As filed with the Securities and Exchange Commission on December 16, 2011
Registration No. 333-177508
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
xPre-Effective Amendment No. 1 | o | Post-Effective Amendment No. __ |
(Check appropriate box or boxes)
MANAGED PORTFOLIO SERIES
(Exact Name of Registrant as Specified in Charter)
615 East Michigan Street
Milwaukee, WI 53202
(Address of Principal Executive Offices, including Zip Code)
Registrant’s Telephone Number, including Area Code: (414) 287-3700
| Angela L.Pingel, Esq. |
| Managed Portfolio Series |
| 615 East Michigan Street |
| Milwaukee, WI 53202 |
(Name and Address of Agent for Service)
Copy to:
| Scot E. Draeger, Esq. |
| Bernstein, Shur, Sawyer & Nelson P.A. |
| 100 Middle Street |
| P.O. Box 9729 |
| Portland, ME 04104-5029 |
| Approximate Date of Proposed Public Offering: | As soon as practicable after this Registration Statement becomes effective under the Securities Act of 1933, as amended. |
No filing fee is required because of reliance on Section 24(f) of the Investment Company Act of 1940, as amended.
| Title of Securities Being Registered: | Shares of common stock, no par value per share, of the |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
CNI CHARTER FUNDS
CSC Small Cap Value Fund
400 North Roxbury Drive
Beverly Hills, California 90210
(888)889-0799
December 17, 2011
Dear Valued Shareholder:
A Special Meeting of Shareholders of the CNI Charter CSC Small Cap Value Fund (the “Fund”), a series of CNI Charter Funds (the “Trust”), has been scheduled for January 17, 2012 (the “Special Meeting”) to vote on a proposal (the “Reorganization”) to reorganize the Fund into the CSC Small Cap Value Fund (the “Acquiring Fund”), a newly-created series of Managed Portfolio Series (“MPS”) that is designed to be substantially identical to the Fund from an investment perspective. Cove Street Capital, LLC (“Cove Street”) serves as the sub-adviser of the Fund and will serve as the adviser of the Acquiring Fund.
The investment objectives, policies and strategies of the Fund and the Acquiring Fund are substantially identical. For the reasons discussed below and in the attached Proxy Statement/Prospectus, based on its own evaluation of the information received from a variety of sources, including City National Asset Management, Inc., the investment adviser to the Fund, and Cove Street, the Board of Trustees of the Trust (the “Board”) has determined that it is in the best interests of the Fund and its shareholders that the Fund reorganize into a new series of MPS. As a result, the Board has approved the Reorganization and has recommended the Reorganization to shareholders. The Board recommends that shareholders vote “FOR” the Reorganization.
If the Reorganization is approved by shareholders, shareholders of Institutional Class and Class R shares of the Fund will receive a number of full and fractional shares of the Acquiring Fund of the same share class as the class of Fund shares that the shareholder owned at the time of the Reorganization with the same net asset value as that of the Fund shares that the shareholder owned at the time of the Reorganization (although the designation of the Investor Class of the Acquiring Fund is different from the designation of the Fund’s Class R shares, the terms of those classes are the same). Class N shareholders will receive a number of full and fractional shares of the Acquiring Fund’s Investor Class with the same net asset value to that of the Fund’s Class N shares that the shareholder owned at the time of the Reorganization. No loads will be assessed in connection with the Reorganization of any class of shares of the Fund into the Acquiring Fund. Because the sales loads on the Acquiring Fund’s Investor Class shares will be permanently waived for existing Class N shareholders of the Fund, those shareholders will receive shares of a class substantially similar to that of the Class N shares of the Fund. In other words, each shareholder’s shares in each class of the Fund will in effect be converted into an equivalent interest in the Acquiring Fund. The table below summaries the share class of the Acquiring Fund you would receive in the Reorganization, depending on which share class of the Fund you currently own:
| Current Fund | Acquiring Fund |
CNI Charter CSC Small Cap Value Fund – Institutional Class | MPS CSC Small Cap Value Fund – Institutional Class |
CNI Charter CSC Small Cap Value Fund – Class N | MPS CSC Small Cap Value Fund – Investor Class, load waived |
| CNI Charter CSC Small Cap Value Fund – Class R | MPS CSC Small Cap Value Fund – Investor Class |
The Acquiring Fund is a newly-organized fund that will commence operations upon consummation of the Reorganization. The Fund will then be dissolved. Based on the opinion of counsel to MPS, neither the Fund nor its shareholders other than holders of Class N shares will recognize any gain or loss for federal income tax purposes as a result of the Reorganization. See “Federal Income Tax Consequences” in the attached Proxy Statement/Prospectus for a discussion of the tax considerations, including those applicable to holders of Class N shares. The attached Proxy Statement/Prospectus is designed to give you more information about the proposal. If shareholders of the Fund do not approve the Reorganization, then the Reorganization will not be implemented and the Board of Trustees of the Trust will consider other alternatives for the Fund. The Board has determined that it would likely liquidate the Fund.
If you have any questions regarding the proposal to be voted on, please do not hesitate to call (888)-889-0799. If you are a shareholder of record of the Fund as of the close of business on November 25, 2011, the record date for the Special Meeting, you are entitled to vote at the Special Meeting and at any adjournment thereof. While you are, of course, welcome to join us at the Special Meeting, most shareholders will cast their votes by filling out and signing the enclosed Proxy Card.
Whether or not you are planning to attend the Special Meeting, we need your vote. Please mark, sign and date the enclosed Proxy Card and promptly return it in the enclosed, postage-paid envelope so that the maximum number of shares may be voted. In the alternative, please call the toll-free number on your proxy card to vote by telephone. You should use the enclosed instructions to vote by telephone. You can also vote on the Internet at the website address listed on your proxy ballot. You may revoke your proxy before it is exercised at the Special Meeting, either by writing to the Secretary of the Trust at the address noted in the Proxy Statement/Prospectus or in person at the time of the Special Meeting. A prior proxy vote can also be revoked by voting the proxy again through the toll-free number or the Internet address listed in the enclosed voting instructions.
Thank you for taking the time to consider this important proposal and for your continuing investment in the Fund.
Sincerely,
| By: | /s/ Richard Gershen |
| | Richard Gershen |
| | President |
CNI CHARTER FUNDS
CSC Small Cap Value Fund
400 North Roxbury Drive
Beverly Hills, California 90210
(888)889-0799
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD January 17, 2012
CNI Charter Funds, a Delaware statutory trust (the “Trust”), will hold a Special Meeting of Shareholders (the “Special Meeting”) of the CSC Small Cap Value Fund, a series of the Trust (the “Fund”) on January 17, 2012 at 10:00 a.m. Pacific time at the offices of CNI Charter Funds, 400 North Roxbury Drive, Beverly Hills, California 90210. At the Special Meeting, you and the other shareholders of the Fund will be asked to consider and vote upon:
| | 1. | An Agreement and Plan of Reorganization providing for the sale of all of the assets of the Fund to, and the assumption of all of the liabilities of the Fund by, the CSC Small Cap Value Fund (the “Acquiring Fund”), a newly-created series of Managed Portfolio Series, in exchange for the Acquiring Fund’s shares, which would be distributed pro rata by the Fund to the holders of its shares in complete liquidation of the Fund; and |
| | 2. | The transaction of such other business as may properly come before the Special Meeting or any adjournments thereof. |
Only shareholders of record at the close of business on November 25, 2011, the record date for this Special Meeting, will be entitled to notice of, and to vote at, the Special Meeting or any postponements or adjournments thereof.
YOUR VOTE IS IMPORTANT.
Please return your Proxy Card promptly or vote your proxy on the Internet or by telephone using the website address and toll-free telephone number found on your Proxy Card.
Based on information provided by City National Asset Management, Inc., the Fund’s investment adviser, and Cove Street Capital, LLC, the Fund’s sub-adviser,
the Board of Trustees of the Trust recommends that you vote in favor of the Proposal.
As a shareholder, you are asked to attend the Special Meeting either in person or by proxy. If you are unable to attend the Special Meeting in person, we urge you to authorize proxies to cast your votes, commonly referred to as “proxy voting.” Whether or not you expect to attend the Special Meeting, please submit your vote by toll-free telephone or through the Internet according to the enclosed voting instructions. You may also vote by completing, dating and signing your proxy card and mailing it in the enclosed postage prepaid envelope. Your prompt voting by proxy will help assure a quorum at the Special Meeting. Voting by proxy will not prevent you from voting your shares in person at the Special Meeting. You may revoke your proxy before it is exercised at the Special Meeting, either by writing to the Secretary of the Trust at the address noted in the Proxy Statement/Prospectus, or in person at the time of the Special Meeting. A prior proxy can also be revoked by voting your proxy again through the toll-free number or Internet website address listed in the enclosed voting instructions.
By Order of the Board of Trustees of CNI Charter Funds
/s/ Carolyn Mead
Carolyn Mead
Secretary
CNI CHARTER FUNDS
CSC Small Cap Value Fund
400 North Roxbury Drive
Beverly Hills, California 90210
(888)-889-0799
QUESTIONS AND ANSWERS
YOUR VOTE IS VERY IMPORTANT!
Dated: December 17, 2011
Question: What is this document and why did you send it to me?
Answer: At meetings of the Board of Trustees (the “Board”) of CNI Charter Funds (the “Trust”) held on August 25, 2011, and October 18, 2011, the Board approved, based on recommendations by City National Asset Management, Inc. (“CNAM”) and Cove Street Capital, LLC (“Cove Street”), a plan to reorganize (the “Reorganization”) the CSC Small Cap Value Fund (the “Fund”), a series of the Trust, into the CSC Small Cap Value Fund (the “Acquiring Fund”), a newly-created series of Managed Portfolio Series (“MPS”). In approving the Reorganization, the Board determined that participation in the Reorganization is in the best interests of the shareholders of the Fund, and concluded that the interests of the shareholders of the Fund will not be diluted as a result of the Reorganization. For more information regarding the factors considered by the Board in coming to these conclusions, please review “Reasons for the Reorganization” in Section I.E.3 of this Proxy Statement/Prospectus.
Shareholder approval is needed to proceed with the Reorganization and a special shareholder meeting will be held on January 17, 2012 (the “Special Meeting”) to consider the proposal. If shareholders of the Fund do not approve the Reorganization, then the Reorganization will not be implemented and the Board of Trustees will consider other alternatives for the Fund, including liquidation.
This document is being sent to you for your use in deciding whether to approve the Reorganization at the Special Meeting. This document includes a Notice of Special Meeting of Shareholders, a combined Proxy Statement/Prospectus, and a form of Proxy.
Question: What is the purpose of this Reorganization?
Answer: Cove Street, the current sub-adviser to the Fund, has indicated that it wishes to become the adviser to the Fund, which would allow it to assume a larger role in the performance and operations of the Fund. CNAM, the current investment adviser to the Fund, has indicated that it wishes to resign as the Fund’s investment adviser. Under these circumstances, the Board recommends that the Fund be reorganized as a series of MPS, another fund complex, and that shareholders vote to approve the reorganization.
The primary purpose of the Reorganization is to move the Fund to the MPS family of funds and allow Cove Street, the Fund’s current sub-adviser, to become the adviser of the Acquiring Fund. The Fund currently operates as a series of the Trust with CNAM serving as the investment adviser and Cove Street serving as the sub-adviser. The Board believes that the Fund and its shareholders can benefit from the umbrella of MPS, a multiple series trust that shares a board of trustees and utilizes U.S. Bancorp Fund Services, LLC (administration, fund accounting, transfer agency), Quasar Distributors, LLC (distribution), and U.S. Bank N.A. (custody), which are affiliated companies, to provide services, and that MPS will be able to provide the Acquiring Fund with increased distribution support. As the adviser to the Fund, CNAM has significant control over the marketing channels in which the Trust offers its series and may not undertake to offer the Fund in the channels that Cove Street believes have the best possibility for increasing the Fund’s asset levels. As a series of MPS, such limitations will be removed and the Acquiring Fund will be able to utilize the services of Quasar Distributors, LLC, the industry’s largest third-party mutual fund distributor.
In order to reconstitute the Fund under the MPS umbrella, MPS has created the Acquiring Fund as a new series of MPS. If shareholders approve the Reorganization, then all of the assets of the Fund will be acquired by the Acquiring Fund and, except for Class N shares, all shares of the Fund will be converted into shares of the same or an equivalent class of the Acquiring Fund. Class N shares will be converted into Investor Class shares on a load-waived basis. The investment objectives, policies and strategies of the Fund and Acquiring Fund are substantially identical. Third party service arrangements will be provided to the Acquiring Fund by U.S. Bancorp Fund Services, LLC and its affiliates. Cove Street, the Fund’s sub-adviser, will serve as the Acquiring Fund’s adviser and manage its assets. Therefore, the Reorganization will not change the way your investment has been managed. The Board of Trustees of MPS is different from the Board of Trustees of the Trust.
Question: How will the Reorganization work?
Answer: Pursuant to an Agreement and Plan of Reorganization (the “Plan”) (attached as Appendix A), the Fund will transfer all of its assets and liabilities to the Acquiring Fund in return for corresponding shares of the Acquiring Fund. The Fund will then distribute the shares it receives from the Acquiring Fund to its shareholders. Shareholders of the Fund will become shareholders of the Acquiring Fund, and each shareholder will hold shares of the Acquiring Fund of the same or equivalent class as its shares of the Fund, with the same net asset value as its shares of the Fund held immediately prior to the Reorganization. If the Plan is carried out as proposed, the Board has determined, in reliance on an opinion of counsel, that neither the Fund nor its shareholders other than holders of Class N shares will recognize any gain or loss for federal income tax purposes as a result of the Reorganization. See the response to the following question and “Federal Income Tax Consequences” in the attached Proxy Statement/Prospectus for a discussion of the tax considerations, including those applicable to holders of Class N shares. Please refer to the Proxy Statement/Prospectus for a detailed explanation of the proposal. The chart below indicates the share class of the Acquiring Fund you will receive in the Reorganization, depending on which share class of the Fund you currently own:
| Current Fund | Acquiring Fund |
CNI Charter CSC Small Cap Value Fund – Institutional Class | MPS CSC Small Cap Value Fund – Institutional Class |
CNI Charter CSC Small Cap Value Fund – Class N | MPS CSC Small Cap Value Fund – Investor Class, load waived |
| CNI Charter CSC Small Cap Value Fund – Class R | MPS CSC Small Cap Value Fund – Investor Class |
The Reorganization is expected to be effective on or about January 20, 2012.
Question: How will this affect my investment?
Answer: Following the Reorganization, you will be a shareholder of the Acquiring Fund, which has a substantially identical investment objective and investment strategies as the Fund, and is managed by Cove Street. The Acquiring Fund will be managed in the same way as the Fund. The primary differences will be (1) the service providers that provide third party service arrangements (i.e., administrative, distribution and other general support services) to the Acquiring Fund will be different from those of the Fund; (2) the Acquiring Fund will be under the MPS umbrella instead of the Trust’s umbrella; and (3) the Acquiring Fund will have a different Board of Trustees. The new shares that you receive will have a total asset value equal to the total net asset value of the shares you hold in the Fund as of the closing date of the Reorganization. The Reorganization will not affect the value of your investment at the time of Reorganization and your interest in the Fund will not be diluted. The Board has determined in reliance on an opinion from counsel that, subject to the qualifications in the Proxy Statement/Prospectus under the heading “Federal Income Tax Consequences,” neither the Fund nor its shareholders other than holders of Class N shares will recognize any gain or loss for federal income tax purposes as a result of the Reorganization. The holders of Class N shares of the Fund may recognize income or gain in the Reorganization based on the current value of the right to make future purchases of Investor Class shares of the Acquiring Fund without paying a sales charge. The Board has not attempted to determine the value of that right either in the abstract or in the case of any particular Class N shareholder, because the value to any particular Class N shareholder is speculative, uncertain and difficult to determine. Class N shareholders should consult with their tax advisors regarding the tax consequences of the sales charge exemption.
Question: How will the proposed Reorganization affect the fees and expenses I pay as a shareholder of the Fund?
Answer: Expenses that shareholders pay are expected to increase as a result of the Reorganization. Cove Street has contractually agreed to limit the total annual operating expenses of the Acquiring Fund’s Investor Class Shares to 1.69%, and Institutional Class Shares to 1.44%, of their respective average daily net assets through December 31, 2014. This agreement may not be terminated for at least one year from the effective date of the Reorganization, subject thereafter to termination at any time upon 60 days’ written notice by either MPS or Cove Street, with the consent of MPS’ Board of Trustees. The following table sets forth 1) the total annual fund expenses of each Class of the Fund for the fiscal year ended September 30, 2011, before and after all voluntary and contractual fee waivers and expense reimbursements, as a percentage of the Class’ average daily net assets, 2) the Fund’s current annual expense limits, 3) the estimated total annual fund expenses of each Class of the Acquiring Fund for the fiscal year ending September 30, 2012, and 4) the Acquiring Fund’s proposed annual expense limits. See the Comparison Fee Table on page 13 of this Proxy Statement/Prospectus for additional information on the annual fund operating expenses for the Fund and the Acquiring Fund.
| | Institutional Class | Class R/Investor Class | Class N/Investor Class |
| | CNI Fund | MPS Fund | CNI Fund | MPS Fund | CNI Fund | MPS Fund |
Total Annual Fund Expenses (as of 09/30/11 for the Fund and estimated through 09/30/12 for the Acquiring Fund) | | | | | | |
| Without the effect of waivers (gross) | 1.20% | 2.41% | 1.60% | 2.66% | 1.45% | 2.66% |
| With the effect of waivers (net) | 1.19% | 1.44% | 1.20% | 1.69% | 1.44% | 1.69% |
| Contractual Annual Expense Limitation | 1.24%(1) | 1.44%(2) | 1.49%(1) | 1.69%(2) | 1.49%(1) | 1.69%(2) |
(1) | CNAM and Cove Street have contractually agreed to cap the Fund’s Total Annual Fund Operating Expenses (excluding taxes, interest, brokerage commissions, extraordinary expenses, and acquired fund fees and expenses) at or below 1.49% for Class R shares, 1.49% for Class N shares and 1.24% for Institutional Class shares, until January 28, 2013. Prior to that date, this arrangement may be terminated without penalty by the Trust’s Board of Trustees upon 60 days’ written notice to CNAM and Cove Street, and it will terminate automatically upon the termination of the Fund’s advisory agreement with CNAM or CNAM’s sub-advisory agreement with Cove Street. Any fee reductions or reimbursements may be repaid to Cove Street within three years after they occur if such repayments can be achieved within the Fund’s expense limit in effect at the time such expenses were incurred and if certain other conditions are satisfied. |
| (2) | Cove Street has contractually agreed to reimburse the Acquiring Fund for its operating expenses, and may reduce its management fees, in order to ensure that the Acquiring Fund’s Total Annual Fund Operating Expenses (excluding acquired fund fees and expenses, brokerage commissions, interest, taxes and extraordinary expenses) do not exceed 1.69% of the average daily net assets of the Investor Class and 1.44% of the average daily net assets of the Institutional Class. Expenses reimbursed and/or fees reduced by Cove Street may be recouped by Cove Street for a period of three fiscal years following the fiscal year during which such reimbursement or reduction was made if such recoupment can be achieved within the foregoing expense limits. The Operating Expense Limitation Agreement will be in effect through December 31, 2014, and cannot be terminated through at least one year from the effective date of the Reorganization, subject thereafter to termination at any time upon 60 days’ written notice by either the MPS Trust or Cove Street. The Board of Trustees of MPS must consent to the termination of the Operating Expense Limitation Agreement by Cove Street after one year from the effective date of the Reorganization, which consent shall not be unreasonably withheld. |
Although the total expenses of the Acquiring Fund would therefore be higher than those of the Fund, at least immediately following the closing of the Reorganization, the Board believes that the shareholders of the Fund should be given an opportunity to vote on whether the Reorganization should occur.
Question: What will happen if the Reorganization is not approved?
Answer: If shareholders of the Fund fail to approve the Reorganization, the Fund will not be reorganized into the Acquiring Fund, and the Board will consider other alternatives for the Fund. The Board has determined that it would likely approve liquidation of the Fund.
Question: Why do I need to vote?
Answer: Your vote is needed to ensure that a quorum is present at the Special Meeting so that the proposal can be acted upon. Your immediate response on the enclosed Proxy Card will help prevent the need for any further solicitations for a shareholder vote, which will result in additional expenses. The Board encourages all shareholders to participate.
Question: I am a small investor. Why should I bother to vote?
Answer: Your vote makes a difference. If other shareholders like you fail to vote, the Fund may not receive enough votes to go forward with the Special Meeting. If this happens, the Reorganization would be delayed, and votes may need to be solicited again.
Question: How does the Board of Trustees suggest that I vote?
Answer: After careful consideration and upon recommendation of CNAM and Cove Street, the Board recommends that you vote “FOR” the Reorganization.
Question: Who is paying for expenses related to the Special Meeting and the Reorganization?
Answer: CNAM and Cove Street will pay all costs relating to the proposed Reorganization, including the costs relating to the Special Meeting and the Proxy Statement/Prospectus. The total cost of the proposed Reorganization to be paid by CNAM and Cove Street is estimated to be about $100,000.
Question: How do I cast my vote?
Answer: You may vote on the Internet at the website provided on your Proxy Card or you may vote by telephone using the toll free number found on your Proxy Card. You may also use the enclosed postage-paid envelope to mail your Proxy Card. Please follow the enclosed instructions to use these methods of voting.
Question: Who do I call if I have questions?
Answer: The Fund’s representatives are happy to answer your questions about the proxy solicitation. Please call shareholder services at (888) 889-0799.
PROXY STATEMENT/PROSPECTUS
December 17, 2011
FOR THE REORGANIZATION OF
CSC Small Cap Value Fund,
a series of CNI Charter Funds
400 North Roxbury Drive
Beverly Hills, California 90210
(888) 889-0799
INTO
CSC Small Cap Value Fund,
a series of Managed Portfolio Series
615 East Michigan Street
Milwaukee, WI 53202
(866) 497-0037
_________________________________________
This Proxy Statement/Prospectus (the “Proxy Statement”) is being sent to you in connection with the solicitation of proxies by the Board of Trustees of CNI Charter Funds (the “Trust”) for use at a Special Meeting of Shareholders (the “Special Meeting”) of the CSC Small Cap Value Fund, a series of the Trust (the “Fund”), to be held at the offices of CNI Charter Funds, 400 North Roxbury Drive, Beverly Hills, California 90210 on January 17, 2012 at 10:00 a.m. Pacific time. At the Special Meeting, shareholders of the Fund will be asked:
| | 1. | To approve an Agreement and Plan of Reorganization providing for the sale of all of the assets of the Fund to, and the assumption of all of the liabilities of the Fund by, the CSC Small Cap Value Fund (the “Acquiring Fund”), a newly-created series of Managed Portfolio Series (“MPS”), in exchange for the Acquiring Fund’s shares, which would be distributed pro rata by the Fund to the holders of its shares in complete liquidation of the Fund (the ”Reorganization”); and |
| | 2. | To transact such other business as may properly come before the Special Meeting or any adjournments thereof. |
Shareholders who execute proxies may revoke them at any time before they are voted, either by writing to the Secretary of the Trust, in person at the time of the Special Meeting, or by voting the proxy again through the toll-free number or through the Internet address listed in the enclosed voting instructions.
The Fund is a series of the Trust, an open-end management investment company registered with the Securities and Exchange Commission (the “SEC”) and organized as a Delaware statutory trust. The Acquiring Fund is a newly-created series of MPS, an open-end management investment company registered with the SEC and organized as a Delaware statutory trust.
The following Fund documents have been filed with the SEC and are incorporated by reference into this Proxy Statement (that means that these documents are considered legally to be part of this Proxy Statement):
| | · | Prospectus and Statement of Additional Information applicable to the CNI Charter CSC Small Cap Value Fund, dated January 28, 2011, as supplemented July 15, 2011 and September 22, 2011; |
| | · | Semi-Annual Report to Shareholders of the CNI Charter CSC Small Cap Value Fund, dated March 31, 2011, and Annual Report to Shareholders of the CNI Charter CSC Small Cap Value Fund, dated September 30, 2011. |
The Fund’s Prospectus and Annual Report to Shareholders for the fiscal year ended September 30, 2011, containing audited financial statements, have been previously mailed to shareholders. Copies of these documents are available upon request and without charge by writing to the Trust, by calling (888) 889-0799 or by visiting the Fund’s website at www.cnicharterfunds.com.
The following Acquiring Fund documents have been filed with the SEC and are incorporated by reference into this Proxy Statement:
| | · | Prospectus and Statement of Additional Information of the Acquiring Fund, dated December 16 , 2011. |
Because the Acquiring Fund has not yet commenced operations as of the date of this Proxy Statement, no annual report is available for the Acquiring Fund at this time.
This Proxy Statement sets forth the basic information you should know before voting on the proposal. You should read it and keep it for future reference. Additional information is set forth in the Statement of Additional Information dated December 17, 2011, relating to this Proxy Statement, which is also incorporated by reference into this Proxy Statement. The Statement of Additional Information is available upon request and without charge by calling(866) 497-0097.
The Fund expects that this Proxy Statement will be mailed to shareholders on or about December 19, 2011.
Date: December 17, 2011
The SEC has not approved or disapproved these securities nor has it passed on the accuracy or adequacy of this combined proxy statement and prospectus. Any representation to the contrary is a criminal offense.
The shares offered by this Proxy Statement are not deposits or obligations of any bank, and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. An investment in the Fund involves investment risk, including the possible loss of principal.
| I. | PROPOSAL – TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION |
Cove Street Capital, LLC (“Cove Street”), the current sub-adviser to the Fund, has indicated that it wishes to become the adviser to the Fund, which would allow it to assume a larger role in the performance and operations of the Fund. City National Asset Management, Inc. (“CNAM”), the current investment adviser to the Fund, has indicated that it wishes to resign as the Fund’s investment adviser. Under these circumstances, after considering information about MPS and the Acquiring Fund, the Board of Trustees of the Trust (the “Board”) (including a majority of the independent trustees, meaning those trustees who are not “interested persons” of the Trust as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) believes that the Reorganization is in the best interests of the Fund and its shareholders, and approved the Reorganization at meetings held on August 25, 2011, and October 18, 2011, subject to the approval of the Fund’s shareholders. The Board has called the Special Meeting to ask shareholders to consider and vote on the proposed reorganization of the Fund into the Acquiring Fund.
The Fund currently operates as a separate series of the Trust. As a series of the Trust, the Fund makes use of a number of service providers who provide an array of services to all series of the Trust. These services include custody, administration, accounting, transfer agency, and distribution (“Third Party Service Arrangements”). Currently, Third Party Service Arrangements are provided to the Trust by U.S. Bank N.A. (custody); SEI Investments Global Funds Services, a wholly owned subsidiary of SEI Investments Company (administration, fund accounting); SEI Institutional Transfer Agent, Inc., a wholly owned subsidiary of SEI Investments Company (transfer agency); UMB Fund Services, Inc. (sub-transfer agency); and SEI Investments Distribution Co., a wholly owned subsidiary of SEI Investments Company (distribution). Cove Street is seeking to become the adviser to the Fund, which would allow it to assume a larger role in the performance and operations of the Fund. Cove Street believes that it, the Fund and its shareholders can benefit from the umbrella of MPS, a multiple series trust that shares a board of trustees and utilizes U.S. Bancorp Fund Services, LLC (administration, fund accounting, transfer agent), Quasar Distributors, LLC (distribution), and U.S. Bank N.A. (custody), which are affiliated companies for Third Party Service Arrangements.
In order to reconstitute the Fund under the MPS umbrella, a substantially similar fund to the Fund, referred to as the “Acquiring Fund,” has been created as a series of MPS. If shareholders approve the Reorganization, then all of the assets of the Fund will be acquired by the Acquiring Fund and, except for Class N shares, all shares of the Fund will be converted into shares of the same or an equivalent class of the Acquiring Fund. Class N shares will be converted into Investor Class shares on a load-waived basis. The Board has determined that the investment objectives, policies and strategies of the Fund and Acquiring Fund are substantially identical. Third Party Service Arrangements will be provided to the Acquiring Fund by U.S. Bancorp Fund Services, LLC (“USBFS”) and its affiliates. Cove Street, the Fund’s sub-adviser, will serve as the Acquiring Fund’s adviser, and Jeff Bronchick, who serves as the portfolio manager for the Fund, will continue to serve as the portfolio manager for the Acquiring Fund. The Board has determined that the Reorganization will not change the way the Fund’s investment portfolio is managed. The Board of Trustees of MPS is different from the Board of Trustees of the Trust.
The Board, including a majority of the independent trustees, has concluded that the terms of the Reorganization are fair and reasonable and that the interests of existing shareholders of the Fund will not be diluted as a result of the proposed Reorganization. Based on the recommendations of CNAM and Cove Street, the Board recommends that the shareholders of the Fund vote “FOR” approval of the Agreement and Plan of Reorganization (the “Plan”) and the resulting Reorganization.
The following summary of Fund Expenses shows the fees for the Fund based on the Fund’s fees for the fiscal year ended September 30, 2011. As the Acquiring Fund has not yet commenced operations as of the date of this Proxy Statement, the summary of Fund Expenses shown for the Acquiring Fund is based on estimated amounts for the current fiscal year ending September 30, 2012.
| | CSC Small Cap Value Fund |
| | Institutional Class | Class R/Investor Class | Class N/Investor Class |
| | CNI Fund | MPS Fund | CNI Fund | MPS Fund | CNI Fund | MPS Fund |
Shareholder Fees (paid directly from your investment) | | | | | | |
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) | None | None | 3.50% | 3.50% | None | 3.50% |
| Maximum deferred sales charge (load) | None | None | None | None | None | None |
| Redemption Fee | None | None | None | None | None | None |
| | | | | | | |
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) | | | | | | |
| Management Fees | 0.85% | 0.85% | 0.85% | 0.85% | 0.85% | 0.85% |
| Distribution (12b-1) Fee | None | None | 0.25% | 0.25% | 0.25% | 0.25% |
| Other Expenses | | | | | | |
| Shareholder Servicing Fee | 0.25% | None | 0.25% | None | 0.25% | None |
| Other Fund Expenses | 0.10% | 1.56% | 0.25% | 1.56% | 0.10% | 1.56% |
| Total Annual Fund Expenses | 1.20% | 2.41% | 1.60% | 2.66% | 1.45% | 2.66% |
| Fee Waiver and/or Expense Reimbursement | (0.01)% | (0.97)% | (0.40)% | (0.97)% | (0.01)% | (0.97)% |
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement | 1.19%(1) | 1.44%(2) | 1.20%(1) | 1.69%(2) | 1.44%(1) | 1.69%(2) |
| | (1) | CNAM and Cove Street have contractually agreed to cap the Fund’s Total Annual Fund Operating Expenses (excluding taxes, interest, brokerage commissions, extraordinary expenses, and acquired fund fees and expenses) at or below 1.24% for Institutional Class shares, 1.49% for Class N shares and 1.49% for Class R shares until January 28, 2013. Prior to that date, this arrangement may be terminated without penalty by the Fund’s Board of Trustees upon 60 days’ written notice to CNAM and Cove Street, and it will terminate automatically upon the termination of the Fund’s advisory agreement with CNAM or CNAM’s sub-advisory agreement with Cove Street. Any fee reductions or reimbursements may be repaid to Cove Street within three years after they occur if such repayments can be achieved within the Fund’s expense limit in effect at the time such expenses were incurred and if certain other conditions are satisfied. |
| | (2) | Cove Street has contractually agreed to reimburse the Acquiring Fund for its operating expenses, and may reduce its management fees, in order to ensure that Total Annual Fund Operating Expenses (excluding acquired fund fees and expenses, brokerage commissions, interest, taxes and extraordinary expenses) do not exceed 1.69% of the average daily net assets of the Investor Class and 1.44% of the average daily net assets of the Institutional Class. Expenses reimbursed and/or fees reduced by Cove Street may be recouped by Cove Street for a period of three fiscal years following the fiscal year during which such reimbursement or reduction was made if such recoupment can be achieved within the foregoing expense limits. The Operating Expense Limitation Agreement will be in effect through December 31, 2014 and cannot be terminated through at least one year from the effective date of the Reorganization, subject thereafter to termination at any time upon 60 days’ written notice by either the Trust or Cove Street. The Board of Trustees of MPS must consent to the termination of the Operating Expense Limitation Agreement by Cove Street after one year from the effective date of the Reorganization, which consent shall not be unreasonably withheld. |
Examples
The Example below is intended to help you compare the cost of investing in the Fund with the cost of investing in the Acquiring Fund on a pro forma basis with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the specified fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, dividends and distributions are reinvested, and the fund’s operating expenses remain the same. The Example reflects the expense limitation agreement for the first year only within each of the years shown below. Although your actual costs may be higher or lower, under the assumptions, your costs would be:
| CSC Small Cap Value Fund | One Year | Three Years | Five Years | Ten Years |
| | | | | |
| Fund – Institutional Class | $121 | $380 | $659 | $1,454 |
| Acquiring Fund (Pro forma) – Institutional Class | $147 | $659 | $1,198 | $2,672 |
| Fund – Class N | $147 | $458 | $791 | $1,734 |
| Fund – Class R | $494 | $851 | $1,232 | $2,299 |
| Acquiring Fund (Pro forma) – Investor Class | $468 | $800 | $1,154 | $2,151 |
The following performance information indicates some of the risks of investing in the Fund by showing changes in the performance of the Fund’s Institutional Class shares from year to year and by showing how the average annual returns of the Fund’s Institutional Class shares for 1, 5, and 10 years compare with those of a broad-based securities market index. The Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future.
During the periods shown in the chart, the highest quarterly return for Institutional Class shares was 33.09% (for the quarter ended June 30, 2009) and the lowest quarterly return was -26.42% (for the quarter ended December 31, 2008).
| Average Annual Total Returns for the periods ended December 31, 2010 |
| | One Year | Five Years | Ten Years | Since Inception (9/30/1998)(1) |
| Institutional Class Shares | | | | |
| Return Before Taxes | 19.15% | 0.45% | 6.87% | 10.23% |
| Return After Taxes on Distributions | 19.02% | (0.43)% | 6.29% | 9.55% |
| Return After Taxes on Distributions and Sale of Fund Shares | 12.45% | 0.16% | 5.93% | 8.96% |
| Class N | | | | |
| Return Before Taxes | 18.80% | 0.20% | 6.64% | 10.03% |
| Class R | | | | |
| Return Before Taxes | 14.77% | (0.33)% | 6.34% | 9.78% |
Russell 2000® Index (reflects no deduction for fees, expenses or taxes) | 26.85% | 4.47% | 6.33% | 7.86% |
Russell 2000® Value Index (reflects no deduction for fees, expenses or taxes) | 24.50% | 3.52% | 8.42% | 9.27% |
Russell 2500® Value Index (reflects no deduction for fees, expenses or taxes) | 24.82% | 3.85% | 8.53% | 9.65% |
| (1) | Performance for “Since Inception” for all classes is shown for periods beginning September 30, 1998, which is the date the predecessor to the Fund (the “Predecessor Fund”) commenced operations. On October 1, 2001, the Predecessor Fund reorganized into Class R shares of the Fund. The performance results for Class R shares of the Fund before October 1, 2001, reflect the performance of the Predecessor Fund. |
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your tax situation and may differ from those shown. The performance of Institutional Class shares does not reflect Class N shares’ and Class R shares’ Rule 12b-1 fees and expenses. After-tax returns for Class N and Class R shares will vary from the after-tax returns shown above for Institutional Class shares. Furthermore, the after-tax returns shown are not relevant to those who hold their shares through tax-deferred arrangements such as 401(k) plans or Individual Retirement Accounts (“IRAs”).
| | D. | SUMMARY OF FUND INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS |
Comparison of Investment Objectives, Strategies and Risks
The Board has concluded that the Acquiring Fund has substantially identical investment objectives, strategies and policies as those of the Fund. For additional information, please see the “Additional Comparisons of the Fund and Acquiring Fund – Investment Objectives, Strategies and Restrictions” section below.
The investment objective of both the Fund and the Acquiring Fund is to seek capital appreciation. The Acquiring Fund’s investment objective is non-fundamental. It may be changed by a vote of the Board of Trustees without shareholder approval upon a 60-day prior written notice to shareholders. There is no current intention to change the investment objective. The investment objective for the Fund is fundamental and may not be changed without shareholder approval. The Fund and the Acquiring Fund each seek to achieve their investment objectives by using the following strategies:
| | CSC Small Cap Value Fund, a series of CNI Charter Funds | CSC Small Cap Value Fund, a series of MPS |
| Investment Objective | The Fund seeks capital appreciation primarily through investment in smaller U.S. corporations which are considered undervalued. The investment objective of the Fund can only be changed with shareholder approval. | The Acquiring Fund’s investment objective is capital appreciation. The investment objective is not fundamental and may be changed without the approval of the Acquiring Fund’s shareholders upon 60 days’ prior written notice to shareholders. |
| Investment Strategy | At least 80% of the Fund’s portfolio consists of equity securities of smaller US corporations. Smaller corporations are defined for this purpose as companies with market capitalizations at the time of purchase in the range of $50 million to $5 billion. As a non-principal strategy, the Fund may invest up to 20% of its total assets in foreign securities. The overall investment philosophy of the Fund involves a value-oriented focus on preservation of capital over the long term and a “bottom-up” approach, analyzing companies on their individual characteristics, prospects and financial conditions. Cove Street, the Fund’s sub-adviser, determines the universe of potential companies for investment through a systematic screening of companies for attractive valuation characteristics and the prospects of fundamental changes, as well as information Cove Street derives from a variety of sources, including, but not limited to, regional brokerage research, trade publications and industry conferences. Cove Street evaluates companies within this universe for fundamental characteristics such as: · Return on capital trends; · Cash flow and/or earnings growth; · Free cash flow; · Balance sheet integrity; and · Intrinsic value analysis. Cove Street’s research effort also includes an investigation of the strength of the business franchises of these companies and the commitment | Under normal market conditions, the Acquiring Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in a limited number of equity securities of small capitalization companies. The equity securities in which the Acquiring Fund invests include common and preferred stocks. The Acquiring Fund considers a company to be a small-cap company if it has a market capitalization, at the time of purchase, in the range of $50 million to $5 billion. Although the Acquiring Fund will invest primarily in the equity securities of U.S. companies, the Acquiring Fund may also invest up to 20% of its assets in the securities of foreign companies, including common and preferred stocks. The overall investment philosophy of the Acquiring Fund involves a value-oriented focus on preservation of capital over the long term and a “bottom-up” approach, analyzing companies on their individual characteristics, prospects and financial conditions. Cove Street determines the universe of potential companies for investment through a systematic screening of companies for attractive valuation characteristics and the prospects of fundamental changes, as well as information it derives from a variety of sources, including, but not limited to, regional brokerage research, trade publications and industry conferences. Cove Street evaluates companies within this universe for fundamental characteristics such as: · Return on capital trends; |
| | CSC Small Cap Value Fund, a series of CNI Charter Funds | CSC Small Cap Value Fund, a series of MPS |
| | of management to shareholders through direct contacts and company visits. Factors that may cause the sale of the Fund’s portfolio holdings include: disappointment in management; changes in the course of business or changes in a company’s fundamentals; Cove Street assesses that a particular company’s stock materially exceeds its estimate of intrinsic value; or if a better risk/reward candidate has been identified. A 15% or greater decline in a company’s stock price as compared to its industry peer group would result in an intensive re-evaluation of the holding and a possible sale. The Fund anticipates a relatively low rate of portfolio turnover relative to other investment companies with similar investment mandates. This means that the Fund has the potential to be a tax-efficient investment, as low turnover should result in the realization and the distribution to shareholders of lower capital gains. This anticipated lack of frequent trading should also lead to lower transaction costs, which could help to improve performance. The securities in which the Fund invests, and the strategies described in this Prospectus, are those that the Fund uses under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, the Fund may invest up to 100% of its assets in cash or cash equivalents that would not ordinarily be consistent with the Fund’s investment goals. The Fund is not required or expected to take such a defensive posture. But if used, such a stance may help the Fund minimize or avoid losses during adverse market, economic or political conditions. | · Cash flow and/or earnings growth; · Free cash flow; · Balance sheet integrity; and · Intrinsic value analysis. Cove Street’s research effort also includes an investigation of the strength of the business franchises of these companies and the commitment of management to shareholders through direct contacts and company visits. Factors that may cause the sale of the Acquiring Fund’s portfolio holdings include: disappointment in management; changes in the course of business or changes in a company’s fundamentals; Cove Street’s assessment that a particular company’s stock materially exceeds its estimate of intrinsic value; or if a better risk/reward candidate has been identified. The Acquiring Fund anticipates it will have lower portfolio turnover than other small-cap value funds. This means that the Acquiring Fund has the potential to be a more tax-efficient investment than other small-cap funds, as lower turnover likely will reduce the realization of capital gains which must be distributed to shareholders. This anticipated lack of frequent trading should also lead to lower transaction costs, which could help to improve performance. Temporary Strategies; Cash or Similar Investments. For temporary defensive purposes, Cove Street may invest up to 100% of the Acquiring Fund’s total assets in high-quality, short-term debt securities and money market instruments. These short-term debt securities and money market instruments include cash, shares of other mutual funds, commercial paper, certificates of deposit, bankers’ acceptances, U.S. government securities and repurchase agreements. Taking a temporary defensive position may result in the Acquiring Fund not achieving its investment objective. Furthermore, to the extent that the Acquiring Fund invests in money market mutual funds for its cash position, there will be some duplication of expenses because the Acquiring Fund will bear its pro rata portion of such money market funds’ management fees and operational expenses. The Acquiring Fund may also hold short-term debt securities and money market instruments to retain flexibility in meeting redemptions and paying expenses. |
The Board has concluded that an investment in the Acquiring Fund is subject to substantially identical risks as an investment in the Fund, although management of MPS has described the principal risks of the Acquiring Fund differently than management of the Trust has described the principal risks of the Fund. In addition, management of MPS has added descriptions of new fund risk, adviser risk (in connection with Cove Street’s recent organization and registration with the SEC as an investment adviser) and foreign securities risk with respect to the Acquiring Fund. In the current prospectus of the Fund, foreign securities risk is described as a non-principal risk of the Fund, as historically foreign securities have not comprised a significant portion of the Fund’s assets. As with all mutual funds, the Acquiring Fund, like the Fund, may expose shareholders to certain market risks that could cause shareholders to lose money, particularly a sudden decline in a holding’s share price or market value or an overall decline in the stock or bond markets or circumstances affecting mutual funds. The Fund and the Acquiring Fund are each subject to the following risks:
| | CSC Small Cap Value Fund, a series of CNI Charter Funds | CSC Small Cap Value Fund, a series of MPS |
| Principal Risks of Investing in the Fund | Market Risk of Equity Securities – By investing directly or indirectly in stocks, the Fund may expose you to a sudden decline in a holding’s share price or an overall decline in the stock market. In addition, as with any stock fund, the value of your investment will fluctuate on a day-to-day and a cyclical basis with movements in the stock market, as well as in response to the activities of individual companies. In addition, individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The rights of a company’s common stockholders to dividends and upon liquidation of the company generally are subordinated (i.e., rank lower) to those of preferred stockholders, bondholders and other creditors of the issuer. | General Market Risk. The net asset value of the Acquiring Fund and investment return will fluctuate based upon changes in the value of its portfolio securities. The market value of a security may move up or down, sometimes rapidly and unpredictably. These fluctuations may cause a security to be worth less than the price originally paid for it, or less than it was worth at an earlier time. Market risk may affect a single issuer, industry, sector of the economy or the market as a whole. U.S. and international markets have experienced significant volatility since 2008. The market value of securities in which the Acquiring Fund invests is based upon the market’s perception of value and is not necessarily an objective measure of the securities’ value. In some cases, for example, the stock prices of individual companies have been negatively impacted even though there may be little or no apparent degradation in the financial condition or prospects of the issuers. Similarly, the debt markets have experienced substantially lower valuations, reduced liquidity, price volatility, credit downgrades, increased likelihood of default, and valuation difficulties. As a result of this significant volatility, many of the following risks associated with an investment in the Fund may be increased. Continuing market volatility may have adverse effects on the Acquiring Fund. Equity Securities Risk. The Acquiring Fund’s investments in equity securities are susceptible to general stock market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change. These investor perceptions are based on various and unpredictable factors including: expectations regarding government, economic, monetary and fiscal policies; inflation and interest rates; economic expansion or contraction; global and/or regional political, economic and banking crises; and factors affecting specific industries, sectors or companies in which the Acquiring Fund invests. The Acquiring Fund’s net asset value and investment return will fluctuate based upon changes in the value of its portfolio securities.
|
| | Investment Style – A value style is primarily used to select investments for the Fund. These styles may fall out of favor, may underperform other styles and may increase the volatility of the Fund’s share price. | Value-Style Investing Risk. The Acquiring Fund’s investments in value stocks may react differently to issuer, political, market, and economic developments than the general market and investments in other types of stocks. Value stocks tend to be inexpensive relative to their earnings or assets compared to other types of stocks. However, value stocks may continue to be inexpensive for long periods of time and may not ever realize their full value. Also, if the market does not consider a stock to be undervalued, then the value of the stock may decline even if stock prices are generally rising. |
| | Small Capitalization (Small-Cap) Companies – The Fund primarily invests in small-cap companies. Cove Street believes that small-cap companies generally have greater earnings and sales growth potential than larger capitalized companies. The level of risk increases to the extent that the Fund has significant exposure to smaller capitalized or unseasoned companies (those with less than a three-year operating history). Investments in small-cap companies may involve greater risks, such as limited product lines, markets and financial or managerial resources. In addition, the securities of small-cap companies may have few market makers, wider spreads between their quoted bid and asked prices, and lower trading volume, resulting in greater price volatility and less liquidity than the securities of larger capitalized companies. Further, the Fund may hold a significant percentage of a company’s outstanding shares, which means that the Fund may have to sell them at discounts from quoted prices. | Small-Cap Companies Risk. The small-cap companies in which the Acquiring Fund invests may not have the management experience, financial resources, product diversification and competitive strengths of large-cap companies. Therefore, these securities may be more volatile and less liquid than the securities of larger, more established companies. Small-cap company stocks may also be bought and sold less often and in smaller amounts than larger company stocks. Because of this, if Cove Street wants to sell a large quantity of a small-cap company stock, it may have to sell at a lower price than it might prefer, or it may have to sell in smaller than desired quantities over a period of time. Analysts and other investors may follow these companies less actively and therefore information about these companies may not be as readily available as that for large-cap companies. |
| | Focus – The Fund holds a relatively small number of securities positions. Losses incurred in such positions could have a material adverse effect on the Fund’s overall financial condition. The Fund’s performance may also differ materially from the relevant benchmarks, which hold many more stocks than the Fund and may be focused on different sectors or industries than the Fund. | Concentration Risk. The Acquiring Fund may have a relatively high concentration of assets in a single or small number of issuers and may have fewer holdings than other mutual funds. As a result, a decline in the value of an investment in a single issuer could cause the Acquiring Fund’s overall value to decline to a greater degree than if the Acquiring Fund held a more diversified portfolio. |
| | Management – The Fund’s performance depends on the portfolio managers’ skill in making appropriate investments. As a result, the Fund may underperform the equity market or similar funds. | Management Risk. The ability of the Acquiring Fund to meet its investment objective is directly related to Cove Street’s investment strategies for the Acquiring Fund. The value of your investment in the Acquiring Fund may vary with the effectiveness of Cove Street’s research, analysis and asset allocation among portfolio securities. If Cove Street’s investment strategies do not produce the expected results, the value of your investment could be diminished or even lost entirely and the Acquiring Fund could underperform other mutual funds with similar investment objectives. |
| | Defensive Investments – The securities in which the Fund invests, and the strategies described in this Prospectus, are those that the Fund uses under normal conditions. During unusual economic or market conditions, or for temporary defensive or liquidity purposes, the Fund may invest up to 100% of its assets in cash or cash equivalents that would not ordinarily be consistent with the Fund’s investment goals. The Fund is not required or expected to take such a defensive posture. But if used, such a stance may help the Fund minimize or avoid losses during adverse market, economic or political conditions. | |
| | | New Fund Risk. There can be no assurance that the Acquiring Fund will grow to or maintain an economically viable size, in which case MPS’ Board of Trustees may determine to liquidate the Acquiring Fund. Liquidation of the Acquiring Fund can be initiated by MPS’ Board of Trustees without shareholder approval if it determines it is in the best interest of shareholders. The timing of any Acquiring Fund liquidation may not be favorable to certain individual shareholders. |
| | | Adviser Risk. Cove Street is a newly formed entity and recently registered as an investment adviser. |
| | | Foreign Securities Risk. Investments in securities of foreign companies involves risks not generally associated with investments in securities of U.S. companies, including risks relating to political, social and economic developments abroad and differences between U.S. and foreign regulatory requirements and market practices. Securities that are denominated in foreign currencies are subject to the further risk that the value of the foreign currency will fall in relation to the U.S. dollar and/or will be affected by volatile currency markets or actions of U.S. and foreign governments or central banks. Foreign securities may be subject to greater fluctuations in price than securities of U.S. companies because foreign markets may be smaller and less liquid than U.S. markets. |
The following is a summary of material information concerning the proposed Reorganization. Keep in mind that more detailed information appears in the Plan, a form of which is attached to this Proxy Statement in Appendix A, and in the prospectus and statement of additional information of the Acquiring Fund incorporated by reference into this Proxy Statement.
| | 1. | SUMMARY OF THE PROPOSED REORGANIZATION |
At the Special Meeting, the shareholders of the Fund will be asked to approve the Plan to reorganize the Fund into the Acquiring Fund. The Acquiring Fund is a newly-organized fund that will commence operations upon consummation of the Reorganization. If the Plan is approved by the shareholders of the Fund and the Reorganization is consummated the Fund will transfer all of the assets and liabilities attributable to each class of its shares, except for Class N shares, to the Acquiring Fund in exchange for full and fractional shares of the corresponding class of the Acquiring Fund with the same aggregate net asset value (“NAV”) as the NAV of the assets and liabilities so transferred as of the close of business on the closing day (the “Closing”) of the Reorganization (the “Valuation Date”). The assets and liabilities attributable to the Class N shares of the Fund will be transferred in exchange for full and fractional shares of the Investor Class shares of the Acquiring Fund with the same aggregate NAV as the NAV of the assets and liabilities so transferred as of the Valuation Date. Immediately thereafter, the Fund will distribute the Acquiring Fund shares to its shareholders by establishing accounts on the Acquiring Fund’s share records in the names of those shareholders representing the respective pro rata number of Acquiring Fund shares deliverable to them, in complete liquidation of the Fund. The expenses associated with the Reorganization will not be borne by the Fund. Certificates evidencing the Acquiring Fund shares will not be issued to the Fund’s shareholders.
Upon completion of the Reorganization, each shareholder of the Fund, except with respect to Class N shares, will own that number of full and fractional shares of the corresponding class of the Acquiring Fund having an aggregate NAV equal to the aggregate NAV of such shareholder’s shares of the Fund as of the Valuation Date. Class N shareholders of the Fund will own full and fractional shares of the Investor Class shares of the Acquiring Fund having an aggregate NAV equal to the aggregate NAV of such shareholders’ Class N shares of the Fund as of the Valuation Date.
Until the Closing, shareholders of the Fund will continue to be able to redeem their shares at the NAV next determined after receipt by the Fund’s transfer agent of a redemption request in proper form. Redemption and purchase requests received by the transfer agent after the Closing will be treated as requests received for the redemption or purchase of shares of the Acquiring Fund received by the shareholder in connection with the Reorganization. After the Reorganization, all of the issued and outstanding shares of the Fund will be canceled on the books of the Fund and the transfer books of the Fund will be permanently closed.
The Reorganization is subject to a number of conditions, including, without limitation, the approval of the Plan and the transactions contemplated thereby described in this Proxy Statement by the shareholders of the Fund and the receipt of a legal opinion from counsel to MPS with respect to certain tax issues, including that the Reorganization is not expected to result in the recognition of gain or loss, for federal income tax purposes, by the Fund or its shareholders other than its Class N shareholders. See Section 4, “Federal Income Tax Consequences” below for a more detailed discussion of the legal opinion, tax issues and certain tax considerations for holders of Class N shares. Assuming satisfaction of the conditions in the Plan, the Reorganization is expected to be effective on January 20, 2012, or such other date as is agreed to by Cove Street, the Board, and the Board of Trustees of MPS.
Cove Street has agreed to pay all costs (other than certain legal expenses that will be borne by CNAM) relating to the proposed Reorganization, including the costs relating to the Special Meeting and this Proxy Statement. Cove Street will also incur the costs associated with the solicitation of proxies, including the cost of copying, printing and mailing proxy materials.
The Plan may be amended by the mutual consent of the Board and the Board of Trustees of MPS, notwithstanding approval thereof by the Fund’s shareholders, provided that no such amendment will have a material adverse effect on the interests of shareholders without their further approval. In addition, the Plan may be terminated at any time prior to the Closing of the Reorganization by the Board or the Board of Trustees of MPS, if, among other reasons, the Board or the Board of Trustees of MPS determine that consummation of the Reorganization is not in the best interest of shareholders.
Each class of the Acquiring Fund’s shares issued to the corresponding class of the Fund’s shareholders pursuant to the Reorganization will be duly authorized, validly issued, fully paid and non-assessable when issued, and will be transferable without restriction and will have no preemptive or conversion rights. The Acquiring Fund’s shares will be sold and redeemed based upon the net asset value per share of the Acquiring Fund next determined after receipt of the purchase or redemption request, as described in Appendix B of this Proxy Statement.
Cove Street, the current sub-adviser to the Fund, has indicated that it wishes to become the adviser to the Fund, which would allow it to assume a larger role in the performance and operations of the Fund. CNAM, the current investment adviser to the Fund, has indicated that it wishes to resign as the Fund’s investment adviser. Under these circumstances, the Board recommends that the Fund be reorganized as a series of MPS, and that shareholders vote to approve the proposed reorganization.
The Board of Trustees met on August 25, 2011, and October 18, 2011, and (with the advice and assistance of independent legal counsel) considered information regarding MPS and the Acquiring Fund prepared by U.S. Bancorp Fund Services, LLC. Based upon the Board’s evaluation of the relevant information presented to it, and in light of the Trustees’ fiduciary duties under federal and state law, the Board has determined that the Reorganization is in the best interests of shareholders of the Fund and the Acquiring Fund. In approving the Reorganization, the Board considered the proposed terms and conditions of the Reorganization and the following factors:
(1) CNAM, the investment adviser to the Fund has indicated that if the Fund is not reorganized into another fund complex, CNAM intends to resign as the Fund’s investment adviser. As CNAM acts as investment adviser to all other series of the Trust, the Board concluded that if CNAM were to resign as the Fund’s investment adviser, continued operation of the Fund as a series of the Trust with another investment adviser would not be practicable and the Board would likely liquidate the Fund.
(2) As the Fund and the Acquiring Fund have substantially identical investment objectives, strategies and risks, the Reorganization would not adversely affect the portfolio management sought by the current investors in the Fund.
(3) The Fund’s current investment sub-adviser, Cove Street, is responsible for the day-to-day management of the Fund’s portfolio. Cove Street would continue to be responsible for the Acquiring Fund’s portfolio as its investment adviser, and Jeff Bronchick, who serves as the portfolio manager for the Fund, would continue to serve as the portfolio manager for the Acquiring Fund.
(4) Although the Fund’s advisory fee would remain the same, the Board recognized that the Acquiring Fund’s annual expense caps would be 1.44% and 1.69% of average daily net assets for its Institutional and Investor Class shares, respectively, compared to the Fund’s current annual expenses of 1.19% and 1.44%, and the Fund’s current annual expense caps of 1.24% and 1.49%, of average daily net assets for its Institutional Class and Class N shares, respectively. Although the total expenses of the Acquiring Fund would therefore be higher than those of the Fund, the Board considered that even with the increased caps, Cove Street would still be subsidizing the Acquiring Fund during the first year of its operations, and that if the expense caps were not increased, Cove Street had indicated that it would not proceed with the Reorganization. The Board considered that even though fund expenses would increase in connection with the Reorganization, the Acquiring Fund’s total expenses were still within the middle 60% of those of all funds in the small-cap core fund universe selected by Lipper, Inc. After considering these factors, the Board concluded that because it believes a significant number of shareholders of the Fund may choose to continue to have their assets managed by Cove Street, even with higher expenses, the shareholders of the Fund should be given an opportunity to vote on whether the Reorganization should occur, so that they could choose to continue to receive advisory services from Cove Street. The Board also considered that shareholders of the Fund are, and the shareholders of the Acquiring Fund would be, able to redeem their shares of Fund and Acquiring Fund, respectively, at any time.
(5) MPS is a substantial and reputable mutual fund which has retained U.S. Bancorp Fund Services, LLC and its affiliates, experienced organizations, to provide administration, fund accounting, transfer agency, distribution and custody services to the Acquiring Fund and MPS’ other series.
(6) Cove Street and CNAM will pay the expenses of the Reorganization.
(7) The interests of the shareholders of the Fund and Acquiring Fund will not be diluted as a result of the Reorganization. The assets and liabilities of the Fund will be transferred to the Acquiring Fund in exchange for shares of beneficial interest of the Acquiring Fund having a total value equal to the value of the assets the Fund transferred to the Acquiring Fund (net of any liabilities). As all known liabilities of the Fund will be paid before the closing of the Reorganization, the parties anticipate that no liabilities of the Fund will be transferred to the Acquiring Fund. The exchange will take place at net asset value and there will be no sales charge or other charge imposed as a result of the Reorganization.
(8) It is not expected that the Fund or its shareholders other than holders of Class N shares will recognize any gain or loss for federal income tax purposes as a result of the Reorganization. Holders of Class N shares may have taxable income or gain based on the value of the right to make future purchases of Investor Class shares of the Acquiring Fund without paying a sales charge. However, the value of that right is uncertain, difficult to determine and not likely to be significant.
After consideration of the factors mentioned above and other relevant information, at a meeting held on August 25, 2011, the Board determined that the Reorganization is in the best interests of the funds and their shareholders, and unanimously approved the Reorganization. At a meeting held on October 18, 2011, the Board of Trustees unanimously approved the Agreement and Plan of Reorganization and directed that it be submitted to the Fund’s Shareholders for approval.
If the Plan is not approved by the Fund’s shareholders, then the Fund will continue to operate as a separate series of the Trust, and the Board may take any further action as it deems to be in the best interests of the Fund and its shareholders, subject to approval by the Fund’s shareholders if required by applicable law. The Board has determined that if the shareholders do not approve the Reorganization, the Board would likely liquidate the Fund.
Under the 1940 Act, an investment adviser of a registered investment company or an affiliate of the investment adviser may receive any amount or benefit in connection with a sale of any interest in the investment adviser which results in an assignment of an investment advisory contract with such company, if 1) for a period of three years after the time of such sale, at least 75% of the members of the board of directors of such registered company (or its successor) are not (i) interested persons of the investment adviser of such company, or (ii) interested persons of the predecessor investment adviser; and 2) there is not imposed an unfair burden on such company as a result of such transaction or any express or implied terms, conditions, or understandings applicable thereto. MPS and the Trust have confirmed that for a period of at least three years following the commencement of Cove Street as sub-adviser to the Fund, at least 75% of the members of the Board of Trustees of each of MPS and the Trust will not be interested persons of CNAM, RCB or Cove Street. Further, neither MPS nor the Trust believes that the Reorganization and its related transactions has imposed an unfair burden on the Fund.
As an unwaivable condition of the Reorganization, the Fund and the Acquiring Fund will receive an opinion of Bernstein, Shur, Sawyer & Nelson, P.A., counsel to MPS, to the effect that, for federal income tax purposes:
| · | the Reorganization will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and each of the Fund and the Acquiring Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code; |
| · | neither the Fund, the Acquiring Fund, nor the Fund’s shareholders are expected to recognize any gain or loss for federal income tax purposes as a result of the Reorganization; |
| · | the tax basis of, and the holding period for, the Acquiring Fund’s shares received by each shareholder of the Fund in the Reorganization will be the same as the tax basis of, and the holding period for, the Fund’s shares exchanged by such shareholder in the Reorganization (provided that, with respect to the holding period for the Acquiring Fund’s shares received, the Fund’s shares exchanged were held as capital assets by the shareholder); |
| · | the tax basis of the Acquiring Fund in the assets received from the Fund in the Reorganization, and the Acquired Fund’s holding period for such assets, will be the same as the Fund’s tax basis in and holding period for those assets, except where the Acquiring Fund’s investment activities have the effect of reducing or eliminating an asset’s holding period; and |
| · | the Reorganization will not result in the termination of the Fund’s taxable year, and pursuant to Section 381 of the Code and Treasury Regulations thereunder, the Acquiring Fund will succeed to and take into account the items of the Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder. |
Bernstein, Shur, Sawyer & Nelson will not express any opinion as to the effect of the Reorganization on the Fund with respect to any asset as to which gain or loss is required to be recognized upon transfer, notwithstanding generally applicable nonrecognition rules.
According to the Acquiring Fund’s prospectus, an investor purchasing Investor Class shares of the Acquiring Fund is obligated to pay a sales charge on such purchase absent certain exemptions. However, Class N shareholders of the Fund will be able to make future purchases of Investor Class shares of the Acquiring Fund without paying a sales charge pursuant to an exemption granted in the Acquiring Fund’s prospectus. Due to that exemption, the Internal Revenue Service (“IRS”) may determine that Class N shareholders of the Fund receive “other property” in the Reorganization in addition to shares of the Acquiring Fund. The Code provides that a taxpayer generally recognizes any taxable gain in a reorganization to the extent that the taxpayer receives other property in the reorganization, with the amount of gain recognized based upon the value of the other property received. To the extent that the IRS deems the exemption from payment of sales charges to constitute other property received in the Reorganization, a Class N shareholder may recognize gain to the extent of the value of that exemption. The Fund believes that the value of the exemption is uncertain, difficult to determine and not likely to be significant. Class N shareholders should consult with their tax advisors regarding the tax consequences of the sales charge exemption.
Bernstein, Shur, Sawyer & Nelson will not express any opinion as to (i) whether the waiver of a sales load for Class N shareholders of the Fund with respect to future purchases of Investor Class shares constitutes a receipt of “other property” in addition to stock for U.S. federal income tax purposes, (ii) the value of the exemption from sales charges, or (iii) the amount of any gain or income the Class N shareholders may recognize because of the exemption.
Since its inception, the Fund believes it has qualified as a “regulated investment company” under the Code and for the special tax treatment afforded under Subchapter M of the Code. Accordingly, the Fund believes it has been, and expects to continue to be, relieved of any federal income tax liability on its taxable income and gains distributed to shareholders. The Fund had a capital loss carry forward of $4,233,000 as of September 30, 2011. This capital loss carry forward expires September 30, 2018.
Although the Trust is not aware of any adverse state income tax consequences, the Trust has not made any investigation as to those consequences for the shareholders. Because each shareholder may have unique tax issues, shareholders should consult their own tax advisors.
Set forth below is a discussion of the material differences between the Fund and the rights of shareholders of the Fund, and the Acquiring Fund and the rights of shareholders of the Acquiring Fund.
Governing Law. The Fund is a separate series of the Trust, which is organized as a Delaware statutory trust. The Acquiring Fund is a separate series of MPS, which is also organized as a Delaware statutory trust. Each of the Fund and Acquiring Fund is authorized to issue an unlimited number of shares of beneficial interest. The Trust’s and MPS’ operations are governed by its respective Agreement and Declaration of Trust and Bylaws (collectively “Governing Instruments”), as well as Delaware law.
Shareholder Liability. With respect to each of the Fund and the Acquiring Fund, under the respective trust’s Governing Instruments, any shareholder or former shareholder of the Fund or Acquiring Fund shall not be held to be personally liable for any obligation or liability of the respective trust solely by reason of being or having been a shareholder and not because of such shareholder’s acts or omissions or for some other reason. The Fund and Acquiring Fund are required to indemnify any shareholder and former shareholder against losses and expenses incurred in connection with proceedings relating to his or her being or having been a shareholder of the Fund or Acquiring Fund and not because of his or her acts or omissions.
Board of Trustees. The Trustees of MPS are different than the Trustees of the Trust. The Board for the Trust has five trustees, none of whom is an interested person of the Trust as that term is defined under the 1940 Act. For more information, refer to the Statement of Additional Information dated January 28, 2011,as supplemented July 15, 2011 and September 22, 2011 for the Fund, which is incorporated by reference into this Proxy Statement.
The Board of Trustees for MPS has five trustees, one of whom is an interested person of MPS. For more information, refer to the Statement of Additional Information dated December 16, 2011 for the Acquiring Fund, which is incorporated by reference into this Proxy Statement.
Classes. Each of the Fund and the Acquiring Fund is a separate series of the Trust and MPS, respectively, and each may issue more than one class of shares. Currently, the Fund has three classes of shares, Institutional Class, Class N and Class R. Following the Reorganization, the Acquiring Fund will have two classes of shares, Institutional Class and Investor Class. The Board of Trustees of MPS has reserved the right to create and issue additional classes of the Acquiring Fund. Each share of a series or class represents an equal proportionate interest in that series or class with each other share of that series or class. Shares of each series or class generally vote together on fund- or trust-wide matters, except when required under federal securities laws to vote separately on matters that only affect a particular class, such as the approval of a distribution plan for a particular class. Because MPS will waive any current and future sales loads on the Acquiring Fund’s Investor Class shares for any shareholder of the Fund’s Class N shares as of the Valuation Date, there is no significant difference between the corresponding share classes of MPS and the Trust.
Generally, the procedures by which MPS intends to value the securities of the Acquiring Fund are very similar to the procedures used by the Trust to value the securities of the Fund. In all cases where a price is not readily available and no other means are available for determining a price, both MPS and the Trust turn to their fair value procedures for guidance. Applying MPS’ valuation policies after the Reorganization to the Acquiring Fund will not result in material differences in the Acquiring Fund’s NAV per share compared to applying the Trust’s valuation policies to the Fund prior to the Reorganization. The material differences between the policies of MPS and the Trust are described below.
Exchange Traded Securities or Securities Traded on an Automated Quotation System. For both MPS and the Trust, securities that are traded on an exchange or an automated quotation system are valued using the last reported sales price on the principal exchange or system on which they are traded. If a price is not readily available, the Trust prices the security using the most recently quoted bid price. For MPS, if a price is not readily available, the security is priced at the mean of the most recently quoted bid and ask price. For securities traded on NASDAQ, both the Trust and MPS use the NASDAQ Official Closing Price.
Over the Counter Securities. For both MPS and the Trust, securities that are not traded on an exchange or an automated quotation system are valued using the last reported sales price. However, if a price is not readily available, the Trust prices the security using the most recently quoted bid price. For MPS, if a price is not readily available, MPS prices the security at the mean of the most recently quoted bid and ask price.
Money Market or Short-Term Instruments. For both MPS and the Trust, money market instruments are valued at amortized cost.
Debt Securities. For MPS, debt securities are valued using the mean between the closing bid and ask prices as determined by an independent pricing service. In the absence of a price from a pricing service, MPS will implement its fair value procedures. For the Trust, securities are valued using the last reported sales price by an independent pricing service. If a price is not readily available, the security is priced using the most recently quoted bid price from an independent broker.
Foreign Securities. For both the Trust and MPS, foreign securities are priced in their local currencies as of the close of the primary exchange or market or the close of the New York Stock Exchange, whichever is earlier. Foreign currencies are translated into U.S. dollars at the exchange rate as provided by a pricing service as of the close of the New York Stock Exchange.
Fair Value Determinations. For MPS, a security or other asset is valued at its fair value as determined under fair value pricing procedures approved by the Board of Trustees when market quotations are not readily available. These fair value pricing procedures will also be used to price a security when corporate events, events in the securities market and/or world events cause Cove Street to believe that a security’s last sale price may not reflect its actual market value. The Board of Trustees of MPS will regularly evaluate whether the fair value pricing procedures continue to be appropriate in light of the specific circumstances and the quality of prices obtained through the application of such procedures by MPS’ valuation committee. Further discussion about MPS’ fair value pricing procedures is contained in Appendix B.
For the Trust, if market prices are not readily available or considered to be unreliable, fair value prices may be determined by the Trust’s Fair Valuation Committee. In addition, if an event materially affecting the value of foreign investments or foreign currency exchange rates occurs prior to the close of business of the New York Stock Exchange but after the time their values are otherwise determined for the Fund, such investments or exchange rates will be valued at their fair value. The Fair Valuation Committee in good faith uses methods approved by and under the ultimate supervision of the Trust’s Board of Trustees. The Trust’s Board of Trustees reviews all fair value determinations. Further discussion about the Trust’s fair valuation procedures is contained in the Fund’s prospectus.
The capitalization of the Fund and the Acquiring Fund as of November 30, 2011 and the Acquiring Fund’s pro forma combined capitalization as of that date after giving effect to the proposed Reorganization are as follows:
| (unaudited) | Aggregate Net Assets | Shares Outstanding | Net Asset Value Per Share |
| FUND – CSC Small Cap Value Fund (Class N) | $4,627,397.00 | 209,316.707 | $22.1072 |
| FUND – CSC Small Cap Value Fund (Class R) | $14,096,994.61 | 636,910.161 | $22.1334 |
Pro forma ACQUIRING FUND – CSC Small Cap Value Fund (Investor Class) | $18,724,391.61 | 845,978.673 | $22.1334 |
FUND - CSC Small Cap Value Fund (Institutional Class) | $1,959,822.95 | 86,748.515 | $22.5920 |
Pro forma ACQUIRING FUND - CSC Small Cap Value Fund (Institutional Class) | $1,959,822.95 | 86,748.515 | $22.5920 |
| | F. | ADDITIONAL COMPARISONS OF THE FUND AND ACQUIRING FUND |
| | 1. | INVESTMENT OBJECTIVES, STRATEGIES AND RESTRICTIONS |
The following discussion supplements the earlier discussion entitled “Summary of Fund Investment Objectives, Strategies, and Risks.” The Acquiring Fund’s investment objectives, policies, strategies and risks are substantially identical to those of the Fund.
Investment Objectives
The investment objective of the Fund is to seek capital appreciation primarily through investment in smaller U.S. corporations which, in the opinion of the Fund’s sub-adviser, are considered to be undervalued. The objective of the Fund is fundamental, which means that it cannot be changed without shareholder approval. The investment objective of the Acquiring Fund is capital appreciation. This objective is non-fundamental, which means that the MPS Board of Trustees would be able to change the investment objective of the Acquiring Fund without shareholder approval. However, shareholders would receive at least 60 days’ advance notice prior to the change being implemented. The Board of Trustees of MPS has no current intention to change this investment objective.
Investment Strategies
In selecting investments for the Acquiring Fund, Cove Street will employ substantially similar strategies as it used for the Fund.
The investment strategy of the Acquiring Fund is as follows:
Investments in Securities. Under normal market conditions, the Acquiring Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in a limited number of equity securities of small capitalization companies. The equity securities in which the Acquiring Fund invests include common and preferred stocks. The Acquiring Fund considers a company to be a small-cap company if it has a market capitalization, at the time of purchase, in the range of $50 million to $5 billion. Although the Acquiring Fund will invest primarily in the equity securities of U.S. companies, the Acquiring Fund may also invest up to 20% of its assets in the securities of foreign companies, including common and preferred stocks. The overall investment philosophy of the Acquiring Fund involves a value-oriented focus on preservation of capital over the long term and a “bottom-up” approach, analyzing companies on their individual characteristics, prospects and financial conditions. Cove Street determines the universe of potential companies for investment through a systematic screening of companies for attractive valuation characteristics and the prospects of fundamental changes, as well as information it derives from a variety of sources, including, but not limited to, regional brokerage research, trade publications and industry conferences.
Cove Street evaluates companies within this universe for fundamental characteristics such as:
• Return on capital trends;
• Cash flow and/or earnings growth;
• Free cash flow;
• Balance sheet integrity; and
• Intrinsic value analysis.
Cove Street’s research effort also includes an investigation of the strength of the business franchises of these companies and the commitment of management to shareholders through direct contacts and company visits. Factors that may cause the sale of the Acquiring Fund’s portfolio holdings include: disappointment in management; changes in the course of business or changes in a company’s fundamentals; Cove Street’s assessment that a particular company’s stock materially exceeds its estimate of intrinsic value; or if a better risk/reward candidate has been identified.
The Acquiring Fund anticipates it will have lower portfolio turnover than other small-cap value funds. This means that the Acquiring Fund has the potential to be a more tax-efficient investment than other small-cap value funds, as lower turnover likely will reduce the realization of capital gains which must be distributed to shareholders. This anticipated lack of frequent trading should also lead to lower transaction costs, which could help to improve performance.
Temporary Strategies; Cash or Similar Investments. For temporary defensive purposes, Cove Street may invest up to 100% of the Acquiring Fund’s total assets in high-quality, short-term debt securities and money market instruments. These short-term debt securities and money market instruments include cash, shares of other mutual funds, commercial paper, certificates of deposit, bankers’ acceptances, U.S. government securities and repurchase agreements. Taking a temporary defensive position may result in the Acquiring Fund not achieving its investment objective. Furthermore, to the extent that the Acquiring Fund invests in money market mutual funds for its cash position, there will be some duplication of expenses because the Acquiring Fund will bear its pro rata portion of such money market funds’ management fees and operational expenses.
The Acquiring Fund may also hold short-term debt securities and money market instruments to retain flexibility in meeting redemptions and paying expenses.
Disclosure of Portfolio Holdings
A description of the Fund’s policies and procedures with respect to the disclosure of portfolio securities is available in the Fund’s Statements of Additional Information. Except for disclosure of portfolio securities on a website, the Acquiring Fund’s policies and procedures with respect to the disclosure of portfolio securities are substantially similar to those of the Fund and are described in the Acquiring Fund’s Statement of Additional Information. Cove Street does not intend to post the Acquiring Fund’s quarterly holdings to its website at this time.
SEI Investments Distribution Co. (the “Distributor”) acts as the distributor of shares of the Fund. The Distributor has an exclusive right to sell shares of the Fund at the net asset value per share, plus any applicable sales charges in accordance with the current prospectus, as agent and on behalf of the Trust. The Distributor is a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”).
Quasar Distributors, LLC (“Quasar”) acts as the distributor for the Acquiring Fund. As such, Quasar agrees to sell Acquiring Fund shares on a best efforts basis as agent for MPS upon the terms and at the current offering price (plus sales charge, if any) described in the current prospectus. Quasar is a registered broker-dealer and member of FINRA.
| | 3. | PURCHASE AND REDEMPTION PROCEDURES |
The Fund and the Acquiring Fund have similar purchase and redemption procedures. Exceptions are noted below.
Purchasing Information
Shares of the Fund and Acquiring Fund are purchased at the next NAV per share calculated plus any applicable sales charge of the Fund or the Acquiring Fund, as the case may be, computed after the purchase order and funds are received by the applicable fund’s transfer agent or certain financial intermediaries and their agents that have made arrangements with the Fund and are authorized to buy and sell shares of the Fund (“Authorized Intermediaries”). The Fund’s Class R shares and all classes of the Acquiring Fund also offer an automatic investment plan, whereby an existing shareholder may purchase additional shares of the applicable fund on a monthly basis, in amounts which must be at least $100 (the Acquiring Fund also permits quarterly purchases), through an Automated Clearing House arrangement. Class N and Institutional Class shares of the Fund are only available through an Authorized Intermediary. Class R shares of the Fund and all of the Acquiring Fund’s shares are available direct through the respective fund’s transfer agent or through Authorized Intermediaries.
Minimum Investments. The minimum initial and subsequent investment amounts for the Fund and the Acquiring Fund are set forth in the table below.
| Fund | Minimum Initial Investment | Subsequent Investment |
| Fund – Institutional Class | None | None |
| Acquiring Fund – Institutional Class | $25,000 | $100 |
| Fund – Class N | None | None |
| Fund – Class R (retirement accounts) | $1,000 | $100 |
| Fund - Class R (non-retirement accounts) | $5,000 | $1,000 |
| Acquiring Fund – Investor Class | $5,000 | $100 |
The Acquiring Fund may waive its minimum investment requirements at its discretion.
Redemption Information
Shares of the Fund and the Acquiring Fund are redeemed at a price equal to the NAV per share next determined after the applicable fund’s transfer agent receives a redemption request in good order less any applicable redemption fee. A redemption request cannot be processed on days the New York Stock Exchange is closed. The Acquiring Fund may redeem shares in an account if the total value of the account falls below $2,500 due to redemptions after giving shareholders at least 30 days’ prior written notice of this redemption to give them an opportunity to increase the value of their account above this minimum. Additionally, both the Fund and Acquiring Fund have reserved the right to redeem shares “in kind.” The Class R shares of the Fund and the Acquiring Fund offer a systematic withdrawal program that allows shareholders to have regular monthly payments redeemed from their accounts.
Additional shareholder account information for the Fund is available in its prospectus. Additional shareholder account information for the Acquiring Fund is provided in Appendix B.
Investment Adviser and Portfolio Management
Cove Street is the Fund’s sub-adviser and the Acquiring Fund’s investment adviser, and therefore, has sole responsibility for selecting individual investments for both funds. Cove Street is located at 2321 Rosecrans Avenue, El Segundo, California 90245. Cove Street was established in 2011 and provides investment advisory services to private clients and institutions. CNAM serves as the investment adviser of the Fund and is responsible for the evaluation, selection and monitoring of Cove Street as the Fund’s sub-adviser. CNAM will not provide any services to the Acquiring Fund. Subject to the general oversight of each respective fund’s board, Cove Street makes investment decisions for the Fund and the Acquiring Fund. CNAM receives an advisory fee of 0.85% of the average daily net assets of the Fund, which CNAM in turn pays in its entirety to Cove Street. Cove Street will receive an advisory fee of 0.85% of the average daily net assets of the Acquiring Fund.
Cove Street commenced providing sub-advisory services to the Fund on July 1, 2011. For the fiscal period ended September 30, 2011, Cove Street earned the following fees for its services with respect to the Fund.
| Fiscal Year Ended September 30, 2011 | | |
| | Advisory Fee Earned | Waiver/Reimbursement | Amount Received After Waiver/Reimbursement |
| Fund | $44,804.84 | $0 | $44,804.84 |
Cove Street is waiving all of its rights to any recoupment of expenses paid or advisory fees waived for the Fund. Cove Street did not earn any fees with respect to the Acquiring Fund since it had not commenced operations as of the date of this Proxy Statement.
CNAM and Cove Street have contractually agreed through January 28, 2013, to cap the Fund’s total annual fund operating expenses (excluding taxes, interest, brokerage commissions, extraordinary expenses and acquired fund fees and expenses) at or below 1.24% of average daily net assets for the Institutional Class shares, 1.49% of average daily net assets for Class N shares and 1.49% of average daily net assets for Class R shares. Cove Street has contractually agreed to reimburse the Acquiring Fund for its operating expenses, and may reduce its management fees, in order to ensure that the Acquiring Fund’s total annual fund operating expenses (excluding acquired fund fees and expenses, brokerage commissions, interest, taxes and extraordinary expenses) do not exceed 1.44% of the average daily net assets of the Institutional Class and 1.69% of the average daily net assets of the Investor Class through at least one year from the effective date of the Reorganization.
Mr. Jeffrey Bronchick, Chief Executive Officer and Chief Investment Officer of Cove Street, is principally responsible for the management of the Fund. Prior to founding Cove Street in 2011, he was a principal, the Chief Investment Officer and a Portfolio Manager/Analyst at Reed Conner & Birdwell LLC (“RCB”), a Los Angeles based investment manager that he joined in 1989. For 22 years, he has managed research driven, concentrated, value based strategies across all market capitalizations and led extensive analysis throughout the corporate capital structure. He was one of the first columnists for TheStreet.com in the 1990’s and then moved on to a similar role at Grant’s Interest Rate Observer’s first online effort. Prior to RCB, Mr. Bronchick worked in research and trading roles at Neuberger Berman, Bankers Trust and First Boston. He attended the London School of Economics and graduated from the University of Pennsylvania.
The Statement of Additional Information of the Fund and the Acquiring Fund provides additional information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the Fund.
Other Service Providers
SEI Global Funds Services serves as the Fund’s administrator and fund accountant. U.S. Bank, National Association, 510 South 16th Street, Philadelphia, Pennsylvania 19102, is custodian of the Fund’s assets. SEI Institutional Transfer Agent, Inc., a wholly owned subsidiary of SEI Investments, One Freedom Valley Drive, Philadelphia, Pennsylvania 19456, acts as the Fund’s transfer agent. UMB Fund Services, Inc., 803 West Michigan Street, Milwaukee, Wisconsin 53233, serves as sub-transfer agent for the Fund’s Class R shares. KPMG LLP, 1601 Market Street, Philadelphia, Pennsylvania 19103, is the independent registered public accounting firm for the Fund and audits the financial statements and the financial highlights of the Fund.
U.S. Bancorp Fund Services, LLC (“USBFS”) 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the Acquiring Fund’s administrator, transfer agent, and fund accountant. U.S. Bank National Association, 1555 N. River Center Drive, Suite 302, Milwaukee, Wisconsin 53212, an affiliate of USBFS, serves as the custodian for the portfolio securities, cash and other assets of the Acquiring Fund. Cohen Fund Audit Services, Ltd., 800 Westpoint Parkway, Suite 1100, Westlake, Ohio 44145, has been selected as the Acquiring Fund’s independent registered public accounting firm and will audit the financial statements and the financial highlights of the Acquiring Fund.
As a technical matter of law, the Trust and MPS are organized under a Delaware statute. Many mutual funds in the United States use this form of organization. The Fund and the Acquiring Fund and are also subject to federal regulation. Further information about the Trust’s and MPS’ current trust structure is contained in each fund’s prospectus and Statement of Additional Information, as well as in the Trust’s and MPS’ respective Governing Instruments and in Delaware law.
THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE PROPOSAL.
This Proxy Statement is being provided in connection with the solicitation of proxies by the Board of the Trust to solicit your vote for the Proposal at a Special Meeting of Shareholders of the Fund. The Special Meeting will be held at the offices of CNI Charter Funds, 400 North Roxbury Drive, Beverly Hills, California 90210 on January 17, 2012 at 10:00 a.m. Pacific time.
You may vote in one of three ways:
| | · | Complete and sign the enclosed proxy ballot and mail it to us in the prepaid return envelope (if mailed in the United States); |
| | · | Vote on the Internet at the website address listed on your proxy ballot; or |
| | · | Call the toll-free number printed on your proxy ballot. |
PLEASE NOTE, TO VOTE VIA THE INTERNET OR TELEPHONE, YOU WILL NEED THE “CONTROL NUMBER” THAT APPEARS ON YOUR PROXY BALLOT.
You may revoke a proxy once it is given. If you desire to revoke a proxy, you must submit a subsequent proxy or a written notice of revocation to the Secretary of the Trust. You may also give written notice of revocation in person at the Special Meeting. All properly executed proxies received in time for the Special Meeting will be voted as specified in the proxy, or, if no specification is made, FOR each proposal.
Only shareholders of record on November 25, 2011, are entitled to receive notice of and to vote at the Special Meeting or at any adjournment thereof. Each whole share held as of the close of business on November 25, 2011, is entitled to one vote and each fractional share is entitled to a proportionate fractional vote. If shareholders of the Fund do not approve the Reorganization, then the Reorganization will not be implemented.
The presence in person or by proxy of one third of the outstanding shares of the Fund entitled to vote will constitute a quorum for the Special Meeting. With respect to the Proposal, a majority of the shares of the Fund entitled to vote must be present in person or by proxy. When a quorum is present, the affirmative vote of the lesser of (1) 67% or more of the shares of the Fund present or represented by proxy at the Special Meeting, if holders of more than 50% of the Fund’s outstanding shares are present or represented by proxy, or (2) more than 50% of the Fund’s outstanding shares.
If a quorum of shareholders of the Fund is not present at the Meeting, or if a quorum is present but sufficient votes to approve the proposal described in this Proxy Statement are not received, the persons named as proxies may, but are under no obligation to, propose one or more adjournments of the Special Meeting of the Fund to permit further solicitation of proxies. Any business that might have been transacted at the Special Meeting with respect to the Fund may be transacted at any such adjourned session(s) at which a quorum is present. The Special Meeting with respect to the Fund may be adjourned from time to time by a majority of the votes of the Fund properly cast upon the question of adjourning the Special Meeting of the Fund to another date and time, whether or not a quorum is present, and the Special Meeting of the Fund may be held as adjourned without further notice. The persons named in the proxy will vote in favor of such adjournment those shares that they are entitled to vote if such adjournment is necessary to obtain a quorum or to obtain a favorable vote on the proposal. The persons named in the proxy will vote against adjournment those shares that they are entitled to vote if the shareholder proxies instruct persons to vote against the proposal.
All proxies voted, including abstentions will be counted toward establishing a quorum. Abstentions will be treated as shares voted against a proposal.
Approval of the Proposal will occur only if a sufficient number of votes are cast “FOR” the proposal. If shareholders of the Fund do not vote to approve the Reorganization, the Trustees of the Trust will consider other possible courses of action in the best interests of the Fund’s shareholders, and they have determined that they would likely liquidate the Fund. If sufficient votes in favor of the Reorganization are not received by the time scheduled for the Special Meeting, the persons named as proxies or any officer present entitled to preside or act as Secretary of such meeting, may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies. In determining whether to adjourn the Special Meeting, the following factors may be considered: the percentage of votes actually cast, the percentage of negative votes actually cast, the nature of any further solicitation and the information to be provided to shareholders with respect to the reasons for the solicitation. Any adjournment will require an affirmative vote of a majority of those shares represented at the Special Meeting, whether or not a quorum is present, in person or by proxy. The persons named as proxies will vote upon such adjournment after consideration of all circumstances that may bear upon a decision to adjourn the Special Meeting. Any business that might have been transacted at the Special Meeting originally called may be transacted at any such adjourned meeting at which a quorum is present. The costs of any additional solicitation and of any adjourned session will be borne by Cove Street.
A shareholder of the Fund who objects to the proposed Reorganization will not be entitled under either Delaware law or the Trust’s Governing Instruments to demand payment for, or an appraisal of, his or her shares. However, shareholders should be aware that the Reorganization as proposed is not expected to result in recognition of gain or loss to shareholders other than Class N shareholders for federal income tax purposes. If the Reorganization is consummated, shareholders will be free to redeem the shares of the Acquiring Fund that they receive in the transaction at their then-current NAV per share. Shares of the Fund may be redeemed at any time prior to the consummation of the Reorganization. Shareholders of the Fund may wish to consult their tax advisors as to any different consequences of redeeming their shares prior to the Reorganization or exchanging such shares in the Reorganization.
| | A. | METHOD AND COST OF SOLICITATION |
This Proxy Statement is being sent to you in connection with the solicitation of proxies by the Board of Trustees for use at the Special Meeting. The Board of Trustees of the Trust has fixed the close of business on November 25, 2011, (the “Record Date”), as the record date for determining the shareholders of the Fund entitled to receive notice of the Special Meeting and to vote, and for determining the number of shares that may be voted, with respect to the Special Meeting or any adjournment thereof. The Fund expects that the solicitation of proxies will be primarily by mail and telephone. The solicitation may also include facsimile, Internet or oral communications by certain employees of Cove Street, who will not be paid for these services. The Fund will not pay for the costs of the Reorganization or the Special Meeting. Cove Street will bear the costs associated with the Reorganization, Special Meeting, and solicitation of proxies, including the cost of copying, printing and mailing proxy materials. CNAM will bear a portion of the legal costs of the Reorganization.
Any shareholder giving a proxy may revoke it before it is exercised at the Special Meeting, either by providing written notice to the Trust, by submission of a later-dated, duly executed proxy or by voting in person at the Special Meeting. A prior proxy can also be revoked by proxy voting again on the Internet or through the toll-free number listed in the enclosed Voting Instructions. If not so revoked, the votes will be cast at the Special Meeting, and any postponements or adjournments thereof. Attendance by a shareholder at the Special Meeting does not, by itself, revoke a proxy.
| | C. | VOTING SECURITIES AND PRINCIPAL HOLDERS |
Shareholders of the Fund at the close of business on the Record Date will be entitled to be present and vote at the Special Meeting. As of that date, the following numbers of shares were outstanding for the Fund:
Shares Outstanding & Entitled to Vote (unaudited) |
| 933,054.39 |
There were no outstanding shares of the Acquiring Fund on the Record Date, as the Acquiring Fund had not yet commenced operations.
As of the Record Date, the Fund’s shareholders of record and/or beneficial owners (to the Trust’s knowledge) who owned five percent or more of the Fund’s shares are set forth below:
| Name and Address | No. of Shares Owned | % of Shares | Type of Ownership |
| Institutional Class | | | |
NFS LLC FEBO City National Bank 225 Broadway Fl 5 San Diego, CA 92101-5029 | 49,715.00 | 5.33% | Beneficial |
| | | | |
| Class R | | | |
Winner Living Trust Andrew Winner Trste None Denise Winner Trste 1545 10th St. Manhattan Beach, CA 90266 | 53,880.190 | 5.77% | Registered |
As of the Record Date, the Officers and Trustees of the Trust, as a group, owned of record and beneficially less than 1.00% of the outstanding voting securities of the Fund.
| | D. | INTEREST OF CERTAIN PERSONS IN THE TRANSACTION |
The following persons may be deemed to have an interest in the Reorganization because each controls Cove Street. Cove Street will provide investment management services to the Acquiring Fund. Future growth of the Acquiring Fund can be expected to increase the total amount of fees payable to Cove Street.
| Name | Relationship to Cove Street |
| Jeffrey Bronchick | Chief Executive Officer and Chief Investment Officer |
| Daniele Beasley | President and Chief Compliance Officer |
| III. | FURTHER INFORMATION ABOUT THE FUND AND THE ACQUIRING FUND |
Further information about the Fund is contained in the following documents:
| | · | Prospectus for the CNI Charter CSC Small Cap Value Fund dated January 28, 2011 , as supplemented July 15, 2011 and September 22, 2011; and |
| | · | Statement of Additional Information for the CNI Charter CSC Small Cap Value Fund dated January 28, 2011, as supplemented July 15, 2011 and September 22, 2011. |
The Annual Report to Shareholders of the Fund for the fiscal year ended September 30, 2011, containing audited financial statements, has been previously mailed to shareholders. Copies of these documents are available upon request and without charge by writing to the Trust or by calling (888) 889-0799.
Shareholders may obtain a copy of the Acquiring Fund’s Prospectus and Statement of Additional Information by writing to the Acquiring Fund c/o U.S. Bancorp Fund Services, LLC, 615 East Michigan Street, 2nd Floor, Milwaukee, Wisconsin 53202. As the Acquiring Fund has not yet commenced operations as of the date of this Proxy Statement, annual and semi-annual reports relating to the Acquiring Fund are not available.
The Trust and MPS are subject to the information requirements of the Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith, file reports and other information, including proxy materials and charter documents, with the SEC. Reports, proxy statements, registration statements and other information filed by the Trust may be inspected without charge and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549, and at certain regional offices of the SEC: Atlanta Regional Office, 3475 Lenox Road, NE., Suite 1000, Atlanta, Georgia 30326-1232; Boston Regional Office, 33 Arch Street, 23rd Floor, Boston, Massachusetts 02110-1424; Chicago Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604-2908; Denver Regional Office, 1801 California Street, Suite 1500, Denver, Colorado 80202-2656; Fort Worth Regional Office, Burnett Plaza, Suite 1900, 801 Cherry Street, Unit 18, Fort Worth, Texas 76102-6882; Los Angeles Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648; Miami Regional Office, 801 Brickell Avenue, Suite 1800, Miami, Florida 33131-4901; New York Regional Office, 3 World Financial Center, Suite 400, New York, New York 10281-1022; Philadelphia Regional Office, 701 Market Street, Suite 2000, Philadelphia, Pennsylvania 19106-1532; Salt Lake Regional Office, 15 West South Temple Street, Suite 1800, Salt Lake City, Utah 84101-1573; San Francisco Regional Office, 44 Montgomery Street, Suite 2600, San Francisco, California 94104-4716. Copies of such materials may also be obtained from the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, DC 20549 at prescribed rates.
The Board knows of no other business to be brought before the Special Meeting. If any other matters come before the Meeting, the Board intends that proxies that do not contain specific restrictions to the contrary will be voted on those matters in accordance with the judgment of the persons named in the enclosed form of proxy.
| | B. | NEXT MEETING OF SHAREHOLDERS |
The Fund is not required and does not intend to hold annual or other periodic meetings of shareholders except as required by the 1940 Act. By observing this policy, the Fund seeks to avoid the expenses customarily incurred in the preparation of proxy material and the holding of shareholder meetings, as well as the related expenditure of staff time. If the Reorganization is not completed, the next meeting of the shareholders of the Fund will be held at such time as the Board of Trustees may determine or at such time as may be legally required. Any shareholder proposal intended to be presented at such meeting must be received by the Trust at its office at a reasonable time before the Trust begins to print and mail its proxy, as determined by the Board of Trustees, to be included in the Fund’s proxy statement and form of proxy relating to that meeting, and must satisfy all other legal requirements.
Certain legal matters in connection with the tax consequences of the Reorganization will be passed upon by Bernstein, Shur, Sawyer and Nelson, P.A.
The financial statements of the Fund for the year ended September 30, 2011, contained in the Trust’s 2011 Annual Report to Shareholders, have been audited by KPMG LLP, an independent registered public accounting firm, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given their authority as experts in accounting and auditing.
By Order of the Board of Trustees of CNI Charter Funds
/s/ Carolyn Mead
Carolyn Mead, Secretary
December 17, 2011
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION (“Agreement”) is made as of ________ __, 2012, among MANAGED PORTFOLIO SERIES, a Delaware statutory trust, with its principal place of business at 615 E. Michigan Street, Milwaukee, WI 53202 (“New Trust”), on behalf of its series, CSC Small Cap Value Fund (“New Fund”), CNI CHARTER FUNDS, a Delaware statutory trust, with its principal place of business at 400 North Roxbury Drive, Beverly Hills, CA 90210 (“Old Trust”), on behalf of its series, CSC Small Cap Value Fund (“Old Fund”), and, solely for purposes of paragraph 6, COVE STREET CAPITAL, LLC, New Fund’s investment manager (“Cove Street”), and CITY NATIONAL ASSET MANAGEMENT, INC., Old Fund’s investment adviser (“CNAM”). (Each of New Trust and Old Trust is sometimes referred to herein as an “Investment Company,” and each New Fund and Old Fund is sometimes referred to herein as a “Fund.”) Notwithstanding anything to the contrary contained herein, (1) the agreements, covenants, representations, warranties, actions, and obligations of and by each Fund, and of and by each Investment Company, as applicable, on its behalf, shall be the agreements, covenants, representations, warranties, actions, and obligations of that Fund only, (2) all rights and benefits created hereunder in favor of a Fund shall inure to and be enforceable by the Investment Company of which that Fund is a series on that Fund’s behalf, and (3) in no event shall any other series of an Investment Company (including the other Fund thereof) or the assets thereof be held liable with respect to the breach or other default by an obligated Fund or Investment Company of its agreements, covenants, representations, warranties, actions, and obligations set forth herein.
New Fund and Old Fund wish to effect a reorganization described in section 368(a) of the Internal Revenue Code of 1986, as amended (“Code”) (all “section” references are to the Code, unless otherwise noted), and intend this Agreement to be, and adopt it as, a “plan of reorganization” within the meaning of Treasury Regulations (“Regulations” Section 1.368-2(g)). The reorganization will involve Old Fund’s changing its identity -- by converting from a series of Old Trust to a series of New Trust -- by (1) transferring all its assets to New Fund (which is being established solely for the purpose of acquiring those assets and continuing Old Fund’s business) in exchange solely for voting shares of beneficial interest (“shares”) in New Fund and New Fund’s assumption of all of Old Fund’s liabilities, (2) distributing those shares pro rata to Old Fund’s shareholders in exchange for their shares therein and in complete liquidation thereof, and (3) terminating Old Fund, all on the terms and conditions set forth herein (all the foregoing transactions involving Old Fund and New Fund being referred to herein collectively as the “Reorganization”).
Each Investment Company’s board of trustees (each, a “Board”), in each case including a majority of its members who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (“1940 Act”)) (“Non-Interested Persons”) of either Investment Company, (1) has duly adopted and approved this Agreement and the transactions contemplated hereby, (2) has duly authorized performance thereof on its Fund’s behalf by all necessary Board action, and (3) has determined that participation in the Reorganization is in the best interests of the Fund that is a series thereof and, in the case of Old Fund, that the interests of the existing shareholders thereof will not be diluted as a result of the Reorganization.
Old Fund currently offers three classes of shares, designated Institutional Class shares, Class N shares and Class R shares (“Institutional Class Old Fund Shares,” “Class N Old Fund Shares” and “Class R Old Fund Shares,” respectively, and collectively, “Old Fund Shares”). New Fund will have two classes of shares, which will be designated Institutional Class shares and Investor Class shares (“Institutional Class New Fund Shares” and “Investor Class New Fund Shares,” respectively, and collectively, “New Fund Shares”). The Institutional Class Old Fund Shares have substantially similar characteristics to the Institutional Class New Fund Shares, and the Class R Old Fund Shares have substantially similar characteristics to the Investor Class New Fund Shares. Other than applicable sales loads, the Class N Old Fund Shares have substantially similar characteristics to the Investor Class New Fund Shares.
In consideration of the mutual promises contained herein, the Investment Companies agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Subject to the requisite approval of Old Fund’s shareholders and the terms and conditions set forth herein, Old Fund shall assign, sell, convey, transfer, and deliver all of its assets described in paragraph 1.2 (“Assets”) to New Fund. In exchange therefor, New Fund shall:
(a) Issue and deliver to Old Fund the number of full and fractional (all references herein to “fractional” shares meaning fractions rounded to the third decimal place) (1) Institutional Class New Fund Shares equal to the number of full and fractional Institutional Class Old Fund Shares then outstanding; (2) Investor Class New Fund Shares equal to the number of full and fractional Class R Old Fund Shares then outstanding; and (3) Investor Class New Fund Shares equal in value to the value of the Class N Old Fund Shares then outstanding; and
(b) Assume all of Old Fund’s liabilities as described in paragraph 1.3 (“Liabilities”).
Those transactions shall take place at the Closing (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property of every kind and nature of Old Fund at the Effective Time (as defined in paragraph 2.1), including, without limitation, all cash, cash equivalents, securities, commodities, futures interests, receivables (including interest and dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, books and records and any deferred and prepaid expenses shown as assets on Old Fund’s books . Old Fund has no unamortized or unpaid organizational fees or expenses that have not previously been disclosed in writing to New Trust.
1.3 The Liabilities shall consist of all of Old Fund’s liabilities, debts, obligations, and duties existing at the Effective Time, whether known or unknown, contingent, accrued, or otherwise, excluding Reorganization Expenses (as defined in paragraph 3.3(f)) borne by Cove Street and CNAM pursuant to paragraph 6. Notwithstanding the foregoing, Old Fund will endeavor to discharge all its known liabilities, debts, obligations, and duties before the Effective Time (other than the obligations set forth in this Agreement and certain investment contracts, including options, futures, forward contracts, and swap agreements).
1.4 At or before the Closing, New Fund shall redeem the Initial Shares (as defined in paragraph 5.5) for the amount at which they are issued pursuant to that paragraph. At the Effective Time (or as soon thereafter as is reasonably practicable), Old Fund shall distribute all the New Fund Shares it receives pursuant to paragraph 1.1(a) to its shareholders of record determined at the Effective Time (each, a “Shareholder”), in proportion to (a) for Institutional Class shareholders and Class R shareholders, the respective number of their Old Fund Shares then held of record, and (b) for Class N shareholders, the respective net asset values of the Old Fund Shares then held of record, in each case in constructive exchange therefor, and shall completely liquidate. That distribution shall be accomplished by New Trust’s transfer agent’s opening accounts on New Fund’s shareholder records in the Shareholders’ names and transferring those New Fund Shares thereto. Pursuant to that transfer, each Shareholder’s account, except for Shareholders holding Class N Old Fund Shares, shall be credited with the number of full and fractional New Fund Shares equal to the number of full and fractional Old Fund Shares held by such Shareholder at the Effective Time, by class (i.e., the account for each Shareholder holding Institutional Class Old Fund Shares shall be credited with the number of full and fractional Institutional Class New Fund Shares due that Shareholder and the account for each Shareholder holding Class R Old Fund Shares shall be credited with the number of full and fractional Investor Class New Fund Shares due that Shareholder). Shareholders holding Class N Old Fund Shares will receive Investor Class New Fund Shares on a load-waived basis equal in net asset value to the Class N Old Fund Shares that the Shareholder owned at the Effective Time. The aggregate net asset value (“NAV”) of New Fund Shares to be so credited to each Shareholder’s account shall equal the aggregate NAV of the Old Fund Shares held by such Shareholder at the Effective Time. All issued and outstanding Old Fund Shares, including any represented by certificates, shall simultaneously be canceled on Old Fund’s shareholder records. New Trust shall not issue certificates representing the New Fund Shares issued in connection with the Reorganization.
1.5 Any transfer taxes payable on the issuance and transfer of New Fund Shares in a name other than that of the registered holder on Old Fund’s shareholder records of the Old Fund Shares actually or constructively exchanged therefor shall be paid by the transferee thereof, as a condition of that issuance and transfer.
1.6 Any reporting responsibility of Old Fund to a public authority, including the responsibility for filing regulatory reports, tax returns, and other documents with the Securities and Exchange Commission (“Commission”), any state securities commission, any federal, state, and local tax authorities, and any other relevant regulatory authority, is and shall remain the responsibility of Old Fund, provided, however, that New Fund shall be responsible for filing any tax return covering a period that includes any period after the date of the Closing..
1.7 After the Effective Time, Old Fund shall not conduct any business except in connection with its dissolution and termination. As soon as reasonably practicable after distribution of the New Fund Shares pursuant to paragraph 1.4, but in all events within six months after the Effective Time, Old Fund shall be terminated as a series of Old Trust.
2. CLOSING AND EFFECTIVE TIME
2.1 Unless the Investment Companies agree otherwise, all acts necessary to consummate the Reorganization (“Closing”) shall be deemed to take place simultaneously as of immediately after the close of business (4:00 p.m., Eastern time) onJanuary 20, 2012 (“Effective Time”). The Closing shall be held at New Trust’s offices or at such other place as to which the Investment Companies agree.
2.2 Old Trust shall cause the custodian of Old Fund’s assets (“Old Custodian”) (a) to make Old Fund’s portfolio securities available to New Trust (or to its custodian (“New Custodian”), if New Trust so directs), for examination, no later than five business days preceding the Effective Time and (b) to transfer and deliver the Assets at the Effective Time to the New Custodian for New Fund’s account, as follows: (1) duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers, (2) by book entry, in accordance with the Old Custodian’s customary practices and any securities depository (as defined in Rule 17f-4 under the 1940 Act) in which Old Fund’s assets are deposited, in the case of Old Fund’s portfolio securities and instruments deposited with those depositories, and (3) by wire transfer of federal funds in the case of cash. Old Trust shall also direct the Old Custodian to deliver at the Closing an authorized officer’s certificate (a) stating that pursuant to proper instructions provided to the Old Custodian by Old Trust, the Old Custodian has delivered all of Old Fund’s portfolio securities, cash, and other Assets to the New Custodian for New Fund’s account and (b) attaching a schedule setting forth information (including adjusted basis and holding period, by lot) concerning the Assets. The New Custodian shall certify to New Trust that such information, as reflected on New Fund’s books immediately after the Effective Time, does or will conform to that information as so certified by the Old Custodian.
2.3 Old Trust shall deliver, or shall direct its transfer agent to deliver, to New Trust at the Closing an authorized officer’s certificate listing the Shareholders’ names and addresses together with the number of full and fractional outstanding Old Fund Shares, by class, each such Shareholder owns, at the Effective Time, certified by Old Trust’s Secretary or Assistant Secretary or by its transfer agent, as applicable. New Trust shall direct its transfer agent to deliver at or as soon as reasonably practicable after the Closing an authorized officer’s certificate as to the opening of accounts on New Fund’s shareholder records in the names of the listed Shareholders and a confirmation, or other evidence satisfactory to Old Trust, that the New Fund Shares to be credited to Old Fund at the Effective Time have been credited to Old Fund’s account on those records.
2.4 Old Trust shall deliver to New Trust and CNAM, within five days before the Closing, an authorized officer’s certificate listing each security, by name of issuer and number of shares, which is being carried on Old Fund’s books at an estimated fair market value provided by an authorized pricing vendor for Old Fund.
2.5 At the Closing, each Investment Company shall deliver to the other (a) bills of sale, checks, assignments, share certificates, receipts, and/or other documents the other Investment Company or its counsel reasonably requests and (b) a certificate executed in its name by its President or a Vice President in form and substance satisfactory to the recipient, and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are true and correct at the Effective Time except as they may be affected by the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES
3.1 Old Trust, on Old Fund’s behalf, represents and warrants to New Trust, on New Fund’s behalf, as follows:
(a) Old Trust (1) is a trust operating under a written instrument or declaration of trust, the beneficial interest in which is divided into transferable shares (“Statutory Trust”), that is duly created, validly existing, and in good standing under the laws of the Delaware (“Delaware”), and its Agreement and Declaration of Trust dated October 25, 1996, as amended April 26, 1999 (“Old Trust Declaration”) and/or the Trust’s Certificate of Trust dated October 25, 1996, and each Certificate of Amendment thereto is on file with the Delaware Secretary of State; (2) is duly registered under the 1940 Act as an open-end management investment company; and (3) has the power to own all its properties and assets and to carry on its business as described in its current registration statement on Form N-1A;
(b) Old Fund is a duly established and designated series of Old Trust;
(c) The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of Old Trust’s Board; and this Agreement constitutes a valid and legally binding obligation of Old Trust, with respect to Old Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights and remedies of creditors generally and general principles of equity;
(d) At the Effective Time, Old Trust will have good and marketable title to the Assets for Old Fund’s benefit and full right, power, and authority to sell, assign, transfer, and deliver the Assets hereunder free of any liens or other encumbrances (except securities that are subject to “securities loans,” as referred to in section 851(b)(2), or that are restricted to resale by their terms); and on delivery and payment for the Assets, New Trust, on New Fund’s behalf, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including restrictions that might arise under the Securities Act of 1933, as amended (“1933 Act”) except securities that are restricted to resale by their terms;
(e) Old Trust, with respect to Old Fund, is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict with or material violation of any provision of Delaware law, the Old Trust Declaration or Old Trust’s Amended and Restated Bylaws, or any agreement, indenture, instrument, contract, lease, or other undertaking (each, an “Undertaking”) to which Old Trust, on Old Fund’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which Old Trust, on Old Fund’s behalf, is a party or by which it is bound;
(f) At or before the Effective Time, either (1) all material contracts and other commitments of Old Fund (other than this Agreement and certain investment contracts, including options, futures, forward contracts, and swap agreements) will terminate, or (2) provision for discharge and/or New Fund’s assumption of any liabilities of Old Fund thereunder will be made, without either Fund’s incurring any penalty with respect thereto and without diminishing or releasing any rights Old Trust may have had with respect to actions taken or omitted or to be taken by any other party thereto before the Closing;
(g) No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to Old Trust’s knowledge, threatened against Old Trust, with respect to Old Fund or any of its properties or assets attributable or allocable to Old Fund, that, if adversely determined, would materially and adversely affect Old Fund’s financial condition or the conduct of its business; and Old Trust, on Old Fund’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects Old Fund’s business or Old Trust’s ability to consummate the transactions contemplated hereby;
(h) Old Fund’s Statement of Assets and Liabilities, Schedule of Investments, Statement of Operations, and Statement of Changes in Net Assets (each, a “Statement”) at and for the fiscal year (in the case of the last Statement, for the two fiscal years) ended September 30, 2011, have been audited by KPMG LLP, an independent registered public accounting firm, and are in accordance with generally accepted accounting principles consistently applied in the United States (“GAAP”); and present fairly, in all material respects, Old Fund’s financial condition at their respective dates in accordance with GAAP and the results of its operations and changes in its net assets for the periods then ended, and there are no known contingent liabilities of Old Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP at either such date that are not disclosed therein;
(i) Since September 30, 2011, there has not been any material adverse change in Old Fund’s financial condition, assets, liabilities, or business, other than changes occurring in the ordinary course of business, or any incurrence by Old Fund of indebtedness (except indebtedness incurred in connection with certain investments, contracts including options, futures, forward and swap contracts) maturing more than one year from the date that indebtedness was incurred; for purposes of this subparagraph, a decline in NAV per Old Fund Share due to declines in market values of securities Old Fund holds, the discharge of Old Fund liabilities, or the redemption of Old Fund Shares by its shareholders shall not constitute a material adverse change;
(j) All federal and other tax returns, dividend reporting forms, and other tax-related reports (collectively, “Returns”) of Old Fund required by law to have been filed by the Effective Time (including any properly and timely filed extensions of time to file) shall have been filed and, and all federal and other taxes shown as due or required to be shown as due on those Returns shall have been paid or provision shall have been made for the payment thereof; to the best of Old Trust’s knowledge, no such Return is currently under audit and no assessment has been asserted with respect to those Returns; and Old Fund is in compliance in all material respects with all applicable Regulations under Chapters 3 and 61 of the Code pertaining to the reporting of dividends and other distributions on and redemptions of its shares and to withholding in respect thereof and is not liable for any material penalties that could be imposed thereunder;
(k) Old Fund has properly elected to be treated as an association that is taxable as a corporation for federal tax purposes under Regulations § 301.7701-3; Old Fund is a “fund” (as defined in section 851(g)(2)) eligible for treatment as a separate corporation under section 851(g)(1)); for each taxable year of its operation, Old Fund has met the requirements of Part I of Subchapter M of Chapter 1 of Subtitle A of the Code (“Subchapter M”) for qualification as a regulated investment company (“RIC”) and has elected to be treated as such; Old Fund has been eligible to and has computed its federal income tax under section 852; Old Fund has not at any time since its inception been liable for, and is not now liable for, any material income or excise tax pursuant to sections 852 or 4982; and Old Fund has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it;
(l) All issued and outstanding Old Fund Shares are, and at the Effective Time will be, duly and validly issued and outstanding, fully paid, and non-assessable by Old Trust and have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws; all issued and outstanding Old Fund Shares will, at the Effective Time, be held by the persons and in the amounts set forth on Old Fund’s shareholder records, as provided in paragraph 2.3; and Old Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any Old Fund Shares, nor are there outstanding any securities convertible into any Old Fund Shares;
(m) Old Fund incurred the Liabilities, which are associated with the Assets, in the ordinary course of its business;
(n) Old Fund is not under the jurisdiction of a court in a “title 11 or similar case” (as defined in section 368(a)(3)(A));
(o) Not more than 25% of the value of Old Fund’s total assets (excluding cash, cash items, and Government securities) is invested in the stock and securities of any one issuer, and not more than 50% of the value of those assets is invested in the stock and securities of five or fewer issuers;
(p) Old Fund’s current prospectus and statement of additional information (1) 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 (2) at the date on which they were issued did not contain, and as supplemented by any supplement thereto dated prior to or at the Effective Time do not contain, any untrue statement of a material fact or omit to state a 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;
(q) The information to be furnished by Old Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal, state, or local regulatory authority (including the Financial Industry Regulatory Authority, Inc. (“FINRA”)) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities laws and other laws and regulations; and the Registration Statement (as defined in paragraph 3.3(a)) (other than written information provided by New Trust for inclusion therein) will, on its effective date, at the Effective Time, and at the time of the Shareholders Meeting (as defined in paragraph 4.1), not contain any untrue statement of a material fact or omit to state a 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;
(r) The Old Trust Declaration permits Old Trust to invest, sell and reinvest in contracts for the future acquisition or delivery of fixed income or other securities and securities of every nature and kind; Old Trust does not have a fixed pool of assets; and each series thereof (including Old Fund) is a managed portfolio of securities, and CNAM has the authority to buy and sell securities for it;
(s) Old Fund’s investment operations from inception to the date hereof have been in compliance in all material respects with the investment policies and investment restrictions set forth in its prospectus, except as previously disclosed in writing to New Trust; and
(t) The New Fund Shares to be delivered hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof.
3.2 New Trust, on New Fund’s behalf, represents and warrants to Old Trust, on Old Fund’s behalf, as follows:
(a) New Trust (1) is a Statutory Trust that is duly created, validly existing, and in good standing under the laws of Delaware, and its Certificate of Trust dated January 27, 2011, and/or the Amended and Restated Agreement and Declaration of Trust dated May 4, 2011 (“New Trust Declaration”) is on file with Delaware Secretary of State, (2) is duly registered under the 1940 Act as an open-end management investment company, and (3) has the power to own all its properties and assets and to carry on its business as described in its current registration statement on Form N-1A;
(b) At the Effective Time, New Fund will be a duly established and designated series of New Trust; New Fund has not commenced operations and will not do so until after the Closing; and, immediately before the Closing, New Fund will be a shell series of New Trust, without assets (except the amount paid for the Initial Shares if they have not already been redeemed by that time), liabilities, employees or business activities, created for the purpose of acquiring the Assets, assuming the Liabilities, and continuing Old Fund’s business;
(c) The execution, delivery, and performance of this Agreement have been duly authorized at the date hereof by all necessary action on the part of New Trust’s Board; and this Agreement constitutes a valid and legally binding obligation of New Trust, with respect to New Fund, enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, fraudulent transfer, reorganization, receivership, moratorium, and other laws affecting the rights and remedies of creditors generally and general principles of equity;
(d) Before the Closing, there will be no (1) issued and outstanding New Fund Shares, (2) options, warrants, or other rights to subscribe for or purchase any New Fund Shares, (3) securities convertible into any New Fund Shares, or (4) any other securities issued by New Fund, except the Initial Shares;
(e) No consideration other than New Fund Shares (and New Fund’s assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization;
(f) New Trust, with respect to New Fund, is not currently engaged in, and its execution, delivery, and performance of this Agreement and consummation of the Reorganization will not result in, (1) a conflict with or material violation of any provision of Delaware law, the New Trust Declaration or New Trust’s Bylaws, or any Undertaking to which New Trust, on New Fund’s behalf, is a party or by which it is bound or (2) the acceleration of any obligation, or the imposition of any penalty, under any Undertaking, judgment, or decree to which New Trust, on New Fund’s behalf, is a party or by which it is bound;
(g) No litigation, administrative proceeding, action, or investigation of or before any court, governmental body, or arbitrator is presently pending or, to New Trust’s knowledge, threatened against New Trust, with respect to New Fund or any of its properties or assets attributable or allocable to New Fund, that, if adversely determined, would materially and adversely affect New Fund’s financial condition or the conduct of its business; and New Trust, on New Fund’s behalf, knows of no facts that might form the basis for the institution of any such litigation, proceeding, action, or investigation and is not a party to or subject to the provisions of any order, decree, judgment, or award of any court, governmental body, or arbitrator that materially and adversely affects New Fund’s business or New Trust’s ability to consummate the transactions contemplated hereby;
(h) New Fund has properly elected to be treated as an association that is taxable as a corporation for federal tax purposes under Regulations §301.7701-3; New Fund has not filed any income tax return and will file its first federal income tax return after the completion of its first taxable year after the Effective Time as a RIC on Form 1120-RIC; New Fund will be a “fund” (as defined in section 851(g)(2)), eligible for treatment as a separate corporation under section 851(g)(1), and has not taken and will not take any steps inconsistent with its qualification as such or its qualification as and eligibility for treatment as a RIC under sections 851 and 852; New Fund expects to meet the requirements of Subchapter M of the Code for qualification as a RIC for the taxable year in which the Reorganization occurs; New Fund will elect to be treated as such and expects to be eligible to compute its federal income tax under section 852 for such taxable year; and New Fund intends to continue to meet all of the requirements of Subchapter M for qualification as a RIC, to elect to be treated as such,, and to be eligible to and to so compute its federal income tax, for the taxable year following that in which the Reorganization occurs;
(i) The New Fund Shares to be issued and delivered to Old Fund, for the Shareholders’ accounts, pursuant to the terms hereof, (1) will at the Effective Time have been duly authorized and duly registered under the federal securities laws, and appropriate notices respecting them will have been duly filed under applicable state securities laws, and (2) when so issued and delivered, will be duly and validly issued and outstanding New Fund Shares and will be fully paid and non-assessable by New Trust;
(j) There is no plan or intention for New Fund to be dissolved or merged into another business or statutory trust or a corporation or any “fund” thereof (as defined in section 851(g)(2)) following the Reorganization;
(k) Assuming the truthfulness and correctness of Old Trust’s representation and warranty in paragraph 3.1(o), immediately after the Reorganization (1) not more than 25% of the value of New Fund’s total assets (excluding cash, cash items, and Government securities) will be invested in the stock and securities of any one issuer and (2) not more than 50% of the value of those assets will be invested in the stock and securities of five or fewer issuers;
(l) Immediately after the Effective Time, New Fund will not be under the jurisdiction of a court in a “title 11 or similar case” (as defined in section 368(a)(3)(A));
(m) The information to be furnished by New Trust for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents filed or to be filed with any federal, state, or local regulatory authority (including FINRA) that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities laws and other laws and regulations; and the Registration Statement (other than written information provided by Old Trust for inclusion therein) will, on its effective date, at the Effective Time, and at the time of the Shareholders Meeting, not contain any untrue statement of a material fact or omit to state a 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; and
(n) The New Trust Declaration permits New Trust to invest, sell and reinvest in contracts for the future acquisition or delivery of fixed income or other securities and securities of every nature and kind; New Trust does not have a fixed pool of assets; and each series thereof (including New Fund after it commences operations) is (or will be) a managed portfolio of securities, and Cove Street has the authority to buy and sell securities for it.
3.3 Each Investment Company, on its Fund’s behalf, represents and warrants to the other Investment Company, on its Fund’s behalf, as follows:
(a) No governmental consents, approvals, authorizations, or filings are required under the 1933 Act, the Securities Exchange Act of 1934, as amended, the 1940 Act, or state securities laws, and no consents, approvals, authorizations, or orders of any court are required, for its execution or performance of this Agreement on its Fund’s behalf, except for (1) New Trust’s filing with the Commission of a registration statement on Form N-14 relating to the New Fund Shares issuable hereunder, and any supplement or amendment thereto, including therein a prospectus and proxy statement (“Registration Statement”), and (2) consents, approvals, authorizations, and filings that have been made or received or may be required after the Effective Time;
(b) The fair market value of the New Fund Shares each Shareholder receives will be approximately equal to the fair market value of its Old Fund Shares it actually or constructively surrenders in exchange therefor;
(c) The Shareholders will pay their own expenses (such as fees of personal investment or tax advisers for advice regarding the Reorganization), if any, incurred in connection with the Reorganization;
(d) The fair market value of the Assets will equal or exceed the Liabilities to be assumed by New Fund and those to which the Assets are subject;
(e) None of the compensation received by any Shareholder who or that is an employee of or service provider to Old Fund will be separate consideration for, or allocable to, any of the Old Fund Shares that Shareholder holds; none of the New Fund Shares any such Shareholder receives will be separate consideration for, or allocable to, any employment agreement, investment advisory agreement, or other service agreement; and the compensation paid to any such Shareholder will be for services actually rendered and will be commensurate with amounts paid to third parties bargaining at arm’s-length for similar services;
(f) No expenses incurred by Old Fund or on its behalf in connection with the Reorganization will be paid or assumed by New Fund, Cove Street, CNAM, or any other third party unless those expenses are solely and directly related to the Reorganization (determined in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187) (“Reorganization Expenses”), and no cash or property other than New Fund Shares will be transferred to Old Fund or any of its shareholders with the intention that it be used to pay any expenses (even Reorganization Expenses) thereof; and
(g) Immediately following consummation of the Reorganization, (1) the Shareholders will own all the New Fund Shares and will own those shares solely by reason of their ownership of the Old Fund Shares immediately before the Reorganization and (2) New Fund will hold the same assets -- except for assets used to pay the Funds’ expenses incurred in connection with the Reorganization -- and be subject to the same liabilities that Old Fund held or was subject to immediately before the Reorganization, plus any liabilities for those expenses; and those excepted assets, together with the amount of all redemptions and distributions (other than regular, normal dividends) Old Fund makes immediately preceding the Reorganization, will, in the aggregate, constitute less than 1% of its net assets.
4. COVENANTS
4.1 Old Trust covenants to call a meeting of Old Fund’s shareholders to consider and act on this Agreement and to take all reasonable actions necessary to obtain approval of the transactions contemplated hereby (“Shareholders Meeting”).
4.2 Old Trust covenants that it will assist New Trust in obtaining such information as the New Trust reasonably requests concerning the beneficial ownership of Old Fund Shares.
4.3 Old Trust covenants that it will turn over its books and records pertaining to Old Fund (including all books and records required to be maintained under the 1940 Act and the rules and regulations thereunder) to New Trust at the Closing.
4.4 Each Investment Company covenants to cooperate with the other in preparing the Registration Statement in compliance with applicable federal and state securities laws.
4.5 Each Investment Company covenants that it will, from time to time, as and when requested by the other, execute and deliver or cause to be executed and delivered all assignments and other instruments, and will take or cause to be taken any further action(s), the other Investment Company deems necessary or desirable in order to vest in, and confirm to, (a) New Trust, on New Fund’s behalf, title to and possession of all the Assets, and (b) Old Trust, on Old Fund’s behalf, title to and possession of the New Fund Shares to be delivered hereunder, and otherwise to carry out the intent and purpose hereof.
4.6 New Trust covenants to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and applicable state securities laws it deems appropriate to commence and continue New Fund’s operations after the Effective Time.
4.7 Subject to this Agreement, each Investment Company covenants to take or cause to be taken all actions, and to do or cause to be done all things, reasonably necessary, proper, or advisable to consummate and effectuate the transactions contemplated hereby.
5. CONDITIONS PRECEDENT
Each Investment Company’s obligations hereunder shall be subject to (a) performance by the other Investment Company of all its obligations to be performed hereunder at or before the Closing, (b) all representations and warranties of the other Investment Company contained herein being true and correct in all material respects at the date hereof and, except as they may be affected by the transactions contemplated hereby, at the Effective Time, with the same force and effect as if made at that time, and (c) the following further conditions that, at or before that time:
5.1 This Agreement and the transactions contemplated hereby shall have been duly adopted and approved by both Boards and by Old Fund’s shareholders at the Shareholders Meeting;
5.2 All necessary filings shall have been made with the Commission and state securities authorities, and no order or directive shall have been received that any other or further action is required to permit the Investment Companies to carry out the transactions contemplated hereby. The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued, and, to each Investment Company’s best knowledge, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened, or contemplated under the 1933 Act or the 1940 Act. The Commission shall not have issued an unfavorable report with respect to the Reorganization under section 25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin consummation of the transactions contemplated hereby under section 25(c) of the 1940 Act. All consents, orders, and permits of federal, state, and local regulatory authorities (including the Commission and state securities authorities) either Investment Company deems necessary to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain same would not involve a risk of a material adverse effect on either Fund’s assets or properties;
5.3 At the Effective Time, no action, suit, or other proceeding shall be pending (or, to either Investment Company’s best knowledge, threatened to be commenced) before any court, governmental agency, or arbitrator in which it is sought to enjoin the performance of, restrain, prohibit, affect the enforceability of, or obtain damages or other relief in connection with, the transactions contemplated hereby;
5.4 The Investment Companies shall have received an opinion of Bernstein, Shur, Sawyer & Nelson, P.A. (“Counsel”) as to the federal income tax consequences mentioned below (“Tax Opinion”). In rendering the Tax Opinion, Counsel may rely as to factual matters, exclusively and without independent verification, on the representations and warranties made in this Agreement, which Counsel may treat as representations and warranties made to it (that, notwithstanding paragraph 7, shall survive the Closing), and in separate letters, if Counsel requests, addressed to it and any certificates delivered pursuant to paragraph 2.5(b). The Tax Opinion shall be substantially to the effect that -- based on the facts and assumptions stated therein and conditioned on those representations and warranties’ being true and complete at the Effective Time and consummation of the Reorganization in accordance with this Agreement (without the waiver or modification of any terms or conditions hereof and without taking into account any amendment hereof that Counsel has not approved) -- for federal income tax purposes:
(a) The transfer to New Fund of the Assets of Old Fund in exchange solely for New Fund Shares and New Fund’s assumption of the Liabilities, followed by Old Fund’s distribution of such New Fund shares pro rata to the Shareholders in exchange for their Old Fund Shares, will qualify as a “reorganization” within the meaning of section 368(a) of the Code, and each Fund will be “a party to a reorganization” within the meaning of section 368(b) of the Code;
(b) Old Fund will recognize no gain or loss on the transfer of the Assets to New Fund in exchange solely for New Fund Shares and New Fund’s assumption of the Liabilities or on the subsequent distribution of those shares to the Shareholders in exchange for their Old Fund Shares;
(c) New Fund will recognize no gain or loss on its receipt of the Assets in exchange solely for New Fund Shares and its assumption of the Liabilities;
(d) New Fund’s basis in each Asset will be the same as Old Fund’s basis therein immediately before the Reorganization, and New Fund’s holding period for each Asset will include Old Fund’s holding period therefor (except where New Fund’s investment activities have the effect of reducing or eliminating an Asset’s holding period);
(e) A Shareholder will recognize no gain or loss on the exchange of all its Old Fund Shares solely for New Fund Shares pursuant to the Reorganization;
(f) A Shareholder’s aggregate basis in the New Fund Shares it receives in the Reorganization will be the same as the aggregate basis in its Old Fund Shares it surrenders in exchange for those New Fund Shares, and its holding period for those New Fund Shares will include, in each instance, its holding period for those Old Fund Shares, provided the Shareholder holds them as capital assets at the Effective Time; and
(g) The Reorganization will not result in the termination of Old Fund’s taxable year, and pursuant to Section 381 of the Code and Treasury Regulations thereunder, New Fund will succeed to and take into account the items of Old Fund described in Section 381(c) of the Code, subject to the provisions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder.
Notwithstanding subparagraphs (b), (d) and (e), the Tax Opinion may state that no opinion is expressed as to the effect of the Reorganization on Old Fund with respect to any Asset as to which any unrealized gain or loss is required to be recognized for federal income tax purposes upon transfer, notwithstanding generally applicable non-recognition rules and on any Class N shareholder of the Old Fund with respect to: (i) whether the waiver of a sales load for Class N shareholders of the Old Fund with respect to future purchases of Investor Class shares constitutes a receipt of “other property” in addition to stock for U.S. federal income tax purposes, (ii) the value of such waiver, or (iii) the amount of any gain the Class N shareholders may recognize because of the waiver;
5.5 Before the Closing, New Trust’s Board shall have authorized the issuance of, and New Trust shall have issued, one Institutional Class New Fund Share and one Investor Class New Fund Share (“Initial Shares”) to Cove Street or an affiliate thereof, in consideration of the payment of $10.00 each (or other amount that Board determines), to vote on the investment management contract, distribution and service plan, and other agreements and plans referred to in paragraph 5.6 and to take whatever action it may be required to take as New Fund’s sole shareholder;
5.6 New Trust, on New Fund’s behalf, shall have entered into, or adopted, as appropriate, an investment management contract, a distribution and service plan pursuant to Rule 12b-1 under the 1940 Act, and other agreements and plans necessary for New Fund’s operation as a series of an open-end management investment company. Each such contract, plan, and agreement shall have been approved by New Trust’s Board and, to the extent required by law (as interpreted by Commission staff positions), by its trustees who are Non-Interested Persons thereof and by Cove Street or its affiliate as New Fund’s sole shareholder; and
5.7 At any time before the Closing, either Investment Company may waive any of the foregoing conditions (except those set forth in paragraphs 5.1 and 5.4) if, in the judgment of its Board, such waiver will not have a material adverse effect on its Fund’s shareholders’ interests.
6. EXPENSES
Subject to complying with the representation and warranty contained in paragraph 3.3(f), Cove Street shall bear all Reorganization Expenses except for a portion of the legal expenses incurred by Old Fund in connection with the Reorganization that CNAM and Cove Street have agreed shall be borne by CNAM. The Reorganization Expenses include (1) costs associated with obtaining any necessary order of exemption from the 1940 Act, preparing and filing Old Fund’s prospectus supplements and the Registration Statement, and printing and distributing New Fund’s prospectus and Old Fund’s proxy materials, (2) legal and accounting fees, (3) transfer agent and custodian conversion costs, (4) transfer taxes for foreign securities, (5) proxy solicitation costs, and (6) expenses of holding the Shareholders Meeting (including any adjournments thereof) but exclude brokerage, CNAM’s and Cove Street’s travel expenses, and similar expenses in connection with the Reorganization. Notwithstanding the foregoing, expenses shall be paid by the Fund directly incurring them if and to the extent that the payment thereof by another person would result in that Fund’s disqualification as a RIC or would prevent the Reorganization from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
7. ENTIRE AGREEMENT; NO SURVIVAL; CONFIDENTIALITY
7.1 Neither Investment Company has made any representation, warranty, or covenant not set forth herein, and this Agreement constitutes the entire agreement between the Investment Companies. The representations, warranties, and covenants contained herein or in any document delivered pursuant hereto or in connection herewith shall not survive the Closing; provided, however, that the covenants to be performed after the Closing Date, and the obligations of New Trust, on behalf of the New Fund, shall continue in effect beyond the consummation of the transactions contemplated hereunder.
7.2 Each Investment Company agrees to treat confidentially and as proprietary information of the other Investment Company all records and other information, including any information relating to portfolio holdings, of its Fund and not to use such records and information for any purpose other than the performance of its duties under this Agreement; provided, however, that after prior notification of and written approval by the Investment Company (which approval shall not be withheld if the other Investment Company would be exposed to civil or criminal contempt proceedings for failure to comply when requested to divulge such information by duly constituted authorities having proper jurisdiction, and which approval shall not be withheld unreasonably in any other circumstance), an Investment Company may disclose such records and/or information as so approved.
8. TERMINATION
This Agreement may be terminated at any time at or before the Closing:
8.1 By either Investment Company (a) in the event of the other Investment Company’s material breach of any representation, warranty, or covenant contained herein to be performed at or before the Closing, (b) if a condition to its obligations has not been met and it reasonably appears that that condition will not or cannot be met, (c) if a governmental body issues an order, decree, or ruling having the effect of permanently enjoining, restraining, or otherwise prohibiting consummation of the Reorganization, or (d) if the Closing has not occurred on or before January 20, 2012, or such other date as to which the Investment Companies agree; or
8.2 By the Investment Companies’ mutual agreement.
In the event of termination under paragraphs 8.1(c) or (d) or 8.2, neither Investment Company (nor its trustees, officers, or shareholders) shall have any liability to the other Investment Company.
9. AMENDMENTS
The Investment Companies may amend, modify, or supplement this Agreement at any time and in any manner on which they mutually agree in writing, notwithstanding Old Fund’s shareholders’ approval thereof; provided that, following that approval, no such amendment, modification, or supplement shall have a material adverse effect on the Shareholders’ interests and provided that no such amendment shall waive or modify the conditions set forth in paragraphs 5.1 and 5.4.
10. SEVERABILITY
Any term or provision hereof that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of that invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions hereof or affecting the validity or enforceability of any of the terms and provisions hereof in any other jurisdiction.
11. MISCELLANEOUS
11.1 This Agreement shall be governed by and construed in accordance with the internal laws of Delaware, without giving effect to principles of conflicts of laws; provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern.
11.2 Nothing expressed or implied herein is intended or shall be construed to confer on or give any person, firm, trust, or corporation other than New Trust, on New Fund’s behalf, or Old Trust, on Old Fund’s behalf, and their respective successors and assigns any rights or remedies under or by reason of this Agreement.
11.3 Notice is hereby given that this instrument is executed and delivered on behalf of each Investment Company’s trustees solely in their capacities as trustees, and not individually, and that each Investment Company’s obligations under this instrument are not binding on or enforceable against any of its trustees, officers, shareholders, or series other than its Fund but are only binding on and enforceable against its property attributable to and held for the benefit of its Fund (“Fund’s Property”) and not its property attributable to and held for the benefit of any other series thereof. Each Investment Company, in asserting any rights or claims under this Agreement on its or its Fund’s behalf, shall look only to the other Fund’s Property in settlement of those rights or claims and not to the property of any other series of the other Investment Company or to those trustees, officers, or shareholders.
11.4 This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been executed by each Investment Company and delivered to the other Investment Company. The headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation hereof.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and delivered by its duly authorized officer as of the day and year first written above.
CNI CHARTER FUNDS, on behalf of Old Fund
By: __________________________________
Richard S. Gershen
President
MANAGED PORTFOLIO SERIES, on behalf of New Fund
By:
James R. Arnold
President
Solely for purposes of paragraph 6,
COVE STREET CAPITAL, LLC
By:
Jeffrey Bronchick
Chief Executive Officer and Chief Investment Officer
CITY NATIONAL ASSET MANAGEMENT, INC.
By: __________________________________
Richard S. Gershen
President
ADDITIONAL SHAREHOLDER ACCOUNT INFORMATION FOR THE ACQUIRING FUND
| Pricing of Acquiring Fund Shares |
The price of each class of the Acquiring Fund’s shares is based on its NAV. The NAV of each class of the shares is calculated by dividing the total assets of each class, less the liabilities of each class, by the number of its shares outstanding of each class. The NAV of each class is calculated at the close of regular trading of the NYSE, which is generally 4:00 p.m., Eastern time. The NAV of each class will not be calculated nor may investors purchase Acquiring Fund shares on days that the NYSE is closed for trading (even though certain securities may trade on days the NYSE is closed (i.e., foreign or debt securities) and may have trading on such days to materially affect the NAV of each of the Acquiring Fund’s shares).
The Acquiring Fund’s assets are generally valued at their market price using valuations provided by independent pricing services. Fixed income securities with remaining maturities of 60 days or less are valued at amortized cost. When market quotations are not readily available, a security or other asset is valued at its fair value as determined under fair value pricing procedures approved by the Board of Trustees of MPS. These fair value pricing procedures will also be used to price a security when corporate events, events in the securities market and/or world events cause Cove Street to believe that a security’s last sale price may not reflect its actual market value. The intended effect of using fair value pricing procedures is to ensure that the Acquiring Fund is accurately priced. The Board of Trustees of MPS will regularly evaluate whether the Acquiring Fund’s fair value pricing procedures continue to be appropriate in light of the specific circumstances of the Acquiring Fund and the quality of prices obtained through the application of such procedures by the MPS’ valuation committee.
When fair value pricing is employed, the prices of securities used by the Acquiring Fund to calculate its NAVs may differ from quoted or published prices for the same securities. Due to the subjective and variable nature of fair value pricing, it is possible that the fair value determined for a particular security may be materially different (higher or lower) from the price of the security quoted or published by others or the value when trading resumes or realized upon its sale. Therefore, if a shareholder purchases or redeems Acquiring Fund shares when the Acquiring Fund holds securities priced at a fair value, the number of shares purchased or redeemed may be higher or lower than it would be if the Acquiring Fund were using market value pricing.
In the case of foreign securities, the occurrence of certain events after the close of foreign markets, but prior to the time the Acquiring Fund’s NAVs are calculated (such as a significant surge or decline in the U.S. or other markets) often will result in an adjustment to the trading prices of foreign securities when foreign markets open on the following business day. If such events occur, the Acquiring Fund will value foreign securities at fair value, taking into account such events, in calculating the NAVs. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Acquiring Fund’s NAVs in advance of the time the NAVs are calculated. The Acquiring Fund’s investments in smaller capitalization companies are more likely to require a fair value determination because they may be more thinly traded and less liquid than securities of larger companies. Cove Street anticipates that the Acquiring Fund’s portfolio holdings will be fair valued only if market quotations for those holdings are unavailable or considered unreliable.
How to Purchase Acquiring Fund Shares |
Shares of the Acquiring Fund are purchased at the next NAV per share calculated plus any applicable sales charge after your purchase order is received in good order by the Acquiring Fund (as defined below).
Shares of the Acquiring Fund have not been registered for sale outside of the United States. The Acquiring Fund generally does not sell shares to investors residing outside the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.
A service fee, currently $25, as well as any loss sustained by the Acquiring Fund, will be deducted from a shareholder’s account for any purchases that do not clear. The Acquiring Fund and USBFS, the Acquiring Fund’s transfer agent (the “Transfer Agent”), will not be responsible for any losses, liability, cost or expense resulting from rejecting any purchase order. Your order will not be accepted until a completed account application (an “Account Application”) is received by the Acquiring Fund or the Transfer Agent.
Investment Minimums. The minimum initial investment amount is $5,000 for the Investor Class Shares and $25,000 for the Institutional Class Shares. The minimum investment amount for subsequent investments is $100. The Acquiring Fund reserves the right to waive the minimum initial investment or minimum subsequent investment amounts at its discretion. Shareholders will be given at least 30 days’ written notice of any increase in the minimum dollar amount of initial or subsequent investments.
Purchases through Financial Intermediaries. For share purchases through a financial intermediary, you must follow the procedures established by your financial intermediary. Your financial intermediary is responsible for sending your purchase order and payment to the Acquiring Fund’s Transfer Agent. Your financial intermediary holds the shares in your name and receives all confirmations of purchases and sales from the Acquiring Fund. Your financial intermediary may charge for the services that they provide to you in connection with processing your transaction order or maintaining an account with them. Financial intermediaries placing orders for themselves or on behalf of their customers should call the Acquiring Fund toll free at (866) 497-0097, or follow the instructions listed in the following sections titled “Investing by Telephone,” “Purchase by Mail” and “Purchase by Wire.”
If you place an order for the Acquiring Fund’s shares through a financial intermediary that is authorized by the Acquiring Fund to receive purchase and redemption orders on its behalf (an “Authorized Intermediary”), your order will be processed at the applicable price next calculated after receipt by the Authorized Intermediary, consistent with applicable laws and regulations. Authorized Intermediaries are authorized to designate other Authorized Intermediaries to receive purchase and redemption orders on the Acquiring Fund’s behalf.
If your financial intermediary is not an Authorized Intermediary, your order will be processed at the applicable price next calculated after the Transfer Agent receives your order from your financial intermediary. Your financial intermediary must agree to send to the Transfer Agent immediately available funds in the amount of the purchase price in accordance with the Transfer Agent’s procedures. If payment is not received within the time specified, the Transfer Agent may rescind the transaction and your financial intermediary will be held liable for any resulting fees or losses. Financial intermediaries that are not Authorized Intermediaries may set cut-off times for the receipt of orders that are earlier than the cut-off times established by the Acquiring Fund.
Purchase Requests Must be Received in Good Order
Your share price will be based on the next NAV per share calculated after the Transfer Agent or your Authorized Intermediary receives your purchase request in good order. “Good order” generally means that your purchase request includes:
| | · | The name of the Acquiring Fund; |
| | · | The class of shares to be purchased; |
| | · | The dollar amount of shares to be purchased; |
| | · | Your account application or investment stub; and |
| | · | A check payable to the name of the Acquiring Fund or a wire transfer received by the Acquiring Fund. |
Each account application (each an “Account Application”) to purchase Acquiring Fund shares is subject to acceptance by the Acquiring Fund and is not binding until so accepted. The Acquiring Fund reserves the right to reject any Account Application or to reject any purchase order if, in its discretion, it is in the Acquiring Fund’s best interest to do so. For example, a purchase order may be refused if it appears so large that it would disrupt the management of the Acquiring Fund. Purchases may also be rejected from persons believed to be “market-timers,” as described under “Tools to Combat Frequent Transactions,” below. Accounts opened by entities, such as corporations, limited liability companies, partnerships or trusts, will require additional documentation. Please note that if any information listed above is missing, your Account Application will be returned and your account will not be opened.
Upon acceptance by the Acquiring Fund, all purchase requests received in good order before the close of the NYSE (generally 4:00 p.m., Eastern time) will be processed at the applicable price next calculated after receipt. Purchase requests received after the close of the NYSE (generally 4:00 p.m., Eastern time) will receive the next business day’s applicable price per share.
Purchase by Mail. To purchase Acquiring Fund shares by mail, simply complete and sign the Account Application and mail it, along with a check made payable to the Acquiring Fund:
| Regular Mail | Overnight or Express Mail |
| CSC Small Cap Value Fund | CSC Small Cap Value Fund |
| c/o U.S. Bancorp Fund Services, LLC | c/o U.S. Bancorp Fund Services, LLC |
| P.O. Box 701 | 615 East Michigan Street, 3rd Floor |
| Milwaukee, WI 53201- 0701 | Milwaukee, WI 53202 |
The Acquiring Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC post office box, of purchase orders or redemption requests does not constitute receipt by the Transfer Agent of the Acquiring Fund. All purchase checks must be in U.S. dollars drawn on a domestic financial institution. The Acquiring Fund will not accept payment in cash or money orders. The Acquiring Fund also does not accept cashier’s checks in amounts of less than $10,000. To prevent check fraud, the Acquiring Fund will not accept third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of shares. The Acquiring Fund is unable to accept post-dated checks, post-dated on-line bill pay checks, or any conditional order or payment.
Purchase by Wire. If you are making your first investment in the Acquiring Fund, before you wire funds the Transfer Agent must have a completed Account Application. You can mail or use an overnight service to deliver your Account Application to the Transfer Agent at the above address. Upon receipt of your completed Account Application, the Transfer Agent will establish an account for you. Once your account has been established, you may instruct your bank to send the wire. Prior to sending the wire, please call the Transfer Agent at (866) 497-0097 to advise them of the wire and to ensure proper credit upon receipt. Your bank must include the name of the Acquiring Fund, your name and your account number so that your wire can be correctly applied. Your bank should transmit immediately available funds by wire to:
| Wire to: | U.S. Bank, N.A. |
| ABA Number: | 075000022 |
| Credit: | U.S. Bancorp Fund Services, LLC |
| Account: | 112-952-137 |
| Further Credit: | CSC Small Cap Value Fund |
| | (Shareholder Name/Account Registration) (Shareholder Account Number) |
Wired funds must be received prior to the close of the NYSE (generally 4:00 p.m., Eastern time) to be eligible for same day pricing. The Acquiring Fund and U.S. Bank, N.A., the Acquiring Fund’s custodian, are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions.
Investing by Telephone. You may not make initial purchases of Acquiring Fund shares by telephone. If you have completed the “Telephone Options - Purchase Authorization” section of the Account Application, you may purchase additional shares by telephoning the Acquiring Fund toll free at (866) 497-0097. This option allows investors to move money from their bank account to their Acquiring Fund account upon request. Only bank accounts held at domestic financial institutions that are Automated Clearing House (“ACH”) members may be used for telephone transactions. The minimum telephone purchase amount is $100. If your order is received prior to the close of the NYSE (generally 4:00 p.m., Eastern time), shares will be purchased in your account at the applicable price determined on the day your order is placed. During periods of high market activity, shareholders may encounter higher than usual call waiting times. Please allow sufficient time to place your telephone transaction. The Acquiring Fund is not responsible for delays due to communications or transmission outages or failure.
Subsequent Investments. The minimum subsequent investment amount is $100. Shareholders will be given at least 30 days’ written notice of any increase in the minimum dollar amount of subsequent investments. You may add to your account at any time by purchasing shares by mail, by telephone or by wire. You must call to notify the Acquiring Fund at (866) 497-0097 before wiring. An investment stub, which is attached to your individual account statement, should accompany any investments made through the mail. All subsequent purchase requests must include your shareholder account number.
Automatic Investment Plan. For your convenience, the Acquiring Fund offers an Automatic Investment Plan (“AIP”). Under the AIP, after your initial investment, you may authorize the Acquiring Fund to withdraw automatically from your personal checking or savings account an amount that you wish to invest, which must be at least $100 on a monthly or quarterly basis. In order to participate in the AIP, your bank must be a member of the ACH network. If you wish to enroll in the AIP, complete the appropriate section in the Account Application. The Acquiring Fund may terminate or modify this privilege at any time. You may terminate your participation in the AIP at any time by notifying the Transfer Agent five days prior to the effective date. A fee will be charged if your bank does not honor the AIP draft for any reason.
Anti-Money Laundering Program. MPS has established an Anti-Money Laundering Compliance Program (the “Program”) as required by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”) and related anti-money laundering laws and regulations. To ensure compliance with these laws, the Account Application asks for, among other things, the following information for all “customers” seeking to open an “account” (as those terms are defined in rules adopted pursuant to the USA PATRIOT Act):
| · | Date of birth (individuals only); |
| · | Social Security or taxpayer identification number; and |
| · | Permanent street address (a P.O. Box number alone is not acceptable). |
In compliance with the USA PATRIOT Act and other applicable anti-money laundering laws and regulations, the Transfer Agent will verify the information on your application as part of the Program. The Acquiring Fund reserves the right to request additional clarifying information and may close your account if such clarifying information is not received by the Acquiring Fund within a reasonable time of the request or if the Acquiring Fund cannot form a reasonable belief as to the true identity of a customer. If you require additional assistance when completing your application, please contact the Transfer Agent at (866) 497-0097.
Cancellations. The Acquiring Fund will not accept a request to cancel a transaction once processing has begun. Please exercise care when placing a transaction request.
How to Redeem Fund Shares |
In general, orders to sell or “redeem” shares may be placed directly with the Acquiring Fund or through a financial intermediary. You may redeem all or part of your investment in the Acquiring Fund’s shares on any business day that the Acquiring Fund calculates its NAVs.
However, if you originally purchased your shares through a financial intermediary, your redemption order must be placed with the same financial intermediary in accordance with their established procedures. Your financial intermediary is responsible for sending your order to the Transfer Agent and for crediting your account with the proceeds. Your financial intermediary may charge for the services that they provide to you in connection with processing your transaction order or maintaining an account with them.
Shareholders who have an IRA or other retirement plan must indicate on their redemption request whether to withhold federal income tax. Redemption requests failing to indicate an election not to have tax withheld will generally be subject to 10% withholding.
Payment of Redemption Proceeds. You may redeem your Acquiring Fund shares at a price equal to the NAV per share next determined after the Transfer Agent or an Authorized Intermediary receives your redemption request in good order. Your redemption request cannot be processed on days the NYSE is closed. All requests received by the Acquiring Fund in good order after the close of the regular trading session of the NYSE (generally 4:00 p.m., Eastern time) will usually be processed on the next business day.
A redemption request will generally be deemed in “good order” if it includes:
| · | The shareholder’s name; |
| · | The name of the Acquiring Fund; |
| · | The class of shares to be redeemed; |
| · | The share or dollar amount to be redeemed; and |
| · | Signatures by all shareholders on the account and signature guarantee(s), if applicable. |
Certain redemption requests may require additional documentation. Please contact the Transfer Agent to confirm the requirements applicable to your specific redemption request. Orders that do not have the required documentation will be rejected.
While redemption proceeds may be paid by check sent to the address of record, the Acquiring Fund is not responsible for interest lost on such amounts due to lost or misdirected mail. Redemption proceeds may be wired to your pre-established bank account or proceeds may be sent via electronic funds transfer through the ACH network using the bank instructions previously established for your account. Redemption proceeds will typically be sent on the business day following your redemption. Wires are subject to a $15 fee. There is no charge to have proceeds sent via ACH; however, funds are typically credited to your bank within two to three days after redemption. Except as set forth below, proceeds will be paid within seven calendar days after the Acquiring Fund receives your redemption request.
Before selling recently purchased shares, please note that if the Transfer Agent has not yet collected payment for the shares you are selling, it may delay sending the proceeds until the payment is collected, which may take up to 12 calendar days from the purchase date. Furthermore, there are certain times when you may be unable to sell Acquiring Fund shares or receive proceeds. Specifically, the Acquiring Fund may suspend the right to redeem shares or postpone the date of payment upon redemption for more than seven calendar days: (1) for any period during which the NYSE is closed (other than customary weekend or holiday closings) or trading on the NYSE is restricted; (2) for any period during which an emergency exists as a result of which disposal by the Acquiring Fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Acquiring Fund to fairly determine the value of its net assets; or (3) for such other periods as the SEC may by order permit for the protection of shareholders. Your ability to redeem shares by telephone will be restricted for 15 days after you change your address. You may change your address at any time by telephone or written request, addressed to the Transfer Agent. Confirmations of an address change will be sent to both your old and new address.
Redemption proceeds will be sent to the address of record. The Transfer Agent may require a signature guarantee for certain redemption requests. A signature guarantee assures that your signature is genuine and protects you from unauthorized account redemptions. Signature guarantees can be obtained from banks and securities dealers, but not from a notary public. A signature guarantee of each owner is required in the following situations:
| · | If ownership is being changed on your account; |
| · | When redemption proceeds are payable or sent to any person, address or bank account not on record; |
| · | If a change of address request has been received by the Transfer Agent within the last 15 days; and |
| · | For all redemptions in excess of $100,000 from any shareholder account. |
Non-financial transactions, including establishing or modifying certain services on an account, may require a signature verification from a Signature Validation Program member or other acceptable form of authentication from a financial institution source.
In addition to the situations described above, the Acquiring Fund and/or the Transfer Agent reserve the right to require a signature guarantee or other acceptable signature verification in other instances based on the circumstances relative to the particular situation.
Redemption by Mail. You may execute most redemptions by furnishing an unconditional written request to the Acquiring Fund to redeem your shares at the current applicable NAV per share. Redemption requests in writing should be sent to the Transfer Agent at:
| Regular Mail | Overnight or Express Mail |
| CSC Small Cap Value Fund | CSC Small Cap Value Fund |
| c/o U.S. Bancorp Fund Services, LLC | c/o U.S. Bancorp Fund Services, LLC |
| P.O. Box 701 | 615 East Michigan Street, 3rd Floor |
| Milwaukee, WI 53201- 0701 | Milwaukee, WI 53202 |
The Acquiring Fund does not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC post office box, of purchase orders or redemption requests does not constitute receipt by the Transfer Agent of the Acquiring Fund.
Wire Redemption. Wire transfers may be arranged to redeem shares. However, the Transfer Agent charges a fee, currently $15, per wire redemption against your account on dollar specific trades, and from proceeds on complete redemptions and share-specific trades.
Telephone Redemption. If you have been authorized to perform telephone transactions (either by completing the required portion of your Account Application or by subsequent arrangement in writing with the Acquiring Fund), you may redeem shares, in amounts of $100,000 or less, by instructing the Acquiring Fund by telephone at (866) 497-0097. A signature verification from a Signature Validation Program member or other acceptable form of authentication from a financial institution source may be required of all shareholders in order to qualify for or to change telephone redemption privileges on an existing account. Telephone redemptions will not be made if you have notified the Transfer Agent of a change of address within 15 days before the redemption request. If you have a retirement account, you may not redeem shares by telephone. During periods of high market activity, shareholders may encounter higher than usual call waiting times. Please allow sufficient time to place your telephone transaction. The Acquiring Fund is not responsible for delays due to communication or transmission outages or failures.
Note: Neither the Acquiring Fund nor any of its service providers will be liable for any loss or expense in acting upon instructions that are reasonably believed to be genuine. To confirm that all telephone instructions are genuine, the Acquiring Fund will use reasonable procedures, such as requesting that you correctly state:
| · | Your Acquiring Fund account number; |
| · | The name in which your account is registered; or |
| · | The Social Security or taxpayer identification number under which the account is registered. |
Systematic Withdrawal Program. The Acquiring Fund offers a systematic withdrawal plan (the “SWP”) whereby shareholders or their representatives may request a redemption in a specific dollar amount be sent to them each month, calendar quarter or annually. Investors may choose to have a check sent to the address of record, or proceeds may be sent to a pre-designated bank account via the ACH network. To start this program, your account must have Acquiring Fund shares with a value of at least $10,000, and the minimum payment amount is $100. This program may be terminated or modified by the Acquiring Fund at any time. Any request to change or terminate your SWP should be communicated in writing or by telephone to the Transfer Agent no later than five days before the next scheduled withdrawal. A withdrawal under the SWP involves redemption of Acquiring Fund shares, and may result in a gain or loss for federal income tax purposes. In addition, if the amount withdrawn exceeds the amounts credited to your account, the account ultimately may be depleted. To establish the SWP, complete the SWP section of the Account Application. Please call (866) 497-0097 for additional information regarding the SWP.
The Acquiring Fund’s Right to Redeem an Account. The Acquiring Fund reserves the right to redeem the shares of any shareholder whose account balance is less than $2,500, other than as a result of a decline in the NAV of the Acquiring Fund. The Acquiring Fund will provide a shareholder with written notice 30 days prior to redeeming the shareholder’s account.
Redemption-in-Kind. The Acquiring Fund generally pays redemption proceeds in cash. However, under unusual conditions that make the payment of cash unwise (and for the protection of the Acquiring Fund’s remaining shareholders), the Acquiring Fund may pay all or part of a shareholder’s redemption proceeds in portfolio securities with a market value equal to the redemption price (redemption-in-kind).
Specifically, if the amount you are redeeming from the Acquiring Fund during any 90-day period is in excess of the lesser of $250,000 or 1% of the Acquiring Fund’s net assets, valued at the beginning of such period, the Acquiring Fund has the right to redeem your shares by giving you the amount that exceeds $250,000 or 1% of the Acquiring Fund’s net assets in securities instead of cash. If the Acquiring Fund pays your redemption proceeds by a distribution of securities, you could incur taxes, brokerage commissions or other charges in converting the securities to cash, and will bear any market risks associated with such securities until they are converted into cash.
Cancellations. The Acquiring Fund will not accept a request to cancel a transaction once processing has begun. Please exercise care when placing a transaction request.
Dividends and Distributions |
The Acquiring Fund will make distributions of net investment income and net capital gains, if any, at least annually, typically during the month of December. The Acquiring Fund may make additional distributions if deemed to be desirable at another time during the year.
All distributions will be reinvested in Acquiring Fund shares unless you choose one of the following options: (1) receive distributions of net capital gains in cash, while reinvesting net investment income distributions in additional Acquiring Fund shares; (2) receive all distributions in cash; or (3) reinvest net capital gain distributions in additional Acquiring Fund shares, while receiving distributions of net investment income in cash.
If you wish to change your distribution option, write to the Transfer Agent in advance of the payment date of the distribution. However, any such change will be effective only as to distributions for which the record date is five or more business days after the Transfer Agent has received the written request.
If you elect to receive distributions in cash and the U.S. Postal Service is unable to deliver your check, or if a check remains uncashed for six months, the Acquiring Fund reserves the right to reinvest the distribution check in your account at the Acquiring Fund’s then current NAV per share and to reinvest all subsequent distributions.
The Investor Class is generally available to retail investors through selected securities dealers and other financial intermediaries or directly from the Fund.
The Institutional Class is generally limited to institutional investors or certain programs, including the following:
| · | Investors making purchases through financial intermediaries that aggregate customer accounts to accumulate the minimum initial investment; |
| · | Clients of financial intermediaries who charge clients an ongoing fee for advisory, investment, consulting or similar services; |
| · | Clients of financial intermediaries that charge their clients transaction fees with respect to their investments in the Acquiring Fund; |
| · | Financial institutions, corporations, trusts, endowments, foundations, estates, education, religious and charitable organizations; |
| · | Institutions or high net worth individuals using a trust or custodial platform; |
| · | Certain retirement and benefit plans, including pension plans and employer sponsored retirement plans established under Section 403(b) or Section 457 of the Internal Revenue Code, or qualified under Section 401, of the Internal Revenue Code; |
| · | Certain qualified plans under Section 529 of the Internal Revenue Code, as amended; |
| · | Certain insurance-related products; |
| · | Certain advisory accounts of Cove Street or its affiliates; |
| · | Trustees and Officers of MPS; and |
| · | Employee retirement plans sponsored by, affiliates of, or employees (including their immediate families) of, Cove Street or its affiliates. |
Sales Charges
Sales charges and fees vary considerably between the Acquiring Fund’s classes. You should carefully consider the differences in the fee and sales charge structures as well as the length of time you wish to invest in the Acquiring Fund before choosing which class to purchase. You may also want to consult with a financial adviser to help you determine which class is most appropriate for you.
The following sub-sections summarize information you should know regarding sales charges applicable to purchases of Investor Class Shares of the Acquiring Fund. Sales charge information is not separately posted on the Acquiring Fund’s website located at www.covestreetfunds.com because a copy of the Acquiring Fund’s Prospectus containing such information is already available for review, free of charge, on the Acquiring Fund’s website.
A front-end sales charge (load) will be applied to purchases of the Acquiring Fund’s Investor Class Shares. The term “offering price” includes the front-end sales load. The front-end sales load will be paid directly from the shareholder’s investment and will vary based on the amount of the investment. An initial sales charge is assessed on purchases of Investor Class Shares as follows:
| | Sales Charge (Load) as % of: |
| Amount of Purchase | Public Offering Price | Net Asset Value(1) |
| Less than $50,000 | 3.50% | 3.63% |
| $50,000 but less than $100,000 | 3.00% | 3.09% |
| $100,000 but less than $200,000 | 2.50% | 2.56% |
| $200,000 but less than $300,000 | 2.00% | 2.04% |
| $300,000 but less than $500,000 | 1.00% | 1.01% |
| $500,000 or more | 0.00% | 0.00% |
| (1) | Rounded to the nearest one-hundredth percent. Because of rounding of the calculation in determining sales charges, the charges may be more or less than those shown in the table. |
Reduced Sales Charges — Investor Class Shares
You may qualify for a reduced initial sales charge on purchases of Investor Class Shares under rights of accumulation (“ROA”) or a letter of intent (“LOI”). The transaction processing procedures maintained by certain financial institutions through which you can purchase Acquiring Fund shares may restrict the universe of accounts considered for purposes of calculating a reduced sales charge under ROA or LOI. For example, the processing procedures of a financial intermediary may limit accounts to those that share the same tax identification number or mailing address and that are maintained only with that financial institution. The Acquiring Fund permits financial intermediaries to calculate ROA and LOI based on the financial intermediary’s transaction processing procedures. Please contact your financial intermediary before investing to determine the process used to identify accounts for ROA and LOI purposes.
ROA. To determine the applicable reduced sales charge under ROA, the Acquiring Fund or its agent will combine the value of your current purchase with the collective value of shares of the Fund or any of the Investor Class Shares offered in this Prospectus (as of the Acquiring Fund’s current day public offering price) that were purchased previously for accounts (1) in your name, (2) in the name of your spouse, (3) in the name of you and your spouse, (4) in the name of your minor child under the age of 21, and (5) sharing the same mailing address (“Accounts”).
To be entitled to a reduced sales charge based on shares already owned, you must ask for the reduction at the time of purchase. You must also provide the Acquiring Fund with your account number(s) and, if applicable, the account numbers for your spouse, children (provide the children’s ages), or other household members and, if requested by your financial intermediary, the following additional information regarding these Accounts:
| · | Information or records regarding Acquiring Fund shares held in all accounts in your name at the Fund’s Transfer Agent; |
| · | Information or records regarding Acquiring Fund shares held in all accounts in your name at a financial intermediary; and |
| · | Information or records regarding Acquiring Fund shares for Accounts at the Transfer Agent or another financial intermediary. |
The Acquiring Fund may amend or terminate this right of accumulation at any time.
LOI. You may also enter into an LOI, which expresses your intent to invest $50,000 or more in the Acquiring Fund’s Investor Class Shares in accounts within a future period of thirteen months. Your individual purchases will be made at the applicable sales charge based on the amount you intend to invest over a thirteen-month period. Any shares purchased within 90 days of the date you sign the letter of intent may be used as credit toward completion, but the reduced sales charge will only apply to new purchases made on or after that date. Purchases resulting from the reinvestment of dividends and capital gains do not apply toward fulfillment of the LOI. Shares equal to 3.50% of the amount of the LOI will be held in escrow during the thirteen-month period. If, at the end of that time the total amount of purchases made is less than the amount intended, you will be required to pay the difference between the reduced sales charge and the sales charge applicable to the individual purchases had the LOI not been in effect. This amount will be obtained from redemption of the escrow shares. Any remaining escrow shares will be released to you.
If you establish an LOI, you can aggregate your accounts as well as the accounts of your immediate family members. You will need to provide written instruction with respect to the other accounts whose purchases should be considered in fulfillment of the LOI.
Elimination of Initial Sales Charges — Investor Class Shares
Certain persons may also be eligible to purchase or redeem Investor Class Shares without a sales charge. No sales charge is assessed on the reinvestment of Investor Class Shares’ distributions. No sales charge is assessed on purchases made for investment purposes by:
| · | A qualified retirement plan under Section 401(a) of the Code or a plan operating consistent with Section 403(b) of the Code; |
| · | Any bank, trust company, savings institution, registered investment adviser, financial planner or securities dealer on behalf of an account for which it provides advisory or fiduciary services pursuant to an account management fee; |
| · | Cove Street and its affiliates; |
| · | Trustees and officers of MPS; directors, officers and full-time employees of Cove Street and its affiliates; the spouse, life partner, or minor children under 21 of any such person; any trust or individual retirement account or self-employed retirement plan for the benefit of any such person; or the estate of any such person; |
| · | Shareholders buying through select platforms and fund supermarkets where the broker/dealers customarily sell mutual funds without sales charges (check with your broker/dealer for availability and transaction charges and other fees that may be charged by the broker/dealer sponsoring the fund supermarket); |
| · | Shareholders of the Fund’s Class N shares at the time of the Reorganization; |
| · | Reinvestment of all or part of the proceeds of redemption of your Investor Class Shares into the same account from which it had been redeemed, if the reinvestment is made within 60 calendar days of the Acquiring Fund’s receipt of your redemption request; and |
| · | Any person who has, within the preceding 60 days, redeemed Acquiring Fund shares through a financial institution and completes a reinstatement form upon investment with that financial institution (but only on purchases in amounts not exceeding the redeemed amounts). |
The Acquiring Fund requires appropriate documentation of an investor’s eligibility to purchase or redeem Investor Class Shares without a sales charge. Acquiring Fund shares so purchased may not be resold except to the Acquiring Fund.
Rule 12b-1 Distribution Fees and Shareholder Service Plan Fees
MPS has adopted a Rule 12b-1 plan under which the Acquiring Fund is authorized to pay to the Quasar or such other entities as approved by the Board of Trustees of MPS, as compensation for the distribution-related services provided by such entities, an aggregate fee of up to 0.25% of the average daily net assets of the Investor Class Shares. Quasar may pay any or all amounts received under the Rule 12b-1 Plan to other persons, including Cove Street or its affiliates, for any distribution service or activity designed to retain Fund shareholders.
Because the distribution and shareholder service fee is paid on an ongoing basis, your investment cost over time may be higher than paying other types of sales charges.
Tools to Combat Frequent Transactions |
The Acquiring Fund is intended for long-term investors. Short-term “market-timers” who engage in frequent purchases and redemptions may disrupt the Acquiring Fund’s investment program and create additional transaction costs that are borne by all of the Acquiring Fund’s shareholders. The Board of Trustees of MPS has adopted policies and procedures that are designed to discourage excessive, short-term trading and other abusive trading practices that may disrupt portfolio management strategies and harm performance. The Acquiring Fund takes steps to reduce the frequency and effect of these activities in the Acquiring Fund. These steps include, among other things, monitoring trading activity and using fair value pricing. Although these efforts are designed to discourage abusive trading practices, these tools cannot eliminate the possibility that such activity will occur. The Acquiring Fund seeks to exercise its judgment in implementing these tools to the best of its abilities in a manner that it believes is consistent with shareholder interests. Except as noted herein, the Acquiring Fund applies all restrictions uniformly in all applicable cases.
Monitoring Trading Practices. The Acquiring Fund monitors selected trades in an effort to detect excessive short-term trading activities. If, as a result of this monitoring, the Acquiring Fund believes that a shareholder has engaged in excessive short-term trading, it may, in its discretion, ask the shareholder to stop such activities or refuse to process purchases in the shareholder’s accounts. In making such judgments, the Acquiring Fund seeks to act in a manner that it believes is consistent with the best interests of its shareholders. The Acquiring Fund uses a variety of techniques to monitor for and detect abusive trading practices. These techniques may change from time to time as determined by the Acquiring Fund in its sole discretion. To minimize harm to the Acquiring Fund and its shareholders, the Acquiring Fund reserves the right to reject any purchase order (but not a redemption request), in whole or in part, for any reason and without prior notice. The Acquiring Fund may decide to restrict purchase and sale activity in its shares based on various factors, including whether frequent purchase and sale activity will disrupt portfolio management strategies and adversely affect Acquiring Fund performance.
Fair Value Pricing. The Acquiring Fund employs fair value pricing selectively to ensure greater accuracy in its daily NAVs and to prevent dilution by frequent traders or market timers who seek to take advantage of temporary market anomalies. The Board of Trustees of MPS has developed procedures which utilize fair value pricing when reliable market quotations are not readily available or when corporate events, events in the securities market and/or world events cause Cove Street to believe that a security’s last sale price may not reflect its actual market value. Valuing securities at fair value involves reliance on judgment. Fair value determinations are made in good faith in accordance with procedures adopted by the Board of Trustees of MPS. There can be no assurance that the Acquiring Fund will obtain the fair value assigned to a security if it were to sell the security at approximately the time at which the Acquiring Fund determines its NAV per share. More detailed information regarding fair value pricing can be found in the Acquiring Fund’s Prospectus under the heading entitled “Pricing of Fund Shares.”
Due to the complexity and subjectivity involved in identifying abusive trading activity and the volume of shareholder transactions the Acquiring Fund handles, there can be no assurance that the Acquiring Fund’s efforts will identify all trades or trading practices that may be considered abusive. In particular, since the Acquiring Fund receives purchase and sale orders through Authorized Intermediaries that use group or omnibus accounts, the Acquiring Fund cannot always detect frequent trading. However, the Acquiring Fund will work with Authorized Intermediaries as necessary to discourage shareholders from engaging in abusive trading practices and to impose restrictions on excessive trades. In this regard, the Acquiring Fund has entered into information sharing agreements with Authorized Intermediaries pursuant to which these intermediaries are required to provide to the Acquiring Fund, at the Acquiring Fund’s request, certain information relating to their customers investing in the Fund through non-disclosed or omnibus accounts. The Acquiring Fund will use this information to attempt to identify abusive trading practices. Authorized Intermediaries are contractually required to follow any instructions from the Acquiring Fund to restrict or prohibit future purchases from shareholders that are found to have engaged in abusive trading in violation of the Acquiring Fund’s policies. However, the Acquiring Fund cannot guarantee the accuracy of the information provided to it from Authorized Intermediaries and cannot ensure that they will always be able to detect abusive trading practices that occur through non-disclosed and omnibus accounts. As a result, the Acquiring Fund’s ability to monitor and discourage abusive trading practices in non-disclosed and omnibus accounts may be limited.
Distributions of the Acquiring Fund’s net investment company taxable income (which includes, but is not limited to, interest, dividends, net short-term capital gains and net gains from foreign currency transactions), if any, are generally taxable to the Acquiring Fund’s shareholders as ordinary income. To the extent that the Acquiring Fund’s distributions of net investment company taxable income are designated as attributable to “qualified dividend” income, such income may be subject to tax at the reduced rate of federal income tax applicable to non-corporate shareholders for net long-term capital gains, if certain holding period requirements have been satisfied by the shareholder. The current federal tax provisions applicable to “qualified dividends” are scheduled to expire for tax years beginning after December 31, 2012. To the extent the Acquiring Fund’s distributions of net investment company taxable income are attributable to net short-term capital gains, such distributions will be treated as ordinary dividend income for the purposes of income tax reporting and will not be available to offset a shareholder’s capital losses from other investments.
Distributions of net capital gains (net long-term capital gains less net short-term capital losses) are generally taxable as long-term capital gains (currently at a maximum rate of 15%, but scheduled to increase in 2013) regardless of the length of time that a shareholder has owned Acquiring Fund shares.
You will be taxed in the same manner whether you receive your distributions (whether of net investment company taxable income or net capital gains) in cash or reinvest them in additional Acquiring Fund shares. Distributions are generally taxable when received. However, distributions declared in October, November or December to shareholders of record on a date in such a month and paid the following January are taxable as if received on December 31. In addition, for taxable years beginning after December 31, 2012, a 3.8% Medicare contribution tax will generally apply to all or a portion of the net investment income of a shareholder who is an individual and not a resident alien for federal income tax purposes and who has adjusted gross income (subject to certain adjustments) that exceeds a threshold amount ($250,000 if married filing jointly or if considered a “surviving spouse” for federal income tax purposes, $125,000 if married filing separately, and $200,000 in other cases). This 3.8% tax will also apply to all or a portion of the undistributed net investment income of certain shareholders that are estates and trusts. For these purposes, dividends, interest and certain capital gains will generally be taken into account in computing a shareholder’s net investment income.
Shareholders who sell or redeem shares generally will have a capital gain or loss from the sale or redemption. The amount of the gain or loss and the applicable rate of federal income tax generally will depend upon the amount paid for the shares, the amount of reinvested taxable distributions, if any, the amount received from the sale or redemption and the amount of time the shares were held by a shareholder. Any loss arising from the sale or redemption of shares held for six months or less, however, is treated as a long-term capital loss to the extent of any amounts treated as distributions of net capital gain received on such shares. In determining the holding period of such shares for this purpose, any period during which your risk of loss is offset by means of options, short sales or similar transactions is not counted. If you purchase Acquiring Fund shares within 30 days before or after redeeming other Acquiring Fund shares at a loss, all or part of that loss will not be deductible and will instead increase the basis of the newly purchased shares.
Shareholders will be advised annually as to the federal tax status of all distributions made by the Acquiring Fund for the preceding year. Distributions by the Acquiring Fund may also be subject to state and local taxes. Additional tax information may be found in the Acquiring Fund’s SAI.
This section is not intended to be a full discussion of federal tax laws and the effect of such laws on you. There may be other federal, state, foreign or local tax considerations applicable to a particular investor. You are urged to consult your own tax advisor.
Telephone Transactions. If you elect telephone privileges on the account application or in a letter to the Acquiring Fund, you may be responsible for any fraudulent telephone orders as long as the Acquiring Fund has taken reasonable precautions to verify your identity. In addition, once you place a telephone transaction request, it cannot be canceled or modified.
During periods of significant economic or market change, telephone transactions may be difficult to complete. If you are unable to contact the Acquiring Fund by telephone, you may also mail the requests to the Acquiring Fund at the address listed previously in the “How to Purchase Shares” section.
Telephone trades must be received by or prior to the close of the NYSE (generally 4:00 p.m., Eastern time). During periods of high market activity, shareholders may encounter higher than usual call waiting times. Please allow sufficient time to ensure that you will be able to complete your telephone transaction prior to the close of the NYSE.
Policies of Other Financial Intermediaries. Financial intermediaries may establish policies that differ from those of the Acquiring Fund. For example, the institution may charge transaction fees, set higher minimum investments or impose certain limitations on buying or selling shares in addition to those identified in this Prospectus. Please contact your financial intermediary for details.
Cove Street retains the right to close the Acquiring Fund (or partially close the Acquiring Fund) to new purchases if it is determined to be in the best interest of shareholders. Based on market and Acquiring Fund conditions, Cove Street may decide to close the Acquiring Fund to new investors, all investors or certain classes of investors (such as fund supermarkets) at any time. If the Acquiring Fund is closed to new purchases it will continue to honor redemption requests, unless the right to redeem shares has been temporarily suspended as permitted by federal law.
Householding. In an effort to decrease costs, the Acquiring Fund intends to reduce the number of duplicate prospectuses and annual and semi-annual reports you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders the Acquiring Fund reasonably believes are from the same family or household. If you would like to discontinue householding for your accounts, please call toll-free at (866) 497-0097 to request individual copies of these documents. Once the Acquiring Fund receives notice to stop householding, the Acquiring Fund will begin sending individual copies 30 days after receiving your request. This policy does not apply to account statements.
Inactive Accounts. Your mutual fund account may be transferred to your state of residence if no activity occurs within your account during the “inactivity period” specified in your State’s abandoned property laws.
FINANCIAL HIGHLIGHTS
It is anticipated that following the Reorganization, the CSC Small Cap Fund, a series of CNI Charter Funds (the “Fund”) will be the accounting survivor of CSC Small Cap Fund, a series of Managed Portfolio Series (the “Acquiring Fund”). The following financial highlights table is intended to help you understand the Fund’s financial performance for the fiscal years ended September 30, 2011, 2010, 2009, 2008 and 2007. Certain information reflects financial results for a single Fund share outstanding for the entire period. The total return presented in the table represents the rate that an investor would have earned on an investment in the Fund for the stated period, assuming the reinvestment of all Fund distributions. These financial highlights have been audited by KPMG LLP, the independent registered public accounting firm of the Fund, whose report, together with the Fund’s financial statements, are included in the Annual Report to Shareholders of the CNI Charter Funds, which is available free of charge upon request.
| | CSC Small Cap Value Fund, a series of CNI Charter Funds Institutional Class Shares |
| | Year Ended September 30, | |
| | 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net asset value, beginning of year | $20.77 | $18.46 | $16.42 | $30.79 | $28.25 | |
Net investment income (loss)1 | (0.05) | 0.08 | (0.02) | 0.19 | 0.02 | |
Net realized and unrealized gain (loss) on investments1 | (1.47) | 2.23 | 2.35 | (9.57) | 3.00 | |
Dividends from net investment income | (0.07) | — | (0.29) | — | (0.01) | |
Distributions from realized capital gains | — | — | — | (4.99) | (0.47) | |
| Net asset value, end of year | $19.18 | $20.77 | $18.46 | $16.42 | $30.79 | |
| | | | | | | |
Total return2 | (7.38)% | 12.51% | 15.20% | (35.01)% | 10.65% | |
| Net assets, end of year (000) | $1,660 | $3,331 | $2,317 | $1,742 | $9,062 | |
Ratio of expenses to average net assets3 | 1.19% | 1.20% | 1.19% | 1.19% | 1.19% | |
Ratio of net investment income (loss) to average net assets | (0.23)% | 0.40% | (0.13)% | 0.85% | 0.08% | |
| Ratio of expenses to average net assets (excluding waivers & recovered fees) | 1.20% | 1.21% | 1.20% | 1.20% | 1.20% | |
| Portfolio turnover rate | 50% | 48% | 62% | 78% | 57% | |
1 Per share calculations are based on average shares outstanding throughout the period.
| | 2 | Returns are for the period indicated and have not been annualized. Fee waivers are in effect; if they had not been in effect, performance would have been lower. Total return figures do not include applicable sales loads. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| | 3 | Ratio includes waivers and previously waived investment advisory fees recovered. The impact of the recovered fees may cause a higher expense ratio. |
| | Amounts designated as “-”are either $0 or have been rounded to $0. |
| | CSC Small Cap Value Fund, a series of CNI Charter Funds Class N Shares |
| | |
| | Year Ended September 30, |
| | 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net asset value, beginning of year | $20.33 | $18.12 | $16.14 | $30.42 | $27.98 | |
Net investment income (loss) 1 | (0.11) | 0.02 | (0.05) | 0.15 | (0.05) | |
Net realized and unrealized gain (loss) on investments1 | (1.43) | 2.19 | 2.30 | (9.44) | 2.96 | |
Dividends from net investment income | (0.02) | — | (0.27) | — | — | |
Distributions from realized capital gains | — | — | — | (4.99) | (0.47) | |
| Net asset value, end of year | $18.77 | $20.33 | $18.12 | $16.14 | $30.42 | |
| | | | | | | |
Total return2 | (7.61)% | 12.20% | 14.91% | (35.16)% | 10.37% | |
| Net assets, end of year (000) | $4,048 | $4,760 | $4,226 | $4,262 | $9,753 | |
Ratio of expenses to average net assets3 | 1.44% | 1.45% | 1.44% | 1.44% | 1.44% | |
Ratio of net investment income (loss) to average net assets | (0.49)% | 0.12% | (0.37)% | 0.70% | (0.16)% | |
Ratio of expenses to average net assets (excluding waivers & recovered fees) | 1.45% | 1.46% | 1.45% | 1.45% | 1.45% | |
| Portfolio turnover rate | 50% | 48% | 62% | 78% | 57% | |
1 Per share calculations are based on average shares outstanding throughout the period.
| | 2 | Fee waivers are in effect; if they had not been in effect, performance would have been lower. Total return figures do not include applicable sales loads. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| | 3 | Ratio includes waivers and previously waived investment advisory fees recovered. The impact of the recovered fees may cause a higher net expense ratio. Amounts designated as “-”are either $0 or have been rounded to $0. |
| | CSC Small Cap Value Fund, a series of CNI Charter Funds Class R Shares |
| | |
| | Year Ended September 30, |
| | 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net asset value, beginning of year | $20.37 | $18.15 | $16.15 | $30.38 | $27.93 | |
Net investment income (loss) 1 | (0.05) | 0.04 | 0.01 | 0.20 | (0.05) | |
Net realized and unrealized gain (loss) on investments1 | (1.43) | 2.20 | 2.31 | (9.44) | 2.97 | |
Dividends from net investment income | (0.10) | (0.02) | (0.32) | — | — | |
Distributions from realized capital gains | — | — | — | (4.99) | (0.47) | |
| Net asset value, end of year | $18.79 | $20.37 | $18.15 | $16.15 | $30.38 | |
| | | | | | | |
Total return2 | (7.35)% | 12.33% | 15.50% | (35.02)% | 10.43% | |
| Net assets, end of year (000) | $12,076 | $16,508 | $16,755 | $19,183 | $40,944 | |
Ratio of expenses to average net assets3 | 1.20% | 1.33% | 0.97% | 1.23% | 1.44% | |
Ratio of net investment income (loss) to average net assets | (0.25)% | 0.23% | 0.08% | 0.92% | (0.17)% | |
Ratio of expenses to average net assets (excluding waivers & recovered fees) | 1.60% | 1.73% | 1.55% | 1.55% | 1.45% | |
| Portfolio turnover rate | 50% | 48% | 62% | 78% | 57% | |
1 Per share calculations are based on average shares outstanding throughout the period.
| | 2 | Fee waivers are in effect; if they had not been in effect, performance would have been lower. Total return figures do not include applicable sales loads. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
| | 3 | Ratio includes waivers and previously waived investment advisory fees recovered. The impact of the recovered fees may cause a higher net expense ratio. Amounts designated as "-" are either $0 or have been rounded to $0. |
[FUND LOGO HERE] (shows through upper window on outbound envelope) | | PROXY CARD | |
CNI CHARTER FUNDS
CSC Small Cap Value Fund
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 17, 2012
The undersigned, revoking prior proxies, hereby appoints Name, Name and Name, and each of them, as attorneys-in-fact and proxies of the undersigned, granted in connection with the voting of the shares subject hereto with full power of substitution, to vote shares held in the name of the undersigned on the record date at the Special Meeting of Shareholders of CSC Small Cap Value Fund (the “Fund”) to be held at the offices of CNI Charter Funds, 400 North Roxbury Drive, Beverly Hills, California 90210, on January 17, 2012 at 10:00 a.m. Pacific time, or at any adjournment thereof, upon the Proposal described in the Notice of Meeting and accompanying Proxy Statement, which have been received by the undersigned.
This proxy is solicited on behalf of the Fund’s Board of Trustees, and the Proposal (set forth on the reverse side of this proxy card) has been unanimously approved by the Board of Trustees and recommended for approval by shareholders.
SHAREHOLDER REGISTRATION PRINTED HERE (shows through lower window on outbound envelope) NOTE: red dotted line boxes are placeholders and are not printed on the final ballots | | | YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE COUNTED. The undersigned acknowledges receipt with this Proxy Statement of the Board of Trustees. Your signature(s) on this should be exactly as your name(s) appear on this Proxy. If the shares are held jointly, each holder should sign this Proxy. Attorneys-in-fact, executors, administrators, trustees or guardians should indicate the full title and capacity in which they are signing. |
| QUESTION ABOUT THIS PROXY? Should you have any questions about the proxy materials or regarding how to vote your shares, please contact our proxy information line toll-free at 1-866-796-7180. Representatives are available Monday through Friday 9:00 a.m. to 10:00 p.m. Eastern time. | | | ___________________________________________________________ SIGNATURE DATE ___________________________________________________________ SIGNATURE (if held jointly) DATE ___________________________________________________________
Title – if a corporation, partnership or other entity |
When properly executed, this proxy will be voted as indicated on the reverse side or “FOR” the Proposal if no choice is indicated. The proxy will be voted in accordance with the proxy holders’ best judgment as to any other matters that may arise at the Meeting.
THREE OPTIONS FOR VOTING YOUR PROXY
| | Log on to www.proxyonline.us. Make sure to have this proxy card available when you plan to vote your shares. You will need the control number found in the box at the right at the time you execute your vote. | | CONTROL NUMBER |
 | 2. Touchtone Phone | Simply dial toll-free 1-888-227-9349 and follow the automated instructions. Please have this proxy card available at the time of the call. | | |
| 3. Mail | Simply sign, date, and complete the reverse side of this proxy card and return it in the postage paid envelope provided. | | |
Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on January 17, 2012
The proxy statement for this meeting is available at: www.proxyonline.us/docs/cscsmallcapvalue.pdf
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER’S VOTE IS IMPORTANT.
CSC Small Cap Value Fund
TO VOTE, MARK ONE BOX IN BLUE OR BLACK INK. Example: x
PROPOSAL:
| | | | FOR | AGAINST | ABSTAIN |
| | 1. An Agreement and Plan of Reorganization providing for the sale of all of the assets of the Fund to, and the assumption of all of the liabilities of the Fund by, the CSC Small Cap Value Fund (the “Acquiring Fund”), a newly-created series of Managed Portfolio Series, in exchange for the Acquiring Fund’s shares, which would be distributed pro rata by the Fund to the holders of its shares in complete liquidation of the Fund | | □ | □ | □ |
THANK YOU FOR VOTING
STATEMENT OF ADDITIONAL INFORMATION
December 17, 2011
REORGANIZATION OF
CSC SMALL CAP VALUE FUND
A series of CNI Charter Funds
IN EXCHANGE FOR SHARES OF
CSC SMALL CAP VALUE FUND
A series of Managed Portfolio Series
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Telephone: (866) 497-0097
This Statement of Additional Information (“SAI”) is not a prospectus. A proxy statement/prospectus dated December 17, 2011 (the “Proxy Statement/Prospectus”) related to the above referenced matter may be obtained from Managed Portfolio Series (“MPS”), on behalf of the CSC Small Cap Value Fund (the “Acquiring Fund”), by writing or calling MPS at the address and telephone number shown above. This SAI should be read in conjunction with such Proxy Statement/Prospectus.
Because the Acquiring Fund has not yet commenced operations, no annual or semi-annual reports to shareholders are available. For the same reason, no pro forma financial statements are provided in this SAI in connection with the proposed reorganization mentioned above. This SAI has been incorporated by reference into the Proxy Statement/Prospectus.
Table of Contents
| 1. | The Statement of Additional Information for the CSC Small Cap Value Fund, a series of CNI Charter Funds, dated January 28, 2011, as supplemented July 15, 2011 and September 22, 2011. |
| 2. | The Statement of Additional Information for the CSC Small Cap Value Fund, a series of Managed Portfolio Series, dated December 16, 2011. |
| 3. | The audited financial statements of the CSC Small Cap Value Fund, a series of CNI Charter Funds, contained in the Annual Report to Shareholders of the CNI Charter Funds for the fiscal year ended September 30, 2011. |
Incorporation by Reference
The following documents are incorporated by reference into this SAI:
| | · | The Statement of Additional Information of the CSC Small Cap Value Fund dated January 28, 2011, as supplemented July 15, 2011 and September 22, 2011, is incorporated by reference to the CNI Charter Funds’ Registration Statement on Form N-1A (File No. 333-16093) filed on September 22, 2011. |
| | · | The audited financial statements of the CSC Small Cap Value Fund, a series of CNI Charter Funds, are incorporated by reference to the Annual Report to Shareholders of the CNI Charter Funds dated September 30, 2011, filed on Form N-CSR (File No. 333-16093) on December 7, 2011. |
| | · | The Statement of Additional Information of the CSC Small Cap Value Fund, dated December 16, 2011, is incorporated by reference to MPS’ Registration Statement on Form N-1A (File No. 333-172080) filed on December 16, 2011. |
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article VII of the Registrant’s Amended and Restated Agreement and Declaration of Trust (previously filed with the Registration Statement on Form N-1A (File No. 333-172080) on May 5, 2011). With respect to the Registrant, the general effect of these provisions is to indemnify any person (Trustee, officer, employee or agent, among others) who was or is a party to any proceeding by reason of their actions performed in their official or duly authorized capacity on behalf of the Trust.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, (the “1933 Act”) the Registrant furnishes the following undertaking: “Insofar as indemnification for liability arising under the 1933 Act may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.”
Item 16. Exhibits
Exhibit No. | Exhibit |
| (1) | Amended and Restated Agreement and Declaration of Trust – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011 |
| (2) | Amended and Restated Bylaws – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011 |
| (3) | Not Applicable |
| (4) | Form of Agreement and Plan of Reorganization – filed herewith as Appendix A to Part A |
| (5) | Instruments Defining Rights of Security Holders – incorporated by reference to the Amended and Restated Agreement and Declaration of Trust and Amended and Restated Bylaws filed on May 5, 2011 |
| (6) | Investment Advisory Agreement between the Registrant, on behalf of the CSC Small Cap Value Fund, and Cove Street Capital, LLC – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (7) | Distribution Agreement between the Registrant, on behalf of the CSC Small Cap Value Fund, and Quasar Distributors, LLC – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (8) | Not Applicable |
| (9)(a) | Custody Agreement between the Registrant and U.S. Bank, National Association – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011 |
| (9)(b) | First Amendment to the Custody Agreement between the Registrant and U.S. Bank, National Association – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (10)(a) | Amended and Restated Rule 12b-1 Plan – incorporated herein by reference from Post-Effective Amendment No. 12 to Registrant’s Registration Statement on Form N-1A filed on December 12, 2011 |
| (10)(b) | Amended and Restated Rule 18f-3 Plan – incorporated herein by reference from Post-Effective Amendment No. 12 to Registrant’s Registration Statement on Form N-1A filed on December 12, 2011 |
| (11) | Opinion and Consent by Richards, Layton & Finger, P.A. for the CSC Small Cap Value Fund regarding the legality of securities being registered – incorporated herein by reference to Registrant’s Registration Statement on Form N-14 filed on October 26, 2011 |
| (12) | Form of Opinion and Consent of Bernstein, Shur, Sawyer & Nelson, P.A. regarding certain tax matters – filed herewith |
| (13)(a) | Fund Administration Servicing Agreement between the Registrant and U.S. Bancorp Fund Services, LLC – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011 |
| (13)(b) | First Amendment to the Fund Administration Servicing Agreement between the Registrant and U.S. Bancorp Fund Services, LLC – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (13)(c) | Fund Accounting Servicing Agreement between the Registrant and U.S. Bancorp Fund Services, LLC – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011 |
| (13)(d) | First Amendment to the Fund Accounting Servicing Agreement between the Registrant and U.S. Bancorp Fund Services, LLC – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (13)(e) | Transfer Agent Servicing Agreement between the Registrant and U.S. Bancorp Fund Services, LLC – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011. |
| (13)(f) | First Amendment to the Transfer Agent Servicing Agreement between the Registrant and U.S. Bancorp Fund Services, LLC – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (13)(g) | Operating Expenses Limitation Agreement between the Registrant, on behalf of the CSC Small Cap Value Fund, and Cove Street Capital, LLC – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A, filed with the SEC on December 16, 2011 |
| (14) | Consent of Independent Registered Public Accounting Firm – filed herewith |
| (15) | Not Applicable |
| (16) | Power of Attorneys for Roel C. Campos, Robert J. Kern, David A. Massart, Leonard M. Rush and David M. Swanson dated April 6, 2011 – incorporated herein by reference to Registrant’s Registration Statement on Form N-1A filed on May 5, 2011 |
| (17)(a) | Prospectus of the CSC Small Cap Value Fund dated January 28, 2011, as supplemented July 15, 2011 and September 22, 2011 – incorporated herein by reference to CNI Charter Funds’(File No. 333-16093) Registration Statement on Form N-1A filed on September 22, 2011 |
| (17)(b) | Statement of Additional Information of the CSC Small Cap Value Fund dated January 28, 2011, as supplemented July 15, 2011 and September 22, 2011 – incorporated herein by reference to CNI Charter Funds’ (File No. 333-16093) Registration Statement on Form N-1A filed on September 22, 2011 |
| (17)(c) | Audited financial statements of the CSC Small Cap Value Fund, a series of CNI Charter Funds, contained in the Annual Report to Shareholders of the CNI Charter Funds dated September 30, 2011 – incorporated herein by reference to CNI Charter Funds’(File No. 333-16093) Form N-CSR filed on December 7, 2011 |
| (17)(d) | Prospectus of the CSC Small Cap Value Fund dated December 16, 2011 – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A filed with the SEC on December 16, 2011 |
| (17)(e) | Statement of Additional Information of the CSC Small Cap Value Fund dated December 16, 2011 – incorporated herein by reference from Post-Effective Amendment No. 14 to Registrant’s Registration Statement on Form N-1A filed with the SEC on December 16, 2011 |
| (17)(f) | Form of Proxy – filed herewith with Part A following the Proxy Statement/Prospectus and its appendices |
Item 17. Undertakings
| | (1) | The undersigned Registrant agrees that prior to any public reoffering of the securities registered through 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, as amended, the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by 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, as amended, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of 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 the opinion of counsel regarding the tax consequences of the proposed reorganization required by Item 16(12) of Form N-14 within a reasonable time after receipt of such opinions. |
SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration Statement has been signed on behalf of the Registrant, in the City of Milwaukee and State of Wisconsin on the 16th day of December, 2011.
Managed Portfolio Series
By: /s/ James R. Arnold
James R. Arnold
President
As required by the Securities Act of 1933, as amended, this Registration Statement has been signed below on December 16, 2011 by the following persons in the capacities indicated:
| Signature | | Title |
| | | |
| /s/ Roel C. Campos* | | Trustee |
| Roel C. Campos | | |
| | | |
| /s/ Robert J. Kern* | | Trustee |
| Robert J. Kern | | |
| | | |
| /s/ David A. Massart* | | Trustee |
| David A. Massart | | |
| | | |
| /s/ Leonard M. Rush* | | Trustee |
| Leonard M. Rush | | |
| | | |
| /s/ David M. Swanson* | | Trustee |
| David M. Swanson | | |
| | | |
| /s/ James R. Arnold | | President and Principal Executive Officer |
| James R. Arnold | | |
| | | |
| /s/ Brian R. Wiedmeyer | | Treasurer and Principal Financial Officer |
| Brian R. Wiedmeyer | | |
| | | |
| *By: | /s/ James R. Arnold | | |
| | James R. Arnold, Attorney-In Fact pursuant to Power of Attorney | | |
INDEX TO EXHIBITS
Exhibit No. | Description |
| (12) | Form of Opinion and Consent of Bernstein, Shur, Sawyer & Nelson, P.A. regarding certain tax matters |
| (14) | Consent of Independent Registered Public Accounting Firm |
