56,100 1,497,309 9,970 266,099 66,070 1,763,408
Novell, Inc. * 6,400 32,896 28,100 144,434 34,500 177,330
Oracle Corp. * 42,100 855,051 97,829 1,986,907 139,929 2,841,958
SAIC, Inc. * 2,600 52,598 2,600 52,598
Solera Holdings, Inc. * 3,500 100,520 3,500 100,520
Synopsys, Inc. * 4,510 89,975 4,510 89,975
VeriSign, Inc. * (a) 3,700 96,496 13,717 357,740 17,417 454,236
Western Union Co. 12,100 298,507 12,100 298,507
Yahoo!, Inc. * (a) 7,300 126,290 7,300 126,290
5,685,601 5,979,797 11,665,398
TECHNOLOGY HARDWARE & EQUIPMENT 9.0%
Agilent Technologies, Inc. * (a) 6,400 189,824 23,490 696,713 29,890 886,537
Amphenol Corp., Class A 3,041 122,066 833 33,437 3,874 155,503
Apple, Inc. * 9,820 1,116,141 80 9,093 9,900 1,125,234
Arrow Electronics, Inc. * 200 5,244 200 5,244
Avnet, Inc. * 2,800 68,964 2,800 68,964
Avocent Corp. * (a) 15 307 15 307
AVX Corp. (a) 300 3,057 300 3,057
Cisco Systems, Inc. * 39,200 884,352 39,200 884,352
CommScope, Inc. * (a) 1,800 62,352 1,800 62,352
Corning, Inc. 9,800 153,272 9,800 153,272
Dell, Inc. * 12,300 202,704 12,300 202,704
EMC Corp. * (a) 10,110 120,916 10,110 120,916
FLIR Systems, Inc. * (a) 2,700 103,734 2,700 103,734
Harris Corp. 2,510 115,962 9,420 435,204 11,930 551,166
Hewlett-Packard Co. 23,340 1,079,241 9,164 423,743 32,504 1,502,984
International Business Machines Corp. 13,311 1,556,854 30,503 3,567,631 43,814 5,124,485
Itron, Inc. * (a) 1,100 97,383 1,100 97,383
JDS Uniphase Corp. * (a) 2,030 17,174 2,030 17,174
Juniper Networks, Inc. * (a) 3,200 67,424 3,200 67,424
Mettler-Toledo International, Inc. * 1,400 137,200 1,400 137,200
NCR Corp. * (a) 800 17,640 800 17,640
12
QLogic Corp. * (a) 4,200 64,512 4,200 64,512
QUALCOMM, Inc. 17,000 730,490 17,000 730,490
Sun Microsystems, Inc. * 8,908 67,701 8,908 67,701
Vishay Intertechnology, Inc. * 300 1,986 300 1,986
6,918,799 5,233,522 12,152,321
TELECOMMUNICATION SERVICES 3.5%
American Tower Corp., Class A * 2,300 82,731 2,300 82,731
AT&T, Inc. 51,220 1,430,062 51,220 1,430,062
Verizon Communications, Inc. 99,533 3,194,014 99,533 3,194,014
82,731 4,624,076 4,706,807
TRANSPORTATION 2.4%
Burlington Northern Santa Fe Corp. 1,700 157,131 1,700 157,131
Con-way, Inc. (a) 110 4,852 110 4,852
CSX Corp. 6,080 331,786 6,080 331,786
Genco Shipping & Trading Ltd. 1,460 48,530 1,460 48,530
Kansas City Southern * (a) 1,800 79,848 1,800 79,848
Norfolk Southern Corp. 3,300 218,493 3,300 218,493
Ryder System, Inc. (a) 800 49,600 800 49,600
Union Pacific Corp. 6,800 483,888 21,960 1,562,674 28,760 2,046,562
United Parcel Service, Inc., Class B (a) 4,000 251,560 4,000 251,560
UTI Worldwide, Inc. 3,100 52,762 690 11,744 3,790 64,506
1,629,920 1,622,948 3,252,868
UTILITIES 2.8%
CMS Energy Corp. 16,790 209,371 16,790 209,371
DTE Energy Co. 11,192 449,023 11,192 449,023
Entergy Corp. (a) 800 71,208 800 71,208
Exelon Corp. (a) 1,800 112,716 1,800 112,716
MDU Resources Group, Inc. 12,920 374,680 12,920 374,680
NiSource, Inc. 19,716 291,008 19,716 291,008
ONEOK, Inc. 3,783 130,135 3,783 130,135
Pepco Holdings, Inc. 14,787 338,770 14,787 338,770
PG&E Corp. 24,570 920,147 24,570 920,147
PPL Corp. 2,311 85,553 2,311 85,553
Public Service Enterprise Group, Inc. 2,900 95,091 2,900 95,091
Sierra Pacific Resources (a) 2,400 22,992 2,400 22,992
The AES Corp. * 12,100 141,449 45,650 533,649 57,750 675,098
529,009 3,246,783 3,775,792
SHORT-TERM INVESTMENTS 1.6%
Repurchase Agreements 595,000 595,000
Repurchase Agreements 1,597,000 1,597,000
595,000 1,597,000 2,192,000
GRAND TOTAL 49,172,285 86,964,544 136,136,829
* Non-income producing security.
(a) All or a portion of this security is on loan.
13
Pro Forma Statement of Assets and Liabilities (Unaudited)
Large Cap Growth Fund, Large Cap Fund and Pro Forma Large Cap Fund
September 30, 2008
LAUDUS LAUDUS
ROSENBERG ROSENBERG
U.S. LARGE U.S. LARGE
CAPITALIZATION CAPITALIZATION PROFORMA PROFORMA
GROWTH FUND FUND ADJUSTMENTS COMBINED
-------------- -------------- ----------- ------------
ASSETS
Investments, at value including $4,512,227 of securities
on loan (cost $143,117,218) $49,172,285 $86,964,544 $136,136,829
Collateral invested for securities on loan 4,617,351 0 4,617,351
Cash 1,005 234 1,239
Receivables:
Investments sold 477,776 3,197,445 3,675,221
Fund shares sold 14,832 319,780 334,612
Dividends 38,647 110,046 148,693
Income from securities on loan 1,072 0 1,072
Interest 20 53 73
Prepaid expenses 3,378 5,353 8,731
----------- ----------- ------------
TOTAL ASSETS 54,326,366 90,597,455 144,923,821
LIABILITIES
Collateral invested for securities on loan 4,617,351 -- 4,617,351
Payables:
Investments bought 416,379 3,769,915 4,186,294
Investment adviser fees 1,983 4,400 42,088 48,471
Fund shares redeemed 129,431 277,813 407,244
Distribution and shareholder services fees 971 4,269 5,240
Accrued expenses 46,630 46,642 (42,088) 51,184
----------- ----------- -------- ------------
TOTAL LIABILITIES 5,212,745 4,103,039 -- 9,315,784
----------- ----------- -------- ------------
NET ASSETS $49,113,621 $86,494,416 $135,608,037
=========== =========== ============
NET ASSETS BY SOURCE
Capital received from investors $49,657,445 $98,858,028 $148,515,473
Net investment income not yet distributed 132,393 757,670 890,063
Net realized capital losses (919,326) (5,897,784) (6,817,110)
Net unrealized capital gains/losses 243,109 (7,223,498) (6,980,389)
NET ASSET VALUE (NAV) BY SHARES CLASS
INVESTOR SHARES:
Net Assets $ 2,904,271 $ 7,767,089 $ 10,671,360
Shares Outstanding 358,738 833,417 (47,121)(a) 1,145,034
----------- ----------- ------------
Net Asset Value $ 8.10 $ 9.32 $ 9.32
=========== =========== ============
SELECT SHARES:
Net Assets $46,209,350 $78,727,327 $124,936,677
Shares Outstanding 5,728,009 8,440,414 (775,238)(a) 13,393,185
----------- ----------- ------------
Net Asset Value $ 8.07 $ 9.33 $ 9.33
=========== =========== ============
(a) Reflects the adjustment to the number of shares outstanding due to the
merger.
14
Pro Forma Statement of Operations (Unaudited)
Large Cap Growth Fund, Large Cap Fund and Pro Forma Large Cap Fund
For the Year Ended September 30, 2008
LAUDUS LAUDUS
ROSENBERG ROSENBERG
U.S. LARGE U.S. LARGE
CAPITALIZATION CAPITALIZATION PROFORMA PROFORMA
GROWTH FUND FUND ADJUSTMENTS COMBINED
-------------- -------------- ----------- ------------
INVESTMENT INCOME
Dividends $ 328,445 $ 952,316 $ 1,280,761
Interest 4,803 8,909 13,712
Securities on loan 14,387 -- 14,387
----------- ----------- ------------
TOTAL INVESTMENT INCOME 347,635 961,225 1,308,860
----------- ----------- ------------
NET REALIZED LOSSES ON INVESTMENTS (901,495) (2,005,352) (2,906,847)
NET UNREALIZED LOSSES ON INVESTMENTS (5,816,605) (8,306,293) (14,122,898)
EXPENSES
Investment adviser fees 217,291 366,961 584,252
Accounting and administration fees 23,022 21,960 (16,698) 28,284(a)
Professional fees 17,842 20,058 (18,950) 18,950(b)
Transfer agent fees 9,681 12,531 22,212
Registration fees 16,201 12,280 28,481
Custodian fees 5,008 11,215 (4,800) 11,423(c)
Shareholder reports 4,379 7,503 11,882
Distribution and shareholder service
fees (Investor Shares) 3,784 11,968 15,752
Trustees' fees 3,279 3,692 (1,640) 5,331(d)
Sub-Accounting fees (Investor
Shares) 1,870 6,182 8,052
Interest expense 1,144 189 1,333
Other expenses 2,650 4,360 7,010
----------- ----------- ------- ------------
Total expenses 306,151 478,899 (42,088) 742,962
Expense reduction by adviser (53,804) (50,592) 42,088 (62,308)(d)
Custody credits (31) (19) (50)
----------- ----------- ------- ------------
NET EXPENSES 252,316 428,288 -- 680,604
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Total investment income 347,635 961,225 1,308,860
Net expenses 252,316 428,288 680,604
----------- ----------- ------------
Net investment income 95,319 532,937 628,256
Net realized losses (901,495) (2,005,352) (2,906,847)
Net unrealized losses (5,816,605) (8,306,293) (14,122,898)
----------- ----------- ------------
DECREASE IN NET ASSETS FROM OPERATIONS $(6,622,781) $(9,778,708) $(16,401,489)
15
Notes to the Unaudited Pro Forma Combined Financial Statements September 30,
2008
1. BASIS OF COMBINATION
The Pro Forma Combined Statement of Assets and Liabilities, including the
Pro Forma Schedule of Investments ("Pro Forma Statements") as of September 30,
2008, and the related Pro Forma Combined Statement of Operations for the
semi-annual period ended September 30, 2008, reflect the accounts of the Laudus
Rosenberg U.S. Large Capitalization Growth Fund (the "Large Cap Growth Fund" or
the "Acquired Fund") and Laudus Rosenberg U.S. Large Capitalization Fund (the
"Large Cap Fund" or the "Surviving Fund"), each a series of Laudus 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 September 30, 2008.
The Pro Forma Statements give effect to the proposed transfer of
substantially all assets and liabilities of the Acquired Funds in exchange for
shares of the Surviving Fund. In conjunction with the reorganization, the Large
Cap Fund is the surviving fund.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of the Surviving Fund and the Acquired Funds included in
their respective Statements of Additional Information.
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 current
exchange rate. The Funds do not isolate the portion of the fluctuation
on investments resulting from changes in foreign currency exchange
rates from the fluctuations in market prices of investments held. Such
fluctuations are included with the net realized and unrealized gain or
loss from investments.
- 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 prices adjusted for changes in value that may occur between the
close of foreign exchange and the time at which Fund shares are
priced. The Board of Trustees regularly reviews fair value
determinations, made by the Funds, pursuant to the procedures.
- SHORT-TERM DEBT SECURITIES (60 DAYS OR LESS TO MATURITY): valued at
amortized cost (which approximates market value).
- MUTUAL 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
September 30, 2008, in connection with the proposed reorganization.
16
Assuming a merger date of September 30, 2008, shareholders of the Large Cap
Growth Fund would have received 0.8647 Select share of the Large Cap Fund in
exchange for 1 Select share of the Large Cap Growth Fund, and 0.8686 Investor
share of Large Cap Fund in exchange for 1 Investor share of the Large Cap Growth
Fund. The Pro Forma Statements assume that all shares of the Acquired Funds
outstanding on September 30, 2008, 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) Adjustment to eliminate certain duplicated accounting/administration fees.
(b) Adjustment to eliminate duplicated audit fees.
(c) Adjustment to eliminate duplicate custodian transaction charges.
(d) Adjustment to eliminate duplicate per-fund trustee fees.
(e) Adjustment to reflect the Contractual expense limitation in effect for the
Surviving Fund.
5. TAX MATTERS
It is the policy of Laudus Trust that each of the Funds qualify or continue
to qualify as a regulated investment company, by complying with the requirements
of the Internal Revenue Code applicable to regulated investment companies, and
by distributing substantially all of its taxable earnings to its shareholders.
In order to avoid a federal excise tax, each Fund is required to distribute
certain minimum amounts of net realized capital gain and net investment income
for the respective twelve-month periods ending October 31 and December 31 each
year. Under the terms of the Plan of Reorganization, this reorganization should
be treated as a tax-free business combination
6. FUND EXPENSES
Pursuant to the Adviser's contractual undertaking (the "Expense Limitation
Agreement") to waive its management fee and bear certain expenses for the Select
and Investor classes when the operating expenses reach 0.84% and 1.14%,
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 Fund's business). The Expense Limitation Agreement will be in place until
at least July 30, 2010. 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 Fund to CSIM during the next
two fiscal years to the extent that the repayment will not cause the Fund's Net
Expenses to exceed the current limit (as stated in the Expense Limitation
Agreement) during the respective year.
7. NEW ACCOUNTING STANDARDS
The fund(s) adopted Financial Accounting Standard Board ("FASB") Statement of
Financial Accounting Standards No. 157 ("FAS 157"), Fair Value Measurements,
effective April 1, 2008. FAS 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements.
Management has concluded that the adoption of FAS 157 is not expected to have a
material impact on the fund's financial statements.
Various inputs are used in determining the value of the fund's investments. FAS
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 fund's 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 fund's net assets as of
September 30, 2008:
U.S. LARGE U.S. LARGE COMBINED LARGE
CAPITALIZATION CAPITALIZATION CAPITALIZATION
VALUATION INPUTS GROWTH FUND FUND FUND
---------------- -------------- -------------- --------------
Level 1 - Quoted Prices $48,577,285 $85,367,544 $133,944,829
Level 2 - Other significant
observable inputs 595,000 1,597,000 2,192,000
Level 3 - Significant
unobservable inputs -- -- --
----------- ----------- ------------
TOTAL $49,172,285 $86,964,544 $136,136,829
=========== =========== ============
E. MISCELLANEOUS
Independent Registered Public Accounting Firm
The audited financial statements of the Funds, incorporated 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 is included in the Annual Reports.
17
PART C
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
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
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."
ITEM 16 EXHIBITS
(1) Third Amended and Restated Agreement and Declaration of Trust of the
Registrant -- incorporated herein by reference 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) Amended and Restated By-Laws of the Registrant - incorporated herein
by reference to Post-Effective Amendment No. 61 to the Registration
Statement on Form N-1A filed with the SEC on December 17, 2007;
(3) Not Applicable;
(4) Plan of Reorganization is filed herewith as Appendix A to Part A of
this Registration Statement on Form N-14;
(5) Reference is made to Article 5 of the Third Amended and Restated
Agreement and Declaration of Trust of the Registrant;
(6)(a)(1) 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
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
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 PEA No. 46;
(6)(a)(4) Management Contract between the Registrant on behalf of its Laudus
Rosenberg U.S. Large Capitalization Growth Fund and Charles Schwab
Investment Management, Inc. -- incorporated herein by reference to
PEA No. 46;
(6)(a)(5) Management Contract between the Registrant on behalf of its Laudus
Rosenberg International Equity Fund and Charles Schwab Investment
Management, Inc. -- incorporated herein by reference to PEA No. 46;
(6)(a)(6) 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 PEA No. 46;
(6)(a)(7) 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
PEA No. 46;
(6)(a)(8) 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 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)(9) 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
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)(10) 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 PEA No. 60;
(6)(a)(11) 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
PEA No. 60;
(6)(a)(12) Management Contract between the Registrant on behalf of its Laudus
Mondrian International Equity Fund and Charles Schwab Investment
Management, Inc. - incorporated herein by reference 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)(13) 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 PEA No. 65;
(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 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 PEA No. 46;
(6)(b)(3) Subadviser Agreement among the Registrant on behalf of its Laudus
Rosenberg Value Long/Short Equity Fund, Charles Schwab Investment
Management, Inc. and AXA Rosenberg Investment Management LLC --
incorporated herein by reference to PEA No. 46;
(6)(b)(4) Subadviser Agreement among the Registrant on behalf of its Laudus
Rosenberg U.S. Large Capitalization Growth Fund, Charles Schwab
Investment Management, Inc. and AXA Rosenberg Investment Management
LLC -- incorporated herein by reference to PEA No. 46;
(6)(b)(5) Subadviser Agreement among the Registrant on behalf of its Laudus
Rosenberg International Equity Fund, Charles Schwab Investment
Management, Inc. and AXA Rosenberg Investment Management LLC --
incorporated herein by reference to PEA No. 46;
(6)(b)(6) 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 PEA No. 46;
(6)(b)(7) 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 PEA No. 46;
(6)(b)(8) 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 Post-Effective Amendment
No. 53 to the Registration Statement on Form N-1A filed with the SEC
on December 22, 2005;
(6)(b)(9) 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 PEA No. 57;
(6)(b)(10) Subadviser Agreement among the Registrant on behalf of its Laudus
Mondrian Emerging Markets Fund and Laudus Mondrian International
Fixed Income Fund, Charles Schwab Investment Management, Inc., and
Mondrian Investment Partners Limited -- incorporated herein by
reference to PEA No. 60;
(6)(b)(11) Subadviser Agreement among the Registrant on behalf of its Laudus
Mondrian International Equity Fund and Laudus Mondrian Global Equity
Fund, Charles Schwab Investment Management, Inc., and Mondrian
Investment Partners Limited -- incorporated herein by reference to
PEA No. 65;
(7)(a)(1) Distribution Agreement by and among the Registrant, Laudus
Institutional Trust, Charles Schwab Investment Management, Inc. and
ALPS Distributors, Inc., -- incorporated herein by reference to PEA
No. 56;
(7)(a)(2) Amendment to the Distribution Agreement -- incorporated herein by
reference to PEA No. 65;
(8) Amended and Restated Laudus Funds Retirement Plan for Trustees -
incorporated herein by reference to PEA No. 65;
(9)(a)(1) Amended and Restated Master Custodian Agreement by and between the
Registrant and State Street Bank and Trust Company -- incorporated
herein by reference to PEA No. 56;
(9)(a)(2) Amendment to the Amended and Restated Master Custodian Agreement --
incorporated herein by reference to PEA No. 65;
(10)(a) Amended and Restated Distribution and Shareholder Service Plan for
Investor Shares --incorporated herein by reference to Post-Effective
Amendment No. 24 to the Registration Statement on Form N-A filed with
the SEC on May 28, 1999;
(10)(b) Further Amended and Restated Multi-Class Plan -- incorporated herein
by reference to PEA No. 65;
(11) Opinion and Consent of Morgan, Lewis & Bockius LLP regarding the
validity of the shares to be issued by the Registrant is filed
herewith;
(12) Form of Opinion and Consent of Morgan, Lewis & Bockius LLP regarding
certain tax matters is filed herewith;
(13)(a)(1) Administration Agreement by and between State Street Bank and Trust
Company and the Registrant -- incorporated herein by reference to PEA
No. 56;
(13)(a)(2) Amendment to the Administration Agreement -- incorporated herein by
reference 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 PEA No. 56;
(13)(b)(2) Amendment to the Master Fund Accounting and Services Agreement --
incorporated herein by reference 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 PEA No. 56;
(13)(c)(2) Amendment to the Transfer Agency and Service Agreement --
incorporated herein by reference to PEA No. 65;
(13)(d) Amended and Restated Expense Limitation Agreement between Charles
Schwab Investment Management, Inc. and the Registrant - incorporated
herein by reference to PEA No. 65;
(14)(1) Consent of PricewaterhouseCoopers LLP is filed herewith;
(14)(2) Consent of Morgan, Lewis & Bockius LLP is filed herewith;
(15) Not Applicable;
(16)(1) 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 Randall W. Merk is filed herewith;
(16)(4) Power of Attorney of George Pereira is filed herewith;
(16)(5) Power Attorney of Jeffrey Mortimer is filed herewith;
(17)(a)(1) Code of Ethics of the Registrant and Charles Schwab Investment
Management, Inc., investment adviser to the Funds -- incorporated
herein by reference to PEA No. 65;
(17)(a)(2) Code of Ethics of AXA Rosenberg Investment Management LLC, investment
subadviser to certain of the Funds -- incorporated herein by
reference to Post-Effective Amendment No. 50 to the Registration
Statement filed on May 27, 2005;
(17)(a)(3) Code of Ethics of ALPS Distributors, Inc., principal underwriter to
the Fund -- incorporated herein by reference to PEA No. 56;
(17)(a)(4) Code of Ethics of Mondrian Investment Partners LLP, investment
subadviser to certain of the Funds -- incorporated herein by
reference to Post-Effective Amendment No 64 to the Registration
Statement filed on June 6, 2008;
(17)(b)(1) Prospectus dated July 31, 2008 with respect to the Laudus Rosenberg
U.S. Equity Funds and the Laudus Rosenberg International Equity Funds
-- incorporated herein by reference to PEA No. 65;
(17)(b)(2) Supplement dated December 15, 2008 to Prospectus dated July 31, 2008
with respect to the Laudus Rosenberg U.S. Equity Funds and the Laudus
Rosenberg International Equity Funds -- incorporated herein by
reference to definitive materials filed with the SEC on December 15,
2008 pursuant to Rule 497 under the Securities Act of 1933, as
amended;
(17)(b)(3) Statement of Additional Information dated July 31, 2008 with respect
to the Laudus Rosenberg U.S. Equity Funds and the Laudus Rosenberg
International Equity Funds -- incorporated herein by reference to PEA
No. 65;
(17)(c) The Report of the Independent Registered Public Accounting Firm and
audited financial statements of the Laudus Rosenberg U.S. Large
Capitalization Growth Fund and Laudus Rosenberg U.S. Large
Capitalization Fund included in the Funds' Annual Reports to
Shareholders for the period ended March 31, 2008 -- incorporated
herein by reference to Registrant's Annual Report on Form N-CSR filed
with the SEC on June 3, 2008;
(17)(d) The unaudited financial statements of the Laudus Rosenberg U.S. Large
Capitalization Growth Fund and Laudus Rosenberg U.S. Large
Capitalization Fund included in the Funds' Semi-Annual Reports to
Shareholders for the period ended September 30, 2008 -- incorporated
herein by reference to Registrant's Semi-Annual Report on Form N-CSR
filed with the SEC on December 4, 2008.
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.
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 14th day of January, 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 14th day of January 2009.
Signature Title
--------- -----
/s/ Jeffrey Mortimer* Chief Executive Officer, Chief
---------------------------------------- Investment Officer & President
Jeffrey Mortimer
/s/ George Pereira* Treasurer and Chief Financial Officer
---------------------------------------- (Principal Financial and Accounting
George Pereira Officer)
/s/ Randall W. Merk* Trustee
----------------------------------------
Randall W. Merk
/s/ Mariann Byerwalter* Trustee
----------------------------------------
Mariann Byerwalter
/s/ Nils H. Hakansson* Trustee
----------------------------------------
Nils H. Hakansson
*By: /s/ Timothy W. Levin
-----------------------------------
Timothy W. Levin, Attorney-in-Fact
Pursuant to Power of Attorney
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
tax matters
(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 Randall W. Merk
(16)(4) Power of Attorney of George Pereira
(16)(5) Power Attorney of Jeffrey Mortimer