As filed with the Securities and Exchange Commission on September 8, 2008. |
|
| Registration No. 333-________ |
|
U.S. SECURITIES AND EXCHANGE COMMISSION |
WASHINGTON, D.C. 20549 |
|
FORM N-14 |
|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] |
|
[ ] Pre-Effective Amendment No. |
[ ] Post-Effective Amendment No. |
|
PRINCIPAL FUNDS, INC. |
f/k/a Principal Investors Fund, Inc. |
(Exact name of Registrant as specified in charter) |
|
680 8th Street, Des Moines, Iowa 50392-2080 |
(Address of Registrant's Principal Executive Offices) |
|
515-248-3842 |
(Registrant's Telephone Number, Including Area Code) |
|
Michael D. Roughton |
Counsel, Principal Funds, Inc. |
711 High Street, Suite 405 West |
Des Moines, Iowa 50392-2080 |
(Name and Address of Agent for Service) |
|
| Copies of all communications to: |
| John W. Blouch |
| Dykema Gossett PLLC |
| 1300 I Street, N.W. |
| Washington, D.C. 20005-3353 |
| 202-906-8714; 202-906-8669 (Fax) |
Approximate date of proposed public offering: As soon as practicable after this Registration Statement becomes effective.
Title of Securities Being Registered: Class R-1, Class R-2, Class R-3, Class R-4, Class R-5 and Institutional Class Shares common stock, par value $.01 per share.
No filing fee is due because an indefinite number of shares have been registered in reliance on Section 24(f) under the Investment Company Act of 1940, as amended.
It is proposed that this filing will become effective on October 9, 2008, pursuant to Rule 488.
PRINCIPAL FUNDS, INC. |
680 8th Street |
Des Moines, Iowa 50392-2080 |
Dear Shareholder:
A Special Meeting of Shareholders of Principal Funds, Inc. ("PFI") will be held at 680 8th Street, Des Moines, Iowa 50392-2080, on November 19, 2008 at 10 a.m., Central Time.
At the meeting, shareholders of the SmallCap Blend Fund I (formerly, the Partners SmallCap Blend Fund) will be asked to consider and approve a Plan of Acquisition (the “Plan”) providing for the combination of the SmallCap Blend Fund I (the “Acquired Fund”) into the SmallCap S&P 600 Index Fund (the “Acquiring Fund”). Each of these Funds is a separate series or fund of PFI.
Under the Plan: (i) the Acquiring Fund will acquire all the assets, subject to all the liabilities, of the Acquired Fund in exchange for shares of the Acquiring Fund; (ii) the Acquiring Fund shares will be distributed to the shareholders of the Acquired Fund; and (iii) the Acquired Fund will liquidate and terminate (the “Reorganization”). As a result of the Reorganization, each shareholder of the Acquired Fund will become a shareholder of the Acquiring Fund. The total value of all shares of the Acquiring Fund issued in the Reorganization will equal the total value of the net assets of the Acquired Fund. The number of full and fractional shares of the Acquiring Fund received by a shareholder of the Acquired Fund will be equal in value to the value of that shareholder’s shares of the Acquired Fund as of the close of regularly scheduled trading on the New York Stock Exchange (“NYSE”) on the closing date of the Reorganization. Holders of Class R-1, Class R-2, Class R-3, Class R-4, Class R-5, and Institutional Class shares of the Acquired Fund will receive, respectively, Class R-1, Class R-2, Class R-3, Class R-4, Class R-5, and Institutional Class shares of the Acquiring Fund. The Reorganization is expected to occur as of the close of regularly scheduled trading on the NYSE on November 21, 2008. All share classes of the Acquired Fund will vote in the aggregate and not by class with respect to the Reorganization.
The Board of Directors believes the Reorganization will benefit shareholders of both, the Acquired and Acquiring Funds. Although the Acquired Fund is actively managed and the Acquiring Fund is an index fund, the Funds have the same investment objective – long-term growth of capital – and broadly similar investment strategies in that each invests principally in equity securities of small capitalization companies, and the Reorganization will afford shareholders of the Acquired Fund reasonable continuity of investment expectations. The Acquiring Fund has a lower advisory fee rate and overall expense ratios than the Acquired Fund. In addition, the Acquiring Fund has outperformed the Acquired Fund for each of the one-, three-, and five-year periods ended April 30, 2008. Moreover, because the Acquiring Fund is much larger than the Acquired Fund, the Reorganization is expected to provide shareholders of the Acquired Fund on an ongoing basis with the greater prospects for growth, efficient management, and reduced overall expenses that are available from a larger fund. Combining the Funds will not result in any dilution of the interests of existing shareholders of the Funds.
The Reorganization is not designed to be tax-free. Shareholders of the Acquired Fund holding such shares through taxable accounts such as non-qualified deferred compensation plans will recognize a gain or a loss for federal income tax purposes. It is anticipated, however, that any capital gains incurred as a result of the Reorganization will be minimal.
Enclosed you will find a Notice of Special Meeting of Shareholders, a Proxy Statement/Prospectus, and a proxy ballot for shares of the Acquired Fund you owned as of September 2, 2008, the record date for the Meeting. The Proxy Statement/Prospectus provides background information and describes in detail the matters to be voted on at the Meeting.
The Board of Directors of PFI has unanimously voted in favor of the proposed Reorganization and recommends that you vote FOR the Proposal.
In order for shares to be voted at the Meeting, we urge you to read the Proxy Statement/Prospectus and then complete and mail your proxy ballot(s) in the enclosed postage-paid envelope, allowing sufficient time for its receipt by November 17, 2008.
We appreciate your taking the time to respond to this important matter. Your vote is important. If you have any questions regarding the Reorganization, please call our shareholder services department toll free at 1-800-222-5852.
![](https://capedge.com/proxy/N-14/0000898745-08-000058/smbl1-n14082008x3x1.jpg)
PRINCIPAL FUNDS, INC. |
680 8th Street |
Des Moines, Iowa 50392-2080 |
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of the SmallCap Blend Fund I:
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of the SmallCap Blend Fund I (formerly the Partners SmallCap Blend Fund), a separate series or fund of Principal Funds, Inc. ("PFI"), will be held at 680 8th Street, Des Moines, Iowa 50392-2080, on November 19, 2008 at 10 a.m., Central Time. A Proxy Statement/Prospectus providing information about the following proposal to be voted on at the Meeting is included with this notice. The Meeting is being held to consider and vote on such proposal as well as any other business that may properly come before the Meeting or any adjournment thereof:
Proposal: Approval of a Plan of Acquisition providing for the reorganization of the SmallCap Blend Fund I |
(the “Fund”) into the SmallCap S&P 600 Index Fund. |
The Board of Directors of PFI recommends that shareholders of the Fund vote FOR the Proposal.
Approval of the Proposal will require the affirmative vote of the holders of at least a "Majority of the Outstanding Voting Securities" (as defined in the accompanying Proxy Statement/Prospectus) of the Acquired Fund.
Each shareholder of record at the close of business on September 2, 2008 is entitled to receive notice of and to vote at the Meeting.
Please read the attached Proxy Statement/Prospectus.
| By order of the Board of Directors
Nora M. Everett President |
October ____, 2008 Des Moines, Iowa |
PRINCIPAL FUNDS, INC. |
680 8th Street |
Des Moines, Iowa 50392-2080 |
|
-------------------------- |
PROXY STATEMENT/PROSPECTUS |
SPECIAL MEETING OF SHAREHOLDERS |
TO BE HELD NOVEMBER 19, 2008 |
|
RELATING TO THE REORGANIZATION OF: |
SMALLCAP BLEND FUND I INTO |
THE SMALLCAP S&P 600 INDEX FUND |
This Proxy Statement/Prospectus is furnished in connection with the solicitation by the Board of Directors (the "Board" or "Directors") of Principal Funds, Inc. ("PFI") of proxies to be used at a Special Meeting of Shareholders of PFI to be held at 680 8th Street, Des Moines, Iowa 50392-2080, on November 19, 2008, at 10 a.m., Central Time (the "Meeting").
At the Meeting, shareholders of the SmallCap Blend Fund I (formerly, the Partners SmallCap Blend Fund) (the “Acquired Fund”) will be asked to consider and approve a proposed Plan of Acquisition (the "Plan") providing for the combination of the Acquired Fund into the SmallCap S&P 600 Index Fund (the "Acquiring Fund").
Under the Plan: (i) the Acquiring Fund will acquire all the assets, subject to all the liabilities of the Acquired Fund in exchange for shares of the Acquiring Fund; (ii) the Acquiring Fund shares will be distributed to the Shareholders of the Acquired Fund; and (iii) the Acquired Fund will liquidate and terminate (the "Reorganization"). As a result of the Reorganization, each shareholder of the Acquired Fund will become a shareholder of the Acquiring Fund. The total value of all shares of the Acquiring Fund issued in the Reorganization will equal the total value of the net assets of the Acquired Fund. The number of full and fractional shares of the Acquiring Fund received by a shareholder of the Acquired Fund will be equal in value to the value of that shareholder's shares of the Acquired Fund as of the close of regularly scheduled trading on the New York Stock Exchange on the closing date of the Reorganization. Holders of Class R-1, Class R-2, Class R-3, Class R-4, Class R-5, and Institutional Class shares will receive, respectively, Class R-1, Class R-2, Class R-3, Class R-4, Class R-5, and Institutional Class shares of the Acquiring Fund. If approved by shareholders of the Acquired Fund, the Reorganization is expected to occur with respect to that Fund immediately after the close of regularly scheduled trading on the New York Stock Exchange on November 21, 2008 (the "Effective Time"). All share classes of the Acquired Fund will vote in the aggregate and not by class. The terms and conditions of the Reorganization are more fully described below in this Proxy Statement/Prospectus and the Plan of Acquisition, which is attached hereto as Appendix A.
This Proxy Statement/Prospectus contains information shareholders should know before voting on the Reorganization. Please read it carefully and retain it for future reference. The Annual and Semi-Annual Reports to Shareholders of PFI contain additional information about the investments of the Acquired and Acquiring Funds, and the Annual Report contains discussions of the market conditions and investment strategies that significantly affected these Funds during the fiscal year ended October 31, 2007. Copies of these reports may be obtained at no charge by calling our Shareholder services department toll free at 1-800-247-4123.
A Statement of Additional Information dated October ____, 2008 (the "Statement of Additional Information") relating to this Proxy Statement/Prospectus has been filed with the Securities and Exchange Commission ("SEC") and is incorporated by reference into this Proxy Statement/Prospectus. PFI's Prospectus, dated February 29, 2008 and as supplemented ("PFI Prospectus"), and the Statement of Additional Information for PFI, dated May 1, 2008 and as supplemented ("PFI SAI"), have been filed with the SEC and, insofar as they relate to the SmallCap Blend Fund I, are incorporated by reference into this Information Statement/Prospectus. Copies of these documents may be obtained without charge by writing to PFI at the address noted above or by calling our shareholder services department toll free at 1-800-222-5852. You may also call our shareholder services department toll fee at 1-800-222-5852 if you have any questions regarding the Reorganization.
PFI is subject to the informational requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 (the "1940 Act") and files reports, proxy materials and other information with the SEC. Such reports, proxy materials and other information may be inspected and copied at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 (information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-5850). Such materials are also available on the SEC's EDGAR Database on its Internet site at www.sec.gov, and copies may be obtained, after paying a duplicating fee, by email request addressed to publicinfo@sec.gov or by writing to the SEC's Public Reference Room.
The SEC has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Proxy Statement/Prospectus. Any representation to the contrary is a criminal offense.
The date of this Proxy Statement/Prospectus is October ____, 2008.
2
TABLE OF CONTENTS |
THE REORGANIZATION | 4 |
PROPOSAL | | 6 |
Comparison of Acquired and Acquiring Funds | 6 |
Comparison of Investment Objectives and Strategies | 8 |
Fees and Expenses of the Funds | 8 |
Comparison of Principal Investment Risks | 10 |
Performance | 13 |
INFORMATION ABOUT THE REORGANIZATION | 15 |
Plan of Acquisition | 15 |
Reasons for the Reorganization | 15 |
Board Consideration of the Reorganization | 15 |
Description of the Securities to Be Issued | 17 |
Federal Income Tax Consequences | 17 |
CAPITALIZATION | 18 |
ADDITIONAL INFORMATION ABOUT THE FUNDS | 19 |
Certain Investment Strategies and Related Risks of the Funds | 19 |
Multiple Classes of Shares | 23 |
Costs of Investing in the Funds | 23 |
Distribution Plans and Additional Information Regarding Intermediary Compensation | 24 |
Dividends and Distributions | 26 |
Pricing of Fund Shares | 27 |
Purchases, Redemptions, and Exchanges of Shares | 28 |
Frequent Purchases and Redemptions | 29 |
Tax Considerations | 30 |
Portfolio Holdings Information | 30 |
VOTING INFORMATION | 31 |
OUTSTANDING SHARES AND SHARE OWNERSHIP | 32 |
FINANCIAL HIGHLIGHTS | 32 |
FINANCIAL STATEMENTS | 36 |
LEGAL MATTERS | 36 |
OTHER INFORMATION | 36 |
APPENDIX A | Form of Plan of Acquisition | A-1 |
APPENDIX B | Description of Indices | B-1 |
3
This Proxy Statement/Prospectus is being furnished to shareholders of the Acquired Fund to provide information regarding the Plan and the Reorganization.
Principal Funds, Inc. PFI is a Maryland corporation and an open-end management investment company registered with the SEC under the 1940 Act. PFI currently offers 74 separate series or funds (the “PFI Funds”), including the Acquired and Acquiring Funds. The sponsor of PFI is Principal Life Insurance Company (“Principal Life”), the investment advisor to the PFI Funds is Principal Management Corporation (“PMC”) and the principal underwriters for PFI are Principal Funds Distributor, Inc. (the “Distributor” or “PFD”) for all share classes, and Princor Financial Services Corporation (“Princor”) for Institutional, J and Plan Class shares. Principal Life, an insurance company organized in 1879 under the laws of Iowa, PMC, PFD, and Princor are indirect, wholly-owned subsidiaries of Principal Financial Group, Inc. (“PFG”). Their address is the Principal Financial Group, Des Moines, Iowa 50392-2080.
Investment Management. Pursuant to an investment advisory agreement with PFI with respect to the Acquired and Acquiring Funds, PMC provides investment advisory services and certain corporate administrative services to the Funds. As permitted by the investment advisory agreements, PMC has entered into sub-advisory agreements with respect to the Acquired and Acquiring Funds as follows:
Acquired Fund | Sub-Advisor |
SmallCap Blend Fund I | Mellon Capital Management Corporation (“Mellon Capital”) |
|
Acquiring Fund | Sub-Advisor |
SmallCap S&P 600 Index Fund | Principal Global Investors, LLC (“PGI”) |
Each of PMC and the sub-advisors are registered with the SEC as investment advisors under the Investment Advisers Act of 1940.
Mellon Capital’s address is 500 Grant Street, Suite 4200, Pittsburgh, PA 15258. Mellon Capital is a wholly owned subsidiary of Mellon Financial Corporation (“Mellon”).
PGI is an indirect wholly owned subsidiary of Principal Life, an affiliate of PMC, and a member of the Principal Financial Group. PGI’s headquarters address is 801 Grand Avenue, Des Moines, IA 50392.
At its meeting held on June 9, 2008, the Board, including all the Directors who are not “interested persons” (as defined in the 1940 Act) of PFI (the “Independent Directors”), approved the Reorganization pursuant to the Plan providing for the combination of the Acquired Fund into the Acquiring Fund. The Board concluded that the Reorganization is in the best interests of the Acquired Fund and the Acquiring Fund and that the interests of existing shareholders of the Funds will not be diluted as a result of the Reorganization. The factors that the Board considered in deciding to approve the Reorganization are discussed below under “Information About the Reorganization – Board Consideration of the Reorganization.”
The Reorganization contemplates: (i) the transfer of all the assets, subject to all of the liabilities, of the Acquired Fund to the Acquiring Fund in exchange for shares of the Acquiring Fund; (ii) the distribution to Acquired Fund shareholders of the Acquiring Fund shares; and (iii) the liquidation and termination of the Acquired Fund. As a result of the Reorganization, each shareholder of the Acquired Fund will become a shareholder of the Acquiring Fund. In the Reorganization, the Acquiring Fund will issue a number of shares with a total value equal to the total value of the net assets of the Acquired Fund, and each shareholder of the Acquired Fund will receive a number of full and fractional shares of the Acquiring Fund with a value equal to the value of that shareholder’s shares of the Acquired Fund, as of the close of regularly scheduled trading on the NYSE on the closing date of the Reorganization (the “Effective Time”). The closing date of the Reorganization is expected to be November 21, 2008. Holders of Class R-1, Class R-2, Class R-3, Class R-4, Class R-5 and Institutional Class shares of the Acquired Fund will receive, respectively, Class R-1, Class R-2, Class R-3, Class R-4, Class R-5, and Institutional Class shares of the Acquiring Fund. The terms and conditions of the Reorganization are more fully described below in this Proxy Statement/Prospectus and in the Form of Plan of Acquisition, which is attached hereto as Appendix A.
The Board of Directors believes the Reorganization will benefit shareholders of both the Acquired and Acquiring Funds. Although the Acquired Fund is actively managed and the Acquiring Fund is an index fund, the Funds have the same investment objective – long-term growth of capital – and broadly similar investment strategies in that each invests
4
principally in equity securities of small capitalization companies, and the Reorganization will afford shareholders of the Acquired Fund reasonable continuity of investment expectations. The Acquiring Fund has a lower advisory fee rate and overall expense ratios than the Acquired Fund. In addition, the Acquiring Fund has outperformed the Acquired Fund for each of the one-, three-, and five-year periods ended April 30, 2008. Moreover, because the Acquiring Fund is much larger than the Acquired Fund, the Reorganization is expected to provide shareholders of the Acquired Fund on an ongoing basis with the greater prospects for growth, efficient management, and reduced overall expenses that are available from a larger fund. Combining the Funds will not result in any dilution of the interests of existing shareholders of the Funds.
The Reorganization is not designed to be tax-free. Shareholders of the Acquired Fund holding such shares through taxable accounts such as non-qualified deferred compensation plans may recognize a gain or a loss for federal income tax purposes. See "Information About the Reorganization--Federal Income Tax Consequences."
The Reorganization will not result in any material change in the purchase and redemption procedures followed with respect to the distribution of shares. See “Additional Information About the Funds – Purchases, Redemptions and Exchanges of Shares.”
The Acquired Fund will pay all fees and expenses in connection with the Reorganization. For the estimated expenses of the Reorganization, see “Capitalization” below. The Acquired Fund will incur trading costs associated with disposing of any portfolio securities that would not be compatible with the investment objectives and strategies of the Acquiring Fund and reinvesting the proceeds in securities that would be compatible.
5
APPROVAL OF A PLAN OF ACQUISITION PROVIDING FOR THE REORGANIZATION OF THE
SMALLCAP BLEND FUND I INTO THE SMALLCAP S&P 600 INDEX FUND
Shareholders of the SmallCap Blend Fund I (the "Acquired Fund") are being asked to approve the reorganization of the Acquired Fund into the SmallCap S&P 600 Index Fund (the "Acquiring Fund").
| Comparison of Acquired and Acquiring Funds |
SmallCap Blend Fund I | SmallCap S&P 600 Index Fund |
(Acquired Fund) | (Acquiring Fund) |
|
|
Approximate Net Assets as of April 30, 2008 (unaudited): | |
$135,882,000* | $486,946,000 |
* This figure does not reflect a proposed redemption of approximately $130,595,000. |
|
Investment Advisor: | |
PMC |
Sub-Advisor and Portfolio Managers: | |
|
Mellon Capital | PGI |
|
Ronald P. Gala, CFA. Mr. Gala is a Senior Vice | Dirk Laschanzky, CFA. Mr. Laschanzky is a |
President and principal of Mellon Capital and joined | portfolio manager for PGI, responsible for portfolio |
the firm in 1993. Mr. Gala earned an MBA in | implementation strategies, asset allocation and |
Finance from the University of Pittsburgh and a BS | managing the midcap value and index portfolios. |
in Business Administration from Duquesne | Prior to joining PGI in 1997, he was a portfolio |
University. He has earned the right to use the | manager and analyst for over seven years at AMR |
Chartered Financial Analyst designation. | Investment Services. He earned an MBA and BA, |
| both in Finance, from the University of Iowa. He has |
Peter D. Goslin, CFA. Mr. Goslin is a Vice | earned the right to use the Chartered Financial |
President and Portfolio Manager with Mellon | Analyst designation. |
Capital. Before joining Mellon Capital in 1999, Mr. | |
Goslin spent over four years with Merrill Lynch. | Scott W. Smith. Mr. Smith is a research analyst and |
During his tenure with Merrill, he worked as a | portfolio manager at Principal Global Investors. He |
NASDAQ market maker and an equity index | is an analyst within the firm’s asset allocation and |
options proprietary trader. Prior to that, he ran | structured investments group. He also provides |
Merrill’s S&P options desk at the Chicago | research assistance to various business units within |
Mercantile Exchange. Mr. Goslin earned his MBA | Principal Global Investors. Mr. Smith joined the |
in Finance at the University of Notre Dame | firm in 1999. He received a bachelor’s degree in |
Graduate School of Business following a BS in | finance from Iowa State University. |
Finance from St. Vincent College. He has earned the | |
right to use the Chartered Financial Analyst | |
designation. | |
|
|
Investment Objective: | |
Both funds seek long term growth of capital. |
6
Principal Investment Strategies: | |
The Fund invests primarily in common stocks of | Under normal market conditions, the Fund invests at |
small capitalization companies. Under normal | least 80% of its assets in common stocks of |
market conditions, the Fund invests at least 80% of | companies that compose the Standard & Poor’s |
its assets in common stocks of companies with | (“S&P”) SmallCap 600 Index. The Sub-Advisor, |
small market capitalizations (those with market | PGI, attempts to mirror the investment performance |
capitalizations similar to companies in the Standard | of the Index by allocating the Fund’s assets in |
and Poor’s SmallCap 600 Index (as of | approximately the same weightings as the S&P |
December 31, 2007, this range was between | SmallCap 600 Index. The S&P SmallCap 600 is an |
approximately $0.06 billion and $4.9 billion)) at the | unmanaged index of 600 domestic stocks chosen for |
time of purchase. Market capitalization is defined as | market size, liquidity and industry group |
total current market value of a company’s | representation. Each stock is weighted by its market |
outstanding common stock. The Fund may invest | capitalization which means larger companies have |
up to 25% of its assets in securities of foreign | greater representation in the Index than smaller ones. |
companies. | As of December 31, 2007, the market capitalization |
| range of the Index was between approximately $0.06 |
In selecting investments for the Fund, the Sub- | billion and $4.9 billion. Over the long-term, PGI |
Advisor, Mellon Capital, uses a disciplined | seeks a very close correlation between performance |
investment process that combines fundamental | of the Fund, before expenses, and that of the S&P |
analysis and risk management with a multi-factor | SmallCap 600. It is unlikely that a perfect correlation |
model that searches for undervalued stocks. A | of 1.00 will be achieved. |
common definition of an undervalued stock is one | |
selling at a low price relative to its profits and | The Fund uses an indexing strategy and is not |
prospective earnings growth. The stock evaluation | managed according to traditional methods of |
process uses several different characteristics, | “active” investment management. Active |
including changes in earnings estimates and change | management would include buying and selling |
in price-to-earnings ratios, in an attempt to identify | securities based on economic, financial and |
value among individual stocks. | investment judgment. Instead, the Fund uses a |
| passive investment approach. Rather than judging the |
Rather than using broad economic or market trends, | merits of a particular stock in selecting investments, |
stocks are selected on a company by company basis. | PGI focuses on tracking the S&P SmallCap 600. PGI |
To ensure ample diversification, the portfolio’s | may also use stock index futures as a substitute for |
assets are allocated among industries and economic | the sale or purchase of securities. It does not attempt |
sectors in similar proportions to those of the Index. | to manage market volatility, use defensive strategies |
The portfolio is generally kept broadly diversified | or reduce the effect of any long-term periods of poor |
in an attempt to capture opportunities that may be | stock performance. |
realized quickly during periods of above-average | |
market volatility. By maintaining such a diversified | The correlation between Fund and Index |
stance, stock selection drives the Fund’s | performance may be affected by the Fund’s |
performance. | expenses, changes in securities markets, changes in |
| the composition of the Index and the timing of |
| purchases and sales of Fund shares. The Fund may |
| invest in futures and options, which could carry |
| additional risks such as losses due to unanticipated |
| market price movements and could also reduce the |
| opportunity for gain. |
|
| Because of the difficulty and expense of executing |
| relatively small stock trades, the Fund may not |
| always be invested in the less heavily weighted S&P |
| SmallCap 600 stocks. At times, the Fund’s portfolio |
| may be weighted differently from the S&P SmallCap |
| 600, particularly if the Fund has a small level of |
| assets to invest. In addition, the Fund’s ability to |
7
| match the performance of the S&P SmallCap 600 is |
| affected to some degree by the size and timing of |
| cash flows into and out of the Fund. The Fund is |
| managed to attempt to minimize such effects. |
| |
| PGI reserves the right to omit or remove any of the |
| S&P SmallCap 600 stocks from the Fund if it |
| determines that the stock is not sufficiently liquid. In |
| addition, a stock might be excluded or removed from |
| the Fund if extraordinary events or financial |
| conditions lead PGI to believe that it should not be a |
| part of the Fund’s assets. |
Hedging and Other Strategies: |
Each of the Funds may invest in inverse floating rate obligations, may engage in hedging transactions |
through the use of financial futures and options thereon and may also purchase and sell securities on a |
when-issued or forward commitment basis, invest in mortgage-backed securities, enter into repurchase |
agreements, invest in stand-by commitments, engage in swap agreements, and lend portfolio securities. |
Each of the Funds may invest in floating rate and variable rate obligations, including participation interests |
therein. |
|
Temporary Defensive Investing: |
For temporary defensive purposes in times of unusual or adverse market, economic, or political conditions, |
each Fund may invest up to 100% of its assets in cash and cash equivalents. In taking such defensive |
measures, either Fund may fail to achieve its investment objective. |
|
Fundamental Investment Restrictions: |
Each of the Funds is subject to the same fundamental investment restrictions which may not be changed |
without the approval of the shareholders of the Fund. These fundamental restrictions deal with such matters |
as the issuance of senior securities, purchasing or selling real estate or commodities, borrowing money, |
making loans, underwriting securities of other issuers, diversification or concentration of investments, and |
short sales of securities. The fundamental investment restrictions of the Funds are described in the |
Statement of Additional Information. |
| Comparison of Investment Objectives and Strategies |
The Funds have the same investment objective – long-term growth of capital – and broadly similar investment |
strategies in that each invests principally in equity securities of small cap companies. However, the Acquired Fund is |
actively managed, while the Acquiring Fund is an index fund which seeks to mirror the investment performance of the |
S&P SmallCap 600 Index by allocating the Fund’s assets in approximately the same weightings as the Index. In addition, |
the Acquired Fund, but not the Acquiring Fund, pursues a value approach to investing and is authorized to invest up to |
25% of its assets in foreign securities. |
|
The investment objective of each of the Funds may be changed by the Board without shareholder approval. |
|
Additional information about the investment strategies and the types of securities in which the Funds may invest is |
discussed below under “Certain Investment Strategies and Related Risks of the Funds” as well as in the Statement of |
Additional Information. |
|
The Statement of Additional Information provides further information about the portfolio managers for each Fund, |
including information about compensation, other accounts managed and ownership of Fund shares. |
| Fees and Expenses of the Funds |
The tables below compare the fees and expenses of the shares of the Acquired and Acquiring Funds. In the |
Reorganization, the holders of Class R-1, Class R-2, Class R-3, Class R-4, Class R-5, and Institutional Class shares of |
the Acquired Fund will receive, respectively, Class R-1, Class R-2, and Class R-3, Class R-4, Class R-5, and Institutional |
Class shares of the Acquiring Fund. |
8
Fees and Expenses as a % of average daily net assets
The following table shows: (a) the ratios of expenses to average net assets of such share classes of the Acquired Fund for the fiscal year ended October 31, 2007; (b) the ratios of expenses to average net assets of such share classes of the Acquiring Fund for the fiscal year ended October 31, 2007; and (c) the pro forma expense ratios of such share classes of the Acquiring fund for the fiscal year ending October 31, 2007 assuming that the Reorganization had taken place at the commencement of the fiscal year ended October 31, 2007.
Annual Fund Operating Expenses |
|
| | Management | 12b-1 | Other | Total Operating |
| | Fees | Fees | Expenses(1) | Expenses(2) |
|
SmallCap Blend Fund I | | | | | |
(Acquired Fund) | Class R-1 | 1.00% | 0.35% | 0.54% | 1.89%(3) |
| Class R-2 | 1.00% | 0.30% | 0.46% | 1.76%(3) |
| Class R-3 | 1.00% | 0.25% | 0.33% | 1.58%(3) |
| Class R-4 | 1.00% | 0.10% | 0.29% | 1.39%(3) |
| Class R-5 | 1.00% | N/A | 0.27% | 1.27%(3) |
| Institutional | 1.00% | N/A | 0.01% | 1.01%(3) |
|
SmallCap S&P 600 Index Fund | | | | | |
(Acquiring Fund) | Class R-1 | 0.15% | 0.35% | 0.54% | 1.04% |
| Class R-2 | 0.15% | 0.30% | 0.46% | 0.91% |
| Class R-3 | 0.15% | 0.25% | 0.33% | 0.73% |
| Class R-4 | 0.15% | 0.10% | 0.29% | 0.54% |
| Class R-5 | 0.15% | N/A | 0.27% | 0.42% |
| Institutional | 0.15% | N/A | 0.01% | 0.16% |
|
SmallCap S&P 600 Index Fund | | | | | |
(Acquiring Fund) | | | | | |
(Pro forma assuming Reorganization) | Class R-1 | 0.15% | 0.35% | 0.54% | 1.04% |
| Class R-2 | 0.15% | 0.30% | 0.46% | 0.91% |
| Class R-3 | 0.15% | 0.25% | 0.33% | 0.73% |
| Class R-4 | 0.15% | 0.10% | 0.29% | 0.54% |
| Class R-5 | 0.15% | N/A | 0.27% | 0.42% |
| Institutional | 0.15% | N/A | 0.01% | 0.16% |
|
(1) | Other Expenses for the Retirement Class shares includes: |
| | R-1 | R-2 | R-3 | R-4 | R-5 |
| | Class | Class | Class | Class | Class |
| Service Fee | 0.25% | 0.25% | 0.17% | 0.15% | 0.15% |
| Administrative Service Fee | 0.28 | 0.20 | 0.15 | 0.13 | 0.11 |
(2) | Expense information has been restated to reflect current fees. Certain other operating expenses of the Fund have increased effective February 29, 2008. |
|
| |
| |
(3) | Approximately $130,595,000 will be redeemed from the Acquired Fund on the date of Reorganization. If this redemption had taken place at the commencement of the year ended October 31, 2007, the estimated Total Operating Expenses for each class of shares of the Acquired Fund, based on the amount of net assets in the Acquired Fund after the redemption, would have been: Class R-1 -- 2.18%; Class R-2 -- 2.05%; Class R-3 -- 1.87%; Class R-4 -- 1.68%; Class R-5 -- 1.56%; and Institutional -- 1.30%. There would have been no change, however, in the pro forma Total Operating Expenses of the Acquiring Fund. |
Examples: The following examples are intended to help you compare the costs of investing in shares of the Acquired and Acquiring Funds. The examples assume that you invest $10,000 in the particular fund for the time periods indicated, regardless of whether you redeem or continue to hold the shares at the end of the period. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The examples should not be considered a representation of future expenses of the Acquired or Acquiring fund. Actual expenses may be greater or less than those shown.
9
| | 1 Year | 3 Years | 5 Years | 10 Years |
SmallCap Blend Fund I | | | | | |
(Acquired Fund) | Class R-1 | $192 | $594 | $1,021 | $2,212 |
| Class R-2 | 179 | 554 | 954 | 2,073 |
| Class R-3 | 161 | 499 | 860 | 1,878 |
| Class R-4 | 142 | 440 | 761 | 1,669 |
| Class R-5 | 129 | 403 | 697 | 1,534 |
| Institutional | 103 | 322 | 558 | 1,236 |
SmallCap S&P 600 Index Fund | | | | | |
(Acquiring Fund) | Class R-1 | $106 | $331 | $574 | $1,271 |
| Class R-2 | 93 | 290 | 504 | 1,120 |
| Class R-3 | 75 | 233 | 406 | 906 |
| Class R-4 | 55 | 173 | 302 | 677 |
| Class R-5 | 43 | 135 | 235 | 530 |
| Institutional | 16 | 52 | 90 | 205 |
SmallCap S&P 600 Index Fund | | | | | |
(Acquiring Fund) | | | | | |
(Pro forma assuming Reorganization) | Class R-1 | $106 | $331 | $574 | $1,271 |
| Class R-2 | 93 | 290 | 504 | 1,120 |
| Class R-3 | 75 | 233 | 406 | 906 |
| Class R-4 | 55 | 173 | 302 | 677 |
| Class R-5 | 43 | 135 | 235 | 530 |
| Institutional | 16 | 52 | 90 | 205 |
Investment Management Fees/Sub-Advisory Arrangements
The Funds each pay their investment advisor, PMC, an advisory fee which for each Fund is calculated as a percentage of the Fund’s average daily net assets pursuant to the following fee schedules:
Acquired Fund
1.00% for the first $500 million, 0.98% for the next $500 million, 0.96% for the next 500 million, and 0.95% on all assets over $1.5 billion.
Acquiring Fund
0.15% on all assets.
As sub-advisors to the Funds, Mellon Capital and PGI are paid sub-advisory fees with respect to each Fund. The sub-advisory fees are paid by PMC, not by the Funds.
A discussion of the basis of the Board’s approval of the advisory and sub-advisory agreements with respect to the Acquired and Acquiring Funds is available in PFI’s Annual Report to Shareholders for the fiscal year ended October 31, 2007.
| Comparison of Principal Investment Risks |
In deciding whether to approve the Reorganization, shareholders should consider the amount and character of investment risk involved in the respective investment objectives and strategies of the Acquired and Acquiring Funds. Both Funds have similar risks because they invest principally in equity securities of small capitalization companies. However, the Funds have some different risks because the Acquired Fund may invest in foreign securities and is actively managed while the Acquiring fund is an index fund. The risks of investing in the Funds include:
Risks Applicable to both Funds:
· | Securities Lending Risk. The principal risk of securities lending is that the financial institution that borrows securities from the Fund could go bankrupt or otherwise default on its commitment under the securities lending agreement and the Fund might not be able to recover the loaned securities or their value. |
10
· | Credit or Counterparty Risk. Each of the Funds is subject to the risk that the issuer or guarantor of a fixed-income security or other obligation, the counterparty to a derivatives contract or repurchase agreement, or the borrower of the Fund’s securities will be unable or unwilling to make timely principal, interest, or settlement payments, or otherwise to honor its obligations. |
|
· | Liquidity Risk. Each of the Funds is exposed to liquidity risk when trading volume, lack of a market maker, or legal restrictions impair its ability to sell particular securities or close derivative positions at an advantageous price. |
|
· | Market Risk. The value of each Fund’s portfolio may go down in response to overall stock or bond market movements. Markets tend to move in cycles, with periods rising prices and periods of falling prices. Stocks tend to go up and down in value more than bonds. If a fund’s investments are concentrated in certain sectors, its performance could be worse than the overall market. It is possible to lose money when investing in either Fund. |
|
· | Equity Securities Risk. Equity securities include common, preferred, and convertible preferred stocks and securities the values of which are tied to the price of stocks, such as rights, warrants, and convertible debt securities. Common and preferred stocks represent equity ownership in a company. Stock markets are volatile, and the price of equity securities (and their equivalents) will fluctuate. The value of equity securities purchased by a fund could decline if the financial condition of the companies in which the fund invests decline or if overall market and economic conditions deteriorate. |
|
· | Small Company Risk. Investments in companies with smaller capitalizations may involve greater risk and price volatility than investments in larger, more mature companies. Smaller companies may be developing or marketing new products or services for which markets are not yet established and may never become established. While small, unseasoned companies may offer greater opportunities for capital growth than larger, more established companies, they also involve greater risks and should be considered speculative. |
Risks Applicable to the Acquiring Fund: |
· | Underlying Fund Risk. The Principal LifeTime Funds and the Strategic Asset Management (“SAM”) Portfolios operate as funds of funds and invest principally in Underlying Funds. From time to time, an underlying fund may experience relatively large investments or redemptions by a fund of funds due to the reallocation or rebalancing of its assets. These transactions may have adverse effects on underlying fund performance to the extent an underlying fund is required to sell portfolio securities to meet such redemptions, or to invest cash from such investments, at times it would not otherwise do so. This may be particularly important when a fund of funds owns a significant portion of an underlying fund. These transactions may also accelerate the realization of taxable income if sales of portfolio securities result in gains, and could increase transaction costs. In addition, when a fund of funds reallocates or redeems significant assets away from an underlying fund, the loss of assets to the underlying fund could result in increased expense ratios for that fund. |
|
| PMC is the advisor to the Principal LifeTime Funds and each of the Underlying Funds. PGI is Sub-Advisor to these funds. The Acquiring Fund is among the Underlying Funds owned by the Principal LifeTime Funds. Principal and PGI are committed to minimizing the potential impact of underlying fund risk on underlying funds to the extent consistent with pursuing the investment objectives of the fund of funds which it manages. Each may face conflicts of interest in fulfilling its responsibilities to all such funds. The following table shows the percentage of the outstanding shares of the Acquiring Fund owned by the Principal LifeTime Funds as of October 31, 2007. |
| PRINCIPAL LIFETIME FUNDS | | | |
|
| | | | | | Principal | |
| | | | | | LifeTime | |
| Principal | Principal | Principal | Principal | Principal | Strategic | |
| LifeTime | LifeTime | LifeTime | LifeTime | LifeTime | Income | |
Underlying Fund | 2010 Fund | 2020 Fund | 2030 Fund | 2040 Fund | 2050 Fund | Fund | Total |
|
SmallCap S&P 600 Index Fund | 8.36% | 15.07% | 8.06% | 3.94% | 1.39% | 1.82% | 38.64% |
· | Derivatives Risk. Derivatives are investments whose values depend on or are derived from other securities or indexes. A fund's use of certain derivative instruments (such as options, futures, and swaps) could produce disproportionate gains or losses. Derivatives are generally considered more risky than direct investments and, in a down market, could become harder to value or sell at a fair price. |
11
Risks Applicable to the Acquired Fund: |
· | Management Risk. Each of the Funds is actively managed by its sub-advisor. Each Fund’s performance will thus reflect in part the ability of its sub-advisor to make investment decisions that are suited to achieving the Fund’s investment objective. If the sub-advisor’s strategies do not perform as expected, the Fund could underperform other mutual funds with similar investment objectives or lose money. |
|
· | Growth Stock Risk. Growth stocks typically trade at higher multiples of current earnings than other securities. Growth stocks are often more sensitive to market fluctuations than other securities because their market prices are highly sensitive to future earnings expectations. Similarly, because growth securities typically do not make dividend payments to shareholders, investment returns are based on capital appreciation, making returns more dependent on market increases and decreases. Growth stocks may therefore be more volatile than non-growth stocks. A fund’s strategy of investing in growth stocks also carries the risk that in certain markets growth stocks will underperform value stocks. |
|
· | Foreign Securities Risk. Foreign securities carry risks that are not generally found in securities of U.S. companies. These risks include the loss of value as a result of political instability and financial and economic events in foreign countries. In addition, nationalization, expropriation or confiscatory taxation, and foreign exchange restrictions could adversely affect a fund’s investments in a foreign country. Foreign securities may be subject to less stringent reporting, accounting, and disclosure standards than are required of U.S. companies, and foreign countries may also have problems associated with and causing delays in the settlement of sales. |
|
· | Market Segment (MidCap) Risk. Funds are subject to the risk that their principal market segment mid capitalization may underperform compared to other market segments or to the equity markets as a whole. Thus, the Acquired Fund’s strategy of investing in mid cap stocks carries the risk that in certain markets mid cap stocks will underperform small cap or large cap stocks. |
|
· | Active Trading Risk. A fund that actively trades portfolio securities in an attempt to achieve its investment objective may have high portfolio turnover rates that may increase the fund’s brokerage costs, accelerate the realization of taxable gains, and adversely impact fund performance. |
|
· | Value Stock Risk. A fund’s investments in value stocks carries the risk that the market will not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. A value stock may not increase in price if other investors fail to recognize the company’s value and bid up the price or invest in markets favoring faster growing companies. A fund’s strategy of investing in value stocks also carries the risk that in certain markets value stocks will underperform growth stocks. |
|
· | Exchange Rate Risk. Because foreign securities are generally denominated in foreign currencies, the value of the net assets of a fund as measured in U.S. dollars will be affected by changes in exchange rates. To protect against future uncertainties in foreign currency exchange rates, the funds are authorized to enter into certain foreign currency exchange transactions. In addition, the funds’ foreign investments may be less liquid and their price more volatile than comparable investments in U.S. securities. Settlement periods may be longer for foreign securities and portfolio liquidity may be affected. |
|
· | Mid Cap Stock Risk. Medium capitalization companies may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, mid-size companies may pose greater risk due to narrow product lines, limited financial resources, less depth in management, or a limited trading market for their securities. |
|
· | Initial Public Offerings (“IPOs”) Risk. There are risks associated with the purchase of shares issued in IPOs by companies that have little operating history as public companies, as well as risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers has been volatile and share prices of certain newly-public companies have fluctuated in significant amounts over short periods of time. A fund cannot guarantee continued access to IPO offerings and may at times dispose of IPO shares shortly after their acquisition. |
|
12
The bar charts below show how each Fund’s total return has varied year-by-year, while the tables below show each Fund’s performance over time (along with the returns of a broad-based market index and an index of funds with similar investment objectives for reference).
Year-By-Year Total Returns (%) as of 12/31 Each Year (Institutional Class)
SmallCap Blend Fund I (Acquired Fund)
![](https://capedge.com/proxy/N-14/0000898745-08-000058/smbl1-n14082008x17x1.jpg)
Highest return for a quarter during the period of the bar chart above: | Q2 '03 | 22.12% |
Lowest return for a quarter during the period of the bar chart above: | Q4 '07 | -6.21% |
|
The year-to-date return as of June 30, 2008 is -7.37%. | | |
Year-By-Year Total Returns (%) as of 12/31 Each Year (Institutional Class)
SmallCap S&P 600 Index Fund (Acquiring Fund)
![](https://capedge.com/proxy/N-14/0000898745-08-000058/smbl1-n14082008x17x2.jpg)
Highest return for a quarter during the period of the bar chart above: | Q4 '01 | 20.55% |
Lowest return for a quarter during the period of the bar chart above: | Q3 '02 | -18.65% |
|
The year-to-date return as of June 30, 2008 is -7.05%. | | |
13
Average Annual Total Returns (%) for periods ended December 31, 2007 |
|
| Past | Past | Since |
| 1 Year | 5 Years | Inception(1) |
|
SmallCap Blend Fund I (Acquired Fund) | | | |
--Institutional Class | -1.88 | 14.42 | 14.44 |
(after taxes on distributions )(2) | -4.83 | 12.31 | 12.33 |
(after taxes on distributions and sales of share)(2) | 0.49 | 11.78 | 11.79 |
--R-1 Class(3) | -2.72 | 13.43 | 13.44 |
--R-2 Class | -2.62 | 13.57 | 13.59 |
--R-3 Class | -2.46 | 13.79 | 13.80 |
--R-4 Class | -2.24 | 14.01 | 14.02 |
--R-5 Class | -2.11 | 14.14 | 14.15 |
S&P SmallCap 600 Index(4) | -0.30 | 16.04 | 16.04 |
Morningstar Small Blend Category Average | -1.10 | 15.72 | 15.61 |
|
| Past | Past | Since |
| 1 Year | 5 Years | Inception(5) |
|
SmallCap S&P 600 Index Fund (Acquiring Fund) | | | |
--Institutional Class(6) | -0.36 | 15.77 | 10.41 |
(after taxes on distributions )(2) (6) | -1.95 | 14.87 | 9.66 |
(after taxes on distributions and sales of share)(2) (6) | 1.46 | 13.74 | 8.96 |
--R-1 Class(7) | -1.22 | 14.78 | 9.48 |
--R-2 Class | -1.09 | 15.00 | 9.64 |
--R-3 Class | -0.93 | 15.12 | 9.81 |
--R-4 Class | -0.70 | 15.35 | 10.02 |
--R-5 Class | -0.59 | 15.48 | 10.13 |
S&P SmallCap 600 Index(4) | -0.30 | 16.04 | 9.71 |
Morningstar Small Blend Category Average | -1.10 | 15.72 | 8.97 |
(1) | Since inception results are measured from the date the Institutional Class shares were first sold (December 30, |
| 2002). |
(2) | 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 the investor's tax situation and may |
| differ from those shown. The after-tax returns shown are not relevant to investors who hold their Fund shares |
| through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. |
(3) | The R-1 Class shares were first sold on November 1, 2004. The other classes were first sold on December 30, 2002. |
| For periods prior to the date on which the R-1 Class began operations, its returns are based on the performance of |
| the Fund's Institutional Class shares adjusted to reflect the fees and expenses of the R-1 Class. The adjustments |
| result in performance (for the periods prior to the date the R-1 Class began operations) that is no higher than the |
| historical performance of the Institutional Class shares. |
(4) | Index performance does not reflect deductions for fees, expenses or taxes. For a description of the indices, see |
| Appendix B to this Proxy Statement/Prospectus. |
(5) | Since inception results are measured from the date the R-3 Class shares were first sold (December 6, 2000). |
(6) | The Institutional Class shares were first sold on March 1, 2001. The returns for the periods prior to that date are |
| based on the performance of the R-3 Class shares adjusted to reflect the fees and expenses of Institutional Class |
| shares. The adjustments result in performance for such periods that is no higher than the historical performance of |
| the R-3 Class shares. R-3 Class shares were first sold on December 6, 2000. |
(7) | The R-1 Class shares were first sold on November 1, 2004. The other classes were first sold on December 6, 2000. |
| For periods prior to the date on which the R-1 Class began operations, its returns are based on the performance of |
| the Fund's Institutional Class shares adjusted to reflect the fees and expenses of the R-1 Class. The adjustments |
| result in performance (for the periods prior to the date the R-1 Class began operations) that is no higher than the |
| historical performance of the Institutional Class shares. |
14
| INFORMATION ABOUT THE REORGANIZATION |
The terms of the Plan are summarized below. The summary is qualified in its entirety by reference to the Form of the Plan which is attached as Appendix A to this Proxy Statement/Prospectus.
Under the Plan, the Acquiring Fund will acquire all the assets and assume all the liabilities of the Acquired Fund. We expect that the closing date will be November 21, 2008, and that the Effective Time of the Reorganization will be as of the close of regularly scheduled trading on the NYSE (normally 3:00 p.m., Central Time) on that date. Each Fund will determine its net asset values as of the close of trading on the NYSE using the procedures described in its then current prospectus (the procedures applicable to the Acquired Fund and the Acquiring Fund are identical). The Acquiring Fund will issue to the Acquired Fund a number of shares of each share class with a total value equal to the total value of the net assets of the corresponding share class of the Acquired Fund outstanding at the Effective Time of the Reorganization.
Immediately after the Effective Time, the Acquired Fund will distribute to its shareholders Acquiring Fund shares of the same class as the Acquired Fund shares you own in exchange for all your Acquired Fund shares of that class. Acquired Fund shareholders will receive a number of full and fractional shares of the Acquiring Fund that are equal in value to the value of the shares of the Acquired Fund that are surrendered in the exchange. In connection with the exchange, the Acquiring Fund will credit on its books an appropriate number of its shares to the account of each Acquired Fund shareholder, and the Acquired Fund will cancel on its books all its shares registered to the account of that shareholder. After the Effective Time of the Reorganization, the Acquired Fund will be dissolved in accordance with applicable law.
The Plan may be amended, but no amendment may be made which in the opinion of the Board would materially adversely affect the interests of the shareholders of the Acquired Fund. The Board may abandon and terminate the Plan at any time before the Effective Time of the Reorganization if it believes that consummation of the transactions contemplated by the Plan would not be in the best interests of the shareholders of either of the Funds.
Under the Plan, the Acquired Fund will pay or cause to be paid all out-of-pocket fees and expenses incurred in connection with the transactions contemplated by the Plan. These fees and expenses include, but are not limited to, accountants’ fees, legal fees, registration fees, printing expenses, transfer taxes (if any) and the fees of banks and transfer agents.
If the Plan is not consummated for any reason, the Board will consider other possible courses of action.
| Reasons for the Reorganization |
The Board of Directors believes the Reorganization will better benefit shareholders of both the Acquired and Acquiring Funds. Although the Acquired Fund is actively managed and the Acquiring Fund is an index fund, the Funds have the same investment objective – long-term growth of capital – and broadly similar investment strategies in that each invests principally in equity securities of small cap companies, and the Reorganization will afford shareholders of the Acquired Fund reasonable continuity of investment expectations; Acquiring Fund has lower advisory fees as well as lower overall expense ratios than the Acquired Fund. In addition, the Acquiring Fund has outperformed the Acquired Fund for each of the one-, three-, and five-year periods ended April 30, 2008. Moreover, because the Acquiring Fund is much larger than the Acquired Fund, the Reorganization is expected to provide shareholders of the Acquired Fund on an ongoing basis with the greater prospects for growth, efficient management and reduced overall expenses that are available from a larger fund. Combining the Funds will not result in any dilution of the interests of existing shareholders of the Funds.
| Board Consideration of the Reorganization |
The Board, including the Independent Directors, considered the Reorganization pursuant to the Plan at its meeting on June 9, 2008. The Board considered information presented by PMC, and the Independent Directors were assisted by independent legal counsel. The Board requested and evaluated such information as it deemed necessary to consider the Reorganization. At the meeting, the Board unanimously approved the Reorganization after concluding that participation in the Reorganization is in the best interests of the Acquired Fund and the Acquiring Fund and that the interests of existing shareholders of the Funds will not be diluted as a result of the Reorganization.
15
In determining whether to approve the Reorganization, the Board made inquiry into a number of matters and considered, among others, the following factors, in no order of priority:
(1) | the identical investment objectives shared by the Funds and their having broadly similar investment concentration |
| in small cap companies, as well as differences resulting from the Acquired Fund being actively managed and the |
| Acquiring Fund being an index fund; |
(2) | the absence of any differences in the Funds’ fundamental investment restrictions; |
(3) | estimated explicit trading costs associated with disposing of any portfolio securities and reinvesting the proceeds |
| in connection with the Reorganization; |
(4) | expense ratios and available information regarding the fees and expenses of the Funds; |
(5) | comparative investment performance of and other information pertaining to the Funds; |
(6) | the potential effect on the Acquired Fund’s shareholders of investing in a larger fund and the potential effect |
| on the portfolio management of the Acquiring Fund of a larger asset base following the Reorganization; |
(7) | the prospects for growth of and for achieving economies of scale by the Acquired Fund in combination with the |
| Acquiring Fund; |
(8) | the absence of any material differences in the rights of shareholders of the Funds; |
(9) | the financial strength, investment experience and resources of PGI, which serves as the sub-advisor to the |
| Acquiring Fund; |
(10) | any direct or indirect benefits expected to be derived by PMC and its affiliates from the Reorganization; |
(11) | the anticipated direct or indirect federal income tax consequences of the Reorganization; |
(12) | the fact that the Reorganization will not result in any dilution of Acquired or Acquiring Fund shareholder values; |
(13) | the terms and conditions of the Plan; and |
(14) | possible alternatives to the Reorganization. |
The Board’s decision to recommend approval of the Reorganization was based on a number of factors, including the following:
(1) | Although the Acquired Fund is actively managed and the Acquiring Fund is an index fund, the Funds have the |
| same investment objective – long-term growth of capital – and broadly similar investment strategies in that each |
| invests principally in equity securities of small cap companies, and the Reorganization will afford shareholders of |
| the Acquired Fund reasonable continuity of investment expectations; |
|
(2) | PGI as the sub-advisor responsible for managing the assets of the Acquiring Fund may be expected to continue to |
| provide high quality investment advisory services and personnel for the foreseeable future; |
|
(3) | the Acquiring Fund, which has a substantially larger asset base than the Acquired Fund, has outperformed the |
| Acquired Fund over the one-, three-, and five-year periods ended April 30, 2008, although no assurance can be |
| given that the Acquiring Fund will achieve any particular level of performance after the Reorganization; and |
|
(4) | the Acquiring Fund has a lower advisory fee rate and lower operating expense ratios than the Acquired Fund. |
16
| Description of the Securities to Be Issued |
PFI is a Maryland corporation that is authorized to issue its shares of common stock in separate series and separate classes of series. Each of the Acquired and Acquiring Funds is a separate series of PFI, and the Class R-1, Class R-2, Class R-3, Class R-4, Class R-5 and Institutional Class shares of common stock of the Acquiring Fund to be issued in connection with the Reorganization represent interests in the assets belonging to that series and have identical dividend, liquidation and other rights, except that expenses allocated to a particular series or class are borne solely by that series or class and may cause differences in rights as described herein. Expenses related to the distribution of, and other identified expenses properly allocated to, the shares of a particular series or class are charged to, and borne solely by, that series or class, and the bearing of expenses by a particular series or class may be appropriately reflected in the net asset value attributable to, and the dividend and liquidation rights of, that series or class.
All shares of PFI have equal voting rights and are voted in the aggregate and not by separate series or class of shares except that shares are voted by series or class: (i) when expressly required by Maryland law or the 1940 Act and (ii) on any matter submitted to shareholders which the Board has determined affects the interests of only a particular series or class.
The share classes of the Acquired Fund have the same rights with respect to the Acquired Fund that the share classes of the Acquiring Fund have with respect to the Acquiring Fund.
Shares of both Funds, when issued, have no cumulative voting rights, are fully paid and non-assessable, have no preemptive or conversion rights and are freely transferable. Each fractional share has proportionately the same rights as are provided for a full share.
Federal Income Tax Consequences
The Reorganization is not designed to be tax-free. Therefore, shareholders of the Acquired Fund holding such shares through taxable accounts such as non-qualified deferred compensation plans may recognize a gain or loss, for federal income tax purposes, on the difference between the fair market value of the Acquiring Fund shares received in the Reorganization and their federal income tax basis in their shares of the Acquired Fund at closing.
Capital Loss Carryforward. As of October 31, 2007, the Acquired Fund had no accumulated capital loss carryforward. The Reorganization is not designed to be tax-free. Therefore, to the extent the Acquired Fund has a capital loss carryforward as of the Effective Time, the capital loss carryforward will not be available to the Acquiring Fund to offset its capital gains.
Distribution of Income and Gains. Prior to the Reorganization, the Acquired Fund, whose taxable year will end as a result of the Reorganization, will declare to its shareholders of record one or more distributions of all of its previously undistributed net investment income and net realized capital gain, including capital gains on any securities disposed of in connection with the Reorganization. Such distributions will be made to shareholders before the Reorganization. An Acquired Fund shareholder will be required to include any such distributions in such shareholder’s taxable income. This may result in the recognition of income that could have been deferred or might never have been realized had the Reorganization not occurred.
The foregoing is only a summary of the potential federal income tax consequences of the Reorganization and should not be considered tax advice. You are urged to consult with your own tax advisors regarding the federal, state, and local tax consequences of the Reorganization which may apply in your particular circumstance.
17
The following table shows the capitalization of each of the Acquired Fund and the Acquiring Fund as of April 30, 2008, and the pro forma combined capitalization of the Acquiring Fund as if the Reorganization had occurred as of that date.
| | | | NET ASSET | SHARES |
| | SHARE | NET ASSETS | VALUE | OUTSTANDING |
| | CLASS | (000S) | PER SHARE | (000S) |
ACQUIRED FUND | Institutional | $130,595 | $12.54 | 10,413 |
| | R-1 | 296 | 12.10 | 24 |
| | R-2 | 1,088 | 11.93 | 91 |
| | R-3 | 3,248 | 12.09 | 269 |
| | R-4 | 384 | 12.24 | 31 |
| | R-5 | 271 | 12.34 | 22 |
| TOTAL ACQUIRED FUND | | $135,882 | | 10,850 |
| | | | |
ACQUIRING FUND | Class J | $ 77,935 | $15.06 | 5,175 |
| | Institutional | 237,600 | 15.57 | 15,262 |
| | R-1 | 4,460 | 15.47 | 288 |
| | R-2 | 20,586 | 15.67 | 1,314 |
| | R-3 | 44,041 | 15.79 | 2,790 |
| | R-4 | 20,004 | 15.89 | 1,259 |
| | R-5 | 76,320 | 15.91 | 4,797 |
| TOTAL ACQUIRING FUND | | $480,946 | | 30,885 |
|
REDUCTION IN NET ASSETS AND | Institutional | $ (13) | $ (0.00) | (1) |
DECREASE IN NET ASSET VALUES PER | R-1 | * | ** | *** |
SHARE OF THE ACQUIRED FUND TO | R-2 | * | ** | *** |
REFLECT THE ESTIMATED EXPENSES OF | R-3 | * | ** | *** |
THE REORGANIZATION | R-4 | * | ** | *** |
| | R-5 | * | ** | *** |
|
REDUCTION IN SHARES | Institutional | | | (2,025) |
OUSTANDING OF THE ACQUIRED | R-1 | | | (5) |
FUND TO REFLECT THE | R-2 | | | (22) |
EXCHANGE FOR THE SHARES OF | R-3 | | | (63) |
THE ACQUIRING FUND | R-4 | | | (7) |
| | R-5 | | | (5) |
| | | | |
ACQUIRING FUND (PRO FORMA ASSUMING REORGANIZATION)(1) | Class J | $ 77,935 | $15.06 | 5,175 |
Institutional | 368,182 | 15.57 | 23,649 |
| | R-1 | 4,756 | 15.47 | 307 |
| | R-2 | 21,674 | 15.67 | 1,383 |
| | R-3 | 47,289 | 15.79 | 2,996 |
| | R-4 | 20,388 | 15.89 | 1,283 |
| | R-5 | 76,591 | 15.91 | 4,814 |
| TOTAL ACQUIRING FUND | | | | |
| (PRO FORMA ASSUMING | | | | |
| REORGANIZATION) | | $616,815 | | 39,607 |
* | Less than $500. | | | | |
** | Per share amount is less than $.005. | | | | |
*** | Less than 500 shares. | | | | |
(1) | SmallCap Blend Fund I is expected to redeem approximately $130,595,000 on the date of the Reorganization. If the proposed redemption were reflected in the table, the pro forma information for the SmallCap S&P 600 Index Fund as a result of the Reorganization would change in the following respects: Institutional Net Assets and Shares Outstanding would be approximately $237,587,000 and 15,261,000 and Total Net Assets and Shares Outstanding would be approximately $486,220,000 and 31,219,000. |
8
ADDITIONAL INFORMATION ABOUT THE FUNDS
Certain Investment Strategies and Related Risks of the Funds
This section provides information about certain investment strategies and related risks of the Funds. The Statement of Additional Information contains additional information about investment strategies and their related risks.
Some of the principal investment risks vary between the Funds and the variations are described above. The value of each Fund’s securities may fluctuate on a daily basis. As with all mutual funds, as the values of each Fund’s assets rise or fall, the Fund’s share price changes. If an investor sells Fund shares when their value is less than the price the investor paid, the investor will lose money. As with any security, the securities in which the Funds invest have associated risk.
Market Volatility
Equity securities include common stocks, preferred stocks, convertible securities, depositary receipts, rights, and warrants. Common stocks, the most familiar type, represent an equity (ownership) interest in a corporation. The value of a company’s stock may fall as a result of factors directly relating to that company, such as decisions made by its management or lower demand for the company’s products or services. A stock’s value may also fall because of factors affecting not just the company, but also companies in the same industry or in a number of different industries, such as increases in production costs. The value of a company’s stock may also be affected by changes in financial markets that are relatively unrelated to the company or its industry, such as changes in interest rates or currency exchange rates. In addition, a company’s stock generally pays dividends only after the company invests in its own business and makes required payments to holders of its bonds and other debt. For this reason, the value of a company’s stock will usually react more strongly than its bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Stocks of smaller companies may be more vulnerable to adverse developments than those of larger companies.
Repurchase Agreements and Loaned Securities
The Funds may invest a portion of their assets in repurchase agreements, although this is not a principal investment strategy. Repurchase agreements typically involve the purchase of debt securities from a financial institution such as a bank, savings and loan association, or broker-dealer. A repurchase agreement provides that the Fund sells back to the seller and that the seller repurchases the underlying securities at a specified price on a specific date. Repurchase agreements may be viewed as loans by the Fund collateralized by the underlying securities. This arrangement results in a fixed rate of return that is not subject to market fluctuation while the Fund holds the security. In the event of a default or bankruptcy by a selling financial institution, the affected Fund bears a risk of loss. To minimize such risks, the Funds enter into repurchase agreements only with large, well-capitalized and well-established financial institutions. In addition, the value of the securities collateralizing the repurchase agreement is, and during the entire term of the repurchase agreement remains, at least equal to the repurchase price, including accrued interest.
The Funds may lend their portfolio securities to unaffiliated broker-dealers and other unaffiliated qualified financial institutions. These transactions involve risk of loss to a fund if the counterparty should fail to return such securities to the fund upon demand or if the counterparty’s collateral invested by the fund declines in value as a result of investment losses.
Forward Commitments
The Funds may enter into forward commitment agreements, although this is not a principal investment strategy. These agreements call for a fund to purchase or sell a security on a future date at a fixed price. The Funds may also enter into contracts to sell their investments either on demand or at a specific interval.
Temporary Defensive Measures
From time to time, as part of its investment strategy, each Fund may invest without limit in cash and cash equivalents for temporary defensive purposes in response to adverse market, economic or political conditions. To the extent that the Fund is in a defensive position, it may lose the benefit of upswings and limit its ability to meet its investment objective. For this purpose, cash equivalents include: bank notes, bank certificates of deposit, bankers’ acceptances, repurchase agreements, commercial paper, and commercial paper master notes which are floating rate debt instruments without a fixed maturity. In addition, each Fund may purchase U.S. government securities, preferred stocks and debt securities, whether or not convertible into or carrying rights for common stock.
There is no limit on the extent to which the Funds may take temporary defensive measures. In taking such measures, the Funds may fail to achieve their investment objective.
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Currency Contracts
The Funds may enter into currency contracts, currency futures contracts and options, and options on currencies for hedging and other purposes. A forward currency contract involves a privately negotiated obligation to purchase or sell a specific currency at a future date at a price set in the contract. A Fund will not hedge currency exposure to an extent greater than the aggregate market value of the securities held or to be purchased by the Fund (denominated or generally quoted or currently convertible into the currency). Hedging is a technique used in an attempt to reduce risk. If a Fund’s Sub-Advisor hedges market conditions incorrectly or employs a strategy that does not correlate well with the Fund’s investment, these techniques could result in a loss. These techniques may increase the volatility of a Fund and may involve a small investment of cash relative to the magnitude of the risk assumed. In addition, these techniques could result in a loss if the other party to the transaction does not perform as promised. There is also a risk of government action through exchange controls that would restrict the ability of the Fund to deliver or receive currency.
Warrants
Each of the Funds may invest in warrants though neither of the Funds use such investments as a principal investment strategy. A warrant is a certificate granting its owner the right to purchase securities from the issuer at a specified price, normally higher than the current market price.
Convertible Securities
Convertible securities are fixed-income securities that a Fund has the right to exchange for equity securities at a specified conversion price. The option allows the Fund to realize additional returns if the market price of the equity securities exceeds the conversion price. For example, the Fund may hold fixed-income securities that are convertible into shares of common stock at a conversion price of $10 per share. If the market value of the shares of common stock reached $12, the Fund could realize an additional $2 per share by converting its fixed-income securities.
Convertible securities have lower yields than comparable fixed-income securities. In addition, at the time a convertible security is issued the conversion price exceeds the market value of the underlying equity securities. Thus, convertible securities may provide lower returns than non-convertible fixed-income securities or equity securities depending upon changes in the price of the underlying equity securities. However, convertible securities permit the Fund to realize some of the potential appreciation of the underlying equity securities with less risk of losing its initial investment.
The Funds treat convertible securities as both fixed-income and equity securities for purposes of investment policies and limitations because of their unique characteristics. The Funds may invest in convertible securities without regard to their ratings.
Portfolio Turnover
“Portfolio Turnover” is the term used in the industry for measuring the amount of trading that occurs in a Fund’s portfolio during the year. For example, a 100% turnover rate means that on average every security in the portfolio has been replaced once during the year. Funds that engage in active trading may have higher portfolio turnover rates. Funds with high turnover rates (more than 100%) often have higher transaction costs (which are paid by the Fund) and may have an adverse impact on the Fund’s performance. Turnover rates for each of the Funds may be found in the Fund’s Financial Highlights table. It is recommended that all the factors are considered when the turnover rates of different funds are compared. A fund with consistently higher total returns and higher turnover rates than another fund may actually be achieving better performance precisely because the managers are active traders. An investor should also be aware that the “total return” line in the Financial Highlights section already includes portfolio turnover costs.
Exchange Traded Funds (ETFs)
These are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track a particular market index. The Funds could purchase shares issued by an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although ETFs have management fees that increase their costs.
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Small and Medium Capitalization Companies
The Funds may invest in securities of companies with small- or mid-sized market capitalizations. Market capitalization is defined as total current market value of a company’s outstanding common stock. Investments in companies with smaller market capitalizations may involve greater risks and price volatility (wide, rapid fluctuations) than investments in larger, more mature companies. Small companies may be less significant within their industries and may be at a competitive disadvantage relative to their larger competitors. While smaller companies may be subject to these additional risks, they may also realize more substantial growth than larger or more established companies.
Smaller companies may be less mature than larger companies. At this earlier stage of development, the companies may have limited product lines, reduced market liquidity for their shares, limited financial resources, or less depth in management than larger or more established companies. Unseasoned issuers are companies with a record of less than three years continuous operation, including the operation of predecessors and parents. Unseasoned issuers by their nature have only a limited operating history that can be used for evaluating the company’s growth prospects. As a result, investment decisions for these securities may place a greater emphasis on current or planned product lines and the reputation and experience of the company’s management and less emphasis on fundamental valuation factors than would be the case for more mature growth companies.
Derivatives
To the extent permitted by its investment objectives and policies, the Funds may invest in securities that are commonly referred to as derivative securities. Generally, a derivative is a financial arrangement, the value of which is derived from, or based on, a security, asset, or market index. Certain derivative securities are described more accurately as index/structured securities. Index/structured securities are derivative securities whose value or performance is linked to other equity securities (such as depositary receipts), currencies, interest rates, indices or other financial indicators (reference indices).
Some derivatives, such as mortgage-related and other asset-backed securities, are in many respects like any other investment, although they may be more volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use them. Futures and options are commonly used for traditional hedging purposes to attempt to protect a fund from exposure to changing interest rates, securities prices, or currency exchange rates and for cash management purposes as a low-cost method of gaining exposure to a particular securities market without investing directly in those securities. A fund may enter into put or call options, future contracts, options on futures contracts and over-the-counter swap contracts (e.g., interest rate swaps, total return swaps and credit default swaps) for both hedging and non-hedging purposes.
Generally, the Funds may not invest in a derivative security unless the reference index or the instrument to which it relates is an eligible investment for the particular Fund. The return on a derivative security may increase or decrease, depending upon changes in the reference index or instrument to which it relates. The risks associated with derivative investments include:
• | the risk that the underlying security, interest rate, market index or other financial asset will not move in the |
| direction the sub-advisor anticipated; |
• | the possibility that there may be no liquid secondary market which may make it difficult or impossible to close |
| out a position when desired; |
• | the risk that adverse price movements in an instrument can result in a loss substantially greater than a fund’s |
| initial investment; and |
• | the counterparty may fail to perform its obligations. |
Initial Public Offerings (“IPOs”)
An IPO is a company’s first offering of stock to the public. IPO risk is that the market value of IPO shares will fluctuate considerably due to factors such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited information about the issuer. The purchase of IPO shares may involve high transaction costs. IPO shares are subject to market risk and liquidity risk. In addition, the market for IPO shares can be speculative and/or inactive for extended periods of time. The limited number of shares available for trading in some IPOs may make it more difficult for a Fund to buy or sell significant amounts of shares without an unfavorable impact on prevailing prices. Investors in IPO shares can be affected by substantial dilution in the value of their shares by sales of
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additional shares and by concentration of control in existing management and principal shareholders. When a Fund’s asset base is small, a significant portion of the Fund’s performance could be attributable to investments in IPOs because such investments would have a magnified impact on the Fund. As the Fund’s assets grow, the effect of the Fund’s investments in IPOs on the Fund’s performance probably will decline, which could reduce the Fund’s performance. Because of the price volatility of IPO shares, a Fund may choose to hold IPO shares for a very short period of time. This may increase the turnover of the Fund’s portfolio and lead to increased expenses to the Fund, such as commissions and transaction costs. By selling IPO shares, the Fund may realize taxable gains it will subsequently distribute to shareholders.
Foreign Investing
The Acquired Fund may invest in securities of foreign companies which are:
• | companies with their principal place of business or principal office outside the U.S. or |
• | companies for which the principal securities trading market is outside the U.S. |
Foreign companies may not be subject to the same uniform accounting, auditing, and financial reporting practices as are required of U.S. companies. In addition, there may be less publicly available information about a foreign company than about a U.S. company. Securities of many foreign companies are less liquid and more volatile than securities of comparable U.S. companies. Commissions on foreign securities exchanges may be generally higher than those on U.S. exchanges, although each Fund seeks the most favorable net results on its portfolio transactions.
Foreign markets also have different clearance and settlement procedures than those in U.S. markets. In certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct these transactions. Delays in settlement could result in temporary periods when a portion of Fund assets is not invested and earning no return. If a Fund is unable to make intended security purchases due to settlement problems, the Fund may miss attractive investment opportunities. In addition, a Fund may incur a loss as a result of a decline in the value of its portfolio if it is unable to sell a security.
With respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, political or social instability, or diplomatic developments that could affect a Fund’s investments in those countries. In addition, a Fund may also suffer losses due to nationalization, expropriation or differing accounting practices and treatments. Investments in foreign securities are subject to laws of the foreign country that may limit the amount and types of foreign investments. Changes of governments or of economic or monetary policies, in the U.S. or abroad, changes in dealings between nations, or currency convertibility or exchange rates could result in investment losses for a Fund. Finally, even though certain currencies may be convertible into U.S. dollars, the conversion rates may be artificial relative to the actual market values and may be unfavorable to Fund investors.
Foreign securities are often traded with less frequency and volume, and therefore may have greater price volatility, than is the case with many U.S. securities. Brokerage commissions, custodial services, and other costs relating to investment in foreign countries are generally more expensive than in the U.S. Though the Funds intend to acquire the securities of foreign issuers where there are public trading markets, economic or political turmoil in a country in which a Fund has a significant portion of its assets or deterioration of the relationship between the U.S. and a foreign country may negatively impact the liquidity of a Fund’s portfolio. A Fund may have difficulty meeting a large number of redemption requests. Furthermore, there may be difficulties in obtaining or enforcing judgments against foreign issuers.
A Fund may choose to invest in a foreign company by purchasing depositary receipts. Depositary receipts are certificates of ownership of shares in a foreign-based issuer held by a bank or other financial institution. They are alternatives to purchasing the underlying security but are subject to the foreign securities to which they relate. Investments in companies of developing countries may be subject to higher risks than investments in companies in more developed countries. These risks include:
• | increased social, political, and economic instability; |
| |
• | a smaller market for these securities and low or nonexistent volume of trading that results in a lack of liquidity |
| and in greater price volatility; |
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• | lack of publicly available information, including reports of payments of dividends or interest on outstanding |
| securities; |
• | foreign government policies that may restrict opportunities, including restrictions on investment in issuers or |
| industries deemed sensitive to national interests; |
• | relatively new capital market structure or market-oriented economy; |
• | the possibility that recent favorable economic developments may be slowed or reversed by unanticipated |
| political or social events in these countries; |
• | restrictions that may make it difficult or impossible for the Fund to vote proxies, exercise shareholder rights, |
| pursue legal remedies, and obtain judgments in foreign courts; and |
• | possible losses through the holding of securities in domestic and foreign custodial banks and depositories. |
In addition, many developing countries have experienced substantial, and in some periods, extremely high rates of inflation for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of those countries.
Repatriation of investment income, capital and proceeds of sales by foreign investors may require governmental registration and/or approval in some developing countries. A Fund could be adversely affected by delays in or a refusal to grant any required governmental registration or approval for repatriation.
Further, the economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.
| Multiple Classes of Shares |
The Board of Directors of PFI has adopted an 18f-3 Plan for each of the Funds. Under these plans, each of the Funds currently offers the following shares: Class R-1, Class R-2, Class R-3, Class R-4, Class R-5 (sometimes collectively referred to as the “Retirement Class Shares”), and Institutional Class shares. The Acquiring Fund also offers Class J shares. The shares are the same except for differences in class expenses, including any Rule 12b-1 fees and any applicable sales charges, excessive trading and other fees. The Acquiring Fund may offer additional share classes in the future.
| Costs of Investing in the Funds |
Fees and Expenses of the Funds
This section describes the fees and expenses you may pay if you invest in Institutional Retirement Class shares. In addition to the ongoing fees listed below, the Institutional Class of the Funds may pay a portion of investment related expenses (e.g., interest on reverse repurchase agreements) that are allocated to all classes of the Funds.
Ongoing fees
Ongoing Fees reduce the value of each share. Because they are ongoing, they increase the cost of investing in the Funds.
Each Fund pays ongoing fees to PMC and others who provide services to the Fund. These fees include:
• | Management Fee – Through the Management Agreement with the Fund, Principal has agreed to provide investment |
| advisory services and corporate administrative services to the Fund. |
| |
• | Other Expenses – A portion of expenses that are allocated to all classes of the Fund. |
The Retirement Class shares may also be charged the following fees:
• | Distribution Fee – Each of the Funds has adopted a distribution plan under Rule 12b-1 of the 1940 Act. Under the |
| plan, the R-1, R-2, R-3, and R-4 classes of each Fund pay a distribution fee based on the average daily net asset |
| value (NAV) of the Fund. These fees pay distribution and other expenses for the sale of Fund shares and for services |
| provided to shareholders. Over time, these fees may exceed other types of sales charges. |
| |
• | Service Fee – Principal has entered into a Services Agreement with the Fund under which Principal performs |
| personal services for shareholders. |
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• | Administrative Service Fee – Principal has entered into an Administrative Services Agreement with the Fund under |
| which Principal provides transfer agent and corporate administrative services to the Fund. In addition, Principal has |
| assumed the responsibility for communications with and recordkeeping services for beneficial owners of Fund |
| shares. |
Princor and Principal Funds Distributor (“PFD”) are the Fund’s principal underwriters for Institutional Class and Retirement Class shares. They may, from time-to-time, at their expense, pay a bonus or other consideration or incentive to dealers who have sold or may sell significant amounts of shares. Any such bonus or incentive program will not change the price paid by investors for the purchase of the Funds’ shares or the amount that any particular Fund receives as the proceeds from such sales. In addition, Princor, PFD, or their affiliates may provide financial support to dealers that sell shares of the Funds. This support is based primarily on the amount of sales of fund shares and/or total assets in the Funds. The amount of support may be affected by: total sales; net sales; levels of redemptions; the dealers’ support of, and participation in, Princor’s and PFD’s marketing programs and the extent of a dealer’s marketing programs relating to the Funds. Financial support to dealers may be made from payments from Princor’s and PFD’s resources and from their retention of underwriting concessions.
You may obtain more information about sales charge reductions and waivers through a link on PFI’s website at www.PrincipalFunds.com, from the Statement of Additional Information, or from your Investment Representative.
| Distribution Plans and Additional Information Regarding Intermediary Compensation |
Each of the Funds has adopted a 12b-1 Plan for the R-1, R-2, R-3, and R-4 Class shares of the Fund. Under the 12b-1 Plans, each Fund will make payments from its assets attributable to the particular share class to the Fund’s Distributors for distribution-related expenses and for providing services to shareholders of that share class. Payments under the 12b-1 plans will not automatically terminate for funds that are closed to new investors or to additional purchases by existing shareholders. The fund Board will determine whether to terminate, modify, or leave unchanged the 12b-1 plan at the time the Board directs the implementation of the closure of the fund. Because Rule 12b-1 fees are ongoing fees, over time they will increase the cost of an investment in the Funds and may cost more than paying other types of sales charges.
The term “Distributors” as used in this section refers to both Princor and PFD.
The maximum annual Rule 12b-1 distribution and/or service fee (as a percentage of average daily net assets) for each of the above classes of the Funds are set forth below:
Share Class | 12b-1 Fee |
R-1 | 0.35% |
R-2 | 0.30% |
R-3 | 0.25% |
R-4 | 0.10% |
Payments to Investment Representatives and Their Firms. Financial intermediaries market and sell shares of the Acquired and Acquiring Funds. These financial intermediaries receive compensation from the Distributors and their affiliates for selling shares of the Funds and/or providing services to the Funds’ shareholders. Financial intermediaries may include, among others, broker-dealers, registered investment advisors, banks, and trust companies. Investment Representatives who deal with investors on an individual basis are typically associated with a financial intermediary. The Distributors and their affiliates may fund this compensation from various sources, including any sales charge and/or Rule 12b-1 Plan fee that the shareholder or the Funds pay to the Distributors. Individual Investment Representatives may receive some or all of the amounts paid to the financial intermediary with which he or she is associated.
Other Payments to Intermediaries. In addition to the commissions paid at the time of sale, ongoing payments, and the reimbursement of costs associated with education, training and marketing efforts, conferences, seminars, due diligence trip expenses, ticket charges, and other general marketing expenses, some or all of which may be paid to financial intermediaries (and, in turn, to your Investment Representative), the Distributors and their affiliates, at their expense, currently provide additional payments to financial intermediaries that sell shares of the Funds for distribution services. Although payments made to each qualifying financial intermediary in any given year may vary, such payments will generally not exceed (a) 0.25% of the current year’s sales of Fund shares by that financial intermediary and/or (b) 0.25% of average daily net assets of Fund shares serviced by that financial intermediary over the year.
24
A number of factors are considered in determining the amount of these additional payments, including each financial intermediary’s Fund sales, assets, and redemption rates as well as the willingness and ability of the financial intermediary to give the Distributor access to its Investment Representatives for educational and marketing purposes. In some cases, financial intermediaries will include the Funds on a ‘‘preferred list.’’ The Distributor’s goals include making the Investment Representatives who interact with current and prospective investors and shareholders more knowledgeable about the Funds so that they can provide suitable information and advice about the and related investor services.
Additionally, the Distributors may provide payments to reimburse directly or indirectly the costs incurred by these financial intermediaries and their associated Investment Representatives in connection with educational seminars and training and marketing efforts related to the Funds for the firms’ employees and/or their clients and potential clients. The costs and expenses associated with these efforts may include travel, lodging, entertainment, and meals. The Distributors may also provide payment or reimbursement for expenses associated with qualifying dealers’ conferences, transactions (‘‘ticket’’) charges, and general marketing expenses.
In connection with the purchase by PMC of WM Advisors, the investment advisor to the WM Funds, and WM Advisors’ two subsidiaries, WM Funds Distributor, Inc. and WM Shareholder Services, Inc. (the "Transaction"), New American Capital, Inc. and its parent company Washington Mutual, Inc. ("WaMu") have agreed to make certain contingent payments to PMC with respect to each of the first four years following the closing of the Transaction. Such payments must be made if aggregate management fee revenues to PMC and its affiliates from assets under management in funds and other financial products advised by PMC and its affiliates (including the Acquired and Acquiring Funds) (collectively, the "Principal Products") sold through WaMu and its affiliates (including WM Financial Services, Inc., a broker-dealer subsidiary of WaMu) fall below certain specified targets during any such year. This could result in up to $30 million being paid by WaMu or New American Capital, Inc. to PMC with respect to each of those four years following the closing of the Transaction. As a result, WM Financial Services, Inc. (and/or it affiliates) will have an additional incentive to sell Principal Products following the closing of the Transaction.
If one mutual fund sponsor makes greater distribution assistance payments than another, your Investment Representative and his or her financial intermediary may have an incentive to recommend one fund complex over another. Similarly, if your Investment Representative or his or her financial intermediary receives more distribution assistance for one share class versus another, then they may have an incentive to recommend that share class.
Please speak with your Investment Representative to learn more about the total amounts paid to your Investment Representative and his or her financial intermediary by the Funds, the Distributor and its affiliates, and by sponsors of other mutual funds he or she may recommend to you. You should also carefully review disclosures made by your Investment Representative at the time of purchase.
As of March 1, 2007, the Distributor anticipates that the firms that will receive additional payments for distribution of the Funds (other than commissions paid at the time of sale, ongoing payments, and the reimbursement of cost associated with education, training and marketing efforts; conferences; ticket charges; and other general marketing expenses) include:
Advantage Capital Corporation | Mutual Service Corporation |
Advest, Inc. | National Financial Services Corp. |
A.G. Edwards & Sons, Inc. | National Investors Corporation |
AIG Advisors, Inc. | National Planning Corporation |
American Portfolios Financial Services, Inc. | NFP Securities, Inc. |
Ameriprise Financial Services Corp. | Oppenheimer & Co., Inc. |
Associated Financial Group | Pacific Select Distributors, Inc. |
Associated Securities Corp. | Pershing |
AXA Advisors, LLC | Piper Jaffray & Co. |
Cadaret, Grant & Co., Inc. | ProEquities, Inc. |
Charles Schwab & Co., Inc. | Prospera Financial Services, Inc. |
Citigroup Global Markets, Inc. | Prudential Investment Management Services, LLC |
Commonwealth Financial Network | Raymond James & Associates, Inc. |
Farmers Financial Solutions, LLC | Raymond James Financial Services, Inc. |
FFP Securities, Inc. | RBC Dain Rauscher, Inc. |
FSC Securities Corporation | Royal Alliance Associates, Inc. |
G.A. Repple & Company | Scottrade, Inc. |
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H. Beck, Inc. | Securities America, Inc. |
INVEST Financial Corporation | Sentra Securities Corp./Spelman and Co., Inc. |
Investacorp, Inc. | SII Investments, Inc. |
Investment Advisors & Consultants, Inc. | Sorrento Pacific Financial, LLC |
Investment Centers of America, Inc. | Southwest Securities, Inc. |
Janney Montgomery Scott, LLC | SunAmerica Securities, Inc. |
Jefferson Pilot Securities Corporation | Triad Advisors, Inc. |
Linsco/Private Ledger Corp. | UBS Financial Services, Inc. |
McDonald Investments, Inc. | United Planners’ Financial Services of America |
Merrill Lynch, Pierce, Fenner & Smith Inc. | Wachovia Securities, LLC |
M.L. Stern & Co. | WM Financial Services, Inc. |
Morgan Stanley DW, Inc. | Waterstone Financial Group, Inc. |
To obtain a current list of such firms, call 1-800-222-5852.
Although a Fund may use brokers who sell shares of the Funds to effect portfolio transactions, the sale of shares is not considered as a factor when selecting brokers to effect portfolio transactions.
Your financial intermediary may charge fees and commissions, including processing fees, in addition to those described in this prospectus. The amount and applicability of any such fee is determined and disclosed separately by the financial intermediary. You should ask your Investment Representative for information about any fees and/or commissions that are charged.
Retirement Plan Services. The Funds pay a Service Fee and Administrative Services Fee to PMC for providing services to retirement plan shareholders. PMC typically pays some or all of these fees to Principal Life, which has entered into an agreement to provide these services to the retirement plan shareholders. PMC may also enter into agreements with other intermediaries to provide these services, and pay some or all of the Fees to such intermediaries.
Plan recordkeepers, who may have affiliated financial intermediaries that sell shares of the funds, may be paid additional amounts. In addition, financial intermediaries may be affiliates of entities that receive compensation from the Distributors for maintaining retirement plan “platforms” that facilitate trading by affiliated and non-affiliated financial intermediaries and recordkeeping for retirement plans.
The amounts paid to plan recordkeepers for recordkeeping services, and their related service requirements may vary across fund groups and share classes. This may create an incentive for financial intermediaries and their Investment Representatives to recommend one fund complex over another or one class of shares over another.
| Dividends and Distributions |
The Acquired and Acquiring Funds pay their net investment income on an annual basis. The payment date is the last business day of the year. Payments are made to shareholders of record on the business day prior to the payment date. You may ask to have your dividends paid to you in cash. If you do not request cash payments, your dividend payment will be reinvested back into additional shares of the Funds.
Net realized capital gains, if any, are distributed annually. Generally the distribution is made on the fourth business day of December. Payments are made to shareholders of record on the business day prior to the payable date. Capital gains may be taxable at different rates, depending on the length of time that the Fund holds it assets.
NOTES:
• | A Fund’s declaration of income dividends and capital gains has the effect of reducing the share price by the |
| amount of the dividend or capital gain declared. |
• | Distributions from a Fund, whether received in cash or reinvested in additional shares, may be subject to federal |
| (and state) income tax. |
• | For these reasons, buying shares of a Fund shortly before it makes a distribution may be disadvantageous to |
| you. |
• | Special tax rules apply to dividends and distributions paid to retirement plans. |
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The shares of the Acquired and Acquiring Funds are bought and sold at the current share price. The share price of each class of each Fund is calculated each day the NYSE is open (shares are not priced on the days on which the NYSE is closed for trading, generally New Year’s Day, Martin Luther King, Jr. Day, Washington's Birthday/Presidents' Day, Good Friday , Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas). The share price is determined as of the close of business of the NYSE (normally 3:00 p.m. Central Time). When an order to buy or sell shares is received, the share price used to fill the order is the next price calculated after the order is received in good order by us at our transaction processing center. In order for us to process your purchase order on the day it is received, we must receive the order (with complete information):
• | on a day that the NYSE is open and |
• | prior to the close of trading on the NYSE (normally 3 p.m. Central Time). |
Orders received after the close of the NYSE or on days that the NYSE is not open will be processed on the next day that the NYSE is open for normal trading. If we receive an application or purchase request for a new mutual fund account or subsequent purchase into an existing account that is accompanied by a check and the application or purchase request does not contain complete information, we may hold the application (and check) for up to two business days while we attempt to obtain the necessary information. If we receive the necessary information within two business days, we will process the order using the next share price calculated. If we do not receive the information within two business days, the application and check will be returned to you.
For each of the Funds, the share price is calculated by:
• | taking the current market value of the total assets of the Fund |
• | subtracting liabilities of the Fund |
• | dividing the remainder proportionately into the classes of the Fund |
• | subtracting the liability of each class |
• | dividing the remainder by the total number of shares owned in that class. |
• | If market quotations are not readily available for a security owned by a Fund, its fair value is determined using a |
| policy adopted by the Directors. Fair valuation pricing is subjective and creates the possibility that the fair value |
| determined for a security may differ materially from the value that could be realized upon the sale of the |
| security. |
| |
• | A Fund’s securities may be traded on foreign securities markets that generally complete trading at various times |
| during the day prior to the close of the NYSE. Generally, the values of foreign securities used in computing a |
| Fund’s NAV are the market quotations as of the close of the foreign market. Foreign securities and currencies |
| are also converted to U.S. dollars using the exchange rate in effect at the close of the NYSE. Occasionally, |
| events affecting the value of foreign securities occur when the foreign market is closed and the NYSE is open. |
| The Fund has adopted policies and procedures to “fair value” some or all securities held by a Fund if significant |
| events occur after the close of the market on which the foreign securities are traded but before the Fund’s NAV |
| is calculated. |
| |
| Significant events can be specific to a single security or can include events that affect a particular foreign market |
| or markets. A significant event can also include a general market movement in the U.S. securities markets. If |
| Principal believes that the market value of any or all of the foreign securities is materially affected by such an |
| event, the securities will be valued, and the Fund’s NAV will be calculated, using the policy adopted by the |
| Fund. These fair valuation procedures are intended to discourage shareholders from investing in the Fund for the |
| purpose of engaging in market timing or arbitrage transactions. |
| |
| The trading of foreign securities generally or in a particular country or countries may not take place on all days |
| the NYSE is open, or may trade on days the NYSE is closed. Thus, the value of the foreign securities held by |
| the Fund may change on days when shareholders are unable to purchase or redeem shares. |
| |
• | Certain securities issued by companies in emerging market countries may have more than one quoted valuation |
| at any point in time. These may be referred to as local price and premium price. The premium price is often a |
| negotiated price that may not consistently represent a price at which a specific transaction can be effected. The |
| Fund has a policy to value such securities at a price at which the Sub-Advisor expects the securities may be |
| sold. |
27
| Purchases, Redemptions, and Exchanges of Shares |
The purchase, redemption and exchange procedures with respect to shares of the Acquired and Acquiring Funds are the same. These procedures vary based on the class of shares owned.
Purchases of Shares
Institutional Class shares may be purchased from Princor or PFD, the Fund’s principal underwriters for this class. There are no sales charges on Institutional Class shares of the Fund. There are no restrictions on amounts to be invested in Institutional Class shares of the Fund.
Shareholder accounts for the Fund are maintained under an open account system. Under this system, an account is opened and maintained for each investor. Each investment is confirmed by sending the investor a statement of account showing the current purchase or sale and the total number of shares owned. The statement of account is treated by the Fund as evidence of ownership of Fund shares. Share certificates are not issued.
The Fund may reject or cancel any purchase orders for any reason. For example, the Fund does not permit market timing because short-term or other excessive trading into and out of the Funds may harm performance by disrupting portfolio management strategies and by increasing expenses. Accordingly, the Fund may reject any purchase orders from market timers or investors that, in Principal’s opinion, may be disruptive to the Fund. For these purposes, Principal may consider an investor’s trading history in the Fund or other Funds sponsored by Principal Life and accounts under common ownership or control. Principal may recommend to the Board, and the Board may elect, to close certain funds to new and existing investors.
Retirement Class Shares may be purchased:
· | via the internet |
|
| · | standard method of accepting data for plans with fewer than 1,000 current and terminated (within the last five years) members |
|
| · | available 7 days a week (7 a.m. to 9 p.m. Central Time |
|
· | using a modem |
|
| · | plan contributions transferred electronically |
|
| · | standard method of accepting data for plans with more than 1,000 current and terminated (within the last five years) members |
|
| · | available 24 hours a day, 7 days a week |
|
To eliminate the need for safekeeping, the Funds will not issue certificates for shares. The Funds may periodically close to new purchases of shares or refuse any order to buy shares if Principal determines that doing so would be in the best interests of the Fund and its shareholders.
Redemptions of Shares
Institutional Class Shares of the Funds may be redeemed upon request. There is no charge for the redemption. Shares are redeemed at the NAV per share next computed after the request is received by the Funds in proper and complete form. The Funds generally send payment for shares sold the business day after the sell order is received. Under unusual circumstances, the Funds may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law.
Retirement Class Shares may be sold back to the Funds any day the NYSE is open, subject to any restrictions imposed by a plan. For more information about how to sell shares of the Funds, including any charges that a plan may impose, please consult the plan. The Funds generally send payment for shares sold the business day after the sell order is received. Under unusual circumstances, the Funds may suspend redemptions, or postpone payment for more than seven days, as permitted by federal securities law.
Distributions in Kind
Payment for shares of the Funds tendered for redemption is ordinarily made by check. However, the Funds may determine that it would be detrimental to the remaining shareholders of a Fund to make the payment of a redemption order wholly or partly in cash. Under certain circumstances, therefore, each of the Funds may pay redemption proceeds in whole or in part by a distribution “in kind” of securities from the Fund’s portfolio in lieu of cash. If a Fund pays the
28
redemption proceeds in kind, the redeeming shareholder might incur brokerage or other costs in selling the securities for cash. Each Fund will value securities used to pay redemptions in kind using the same method the Fund uses to value its portfolio securities as described in this information statement/prospectus.
Redemption Fees
The Board has determined that it is not necessary to impose a fee upon the redemption of Institutional or Retirement Class shares because PFI has adopted transfer restrictions as described in “Exchange of Fund Shares.”
Exchanges of Fund Shares
An exchange between PFI Funds is a redemption of shares of one Fund and a concurrent purchase of shares in another Fund with the redemption proceeds. A shareholder, including a beneficial owner of shares held in nominee name or a participant in a participant-directed employee benefit plan, may exchange Fund shares under certain circumstances. In addition to any restrictions an intermediary or an employee benefit plan imposes, Fund shares may be exchanged, without charge, for shares of any other Fund of PFI, provided that:
• | the shareholder has not exchanged shares of the Fund within 30 days preceding the exchange, unless the |
| shareholder is exchanging into the Money Market Fund, |
• | the share class of such other Fund is available through the plan, and |
• | the share class of such other Fund is available in the shareholder’s state of residence. |
All exchanges completed on the same day are considered a single exchange for purposes of this exchange limitation. In addition, PFI will reject an order to purchase shares of any Fund, except shares of the Money Market Fund, if the shareholder redeemed shares from that Fund within the preceding 30-day period. The 30-day exchange or purchase restriction does not apply to exchanges or purchases made on a scheduled basis such as scheduled periodic portfolio rebalancing transactions.
If Fund shares are purchased through an intermediary that is unable or unwilling to impose the 30-day exchange restriction described above, Fund management may waive this restriction in lieu of the exchange limitation that the intermediary is able to impose if, in management’s judgment, such limitation is reasonably likely to prevent excessive trading in Fund shares. In order to prevent excessive exchanges, and under other circumstances where the Board or PMC believes it is in the best interests of the Fund, PFI reserves the right to revise or terminate this exchange privilege, limit the amount or further limit the number of exchanges, reject any exchange or close an account.
| Frequent Purchases and Redemptions |
The Funds are not designed for, and do not knowingly accommodate, frequent purchases and redemptions of fund shares by investors. If you intend to trade frequently and/or use market timing investment strategies, you should not purchase these Funds.
Frequent purchases and redemptions pose a risk to the Funds because they may:
• | Disrupt the management of the Funds by: |
| • | Forcing the Funds to hold short-term (liquid) assets rather than investing for long term growth, which |
| | results in lost investment opportunities for the Fund, and |
| • | Causing unplanned portfolio turnover; |
• | Hurt the portfolio performance of the Funds, and |
• | Increase expenses of the Funds due to: |
| • | Increased broker-dealer commissions and |
| • | Increased recordkeeping and related costs |
The Acquired Fund may be at greater risk of harm due to frequent purchases and redemptions because it invests in foreign securities and may appeal to investors attempting to take advantage of time-zone arbitrage. It is necessary to identify such abusive trading practices because the abuses described above will negatively impact the Fund. The potential negative impact and harms of undetected excessive trading in shares of the Acquiring Fund in which the Principal LifeTime Funds invest could flow through to the Principal LifeTime Funds as they would for any fund shareholder.
29
The Funds have adopted procedures to “fair value” foreign securities under certain circumstances, which are intended, in part, to discourage excessive trading of shares of the Funds. The Board has also adopted policies and procedures with respect to frequent purchases and redemptions of shares of the Funds. The Funds monitor trading activity to identify and take action against abuses. While the policies and procedures are designed to identify and protect against abusive trading practices, there can be no certainty that all instances of abusive trading will be identified and prevented and the Funds may be negatively impacted and may cause investors to suffer the harms described. The potential negative impact and harms of undetected excessive trading in shares of the underlying Funds in which the Principal LifeTime Funds invest could flow through to the Principal LifeTime Funds as they would for any Fund shareholder. When abusive trading is identified, the policies and procedures will be applied in a fair and uniform manner. The following actions may include, but not limited to:
· | Rejecting exchange instructions from shareholder or other person authorized by the shareholder to direct exchanges; |
|
· | Restricting submission of exchange requests by, for example, allowing exchange requests to be submitted by 1st class U.S. mail only and disallowing requests made by facsimile, overnight courier, telephone or via the internet; |
|
· | Limiting the number of exchanges during a year; |
|
· | Requiring a holding period of a minimum of 30 days before permitting exchanges among the Funds where there is evidence of at least one round-trip exchange (exchange or redemption of shares that were purchased within 30 days of the exchange/redemption); and |
|
· | Taking such other action as directed by the Fund. |
The Funds have reserved the right to accept or reject, without prior written notice, any exchange requests. In some instances, an exchange may be completed prior to a determination of abusive trading. In those instances, we will reverse the exchange. We will give you notice in writing in this instance.
Shareholders are responsible for federal income tax (and any other taxes, including state and local income taxes, if applicable) on dividends and capital gains distributions whether such dividends or distributions are paid in cash or reinvested in additional shares.
Generally, dividends paid by the Funds from net short-term capital gains will be taxed as ordinary income. Distributions properly designated by a Fund as deriving from net gains on securities held for more than one year are taxable as such (generally at a 15% tax rate), regardless of how long you have held your shares.
A dividend or distribution made shortly after the purchase of shares of a PFI Fund by a shareholder, although in effect a return of capital to that shareholder, would be taxable to that shareholder as described above.
The information contained in this Proxy Statement/Prospectus is not a complete description of the federal, state, local, or foreign tax consequences of investing in the Fund. You should consult your tax advisor before investing in the Fund.
| Portfolio Holdings Information |
PFI will publish month-end portfolio holdings information for the PFI Funds on the principal.com website and the PrincipalFunds.com website on the 15th business day of the following month. The information will include all of each Fund’s holdings, and may include information regarding the top ten holdings as well. The information will remain on the website until PFI files portfolio holding information with the SEC for a period that includes the date on which the holdings are published on the websites. Also, from time to time, information relating to the impact of specific events, such as national disasters, corporate debt defaults, or similar events, on a Fund’s portfolio will be published on the website.
Third parties who need portfolio holdings information to provide services to the Funds may be provided such information prior to its posting on the website, solely for legitimate business purposes and subject to confidentiality agreements. A description of PFI's policies and procedures with respect to the disclosure of portfolio securities is available in the Statement of Additional Information.
30
Voting procedures. If you complete and return the enclosed proxy ballot, the persons named as proxies will vote your shares as you indicate or for approval of each matter for which there is no indication. You may revoke your proxy at any time prior to the proxy's exercise by: (i) sending written notice to the Secretary of Principal Funds, Inc. at Principal Financial Group, Des Moines, Iowa 50392-2080, prior to the Meeting; (ii) subsequent execution and return of another proxy prior to the Meeting; or (iii) being present and voting in person at the Meeting after giving oral notice of the revocation to the Chairman of the Meeting.
Voting rights. Only shareholders of record at the close of business on September 2, 2008, (the "Record Date") are entitled to vote. The shareholders of each class of shares of the Acquired Fund will vote together on the proposed Reorganization relating to that Fund and on any other matter submitted to such shareholders. You are entitled to one vote on each matter submitted to the shareholders of the Acquired Fund for each share of the Fund that you hold, and fractional votes for fractional shares held. The Proposal requires for approval the affirmative vote of a "Majority of the Outstanding Voting Securities," which is a term defined in the 1940 Act to mean with respect to the Acquired Fund, the affirmative vote of the lesser of (1) 67% or more of the voting securities of the Fund present at the meeting of the Fund, if the holders of more than 50% of the outstanding voting securities of the Fund are present in person or by proxy, or (2) more than 50% of the outstanding voting securities of the Fund.
The number of votes eligible to be cast at the meeting as of the Record Date and other share ownership information are set forth below under the heading "Outstanding Shares and Share Ownership" in this Proxy Statement/Prospectus.
Quorum requirements. A quorum must be present at the Meeting for the transaction of business. The presence in person or by proxy of one-third of the shares of the Acquired Fund outstanding at the close of business on the Record Date constitutes a quorum for a meeting of that Fund. Abstentions and broker non-votes (proxies from brokers or nominees indicating that they have not received instructions from the beneficial owners on an item for which the broker or nominee does not have discretionary power) are counted toward a quorum but do not represent votes cast for any issue. Under the 1940 Act, the affirmative vote necessary to approve a Proposal may be determined with reference to a percentage of votes present at the Meeting, which would have the effect of counting abstentions as if they were votes against a Proposal.
In the event the necessary quorum to transact business or the vote required to approve a Proposal is not obtained at the Meeting, the persons named as proxies or any shareholder present at the Meeting may propose one or more adjournments of the Meeting in accordance with applicable law to permit further solicitation of proxies. Any such adjournment as to the Proposal or any other matter will require the affirmative vote of the holders of a majority of the shares of the Acquired Fund cast at the Meeting. The persons named as proxies and any shareholder present at the Meeting will vote for or against any adjournment in their discretion.
Solicitation procedures. PFI intends to solicit proxies by mail. Officers or employees of PFI, PMC or their affiliates may make additional solicitations by telephone, internet, facsimile or personal contact. They will not be specially compensated for these services. Brokerage houses, banks and other fiduciaries may be requested to forward soliciting materials to their principals and to obtain authorization for the execution of proxies. For those services, they will be reimbursed by PMC for their out-of-pocket expenses.
Expenses of the Meetings. The expenses of the Meeting for the Acquired Fund will be treated as an expense related to the Reorganizations and will be paid by the Acquired Fund.
31
OUTSTANDING SHARES AND SHARE OWNERSHIP
The following table shows as of September 2, 2008, Record Date, the number of shares outstanding for each class of the Acquired and Acquiring Funds:
To be completed at the time of the Definitive filing. | | |
|
SmallCap Blend Fund I | SmallCap S&P 600 Index Fund |
(Acquired Fund) | (Acquiring Fund) |
|
| Shares | | Shares |
Share Class | Outstanding | Share Class | Outstanding |
Institutional | XXX,XXX.XXX | Institutional | XXX,XXX.XXX |
R-1 | XXX,XXX.XXX | R-1 | XXX,XXX.XXX |
R-2 | XXX,XXX.XXX | R-2 | XXX,XXX.XXX |
R-3 | XXX,XXX.XXX | R-3 | XXX,XXX.XXX |
R-4 | XXX,XXX.XXX | R-4 | XXX,XXX.XXX |
R-5 | XXX,XXX.XXX | R-5 | XXX,XXX.XXX |
As of the September 2, 2008, Record Date, the Directors and Officers of PFI together owned less than 1% of the outstanding shares of any class of shares of the Acquired or Acquiring Funds.
As of the September 2, 2008, Record Date, the following persons owned of record, or were known by PFI to own beneficially, 5% or more the outstanding shares of any class of shares of the Acquired Fund:
| | Percentage of |
Share Class | Name/Address of Shareholder | Ownership |
To be completed at the time of the Definitive filing. | |
As of the September 2, 2008, Record Date, the following persons owned of record, or were known by PFI to own beneficially, 5% or more the outstanding shares of any class of shares of the Acquiring Fund:
| | Percentage of |
Share Class | Name/Address of Shareholder | Ownership |
To be completed at the time of the Definitive filing. | |
FINANCIAL HIGHLIGHTS
The financial highlights table for each of the Acquired Fund and the Acquiring Fund is intended to help investors understand the financial performance of each Fund for the past five fiscal years (or since inception in the case of a Fund in operation for less than five years) and for the semi-annual period ending April 30, 2008. Certain information reflects financial results for a single share of a Fund. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in a particular Fund (assuming reinvestment of all dividends and distributions). Information for the fiscal years ended October 31, 2003 through October 31, 2007 has been audited by Ernst & Young LLP, Independent Registered Public Accounting Firm, whose report, along with each Fund's financial statements, is included in PFI's Annual Report to Shareholders for the fiscal year ended October 31, 2007. Copies of this report are available on request as described above. Information for the semi-annual period ended April 30, 2008 has not been audited.
32
FINANCIAL HIGHLIGHTS |
PRINCIPAL FUNDS, INC. |
(unaudited) |
|
Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted): |
| 2008(a) | 2007 | 2006 | 2005 | 2004 | 2003(b) |
SMALLCAP BLEND FUND I | | | | | | |
R-3 shares | | | | | | |
Net Asset Value, Beginning of Period | $ 16.10 | $ 16.50 | $ 16.29 | $ 14.80 | $ 13.56 | $ 10.00 |
Income from Investment Operations: | | | | | | |
Net Investment Income (Operating Loss)(c) | (0 .04) | (0.09) | (0.08) | (0.07) | (0.05) | (0 .06) |
Net Realized and Unrealized Gain (Loss) on Investments | (1 .87) | 1 .39 | 1 .44 | 1 .83 | 2 .10 | 3.62 |
|
|
Total From Investment Operations | (1 .91) | 1 .30 | 1 .36 | 1 .76 | 2 .05 | 3.56 |
Less Dividends and Distributions: | | | | | | |
Dividends from Net Investment Income | – | – | – | (0.02) | – | – |
Distributions from Realized Gains | (2 .10) | (1.70) | (1.15) | (0.25) | (0.81) | – |
|
|
Total Dividends and Distributions | (2 .10) | (1.70) | (1.15) | (0.27) | (0.81) | – |
|
|
Net Asset Value, End of Period | $ 12.09 | $ 16.10 | $ 16.50 | $ 16.29 | $ 14.80 | $ 13.56 |
|
|
Total Return | (13.07)%(d) | 8.31% | 8.52% | 11.98% | 15.88% | 35 .60%(d) |
Ratio/Supplemental Data: | | | | | | |
Net Assets, End of Period (in thousands) | $ 3,248 | $ 3,443 | $ 3,580 | $ 2,945 | $ 158 | $ 136 |
Ratio of Expenses to Average Net Assets | 1.58%(e) | 1.57% | 1.57% | 1.57% | 1.54% | 1 .54%(e) |
Ratio of Gross Expenses to Average Net Assets | – | – | – | – | 1.57%(f) | 1.57%(e),(f) |
Ratio of Net Investment Income to Average Net Assets | (0.57)%(e) | (0.58)% | (0.50)% | (0.43)% | (0.39)% | (0 .60)%(e) |
Portfolio Turnover Rate | 75 .0%(e) | 100.1% | 109.8% | 110.2% | 117.5% | 111.5%(e) |
| 2008(a) | 2007 | 2006 | 2005 | 2004 | 2003(b) |
SMALLCAP BLEND FUND I | | | | | | |
R-2 shares | | | | | | |
Net Asset Value, Beginning of Period | $ 15.93 | $ 16.37 | $ 16.19 | $ 14.74 | $ 13.54 | $ 10.00 |
Income from Investment Operations: | | | | | | |
Net Investment Income (Operating Loss)(c) | (0 .05) | (0.12) | (0.11) | (0.11) | (0.09) | (0 .07) |
Net Realized and Unrealized Gain (Loss) on Investments | (1 .85) | 1 .38 | 1 .44 | 1 .83 | 2 .10 | 3.61 |
|
|
Total From Investment Operations | (1 .90) | 1 .26 | 1 .33 | 1 .72 | 2 .01 | 3.54 |
Less Dividends and Distributions: | | | | | | |
Dividends from Net Investment Income | – | – | – | (0.02) | – | – |
Distributions from Realized Gains | (2 .10) | (1.70) | (1.15) | (0.25) | (0.81) | – |
|
|
Total Dividends and Distributions | (2 .10) | (1.70) | (1.15) | (0.27) | (0.81) | – |
|
|
Net Asset Value, End of Period | $ 11.93 | $ 15.93 | $ 16.37 | $ 16.19 | $ 14.74 | $ 13.54 |
|
|
Total Return | (13.16)%(d) | 8.11% | 8.38% | 11.74% | 15.59% | 35 .40%(d) |
Ratio/Supplemental Data: | | | | | | |
Net Assets, End of Period (in thousands) | $ 1,088 | $ 860 | $ 1,265 | $ 965 | $ 83 | $ 135 |
Ratio of Expenses to Average Net Assets | 1.76%(e) | 1.75% | 1.75% | 1.75% | 1.72% | 1 .72%(e) |
Ratio of Gross Expenses to Average Net Assets | – | – | – | – | 1.75%(f) | 1.75%(e),(f) |
Ratio of Net Investment Income to Average Net Assets | (0.78)%(e) | (0.77)% | (0.67)% | (0.66)% | (0.66)% | (0 .79)%(e) |
Portfolio Turnover Rate | 75 .0%(e) | 100.1% | 109.8% | 110.2% | 117.5% | 111.5%(e) |
| 2008(a) | 2007 | 2006 | 2005 |
SMALLCAP BLEND FUND I | | | | |
R-1 shares | | | | |
Net Asset Value, Beginning of Period | $ 16.13 | $ 16.58 | $ 16.41 | $ 15.02 |
Income from Investment Operations: | | | | |
Net Investment Income (Operating Loss)(c) | (0 .06) | (0 .14) | (0 .13) | (0 .13) |
Net Realized and Unrealized Gain (Loss) on Investments | (1 .87) | 1.39 | 1.45 | 1.79 |
|
|
Total From Investment Operations | (1 .93) | 1.25 | 1.32 | 1.66 |
Less Dividends and Distributions: | | | | |
Dividends from Net Investment Income | – | – | – | (0 .02) |
Distributions from Realized Gains | (2 .10) | (1 .70) | (1 .15) | (0 .25) |
|
|
Total Dividends and Distributions | (2 .10) | (1 .70) | (1 .15) | (0 .27) |
|
|
Net Asset Value, End of Period | $ 12.10 | $ 16.13 | $ 16.58 | $ 16.41 |
|
|
Total Return | (13.19)%(d) | 7 .93% | 8 .20% | 11 .10%(d) |
Ratio/Supplemental Data: | | | | |
Net Assets, End of Period (in thousands) | $ 296 | $ 213 | $ 166 | $ 41 |
Ratio of Expenses to Average Net Assets | 1.89%(e) | 1 .88% | 1 .88% | 1.88% |
Ratio of Net Investment Income to Average Net Assets | (0.89)%(e) | (0.89)% | (0.82)% | (0.83)% |
Portfolio Turnover Rate | 75 .0%(e) | 100 .1% | 109 .8% | 110 .2% |
FINANCIAL HIGHLIGHTS (Continued) |
PRINCIPAL FUNDS, INC. |
(unaudited) |
|
| 2008(a) | 2007 | 2006 | 2005 | 2004 | 2003(b) |
SMALLCAP BLEND FUND I | | | | | | |
Institutional shares | | | | | | |
Net Asset Value, Beginning of Period | $ 16.58 | $ 16.86 | $ 16.54 | $ 14.95 | $ 13.62 | $ 10.00 |
Income from Investment Operations: | | | | | | |
Net Investment Income (Operating Loss)(c) | – | – | 0.01 | – | 0.07 | – |
Net Realized and Unrealized Gain (Loss) on Investments | (1 .94) | 1.43 | 1.47 | 1.87 | 2.07 | 3.62 |
|
|
Total From Investment Operations | (1 .94) | 1.43 | 1.48 | 1.87 | 2.14 | 3.62 |
Less Dividends and Distributions: | | | | | | |
Dividends from Net Investment Income | – | (0 .01) | (0 .01) | (0 .03) | – | – |
Distributions from Realized Gains | (2 .10) | (1 .70) | (1 .15) | (0 .25) | (0 .81) | – |
|
|
Total Dividends and Distributions | (2 .10) | (1 .71) | (1 .16) | (0 .28) | (0 .81) | – |
|
|
Net Asset Value, End of Period | $ 12.54 | $ 16.58 | $ 16.86 | $ 16.54 | $ 14.95 | $ 13.62 |
|
|
Total Return | (12.85)%(d) | 8.94% | 9.14% | 12.59% | 16.50% | 36 .20%(d) |
Ratio/Supplemental Data: | | | | | | |
Net Assets, End of Period (in thousands) | $ 130,595 | $ 171,101 | $ 220,551 | $ 235,767 | $ 159,678 | $ 4,868 |
Ratio of Expenses to Average Net Assets | 1.01%(e) | 1.00% | 1.00% | 1.00% | 0.94% | 0 .97%(e) |
Ratio of Gross Expenses to Average Net Assets | – | – | – | – | 1 .00%(f) | 1.00%(e),(f) |
Ratio of Net Investment Income to Average Net Assets | 0.00%(e) | (0.02)% | 0.08% | 0.01% | 0.53% | (0 .04)%(e) |
Portfolio Turnover Rate | 75 .0%(e) | 100 .1% | 109 .8% | 110 .2% | 117 .5% | 111.5%(e) |
| 2008(a) | 2007 | 2006 | 2005 | 2004 | 2003(b) |
SMALLCAP BLEND FUND I | | | | | | |
R-5 shares | | | | | | |
Net Asset Value, Beginning of Period | $ 16.37 | $ 16.70 | $ 16.42 | $ 14.88 | $ 13.59 | $ 10.00 |
Income from Investment Operations: | | | | | | |
Net Investment Income (Operating Loss)(c) | (0 .02) | (0.04) | (0.03) | (0.03) | (0.03) | (0 .03) |
Net Realized and Unrealized Gain (Loss) on Investments | (1 .91) | 1 .41 | 1 .46 | 1 .85 | 2 .13 | 3.62 |
|
|
Total From Investment Operations | (1 .93) | 1 .37 | 1 .43 | 1 .82 | 2 .10 | 3.59 |
Less Dividends and Distributions: | | | | | | |
Dividends from Net Investment Income | – | – | – | (0.03) | – | – |
Distributions from Realized Gains | (2 .10) | (1.70) | (1.15) | (0.25) | (0.81) | – |
|
|
Total Dividends and Distributions | (2 .10) | (1.70) | (1.15) | (0.28) | (0.81) | – |
|
|
Net Asset Value, End of Period | $ 12.34 | $ 16.37 | $ 16.70 | $ 16.42 | $ 14.88 | $ 13.59 |
|
|
Total Return | (12.97)%(d) | 8.65% | 8.90% | 12.28% | 16.23% | 35 .90%(d) |
Ratio/Supplemental Data: | | | | | | |
Net Assets, End of Period (in thousands) | $ 271 | $ 348 | $ 315 | $ 276 | $ 71 | $ 136 |
Ratio of Expenses to Average Net Assets | 1.27%(e) | 1.26% | 1.26% | 1.26% | 1.23% | 1 .23%(e) |
Ratio of Gross Expenses to Average Net Assets | – | – | – | – | 1.26%(f) | 1.26%(e),(f) |
Ratio of Net Investment Income to Average Net Assets | (0.27)%(e) | (0.26)% | (0.18)% | (0.21)% | (0.18)% | (0 .30)%(e) |
Portfolio Turnover Rate | 75 .0%(e) | 100.1% | 109.8% | 110.2% | 117.5% | 111.5%(e) |
| 2008(a) | 2007 | 2006 | 2005 | 2004 | 2003(b) |
SMALLCAP BLEND FUND I | | | | | | |
R-4 shares | | | | | | |
Net Asset Value, Beginning of Period | $ 16.26 | $ 16.62 | $ 16.37 | $ 14.85 | $ 13.58 | $ 10.00 |
Income from Investment Operations: | | | | | | |
Net Investment Income (Operating Loss)(c) | (0 .02) | (0.06) | (0.05) | (0.06) | (0.03) | (0 .04) |
Net Realized and Unrealized Gain (Loss) on Investments | (1 .90) | 1 .40 | 1 .45 | 1 .86 | 2 .11 | 3.62 |
|
|
Total From Investment Operations | (1 .92) | 1 .34 | 1 .40 | 1 .80 | 2 .08 | 3.58 |
Less Dividends and Distributions: | | | | | | |
Dividends from Net Investment Income | – | – | – | (0.03) | – | – |
Distributions from Realized Gains | (2 .10) | (1.70) | (1.15) | (0.25) | (0.81) | – |
|
|
Total Dividends and Distributions | (2 .10) | (1.70) | (1.15) | (0.28) | (0.81) | – |
|
|
Net Asset Value, End of Period | $ 12.24 | $ 16.26 | $ 16.62 | $ 16.37 | $ 14.85 | $ 13.58 |
|
|
Total Return | (12.99)%(d) | 8.50% | 8.74% | 12.16% | 16.09% | 35 .80%(d) |
Ratio/Supplemental Data: | | | | | | |
Net Assets, End of Period (in thousands) | $ 384 | $ 937 | $ 1,004 | $ 355 | $ 161 | $ 136 |
Ratio of Expenses to Average Net Assets | 1.39%(e) | 1.38% | 1.38% | 1.38% | 1.35% | 1 .35%(e) |
Ratio of Gross Expenses to Average Net Assets | – | – | – | – | 1.38%(f) | 1.38%(e),(f) |
Ratio of Net Investment Income to Average Net Assets | (0.36)%(e) | (0.40)% | (0.30)% | (0.36)% | (0.20)% | (0 .42)%(e) |
Portfolio Turnover Rate | 75 .0%(e) | 100.1% | 109.8% | 110.2% | 117.5% | 111.5%(e) |
(a) Six months ended April 30, 2008. |
(b) Period from December 30, 2002, date operations commenced, through October 31, 2003. |
(c) Calculated based on average shares outstanding during the period. |
(d) Total return amounts have not been annualized. |
(e) Computed on an annualized basis. |
(f) Expense ratio without commission rebates. |
FINANCIAL HIGHLIGHTS |
PRINCIPAL FUNDS, INC. |
(unaudited) |
|
Selected data for a share of Capital Stock outstanding throughout each year ended October 31 (except as noted): |
|
| 2008(a) | | 2007 | 2006 | 2005 | 2004 | 2003 |
SMALLCAP S&P 600 INDEX FUND | | | | | | | |
R-3 shares | | | | | | | |
Net Asset Value, Beginning of Period | $ 19.57 | $ 18.75 | $ 16.65 | $ 14.94 | $ 12.91 | $ 9.75 |
Income from Investment Operations: | | | | | | | |
Net Investment Income (Operating Loss)(b) | 0 .05 | | 0 .07 | 0.05 | 0.05 | 0.05 | 0.02 |
Net Realized and Unrealized Gain (Loss) on Investments | (2.25) | | 1 .88 | 2.46 | 2.07 | 1.98 | 3.14 |
| |
Total From Investment Operations | (2.20) | | 1 .95 | 2.51 | 2.12 | 2.03 | 3.16 |
Less Dividends and Distributions: | | | | | | | |
Dividends from Net Investment Income | (0.06) | | (0.04) | (0 .03) | (0 .05) | – | – |
Distributions from Realized Gains | (1.52) | | (1.09) | (0 .38) | (0 .36) | – | – |
|
|
Total Dividends and Distributions | (1.58) | | (1.13) | (0 .41) | (0 .41) | – | – |
|
|
Net Asset Value, End of Period | $ 15.79 | $ 19.57 | $ 18.75 | $ 16.65 | $ 14.94 | $ 12.91 |
|
|
Total Return | (11.79)%(c) | 10.78% | 15.26% | 14.32% | 15.75% | 32 .41% |
Ratio/Supplemental Data: | | | | | | | |
Net Assets, End of Period (in thousands) | $ 44,041 | $ 50,068 | $ 34,153 | $ 24,278 | $ 11,912 | $ 3,540 |
Ratio of Expenses to Average Net Assets | 0 .73%(d) | 0.72% | 0.72% | 0.72% | 0.72% | 0 .72% |
Ratio of Net Investment Income to Average Net Assets | 0 .67%(d) | 0.39% | 0.30% | 0.29% | 0.38% | 0 .18% |
Portfolio Turnover Rate | 48.6%(d) | 62.0% | 56 .2% | 43 .2% | 54 .5% | 44 .6% |
|
| 2008(a) | | 2007 | 2006 | 2005 | 2004 | 2003 |
SMALLCAP S&P 600 INDEX FUND | | | | | | | |
R-2 shares | | | | | | | |
Net Asset Value, Beginning of Period | $ 19.42 | | $ 18.61 | $ 16.53 | $ 14.86 | $ 12.87 | $ 9.71 |
Income from Investment Operations: | | | | | | | |
Net Investment Income (Operating Loss)(b) | 0 .04 | | 0 .04 | 0.02 | 0.02 | 0.03 | – |
Net Realized and Unrealized Gain (Loss) on Investments | (2.24) | | 1 .87 | 2.44 | 2.06 | 1.96 | 3.16 |
| |
Total From Investment Operations | (2.20) | | 1 .91 | 2.46 | 2.08 | 1.99 | 3.16 |
Less Dividends and Distributions: | | | | | | | |
Dividends from Net Investment Income | (0.03) | | (0.01) | – | (0 .05) | – | – |
Distributions from Realized Gains | (1.52) | | (1.09) | (0 .38) | (0 .36) | – | – |
|
|
Total Dividends and Distributions | (1.55) | | (1.10) | (0 .38) | (0 .41) | – | – |
|
|
Net Asset Value, End of Period | $ 15.67 | $ 19.42 | $ 18.61 | $ 16.53 | $ 14.86 | $ 12.87 |
|
|
Total Return | (11.88)%(c) | 10.61% | 15.06% | 14.11% | 15.48% | 32 .54% |
Ratio/Supplemental Data: | | | | | | | |
Net Assets, End of Period (in thousands) | $ 20,586 | $ 25,125 | $ 22,868 | $ 16,875 | $ 11,254 | $ 3,176 |
Ratio of Expenses to Average Net Assets | 0 .91%(d) | 0.90% | 0.90% | 0.90% | 0.90% | 0 .90% |
Ratio of Net Investment Income to Average Net Assets | 0 .49%(d) | 0.21% | 0.12% | 0.10% | 0.21% | 0 .01% |
Portfolio Turnover Rate | 48.6%(d) | 62.0% | 56 .2% | 43 .2% | 54 .5% | 44 .6% |
|
| 2008(a) | | 2007 | 2006 | 2005 | | |
SMALLCAP S&P 600 INDEX FUND | | | | | | | |
R-1 shares | | | | | | | |
Net Asset Value, Beginning of Period | $ 19.18 | $ 18.41 | $ 16.37 | $ 14.81 | | |
Income from Investment Operations: | | | | | | | |
Net Investment Income (Operating Loss)(b) | 0 .03 | | 0 .01 | – | – | | |
Net Realized and Unrealized Gain (Loss) on Investments | (2.21) | | 1 .85 | 2 .42 | 1.97 | | |
|
| | |
Total From Investment Operations | (2.18) | | 1 .86 | 2 .42 | 1.97 | | |
Less Dividends and Distributions: | | | | | | | |
Dividends from Net Investment Income | (0.01) | | – | – | (0 .05) | | |
Distributions from Realized Gains | (1.52) | | (1.09) | (0.38) | (0 .36) | | |
|
| | |
Total Dividends and Distributions | (1.53) | | (1.09) | (0.38) | (0 .41) | | |
|
| | |
Net Asset Value, End of Period | $ 15.47 | $ 19.18 | $ 18.41 | $ 16.37 | | |
|
| |
Total Return | (11.92)%(c) | 10.44% | 14 .96% | 13 .40%(c) | | |
Ratio/Supplemental Data: | | | | | | | |
Net Assets, End of Period (in thousands) | $ 4,460 | $ 4,520 | $ 1,949 | $ 122 | | |
Ratio of Expenses to Average Net Assets | 1 .04%(d) | 1.03% | 1 .03% | 1.03% | | |
Ratio of Net Investment Income to Average Net Assets | 0 .36%(d) | 0.08% | (0 .01)% | 0.01% | | |
Portfolio Turnover Rate | 48.6%(d) | 62.0% | 56.2% | 43 .2% | | |
The financial statements of the Acquiring Fund and the Acquired Fund included in PFI's Annual Report to Shareholders for the fiscal year ended October 31, 2007 are incorporated by reference into the Statement of Additional Information and have been so incorporated by reference in reliance on the report of Ernst & Young LLP, Independent Registered Public Accounting Firm. The unaudited financial statements of the Acquiring Fund and the Acquired Fund included in PFI's Semi-Annual Report to Shareholders for the six-month period ended April 30, 2008 have also been incorporated by reference into the Statement of Additional Information. Copies of the Annual and Semi-Annual Reports are available upon request as described above.
Certain matters concerning the issuance of shares of the Acquiring Fund will be passed upon by Michael D. Roughton, Esq., Counsel to PFI.
PFI is not required to hold annual meetings of shareholders and, therefore, it cannot be determined when the next meeting of shareholders will be held. Shareholder proposals to be presented at any future meeting of shareholders of any PFI Fund must be received by PFI a reasonable time before its solicitation of proxies for that meeting in order for such proposals to be considered for inclusion in the proxy materials related to that meeting.
| BY ORDER OF THE BOARD OF DIRECTORS
October ______, 2008 Des Moines, Iowa |
36
FORM OF PLAN OF ACQUISITION |
| SmallCap Blend Fund I and SmallCap S&P 600 Index Fund |
The Board of Directors of Principal Funds, Inc., a Maryland corporation (the “Fund”), deems it advisable that the SmallCap S&P 600 Index Fund series of the Fund (“SmallCap S&P 600 Index”) acquire all of the assets of the SmallCap Blend Fund I series of the Fund (“SmallCap Blend I”) in exchange for the assumption by SmallCap S&P 600 Index of all of the liabilities of SmallCap Blend I and shares issued by SmallCap S&P 600 Index which are thereafter to be distributed by SmallCap Blend I pro rata to its shareholders in complete liquidation and termination of SmallCap Blend I and in exchange for all of SmallCap Blend I’s outstanding shares.
SmallCap Blend I will transfer to SmallCap S&P 600 Index, and SmallCap S&P 600 Index will acquire from SmallCap Blend I, all of the assets of SmallCap Blend I on the Closing Date and will assume from SmallCap Blend I all of the liabilities of SmallCap Blend I in exchange for the issuance of the number of shares of SmallCap S&P 600 Index determined as provided in the following paragraphs, which shares will be subsequently distributed pro rata to the shareholders of SmallCap Blend I in complete liquidation and termination of SmallCap Blend I and in exchange for all of SmallCap Blend I’s outstanding shares. SmallCap Blend I will not issue, sell or transfer any of its shares after the Closing Date, and only redemption requests received by SmallCap Blend I in proper form prior to the Closing Date shall be fulfilled by SmallCap Blend I. Redemption requests received by SmallCap Blend I thereafter will be treated as requests for redemption of those shares of SmallCap S&P 600 Index allocable to the shareholder in question.
SmallCap Blend I will declare, and SmallCap S&P 600 Index may declare, to its shareholders of record on or prior to the Closing Date a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders all of its income (computed without regard to any deduction for dividends paid) and all of its net realized capital gains, if any, as of the Closing Date.
On the Closing Date, SmallCap S&P 600 Index will issue to SmallCap Blend I a number of full and fractional shares of SmallCap S&P 600 Index, taken at their then net asset value, having an aggregate net asset value equal to the aggregate value of the net assets of SmallCap Blend I. The aggregate value of the net assets of SmallCap Blend I and SmallCap S&P 600 Index shall be determined in accordance with the then current Prospectus of SmallCap S&P 600 Index as of close of regularly scheduled trading on the New York Stock Exchange on the Closing Date.
The closing of the transactions contemplated in this Plan (the “Closing”) shall be held at the offices of Principal Management Corporation, 680 8th Street, Des Moines, Iowa 50392 at 3:00 p.m. Central Time on ________, 2008, or on such earlier or later date as fund management may determine. The date on which the Closing is to be held as provided in this Plan shall be known as the “Closing Date.”
In the event that on the Closing Date (a) the New York Stock Exchange is closed for other than customary weekend and holiday closings or (b) trading on said Exchange is restricted or (c) an emergency exists as a result of which it is not reasonably practicable for SmallCap S&P 600 Index or SmallCap Blend I to fairly determine the value of its assets, the Closing Date shall be postponed until the first business day after the day on which trading shall have been fully resumed.
As soon as practicable after the Closing, SmallCap Blend I shall (a) distribute on a pro rata basis to the shareholders of record of SmallCap Blend I at the close of business on the Closing Date the shares of SmallCap S&P 600 Index received by SmallCap Blend I at the Closing in exchange for all of SmallCap Blend I’s outstanding shares, and (b) be liquidated in accordance with applicable law and the Fund’s Articles of Incorporation.
For purposes of the distribution of shares of SmallCap S&P 600 Index to shareholders of SmallCap Blend I, SmallCap S&P 600 Index shall credit its books an appropriate number its shares to the account of each shareholder of SmallCap Blend I. No certificates will be issued for shares of SmallCap S&P 600 Index. After the Closing Date and until surrendered, each outstanding certificate, if any, which, prior to the Closing Date, represented shares of SmallCap Blend I, shall be deemed for all purposes of the Fund’s Articles of Incorporation and Bylaws to evidence the appropriate number of shares of SmallCap S&P 600 Index to be credited on the books of SmallCap S&P 600 Index in respect of such shares of SmallCap Blend I as provided above.
A-1
Prior to the Closing Date, SmallCap Blend I shall deliver to SmallCap S&P 600 Index a list setting forth the assets to be assigned, delivered and transferred to SmallCap S&P 600 Index, including the securities then owned by SmallCap Blend I and the respective federal income tax bases (on an identified cost basis) thereof, and the liabilities to be assumed by SmallCap S&P 600 Index pursuant to this Plan.
All of SmallCap Blend I’s portfolio securities shall be delivered by SmallCap Blend I’s custodian on the Closing Date to SmallCap S&P 600 Index or its custodian, either endorsed in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the practice of brokers or, if such securities are held in a securities depository within the meaning of Rule 17f-4 under the Investment Company Act of 1940, transferred to an account in the name of SmallCap S&P 600 Index or its custodian with said depository. All cash to be delivered pursuant to this Plan shall be transferred from SmallCap Blend I’s account at its custodian to SmallCap S&P 600 Index’s account at its custodian. If on the Closing Date SmallCap Blend I is unable to make good delivery to SmallCap S&P 600 Index’s custodian of any of SmallCap Blend I’s portfolio securities because such securities have not yet been delivered to SmallCap Blend I’s custodian by its brokers or by the transfer agent for such securities, then the delivery requirement with respect to such securities shall be waived, and SmallCap Blend I shall deliver to SmallCap S&P 600 Index’s custodian on or by said Closing Date with respect to said undelivered securities executed copies of an agreement of assignment in a form satisfactory to SmallCap S&P 600 Index, and a due bill or due bills in form and substance satisfactory to the custodian, together with such other documents including brokers’ confirmations, as may be reasonably required by SmallCap S&P 600 Index.
This Plan may be abandoned and terminated, whether before or after action thereon by the shareholders of SmallCap Blend I and notwithstanding favorable action by such shareholders, if the Board of Directors believe that the consummation of the transactions contemplated hereunder would not be in the best interests of the shareholders of either Fund. This Plan may be amended by the Board of Directors at any time, except that after approval by the shareholders of SmallCap Blend I no amendment may be made with respect to the Plan which in the opinion of the Board of Directors materially adversely affects the interests of the shareholders of SmallCap Blend I.
Except as expressly provided otherwise in this Plan, SmallCap Blend I will pay or cause to be paid all out-of-pocket fees and expenses incurred in connection with the transactions contemplated under this Plan, including, but not limited to, accountants’ fees, legal fees, registration fees, printing expenses, transfer taxes (if any) and the fees of banks and transfer agents.
IN WITNESS WHEREOF, each of the parties hereto has caused this Plan to be executed by its President and its Executive Vice President as of the _______th day of __________, 2008.
PRINCIPAL FUNDS, INC. |
on behalf of the following Acquired Fund: |
SmallCap Blend Fund I |
|
|
By: |
Nora Everett, President |
|
|
PRINCIPAL FUNDS, INC. |
on behalf of the following Acquiring Fund: |
SmallCap S&P 600 Index Fund |
|
|
By: |
Michael J. Beer, Executive Vice President |
A-2
The performance tables included in this Proxy Statement/Prospectus provide performance information of various indices. These indices are described in this Appendix. An investment cannot be made directly in the indices and the indices' performance figures do not include any commissions or sales charges that would be paid by investors purchasing the securities represented by the indices.
Morningstar Small Blend Category Average is an average of net asset value (NAV) returns of mutual funds that focus on small companies that are fairly representative of the overall stock market in terms of valuations.
S&P SmallCap 600 Index is an unmanaged index that consists of 600 domestic stocks chosen for market size, liquidity, and industry group representation. It is a market weighted index (stock price x shares outstanding), with each stock affecting the index in proportion to its market value.
B-1
PRINCIPAL FUNDS, INC. – SMALLCAP BLEND FUND I |
Des Moines, Iowa 50392-2080 |
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS |
November 19, 2008 |
This proxy is solicited on behalf of the Board of Directors of the Fund. The undersigned |
shareholder appoints Michael J. Beer, Michael D. Roughton, and Ernest H. Gillum, and each of |
them separately, Proxies, with power of substitution, and authorizes them to represent and to |
vote as designated on this ballot, at the meeting of shareholders of the Fund to be held on |
November 19, 2008 at 10:00 a.m., Central Time, and at any adjournments thereof, all the |
shares of the Fund that the undersigned shareholder would be entitled to vote if personally |
present. |
|
Check the appropriate boxes below on this ballot, date and sign exactly as your name appears. |
Your signature acknowledges receipt of Notice of the Special Meeting of Shareholders and Proxy |
Statement dated October __, 2008. Shares will be voted as you instruct. If no direction is made, |
the proxy will be voted FOR the proposals listed below. In their discretion the Proxies will also be |
authorized to vote upon such other matters that may properly come before the meeting. |
|
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS BALLOT. PLEASE |
MARK, SIGN, DATE AND MAIL YOUR PROXY BALLOT IN THE ENCLOSED |
POSTAGE-PAID ENVELOPE. If shares are held jointly, either party may sign. If executed |
by a corporation, an authorized officer must sign. Executors, administrators and trustees |
should so indicate when signing. |
|
The Board of Directors recommends that shareholders vote FOR the following proposals. Please |
make your choice below in blue or black ink. Example: [X] |
|
Sign this proxy ballot and return it as soon as possible in the enclosed envelope. |
Approval of a Plan of Acquisition providing for the reorganization of the SmallCap Blend |
Fund I (the "Acquired Fund") into the SmallCap S&P 600 Index Fund. | |
|
FOR [ ] | AGAINST [ ] | ABSTAIN [ ] |
|
|
|
|
____________________ | ____________________ | _________, 2008 |
Signature | Signature (if held jointly) | Date | |
PART B |
|
INFORMATION REQUIRED IN |
A STATEMENT OF ADDITIONAL INFORMATION |
|
PRINCIPAL FUNDS, INC. |
680 8th Street |
Des Moines, Iowa 50392-2080 |
|
STATEMENT OF ADDITIONAL INFORMATION |
Dated: October ____, 2008 |
This Statement of Additional Information is available to the shareholders of the SmallCap Blend Fund I (the "Acquired Fund"), in connection with the proposed reorganization of the Acquired Fund into the SmallCap S&P 600 Index Fund (the "Acquiring Fund"), each of which is a separate series of Principal Funds, Inc. ( the "Reorganization").
This Statement of Additional Information is not a prospectus and should be read in conjunction with the Proxy Statement/Prospectus dated October __, 2008, relating to the Special Meeting of Shareholders of the Acquired Fund to be held on November 12, 2008. The Proxy Statement/Prospectus, which describes the proposed Reorganization, may be obtained without charge by writing to Principal Management Corporation, 680 8th Street, Des Moines, Iowa 50392-2080, or by calling toll free at _________________.
This Statement of Additional Information incorporates by reference the following documents (or designated portions thereof) that have been filed with the Securities and Exchange Commission:
(1) | The Statement of Additional Information of Principal Funds, Inc. ("PFI") dated |
| May 1, 2008, as supplemented; |
|
(2) | The financial statements of the Acquired Fund and the Acquiring Fund included |
| in PFI's Annual Report to Shareholders for the fiscal year ended October 31, 2007, |
| which have been audited by Ernst & Young LLP, Independent Registered Public |
| Accounting Firm, as filed on Form N-CSR on December 28, 2007; and |
|
(3) | The unaudited financial statements of the Acquired Fund and the Acquiring Fund |
| included in PFI's Semi-Annual Report to Shareholders for the six-month period |
| ended April 30, 2008, as filed on Form N-CSRS on July 7, 2008. |
The Annual and Semi-Annual Reports to Shareholders of PFI are available upon request and without charge by calling toll-free at 1-800-222-5852.
PRO FORMA FINANCIAL STATEMENTS
On June 9, 2008, the Board of Directors of PFI approved a Plan of Acquisition whereby, the SmallCap S&P 600 Index Fund (the "Acquiring Fund") will acquire all the assets of the SmallCap Blend Fund I (the "Acquired Fund"), subject to the liabilities of the Acquired Fund, in exchange for a number of shares equal in value to the pro rata net assets of shares of the Acquired Fund (the "Reorganization").
Shown below are unaudited pro forma financial statements for the combined Acquiring Fund, assuming the Reorganization had been consummated as of April 30, 2008. The first table presents pro forma Statements of Assets and Liabilities for the combined Acquiring Fund. The second table presents pro forma Statements of Operations for the combined Acquiring Fund. The third table presents a pro forma Schedule of Investments for the combined Acquiring Fund.
Please see the accompanying notes for additional information about the pro forma financial statements. The pro forma schedules of investments and statements of assets and liabilities and operations should be read in conjunction with the historical financial statements of the Acquired Fund and the Acquiring Fund incorporated by reference in the Statement of Additional Information.
Statements of Assets and Liabilities |
Principal Funds, Inc. |
April 30, 2008 (unaudited) |
Amounts in thousands |
|
| SmallCap Blend Fund I | SmallCap S&P 600 Index Fund | Pro Forma | | Combined SmallCap S&P | |
| Adjustments | | 600 Index Fund
| |
|
| | |
Investment in securities--at cost | $ 169,909 | $ 580,788 | $ | (5,390) | (d) | $ 745,307 | |
|
| |
| |
Assets | | | | | | | |
Investment in securities--at value | $ 164,519 | $ 567,785 | $ - | | $ 732,304 | |
Cash | 780 | 11 | | - | | 791 | |
Receivables: | | | | | | | |
Capital Shares sold | 4 | 497 | | - | | 501 | |
Dividends and interest | 61 | 296 | | - | | 357 | |
Expense reimbursement from Underwriter | - | 3 | | - | | 3 | |
Investment securities sold | | 147 | | - | | 147 | |
Prepaid directors' expenses | 2 | 2 | | - | | 4 | |
|
| |
| |
Total Assets | 165,366 | 568,741 | | - | | 734,107 | |
|
Liabilities | | | | | | | |
Accrued management and investment advisory fees | 110 | 58 | | - | | 168 | |
Accrued administrative service fees | 1 | 19 | | - | | 20 | |
Accrued distribution fees | 1 | 45 | | - | | 46 | |
Accrued service fees | 1 | 23 | | - | | 24 | |
Accrued transfer agent fees | - | 26 | | - | | 26 | |
Accrued other expenses | 4 | 26 | | - | | 30 | |
Payables: | | | | | | | |
Capital Shares reacquired | 28 | 316 | | - | | 344 | |
Reorganization costs | - | - | | 13 | (c) | 13 | |
Variation margin on futures contracts | - | 15 | | - | | 15 | |
Collateral obligation on securities loaned, at value | 29,339 | 87,267 | | - | | 116,606 | |
|
| |
| |
Total Liabilities | 29,484 | 87,795 | | 13 | | 117,292 | |
|
| |
| |
Net Assets Applicable to Outstanding Shares | $ 135,882 | $ 480,946 | $ (13) | | $ 616,815 | |
|
| |
| |
|
Net Assets Consist of: | | | | | | | |
Capital Shares and additional paid-in-capital | $ 149,493 | $ 488,280 | $ - | | $ 637,773 | |
Accumulated undistributed (overdistributed) net investment income (operating loss) | (12) | 1,587 | | (13) | (c) | 1,562 | |
Accumulated undistributed (overdistributed) net realized gain (loss) | (8,209) | 3,774 | | (5,390) | (d) | (9,825) | |
Net unrealized appreciation (depreciation) of investments | (5,390) | (12,695) | | 5,390 | (d) | (12,695) | |
|
| |
| |
Total Net Assets | $ 135,882 | $ 480,946 | $ (13) | | $ 616,815 | |
|
| |
| |
|
Capital Stock (par value: $.01 a share): | | | | | | | |
Shares authorized | 265,000 | 305,000 | | - | | 305,000 | |
Net Asset Value Per Share: | | | | | | | |
Class J: Net Assets | N/A | $ 77,935 | $ | - | | $ 77,935 | |
Shares issued and outstanding | | 5,175 | | - | (b) | 5,175 | |
Net asset value per share | | $ 15.06 | (a) | | | $ 15.06 | (a) |
| | |
| |
|
Institutional: Net Assets | $ 130,595 | $ 237,600 | $ | (13) | (c) | $ 368,182 | (e) |
Shares issued and outstanding | 10,413 | 15,262 | | (2,026) | (b) | 23,649 | |
Net asset value per share | $ 12.54 | $ 15.57 | | | | $ 15.57 | |
|
| |
| |
|
R-1: Net Assets | $ 296 | $ 4,460 | $ - | | $ 4,756 | |
Shares issued and outstanding | 24 | 288 | | (5) | (b) | 307 | |
Net asset value per share | $ 12.10 | $ 15.47 | | | | $ 15.47 | |
|
| |
| |
|
R-2: Net Assets | $ 1,088 | $ 20,586 | $ - | | $ 21,674 | |
Shares issued and outstanding | 91 | 1,314 | | (22) | (b) | 1,383 | |
Net asset value per share | $ 11.93 | $ 15.67 | | | | $ 15.67 | |
|
| |
| |
|
R-3: Net Assets | $ 3,248 | $ 44,041 | $ - | | $ 47,289 | |
Shares issued and outstanding | 269 | 2,790 | | (63) | (b) | 2,996 | |
Net asset value per share | $ 12.09 | $ 15.79 | | | | $ 15.79 | |
|
| |
| |
|
R-4: Net Assets | $ 384 | $ 20,004 | $ - | | $ 20,388 | |
Shares issued and outstanding | 31 | 1,259 | | (7) | (b) | 1,283 | |
Net asset value per share | $ 12.24 | $ 15.89 | | | | $ 15.89 | |
|
| |
| |
|
R-5: Net Assets | $ 271 | $ 76,320 | $ - | | $ 76,591 | |
Shares issued and outstanding | 22 | 4,797 | | (5) | (b) | 4,814 | |
Net asset value per share | $ 12.34 | $ 15.91 | | | | $ 15.91 | |
|
| |
| |
(a) | Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. |
(b) | Reflects new shares issued, net of retired shares of SmallCap Blend Fund I. |
(c) | Reduction in net assets to reflect the estimated expenses of the Reorganization. |
(d) | Due to taxable reorganization |
(e) | SmallCap Blend Fund I is expected to have a redemption of approximately $130,595,000 on the date of the Reorganization, reducing net assets to approximately $486,220,000. |
See accompanying notes |
STATEMENT OF OPERATIONS |
Principal Funds, Inc. |
Twelve Months Ended April 30, 2008 (unaudited) |
|
| | | | | | Combined SmallCap S&P 600 Index Fund |
| SmallCap Blend Fund I | SmallCap S&P 600 Index Fund | Pro Forma Adjustments | |
Amounts in thousands | |
|
Net Investment Income (Operating Loss) | | | | | | |
Income: | | | | | | |
Dividends | $ 1,496 | $ 5,144 | $ - | | $ 6,640 |
Interest | 15 | | 113 | - | | 128 |
Securities lending | 266 | | 823 | - | | 1,089 |
|
| |
|
Total Income | 1,777 | | 6,080 | - | | 7,857 |
Expenses: | | | | | | |
Management and investment advisory fees | 1,684 | | 705 | (1,435) | (a) | 954 |
Distribution Fees - R-1 | 1 | | 13 | - | | 14 |
Distribution Fees - R-2 | 3 | | 70 | - | | 73 |
Distribution Fees - R-3 | 8 | | 109 | - | | 117 |
Distribution Fees - R-4 | 1 | | 17 | - | | 18 |
Distribution Fees - Class J | N/A | | 394 | - | | 394 |
Administrative service fees - R-1 | 1 | | 11 | - | | 12 |
Administrative service fees - R-2 | 2 | | 47 | - | | 49 |
Administrative service fees - R-3 | 5 | | 65 | - | | 70 |
Administrative service fees - R-4 | 1 | | 22 | - | | 23 |
Administrative service fees - R-5 | - | | 91 | - | | 91 |
Registration fees - Class J | N/A | | 19 | - | | 19 |
Service Fees - R-1 | 1 | | 9 | - | | 10 |
Service Fees - R-2 | 2 | | 58 | - | | 60 |
Service Fees - R-3 | 6 | | 75 | - | | 81 |
Service Fees - R-4 | 1 | | 26 | - | | 27 |
Service Fees - R-5 | 1 | | 124 | - | | 125 |
Shareholder reports - Class J | N/A | | 24 | - | | 24 |
Transfer agent fees - Class J | N/A | | 147 | - | | 147 |
Auditing and legal fees | 3 | | 3 | (3) | (a) | 3 |
Custodian fees | 1 | | 4 | (1) | (a) | 4 |
Directors' expenses | 1 | | 2 | - | | 3 |
Other expenses | 4 | | 4 | - | | 8 |
|
| |
|
Total Gross Expenses | 1,726 | | 2,039 | (1,439) | | 2,326 |
|
Less: Reimbursement from Underwriter - Class J | N/A | | 40 | - | | 40 |
|
| |
|
Total Net Expenses | 1,726 | | 1,999 | (1,439) | | 2,286 |
|
| |
|
Net Investment Income (Operating Loss) | 51 | | 4,081 | 1,439 | | 5,571 |
|
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies | | | | | | |
Net realized gain (loss) from: | | | | | | |
Investment transactions | 515 | | 26,072 | (5,390) | (b) | 21,197 |
Futures contracts | - | | (492) | - | | (492) |
Change in unrealized appreciation/depreciation of: | | | | | | |
Investments | (23,634) | | (77,516) | 5,390 | (b) | (95,760) |
Futures contracts | - | | 309 | - | | 309 |
|
| |
|
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies | (23,119) | | (51,627) | - | | (74,746) |
|
| |
|
Net Increase (Decrease) in Net Assets Resulting from Operations | $ (23,068) | $ (47,546) | $ 1,439 | | $ (69,175) |
|
| |
|
|
(a) To adjust expenses to reflect the Combined Fund's estimated fees and expenses, based on elimination of duplicate services. |
(b) Due to taxable reorganization. |
|
See accompanying notes | | | | | | |
| Schedule of Investments April 30, 2008 (unaudited) |
SmallCap Blend Fund I | SmallCap S&P 600 Index Fund | Combined SmallCap S&P 600 Index Fund | | SmallCap Blend Fund I | SmallCap S&P 600 Index Fund | Combined SmallCap S&P 600 Index Fund |
|
|
Shares Held (000's) | | Value (000's) |
| | | 99.26% COMMON STOCKS | | | |
| | | 0.16% Advanced Materials & Products | | | |
- | 25,420 | 25,420 | Ceradyne Inc (a)(b) | - | 990 | 990 |
| | | 0.15% Advertising Services | | | |
- | 30,159 | 30,159 | inVentiv Health Inc (b) | - | 897 | 897 |
| | | 0.75% Aerospace & Defense | | | |
- | 14,417 | 14,417 | Cubic Corp | - | 391 | 391 |
- | 27,354 | 27,354 | Esterline Technologies Corp (b) | - | 1,523 | 1,523 |
13,800 | 32,852 | 46,652 | Teledyne Technologies Inc (a)(b)* | 811 | 1,929 | 2,740 |
| | | 1.67% Aerospace & Defense Equipment | | | |
- | 35,288 | 35,288 | AAR Corp (a)(b) | - | 826 | 826 |
13,300 | 41,596 | 54,896 | Curtiss-Wright Corp* | 632 | 1,975 | 2,607 |
- | 52,557 | 52,557 | GenCorp Inc (a)(b) | - | 450 | 450 |
12,500 | - | 12,500 | Heico Corp(a)* | 644 | | 644 |
- | 23,422 | 23,422 | Kaman Corp | - | 635 | 635 |
17,100 | 39,627 | 56,727 | Moog Inc (b)* | 737 | 1,708 | 2,445 |
- | 54,352 | 54,352 | Orbital Sciences Corp (a)(b) | - | 1,463 | 1,463 |
4,900 | 15,542 | 20,442 | Triumph Group Inc (a)* | 288 | 915 | 1,203 |
| | | 0.21% Agricultural Operations | | | |
11,400 | 16,837 | 28,237 | Andersons Inc/The (a)* | 518 | 765 | 1,283 |
| | | 0.23% Airlines | | | |
19,200 | 56,440 | 75,640 | Skywest Inc* | 365 | 1,074 | 1,439 |
| | | 0.14% Apparel Manufacturers | | | |
- | 17,545 | 17,545 | Maidenform Brands Inc (a)(b) | - | 261 | 261 |
- | 12,989 | 12,989 | Oxford Industries Inc | - | 361 | 361 |
- | 13,590 | 13,590 | Volcom Inc (b) | - | 258 | 258 |
| | | 0.42% Applications Software | | | |
25,700 | - | 25,700 | American Reprographics Co(a)(b)* | 408 | - | 408 |
- | 28,888 | 28,888 | EPIQ Systems Inc (a)(b) | - | 446 | 446 |
19,300 | 39,140 | 58,440 | Progress Software Corp (b)* | 583 | 1,183 | 1,766 |
| | | 0.02% Athletic Equipment | | | |
- | 29,353 | 29,353 | Nautilus Inc (a) | - | 106 | 106 |
| | | 0.06% Athletic Footwear | | | |
- | 24,895 | 24,895 | K-Swiss Inc | - | 365 | 365 |
| | | 0.12% Auction House & Art Dealer | | | |
41,800 | - | 41,800 | Premier Exhibitions Inc(a)(b)* | 243 | - | 243 |
17,600 | - | 17,600 | Sotheby's* | 487 | - | 487 |
| | | 0.09% Audio & Video Products | | | |
- | 17,008 | 17,008 | Audiovox Corp (b) | - | 186 | 186 |
- | 13,552 | 13,552 | Universal Electronics Inc (b) | - | 348 | 348 |
| | | 0.04% Auto - Truck Trailers | | | |
- | 28,556 | 28,556 | Wabash National Corp (a) | - | 239 | 239 |
| | | 0.03% Auto Repair Centers | | | |
- | 13,309 | 13,309 | Midas Inc (b) | - | 207 | 207 |
| | | 0.12% Auto/Truck Parts & Equipment - Original | | | |
- | 30,344 | 30,344 | Spartan Motors Inc (a) | - | 285 | 285 |
- | 21,552 | 21,552 | Superior Industries International Inc (a) | - | 438 | 438 |
| | | 0.09% Auto/Truck Parts & Equipment - Replacement | | | |
- | 20,626 | 20,626 | Aftermarket Technology Corp (b) | - | 472 | 472 |
- | 11,139 | 11,139 | Standard Motor Products Inc | - | 68 | 68 |
| | | 0.13% Batteries & Battery Systems | | | |
22,500 | 21,012 | 43,512 | Greatbatch Inc (a)(b)* | 409 | 382 | 791 |
| | | 0.07% Brewery | | | |
- | 9,496 | 9,496 | Boston Beer Co Inc (b) | - | 421 | 421 |
| | | 0.05% Building - Heavy Construction | | | |
7,700 | - | 7,700 | Perini Corp(b)* | 279 | - | 279 |
| | | 0.14% Building - Maintenance & Service | | | |
- | 41,089 | 41,089 | ABM Industries Inc | - | 860 | 860 |
| | | 0.28% Building - Mobile Home & Manufactured Housing | | | |
- | 72,134 | 72,134 | Champion Enterprises Inc (a)(b) | - | 744 | 744 |
- | 59,773 | 59,773 | Fleetwood Enterprises Inc (a)(b) | - | 206 | 206 |
- | 27,889 | 27,889 | Monaco Coach Corp (a) | - | 177 | 177 |
- | 6,322 | 6,322 | Skyline Corp | - | 174 | 174 |
- | 26,968 | 26,968 | Winnebago Industries (a) | - | 434 | 434 |
| | | 0.17% Building - Residential & Commercial | | | |
- | 11,464 | 11,464 | M/I Homes Inc (a) | - | 197 | 197 |
- | 28,178 | 28,178 | Meritage Homes Corp (a)(b) | - | 534 | 534 |
- | 60,406 | 60,406 | Standard Pacific Corp (a) | - | 306 | 306 |
| | | 0.07% Building & Construction - Miscellaneous | | | |
- | 25,554 | 25,554 | Insituform Technologies Inc (a)(b) | - | 432 | 432 |
| | | 0.43% Building & Construction Products - Miscellaneous | | | |
- | 16,926 | 16,926 | Drew Industries Inc (a)(b) | - | 413 | 413 |
- | 27,802 | 27,802 | Gibraltar Industries Inc | - | 291 | 291 |
- | 18,357 | 18,357 | NCI Building Systems Inc (a)(b) | - | 443 | 443 |
- | 34,694 | 34,694 | Quanex Building Products Corp (a) | - | 590 | 590 |
- | 34,759 | 34,759 | Simpson Manufacturing Co Inc (a) | - | 917 | 917 |
| | | 0.43% Building Products - Air & Heating | | | |
23,700 | 56,335 | 80,035 | Lennox International Inc* | 785 | 1,867 | 2,652 |
| | | 0.32% Building Products - Cement & Aggregate | | | |
- | 25,441 | 25,441 | Texas Industries Inc (a) | - | 1,969 | 1,969 |
| | | 0.16% Building Products - Doors & Windows | | | |
17,000 | 27,078 | 44,078 | Apogee Enterprises Inc (a)* | 379 | 604 | 983 |
| | | 0.10% Building Products - Wood | | | |
- | 17,602 | 17,602 | Universal Forest Products Inc (a) | - | 611 | 611 |
| | | 0.03% Casino Hotels | | | |
- | 13,140 | 13,140 | Monarch Casino & Resort Inc (b) | - | 174 | 174 |
| | | 0.03% Casino Services | | | |
- | 32,742 | 32,742 | Shuffle Master Inc (a)(b) | - | 161 | 161 |
| | | 0.03% Chemicals - Diversified | | | |
- | 31,992 | 31,992 | Georgia Gulf Corp (a) | - | 192 | 192 |
| | | 0.19% Chemicals - Plastics | | | |
- | 86,657 | 86,657 | PolyOne Corp (b) | - | 640 | 640 |
- | 26,003 | 26,003 | Schulman A Inc | - | 551 | 551 |
| | | 1.24% Chemicals - Specialty | | | |
- | 23,103 | 23,103 | Arch Chemicals Inc | - | 787 | 787 |
47,700 | 49,174 | 96,874 | HB Fuller Co* | 1,101 | 1,135 | 2,236 |
- | 12,784 | 12,784 | NewMarket Corp | - | 830 | 830 |
21,700 | 27,970 | 49,670 | OM Group Inc (a)(b)* | 1,188 | 1,532 | 2,720 |
- | 39,645 | 39,645 | Omnova Solutions Inc (b) | - | 135 | 135 |
- | 10,436 | 10,436 | Penford Corp | - | 229 | 229 |
- | 9,514 | 9,514 | Quaker Chemical Corp | - | 295 | 295 |
- | 38,545 | 38,545 | Tronox Inc - Class B | - | 115 | 115 |
- | 19,895 | 19,895 | Zep Inc | - | 295 | 295 |
| | | 0.24% Circuit Boards | | | |
16,500 | 18,917 | 35,417 | Park Electrochemical Corp* | 447 | 512 | 959 |
- | 39,429 | 39,429 | TTM Technologies Inc (a)(b) | - | 525 | 525 |
| | | 1.12% Coal | | | |
26,000 | 74,875 | 100,875 | Massey Energy Co | 1,361 | 3,918 | 5,279 |
- | 24,717 | 24,717 | Patriot Coal Corp (b) | - | 1,633 | 1,633 |
| | | 0.04% Coffee | | | |
- | 11,663 | 11,663 | Peet's Coffee & Tea Inc (a)(b) | - | 271 | 271 |
| | | 0.05% Collectibles | | | |
- | 16,695 | 16,695 | RC2 Corp (b) | - | 309 | 309 |
| | | 5.37% Commercial Banks | | | |
7,200 | - | 7,200 | Bancfirst Corp* | 315 | - | 315 |
- | 45,213 | 45,213 | Bank Mutual Corp (a) | - | 506 | 506 |
- | 26,057 | 26,057 | Cascade Bancorp (a) | - | 238 | 238 |
- | 26,751 | 26,751 | Central Pacific Financial Corp (a) | - | 491 | 491 |
- | 16,725 | 16,725 | Columbia Banking System Inc | - | 453 | 453 |
24,300 | 27,572 | 51,872 | Community Bank System Inc (a)* | 619 | 703 | 1,322 |
6,600 | - | 6,600 | Community Trust Bancorp Inc* | 198 | - | 198 |
- | 29,679 | 29,679 | Corus Bankshares Inc (a) | - | 218 | 218 |
17,900 | 58,737 | 76,637 | East West Bancorp Inc* | 255 | 836 | 1,091 |
- | 70,560 | 70,560 | First Bancorp/Puerto Rico (a) | - | 726 | 726 |
- | 59,204 | 59,204 | First Commonwealth Financial Corp (a) | - | 737 | 737 |
- | 28,500 | 28,500 | First Financial Bancorp | - | 374 | 374 |
- | 45,160 | 45,160 | First Midwest Bancorp Inc/IL (a) | - | 1,153 | 1,153 |
26,900 | 38,466 | 65,366 | Frontier Financial Corp (a)* | 430 | 615 | 1,045 |
19,100 | 50,128 | 69,228 | Glacier Bancorp Inc (a)* | 393 | 1,032 | 1,425 |
18,300 | - | 18,300 | Green Bankshares Inc(a)* | 367 | - | 367 |
21,200 | 22,462 | 43,662 | Hancock Holding Co (a)* | 875 | 927 | 1,802 |
16,000 | 35,838 | 51,838 | Hanmi Financial Corp* | 112 | 250 | 362 |
- | 18,539 | 18,539 | Independent Bank Corp/MI (a) | - | 148 | 148 |
- | 17,472 | 17,472 | Irwin Financial Corp (a) | - | 102 | 102 |
- | 20,262 | 20,262 | Nara Bancorp Inc | - | 266 | 266 |
- | 73,965 | 73,965 | National Penn Bancshares Inc | - | 1,234 | 1,234 |
- | 61,753 | 61,753 | Old National Bancorp/IN (a) | - | 1,057 | 1,057 |
15,600 | - | 15,600 | Preferred Bank/Los Angeles CA(a)* | 183 | - | 183 |
- | 22,950 | 22,950 | PrivateBancorp Inc (a) | - | 780 | 780 |
- | 35,767 | 35,767 | Prosperity Bancshares Inc | - | 1,108 | 1,108 |
- | 29,419 | 29,419 | Provident Bankshares Corp (a) | - | 377 | 377 |
- | 27,624 | 27,624 | Signature Bank/New York NY (a)(b) | - | 729 | 729 |
- | 67,533 | 67,533 | South Financial Group Inc/The (a) | - | 408 | 408 |
- | 16,575 | 16,575 | Sterling Bancorp/NY | - | 272 | 272 |
115,800 | 68,111 | 183,911 | Sterling Bancshares Inc/TX* | 1,203 | 708 | 1,911 |
- | 48,061 | 48,061 | Sterling Financial Corp/WA (a) | - | 587 | 587 |
- | 79,953 | 79,953 | Susquehanna Bancshares Inc | - | 1,590 | 1,590 |
23,500 | - | 23,500 | SVB Financial Group(a)(b)* | 1,144 | - | 1,144 |
15,600 | - | 15,600 | Texas Capital Bancshares Inc(b)* | 288 | - | 288 |
- | 70,256 | 70,256 | Trustco Bank Corp NY (a) | - | 613 | 613 |
- | 97,151 | 97,151 | UCBH Holdings Inc | - | 707 | 707 |
- | 33,441 | 33,441 | UMB Financial Corp | - | 1,660 | 1,660 |
- | 55,864 | 55,864 | Umpqua Holdings Corp (a) | - | 824 | 824 |
- | 35,810 | 35,810 | United Bankshares Inc (a) | - | 1,042 | 1,042 |
- | 38,087 | 38,087 | United Community Banks Inc/GA (a) | - | 523 | 523 |
- | 60,234 | 60,234 | Whitney Holding Corp | - | 1,410 | 1,410 |
64,700 | 16,326 | 81,026 | Wilshire Bancorp Inc* | 533 | 134 | 667 |
- | 21,904 | 21,904 | Wintrust Financial Corp | - | 695 | 695 |
| | | 0.63% Commercial Services | | | |
- | 26,337 | 26,337 | Arbitron Inc | - | 1,260 | 1,260 |
- | 4,948 | 4,948 | CPI Corp (a) | - | 93 | 93 |
- | 39,927 | 39,927 | Healthcare Services Group | - | 609 | 609 |
- | 20,486 | 20,486 | HMS Holdings Corp (b) | - | 528 | 528 |
- | 69,708 | 69,708 | Live Nation Inc (a)(b) | - | 961 | 961 |
- | 7,863 | 7,863 | Pre-Paid Legal Services Inc (a)(b) | - | 344 | 344 |
- | 10,554 | 10,554 | Startek Inc (b) | - | 100 | 100 |
| | | 0.45% Commercial Services - Finance | | | |
- | 12,291 | 12,291 | Bankrate Inc (a)(b) | - | 642 | 642 |
- | 25,802 | 25,802 | Coinstar Inc (b) | - | 823 | 823 |
- | 24,977 | 24,977 | Rewards Network Inc (b) | - | 121 | 121 |
- | 36,523 | 36,523 | Wright Express Corp (b) | - | 1,205 | 1,205 |
| | | 0.09% Communications Software | | | |
- | 24,786 | 24,786 | Captaris Inc (b) | - | 120 | 120 |
- | 23,898 | 23,898 | Digi International Inc (a)(b) | - | 197 | 197 |
- | 28,111 | 28,111 | Smith Micro Software Inc (a)(b) | - | 242 | 242 |
| | | 0.87% Computer Aided Design | | | |
60,700 | 72,870 | 133,570 | Ansys Inc (b)* | 2,442 | 2,932 | 5,374 |
| | | 0.50% Computer Services | | | |
- | 27,985 | 27,985 | CACI International Inc (b) | - | 1,403 | 1,403 |
- | 49,756 | 49,756 | Ciber Inc (b) | - | 311 | 311 |
- | 22,782 | 22,782 | Manhattan Associates Inc (a)(b) | - | 593 | 593 |
- | 12,174 | 12,174 | SI International Inc (b) | - | 279 | 279 |
- | 30,390 | 30,390 | SYKES Enterprises Inc (b) | - | 505 | 505 |
| | | 0.31% Computer Software | | | |
- | 30,014 | 30,014 | Avid Technology Inc (a)(b) | - | 626 | 626 |
- | 41,904 | 41,904 | Blackbaud Inc | - | 984 | 984 |
- | 25,488 | 25,488 | Phoenix Technologies Ltd (b) | - | 301 | 301 |
| | | 1.13% Computers - Integrated Systems | | | |
- | 21,170 | 21,170 | Agilysys Inc | - | 232 | 232 |
- | 8,507 | 8,507 | Catapult Communications Corp (b) | - | 61 | 61 |
- | 21,215 | 21,215 | Mercury Computer Systems Inc (a)(b) | - | 170 | 170 |
42,200 | 76,265 | 118,465 | Micros Systems Inc (b)* | 1,504 | 2,719 | 4,223 |
24,200 | 16,394 | 40,594 | MTS Systems Corp * | 832 | 564 | 1,396 |
- | 25,033 | 25,033 | Radiant Systems Inc (b) | - | 338 | 338 |
- | 20,881 | 20,881 | Radisys Corp (a)(b) | - | 197 | 197 |
- | 19,545 | 19,545 | Stratasys Inc (a)(b) | - | 380 | 380 |
| | | 0.06% Computers - Memory Devices | | | |
- | 24,550 | 24,550 | Hutchinson Technology Inc (a)(b) | - | 347 | 347 |
| | | 0.21% Computers - Peripheral Equipment | | | |
- | 16,519 | 16,519 | Planar Systems Inc (a)(b) | - | 38 | 38 |
14,200 | 22,364 | 36,564 | Synaptics Inc (a)(b)* | 482 | 759 | 1,241 |
| | | 0.93% Consulting Services | | | |
12,000 | - | 12,000 | Forrester Research Inc (b)* | 346 | - | 346 |
5,500 | - | 5,500 | Huron Consulting Group Inc (b)* | 230 | - | 230 |
- | 17,206 | 17,206 | MAXIMUS Inc | - | 652 | 652 |
37,200 | 39,364 | 76,564 | Watson Wyatt Worldwide Inc* | 2,181 | 2,308 | 4,489 |
| | | 0.20% Consumer Products - Miscellaneous | | | |
- | 66,781 | 66,781 | Central Garden and Pet Co - A Shares (a)(b) | - | 335 | 335 |
- | 15,550 | 15,550 | Russ Berrie & Co Inc (b) | - | 218 | 218 |
- | 37,814 | 37,814 | Spectrum Brands Inc (a)(b) | - | 170 | 170 |
- | 15,769 | 15,769 | WD-40 Co | - | 491 | 491 |
| | | 0.33% Containers - Metal & Glass | | | |
26,100 | - | 26,100 | Greif Inc* | 1,686 | - | 1,686 |
6,700 | - | 6,700 | Silgan Holdings Inc* | 357 | - | 357 |
| | | 0.08% Containers - Paper & Plastic | | | |
- | 18,615 | 18,615 | Chesapeake Corp (a) | - | 82 | 82 |
18,000 | - | 18,000 | Pactiv Corp (b)* | 428 | - | 428 |
| | | 0.27% Cosmetics & Toiletries | | | |
5,600 | 17,824 | 23,424 | Chattem Inc (a)(b)* | 391 | 1,246 | 1,637 |
| | | 0.21% Decision Support Software | | | |
14,200 | 16,524 | 30,724 | SPSS Inc (a)(b)* | 600 | 698 | 1,298 |
| | | 0.36% Diagnostic Equipment | | | |
17,100 | 65,088 | 82,188 | Immucor Inc (b) | 461 | 1,756 | 2,217 |
| | | 0.69% Diagnostic Kits | | | |
4,300 | 56,700 | 61,000 | Idexx Laboratories Inc (b) | 229 | 3,016 | 3,245 |
- | 37,283 | 37,283 | Meridian Bioscience Inc | - | 1,004 | 1,004 |
| | | 0.19% Disposable Medical Products | | | |
20,400 | 11,387 | 31,787 | ICU Medical Inc (b)* | 512 | 286 | 798 |
- | 25,400 | 25,400 | Merit Medical Systems Inc (a)(b) | - | 374 | 374 |
| | | 1.66% Distribution & Wholesale | | | |
22,700 | 47,819 | 70,519 | Brightpoint Inc (b)* | 208 | 438 | 646 |
- | 27,332 | 27,332 | Building Materials Holding Corp (a) | - | 127 | 127 |
- | 42,914 | 42,914 | Fossil Inc (b) | - | 1,536 | 1,536 |
- | 106,349 | 106,349 | LKQ Corp (a)(b) | - | 2,314 | 2,314 |
- | 38,073 | 38,073 | Owens & Minor Inc | - | 1,725 | 1,725 |
- | 44,393 | 44,393 | Pool Corp (a) | - | 969 | 969 |
- | 24,136 | 24,136 | Scansource Inc (b) | - | 603 | 603 |
7,300 | 21,746 | 29,046 | United Stationers Inc (b)* | 322 | 959 | 1,281 |
- | 22,900 | 22,900 | Watsco Inc (a) | - | 1,039 | 1,039 |
| | | 1.41% Diversified Manufacturing Operations | | | |
25,700 | 39,298 | 64,998 | Acuity Brands Inc* | 1,230 | 1,880 | 3,110 |
- | 20,128 | 20,128 | AO Smith Corp | - | 623 | 623 |
- | 42,308 | 42,308 | Barnes Group Inc | - | 1,103 | 1,103 |
13,700 | 20,121 | 33,821 | EnPro Industries Inc (a)(b)* | 497 | 730 | 1,227 |
- | 24,466 | 24,466 | Griffon Corp (a)(b) | - | 229 | 229 |
19,000 | - | 19,000 | Harsco Corp* | 1,127 | - | 1,127 |
10,700 | - | 10,700 | Koppers Holdings Inc (a)* | 518 | - | 518 |
- | 15,338 | 15,338 | Lydall Inc (b) | - | 179 | 179 |
- | 11,616 | 11,616 | Standex International Corp | - | 245 | 245 |
- | 20,012 | 20,012 | Tredegar Corp (a) | - | 327 | 327 |
| | | 0.10% Diversified Minerals | | | |
- | 20,699 | 20,699 | AMCOL International Corp | - | 615 | 615 |
| | | 0.37% Diversified Operations & Commercial Services | | | |
22,600 | 22,464 | 45,064 | Chemed Corp* | 771 | 766 | 1,537 |
- | 19,121 | 19,121 | Viad Corp (a) | - | 602 | 602 |
- | 12,474 | 12,474 | Volt Information Sciences Inc (b) | - | 166 | 166 |
| | | 0.03% Drug Delivery Systems | | | |
- | 22,839 | 22,839 | Noven Pharmaceuticals Inc (a)(b) | - | 208 | 208 |
| | | 0.35% E-Commerce - Products | | | |
- | 14,669 | 14,669 | Blue Nile Inc (a)(b) | - | 729 | 729 |
45,200 | - | 45,200 | FTD Group Inc (a)* | 622 | - | 622 |
- | 31,256 | 31,256 | NutriSystem Inc (a) | - | 628 | 628 |
- | 15,123 | 15,123 | Stamps.com Inc (a)(b) | - | 207 | 207 |
| | | 0.06% E-Commerce - Services | | | |
2,800 | - | 2,800 | Priceline.com Inc (a)(b)* | 357 | - | 357 |
| | | 1.33% Electric - Integrated | | | |
- | 24,090 | 24,090 | Allete Inc | - | 1,006 | 1,006 |
20,100 | 49,315 | 69,415 | Avista Corp* | 413 | 1,012 | 1,425 |
- | 9,558 | 9,558 | Central Vermont Public Service Corp | - | 223 | 223 |
7,100 | 12,618 | 19,718 | CH Energy Group Inc* | 251 | 446�� | 697 |
19,700 | 55,975 | 75,675 | Cleco Corp* | 473 | 1,344 | 1,817 |
13,200 | 42,000 | 55,200 | El Paso Electric Co (b)* | 298 | 948 | 1,246 |
- | 23,404 | 23,404 | UIL Holdings Corp | - | 733 | 733 |
- | 32,919 | 32,919 | Unisource Energy Corp (a) | - | 1,028 | 1,028 |
| | | 0.32% Electric Products - Miscellaneous | | | |
39,800 | - | 39,800 | GrafTech International Ltd (b)* | 782 | - | 782 |
11,900 | 21,126 | 33,026 | Littelfuse Inc (b)* | 438 | 777 | 1,215 |
| | | 1.07% Electronic Components - Miscellaneous | | | |
- | 11,033 | 11,033 | Bel Fuse Inc | - | 288 | 288 |
- | 64,329 | 64,329 | Benchmark Electronics Inc (b) | - | 1,144 | 1,144 |
- | 31,381 | 31,381 | CTS Corp | - | 353 | 353 |
- | 31,397 | 31,397 | Daktronics Inc (a) | - | 464 | 464 |
55,900 | 35,318 | 91,218 | Methode Electronics Inc* | 606 | 383 | 989 |
- | 43,219 | 43,219 | Plexus Corp (b) | - | 1,041 | 1,041 |
- | 16,664 | 16,664 | Rogers Corp (a)(b) | - | 532 | 532 |
47,100 | 38,047 | 85,147 | Technitrol Inc* | 989 | 799 | 1,788 |
| | | 1.14% Electronic Components - Semiconductors | | | |
- | 24,647 | 24,647 | Actel Corp (b) | - | 407 | 407 |
- | 29,922 | 29,922 | Diodes Inc (a)(b) | - | 809 | 809 |
- | 27,949 | 27,949 | DSP Group Inc (b) | - | 367 | 367 |
- | 63,141 | 63,141 | Kopin Corp (b) | - | 188 | 188 |
29,000 | 72,739 | 101,739 | Microsemi Corp (a)(b)* | 710 | 1,782 | 2,492 |
102,300 | 150,766 | 253,066 | Skyworks Solutions Inc (a)(b)* | 889 | 1,310 | 2,199 |
- | 11,975 | 11,975 | Supertex Inc (a)(b) | - | 257 | 257 |
21,400 | - | 21,400 | Zoran Corp (b)* | 282 | - | 282 |
| | | 0.08% Electronic Design Automation | | | |
- | 14,751 | 14,751 | Ansoft Corp (b) | - | 489 | 489 |
| | | 2.24% Electronic Measurement Instruments | | | |
- | 12,459 | 12,459 | Analogic Corp | - | 717 | 717 |
- | 15,499 | 15,499 | FARO Technologies Inc (a)(b) | - | 546 | 546 |
- | 127,673 | 127,673 | Flir Systems Inc (a)(b) | - | 4,383 | 4,383 |
- | 28,532 | 28,532 | Itron Inc (a)(b) | - | 2,656 | 2,656 |
- | 12,843 | 12,843 | Keithley Instruments Inc | - | 135 | 135 |
52,100 | 112,707 | 164,807 | Trimble Navigation Ltd (b)* | 1,708 | 3,696 | 5,404 |
| | | 0.03% Electronic Security Devices | | | |
- | 17,239 | 17,239 | LoJack Corp (b) | - | 170 | 170 |
| | | 0.07% Energy - Alternate Sources | | | |
- | 39,066 | 39,066 | Headwaters Inc (a)(b) | - | 447 | 447 |
| | | 1.27% Engineering - Research & Development Services | | | |
63,800 | 60,676 | 124,476 | EMCOR Group Inc (b)* | 1,599 | 1,520 | 3,119 |
19,600 | 76,020 | 95,620 | Shaw Group Inc/The (b)* | 968 | 3,757 | 4,725 |
| | | 0.11% Engines - Internal Combustion | | | |
- | 46,236 | 46,236 | Briggs & Stratton Corp (a) | - | 704 | 704 |
| | | 1.38% Enterprise Software & Services | | | |
- | 40,975 | 40,975 | Concur Technologies Inc (a)(b) | - | 1,358 | 1,358 |
- | 54,321 | 54,321 | Epicor Software Corp (a)(b) | - | 434 | 434 |
38,100 | 81,873 | 119,973 | Informatica Corp (a)(b)* | 608 | 1,307 | 1,915 |
22,200 | 24,690 | 46,890 | JDA Software Group Inc (b)* | 420 | 467 | 887 |
19,300 | 18,206 | 37,506 | Mantech International Corp (b)* | 922 | 870 | 1,792 |
4,500 | - | 4,500 | MicroStrategy Inc (b)* | 399 | - | 399 |
- | 32,078 | 32,078 | Omnicell Inc (a)(b) | - | 385 | 385 |
18,000 | - | 18,000 | Sybase Inc (b)* | 530 | - | 530 |
- | 15,704 | 15,704 | SYNNEX Corp (b) | - | 375 | 375 |
- | 31,780 | 31,780 | Tyler Technologies Inc (a)(b) | - | 460 | 460 |
| | | 0.52% Entertainment Software | | | |
- | 71,501 | 71,501 | Take-Two Interactive Software Inc (a)(b) | - | 1,876 | 1,876 |
- | 61,869 | 61,869 | THQ Inc (b) | - | 1,317 | 1,317 |
| | | 0.19% Environmental Consulting & Engineering | | | |
- | 54,681 | 54,681 | Tetra Tech Inc (a)(b) | - | 1,155 | 1,155 |
| | | 0.18% E-Services - Consulting | | | |
- | 29,682 | 29,682 | Perficient Inc (a)(b) | - | 272 | 272 |
- | 42,263 | 42,263 | Websense Inc (a)(b) | - | 822 | 822 |
| | | 0.07% Fiduciary Banks | | | |
14,000 | 34,815 | 48,815 | Boston Private Financial Holdings Inc* | 130 | 324 | 454 |
| | | 0.33% Filtration & Separation Products | | | |
- | 47,793 | 47,793 | Clarcor Inc | - | 2,005 | 2,005 |
| | | 0.29% Finance - Consumer Loans | | | |
16,888 | - | 16,888 | Asta Funding Inc* | 241 | - | 241 |
6,700 | 14,105 | 20,805 | Portfolio Recovery Associates Inc (a)* | 295 | 621 | 916 |
- | 15,749 | 15,749 | World Acceptance Corp (a)(b) | - | 620 | 620 |
| | | 1.16% Finance - Investment Banker & Broker | | | |
6,100 | - | 6,100 | Greenhill & Co Inc (a)* | 397 | - | 397 |
35,500 | 40,618 | 76,118 | Investment Technology Group Inc (b)* | 1,713 | 1,960 | 3,673 |
- | 50,336 | 50,336 | LaBranche & Co Inc (a)(b) | - | 322 | 322 |
37,400 | 41,043 | 78,443 | optionsXpress Holdings Inc* | 803 | 881 | 1,684 |
- | 14,570 | 14,570 | Piper Jaffray Cos (a)(b) | - | 543 | 543 |
- | 20,643 | 20,643 | SWS Group Inc | - | 271 | 271 |
- | 26,697 | 26,697 | TradeStation Group Inc (b) | - | 249 | 249 |
| | | 0.09% Finance - Leasing Company | | | |
- | 23,690 | 23,690 | Financial Federal Corp | - | 553 | 553 |
| | | 0.02% Firearms & Ammunition | | | |
- | 19,337 | 19,337 | Sturm Ruger & Co Inc (a)(b) | - | 145 | 145 |
| | | 0.48% Food - Baking | | | |
41,100 | 72,787 | 113,887 | Flowers Foods Inc* | 1,064 | 1,884 | 2,948 |
| | | 0.11% Food - Canned | | | |
- | 29,026 | 29,026 | TreeHouse Foods Inc (b) | - | 658 | 658 |
| | | 0.72% Food - Miscellaneous/Diversified | | | |
16,100 | - | 16,100 | Corn Products International Inc* | 747 | - | 747 |
14,000 | 37,292 | 51,292 | Hain Celestial Group Inc (a)(b)* | 345 | 920 | 1,265 |
- | 13,055 | 13,055 | J&J Snack Foods Corp | - | 374 | 374 |
- | 29,034 | 29,034 | Lance Inc | - | 609 | 609 |
- | 24,157 | 24,157 | Ralcorp Holdings Inc (b) | - | 1,474 | 1,474 |
| | | 0.10% Food - Retail | | | |
- | 21,364 | 21,364 | Great Atlantic & Pacific Tea Co (a)(b) | - | 588 | 588 |
| | | 0.53% Food - Wholesale & Distribution | | | |
- | 12,209 | 12,209 | Nash Finch Co (a) | - | 447 | 447 |
- | 33,098 | 33,098 | Performance Food Group Co (b) | - | 1,107 | 1,107 |
23,000 | 20,377 | 43,377 | Spartan Stores Inc* | 480 | 425 | 905 |
- | 40,092 | 40,092 | United Natural Foods Inc (a)(b) | - | 794 | 794 |
| | | 1.29% Footwear & Related Apparel | | | |
- | 76,687 | 76,687 | CROCS Inc (a)(b) | - | 783 | 783 |
8,200 | 12,098 | 20,298 | Deckers Outdoor Corp (a)(b)* | 1,132 | 1,670 | 2,802 |
56,600 | 53,387 | 109,987 | Iconix Brand Group Inc (a)(b)* | 901 | 850 | 1,751 |
- | 30,290 | 30,290 | Skechers U.S.A. Inc (b) | - | 716 | 716 |
18,400 | 46,821 | 65,221 | Wolverine World Wide Inc* | 529 | 1,346 | 1,875 |
| | | 0.08% Forestry | | | |
- | 9,801 | 9,801 | Deltic Timber Corp | - | 517 | 517 |
| | | 0.18% Funeral Services & Related Items | | | |
- | 57,997 | 57,997 | Hillenbrand Inc | - | 1,104 | 1,104 |
| | | 0.19% Gambling (Non-Hotel) | | | |
41,700 | - | 41,700 | Dover Downs Gaming & Entertainment Inc (a)* | 337 | - | 337 |
- | 55,754 | 55,754 | Pinnacle Entertainment Inc (a)(b) | - | 865 | 865 |
| | | 0.30% Garden Products | | | |
9,400 | 34,849 | 44,249 | Toro Co* | 399 | 1,477 | 1,876 |
| | | 3.11% Gas - Distribution | | | |
27,600 | 83,680 | 111,280 | Atmos Energy Corp* | 764 | 2,316 | 3,080 |
- | 20,268 | 20,268 | Laclede Group Inc/The (a) | - | 767 | 767 |
15,450 | 38,916 | 54,366 | New Jersey Resources Corp* | 492 | 1,240 | 1,732 |
- | 24,565 | 24,565 | Northwest Natural Gas Co | - | 1,102 | 1,102 |
- | 68,285 | 68,285 | Piedmont Natural Gas Co (a) | - | 1,795 | 1,795 |
- | 27,557 | 27,557 | South Jersey Industries Inc | - | 1,006 | 1,006 |
58,500 | 115,135 | 173,635 | Southern Union Co* | 1,499 | 2,950 | 4,449 |
13,900 | 40,040 | 53,940 | Southwest Gas Corp* | 401 | 1,156 | 1,557 |
31,000 | 99,307 | 130,307 | UGI Corp* | 806 | 2,582 | 3,388 |
8,900 | - | 8,900 | WGL Holdings Inc* | 292 | - | 292 |
| | | 0.25% Home Furnishings | | | |
- | 10,982 | 10,982 | Bassett Furniture Industries Inc | - | 131 | 131 |
- | 26,997 | 26,997 | Ethan Allen Interiors Inc (a)(c) | - | 741 | 741 |
- | 47,829 | 47,829 | La-Z-Boy Inc (a) | - | 305 | 305 |
32,800 | - | 32,800 | Tempur-Pedic International Inc (a)* | 364 | - | 364 |
| | | 0.05% Hotels & Motels | | | |
- | 19,770 | 19,770 | Marcus Corp | - | 328 | 328 |
| | | 0.07% Housewares | | | |
- | 13,537 | 13,537 | Libbey Inc | - | 192 | 192 |
- | 4,388 | 4,388 | National Presto Industries Inc | - | 238 | 238 |
| | | 0.89% Human Resources | | | |
- | 21,227 | 21,227 | Administaff Inc | - | 556 | 556 |
- | 28,007 | 28,007 | AMN Healthcare Services Inc (b) | - | 408 | 408 |
22,700 | 12,672 | 35,372 | CDI Corp (a)* | 618 | 345 | 963 |
- | 29,686 | 29,686 | Cross Country Healthcare Inc (b) | - | 355 | 355 |
- | 21,668 | 21,668 | Gevity HR Inc | - | 148 | 148 |
12,200 | 16,071 | 28,271 | Heidrick & Struggles International Inc (a)* | 365 | 481 | 846 |
42,700 | - | 42,700 | Korn/Ferry International (b)* | 797 | - | 797 |
- | 32,954 | 32,954 | On Assignment Inc (a)(b) | - | 232 | 232 |
80,000 | 51,970 | 131,970 | Spherion Corp (a)(b)* | 395 | 257 | 652 |
- | 40,790 | 40,790 | TrueBlue Inc (a)(b) | - | 519 | 519 |
| | | 0.43% Identification Systems - Development | | | |
- | 50,532 | 50,532 | Brady Corp | - | 1,715 | 1,715 |
- | 37,083 | 37,083 | Checkpoint Systems Inc (a)(b) | - | 962 | 962 |
| | | 0.04% Industrial Audio & Video Products | | | |
- | 24,514 | 24,514 | Sonic Solutions Inc (a)(b) | - | 225 | 225 |
| | | 0.19% Industrial Automation & Robots | | | |
- | 40,348 | 40,348 | Cognex Corp | - | 1,017 | 1,017 |
- | 22,017 | 22,017 | Gerber Scientific Inc (b) | - | 204 | 204 |
| | | 0.70% Instruments - Controls | | | |
- | 16,503 | 16,503 | Photon Dynamics Inc (b) | - | 183 | 183 |
- | 27,552 | 27,552 | Watts Water Technologies Inc (a) | - | 740 | 740 |
39,400 | 55,155 | 94,555 | Woodward Governor Co* | 1,384 | 1,937 | 3,321 |
- | 27,221 | 27,221 | X-Rite Inc (b) | - | 69 | 69 |
| | | 0.34% Instruments - Scientific | | | |
- | 17,272 | 17,272 | Dionex Corp (b) | - | 1,351 | 1,351 |
- | 33,896 | 33,896 | FEI Co (a)(b) | ��- | 741 | 741 |
| | | 0.21% Insurance Brokers | | | |
10,200 | 34,190 | 44,390 | Hilb Rogal & Hobbs Co | 295 | 989 | 1,284 |
| | | 0.27% Internet Application Software | | | |
- | 64,024 | 64,024 | Cybersource Corp (b) | - | 1,162 | 1,162 |
- | 27,710 | 27,710 | DealerTrack Holdings Inc (b) | - | 533 | 533 |
| | | 0.03% Internet Connectivity Services | | | |
- | 20,418 | 20,418 | PC-Tel Inc (b) | - | 168 | 168 |
| | | 0.20% Internet Content - Information & News | - | | |
- | 31,965 | 31,965 | Infospace Inc (a) | - | 386 | 386 |
- | 25,828 | 25,828 | Knot Inc/The (a)(b) | - | 303 | 303 |
17,400 | - | 17,400 | WebMD Health Corp (a)(b)* | 546 | - | 546 |
| | | 0.24% Internet Security | | | |
17,400 | 35,536 | 52,936 | Blue Coat Systems Inc (b)* | 367 | 750 | 1,117 |
- | 53,304 | 53,304 | Secure Computing Corp (a)(b) | - | 353 | 353 |
| | | 0.24% Internet Telephony | | | |
24,700 | 45,272 | 69,972 | j2 Global Communications Inc (a)(b)* | 529 | 969 | 1,498 |
| | | 0.08% Investment Management & Advisory Services | | | |
14,600 | - | 14,600 | Waddell & Reed Financial Inc* | 494 | - | 494 |
| | | 0.29% Lasers - Systems & Components | | | |
9,100 | 28,204 | 37,304 | Cymer Inc (a)(b)* | 237 | 733 | 970 |
- | 25,942 | 25,942 | Electro Scientific Industries Inc (b) | - | 425 | 425 |
- | 33,429 | 33,429 | Newport Corp (a)(b) | - | 385 | 385 |
| | | 0.31% Leisure & Recreation Products | | | |
- | 21,506 | 21,506 | Multimedia Games Inc (a)(b) | - | 92 | 92 |
11,000 | 38,615 | 49,615 | WMS Industries Inc (a)(b)* | 398 | 1,397 | 1,795 |
| | | 0.29% Life & Health Insurance | | | |
13,200 | 39,945 | 53,145 | Delphi Financial Group Inc* | 359 | 1,087 | 1,446 |
- | 20,068 | 20,068 | Presidential Life Corp (a) | - | 341 | 341 |
| | | 0.22% Linen Supply & Related Items | | | |
- | 9,088 | 9,088 | Angelica Corp | - | 147 | 147 |
- | 18,554 | 18,554 | G&K Services Inc | - | 585 | 585 |
- | 13,278 | 13,278 | Unifirst Corp/MA (a) | - | 621 | 621 |
| | | 0.11% Machinery - Construction & Mining | | | |
- | 17,839 | 17,839 | Astec Industries Inc (b) | - | 654 | 654 |
| | | 0.40% Machinery - Electrical | | | |
- | 42,781 | 42,781 | Baldor Electric Co | - | 1,386 | 1,386 |
- | 29,160 | 29,160 | Regal-Beloit Corp | - | 1,082 | 1,082 |
| | | 0.19% Machinery - Farm | | | |
- | 11,011 | 11,011 | Lindsay Corp (a) | - | 1,146 | 1,146 |
| | | 1.60% Machinery - General Industry | | | |
- | 24,495 | 24,495 | Albany International Corp | - | 889 | 889 |
27,150 | 33,729 | 60,879 | Applied Industrial Technologies Inc* | 656 | 815 | 1,471 |
20,500 | 49,382 | 69,882 | Gardner Denver Inc (b)* | 952 | 2,294 | 3,246 |
21,200 | 20,069 | 41,269 | Intevac Inc (a)(b)* | 281 | 267 | 548 |
37,500 | 32,075 | 69,575 | Robbins & Myers Inc* | 1,495 | 1,278 | 2,773 |
21,800 | - | 21,800 | Wabtec Corp* | 935 | - | 935 |
| | | 0.17% Machinery - Material Handling | | | |
- | 7,952 | 7,952 | Cascade Corp | - | 344 | 344 |
24,000 | - | 24,000 | Columbus McKinnon Corp/NY (a)* | 679 | - | 679 |
| | | 1.03% Medical - Biomedical/Gene | | | |
- | 32,120 | 32,120 | Arqule Inc (b) | - | 124 | 124 |
49,400 | 26,990 | 76,390 | Cambrex Corp* | 289 | 158 | 447 |
- | 23,128 | 23,128 | CryoLife Inc (a)(b) | - | 246 | 246 |
- | 29,105 | 29,105 | Enzo Biochem Inc (a)(b) | - | 238 | 238 |
- | 17,166 | 17,166 | Integra LifeSciences Holdings Corp (a)(b) | - | 727 | 727 |
- | 28,617 | 28,617 | Lifecell Corp (a)(b) | - | 1,453 | 1,453 |
- | 30,570 | 30,570 | Martek Biosciences Corp (a)(b) | - | 1,078 | 1,078 |
- | 58,043 | 58,043 | Regeneron Pharmaceuticals Inc (a)(b) | - | 1,139 | 1,139 |
- | 40,855 | 40,855 | Savient Pharmaceuticals Inc (a)(b) | - | 892 | 892 |
| | | 0.84% Medical - Drugs | | | |
17,600 | 52,296 | 69,896 | Cubist Pharmaceuticals Inc (b)* | 341 | 1,012 | 1,353 |
- | 28,238 | 28,238 | PharMerica Corp (a)(b) | - | 481 | 481 |
- | 44,269 | 44,269 | Salix Pharmaceuticals Ltd (a)(b) | - | 311 | 311 |
52,200 | 33,758 | 85,958 | Sciele Pharma Inc (a)(b)* | 1,006 | 651 | 1,657 |
86,300 | 65,062 | 151,362 | Viropharma Inc (a)(b)* | 790 | 596 | 1,386 |
| | | 0.21% Medical - Generic Drugs | | | |
11,500 | 41,080 | 52,580 | Alpharma Inc (a)(b)* | 283 | 1,011 | 1,294 |
| | | 0.45% Medical - HMO | | | |
16,400 | 49,754 | 66,154 | AMERIGROUP Corp (b)* | 426 | 1,293 | 1,719 |
- | 40,616 | 40,616 | Centene Corp (b) | - | 746 | 746 |
- | 13,229 | 13,229 | Molina Healthcare Inc (a)(b) | - | 329 | 329 |
| | | 0.10% Medical - Hospitals | | | |
19,900 | 12,672 | 32,572 | Medcath Corp (a)(b)* | 369 | 235 | 604 |
| | | 0.81% Medical - Outpatient & Home Medical Care | | | |
- | 9,948 | 9,948 | Air Methods Corp (b) | - | 399 | 399 |
- | 24,624 | 24,624 | Amedisys Inc (a)(b) | - | 1,276 | 1,276 |
- | 29,187 | 29,187 | Amsurg Corp (b) | - | 745 | 745 |
42,700 | 26,089 | 68,789 | Gentiva Health Services Inc (a)(b)* | 928 | 567 | 1,495 |
- | 13,403 | 13,403 | LHC Group Inc (a)(b) | - | 209 | 209 |
- | 30,425 | 30,425 | Odyssey HealthCare Inc (b) | - | 278 | 278 |
14,400 | 23,613 | 38,013 | Res-Care Inc (b)* | 235 | 385 | 620 |
| | | 0.30% Medical Information Systems | | | |
- | 52,937 | 52,937 | Allscripts Healthcare Solutions Inc (a)(b) | - | 590 | 590 |
- | 39,342 | 39,342 | Phase Forward Inc (b) | - | 724 | 724 |
- | 16,308 | 16,308 | Quality Systems Inc | - | 524 | 524 |
| | | 1.26% Medical Instruments | | | |
- | 20,161 | 20,161 | Abaxis Inc (a)(b) | - | 514 | 514 |
40,700 | 24,730 | 65,430 | Arthrocare Corp (a)(b)* | 1,834 | 1,114 | 2,948 |
23,700 | 26,626 | 50,326 | Conmed Corp (b)* | 605 | 679 | 1,284 |
12,100 | 12,065 | 24,165 | Datascope Corp* | 453 | 452 | 905 |
- | 11,094 | 11,094 | Kensey Nash Corp (a)(b) | - | 324 | 324 |
15,300 | - | 15,300 | Natus Medical Inc (a)(b)* | 301 | - | 301 |
9,400 | 14,278 | 23,678 | SurModics Inc (a)(b)* | 418 | 635 | 1,053 |
- | 32,962 | 32,962 | Symmetry Medical Inc (b) | - | 462 | 462 |
| | | 0.08% Medical Laser Systems | | | |
- | 22,221 | 22,221 | Biolase Technology Inc (a)(b) | - | 58 | 58 |
- | 17,194 | 17,194 | LCA-Vision Inc (a) | - | 174 | 174 |
- | 17,058 | 17,058 | Palomar Medical Technologies Inc (a)(b) | - | 240 | 240 |
| | | 1.72% Medical Products | | | |
- | 67,388 | 67,388 | American Medical Systems Holdings Inc (a)(b) | - | 950 | 950 |
- | 41,848 | 41,848 | Cooper Cos Inc/The (a) | - | 1,465 | 1,465 |
- | 20,891 | 20,891 | Cyberonics Inc (a)(b) | - | 330 | 330 |
4,500 | 23,834 | 28,334 | Haemonetics Corp (b) | 258 | 1,364 | 1,622 |
- | 29,800 | 29,800 | Invacare Corp (a) | - | 538 | 538 |
9,000 | 31,383 | 40,383 | Mentor Corp | 263 | 918 | 1,181 |
- | 16,489 | 16,489 | Osteotech Inc (b) | - | 83 | 83 |
- | 60,151 | 60,151 | PSS World Medical Inc (a)(b) | - | 991 | 991 |
6,900 | 7,415 | 14,315 | Vital Signs Inc* | 361 | 388 | 749 |
13,600 | 29,880 | 43,480 | West Pharmaceutical Services Inc* | 638 | 1,402 | 2,040 |
- | 19,285 | 19,285 | Zoll Medical Corp (b) | - | 644 | 644 |
| | | 0.30% Metal - Aluminum | | | |
- | 27,084 | 27,084 | Century Aluminum Co (a)(b) | - | 1,877 | 1,877 |
| | | 0.40% Metal Processors & Fabrication | | | |
- | 25,879 | 25,879 | Kaydon Corp | - | 1,355 | 1,355 |
- | 34,505 | 34,505 | Mueller Industries Inc | - | 1,117 | 1,117 |
| | | 0.09% Metal Products - Distribution | | | |
- | 15,214 | 15,214 | AM Castle & Co | - | 470 | 470 |
- | 3,884 | 3,884 | Lawson Products | - | 99 | 99 |
| | | 0.11% Multi-Line Insurance | | | |
- | 20,178 | 20,178 | United Fire & Casualty Co (a) | - | 665 | 665 |
| | | 0.08% Multilevel Direct Selling | | | |
28,600 | - | 28,600 | Nu Skin Enterprises Inc (a)* | 513 | - | 513 |
| | | 0.53% Multimedia | | | |
- | 12,290 | 12,290 | 4Kids Entertainment Inc (b) | - | 109 | 109 |
12,650 | 39,482 | 52,132 | Factset Research Systems Inc (a)* | 759 | 2,370 | 3,129 |
| | | 0.69% Networking Products | | | |
- | 112,484 | 112,484 | Adaptec Inc (b)(c) | - | 314 | 314 |
15,200 | 28,092 | 43,292 | Anixter International Inc (a)(b)* | 866 | 1,600 | 2,466 |
- | 16,470 | 16,470 | Black Box Corp | - | 490 | 490 |
27,944 | 32,862 | 60,806 | Netgear Inc (b)* | 453 | 533 | 986 |
| | | 0.24% Non-Ferrous Metals | | | |
- | 18,966 | 18,966 | Brush Engineered Materials Inc (a)(b) | - | 588 | 588 |
- | 21,536 | 21,536 | RTI International Metals Inc (b) | - | 887 | 887 |
| | | 0.32% Non-Hazardous Waste Disposal | | | |
- | 62,384 | 62,384 | Waste Connections Inc (b) | - | 2,001 | 2,001 |
| | | 0.37% Office Furnishings - Original | | | |
28,000 | - | 28,000 | Herman Miller Inc (a)* | 653 | - | 653 |
22,000 | 52,066 | 74,066 | Interface Inc* | 283 | 669 | 952 |
53,700 | - | 53,700 | Knoll Inc (a)* | 699 | - | 699 |
| | | 0.02% Office Supplies & Forms | | | |
- | 11,758 | 11,758 | Standard Register Co/The | - | 111 | 111 |
| | | 2.85% Oil - Field Services | | | |
- | 20,938 | 20,938 | Basic Energy Services Inc (a)(b) | - | 486 | 486 |
28,100 | 85,276 | 113,376 | Helix Energy Solutions Group Inc (b)* | 971 | 2,946 | 3,917 |
13,600 | 21,489 | 35,089 | Hornbeck Offshore Services Inc (a)(b)* | 678 | 1,072 | 1,750 |
- | 24,808 | 24,808 | Matrix Service Co (b) | - | 499 | 499 |
30,000 | 51,235 | 81,235 | Oceaneering International Inc (b)* | 2,004 | 3,422 | 5,426 |
- | 21,009 | 21,009 | SEACOR Holdings Inc (b) | - | 1,788 | 1,788 |
- | 14,632 | 14,632 | Superior Well Services Inc (a)(b) | - | 348 | 348 |
- | 69,260 | 69,260 | Tetra Technologies Inc (b) | - | 1,126 | 1,126 |
- | 28,699 | 28,699 | W-H Energy Services Inc (a)(b) | - | 2,218 | 2,218 |
| | | 0.54% Oil & Gas Drilling | | | |
- | 25,674 | 25,674 | Atwood Oceanics Inc (b) | - | 2,585 | 2,585 |
- | 46,288 | 46,288 | Pioneer Drilling Co (a)(b) | - | 756 | 756 |
| | | 3.70% Oil Company - Exploration & Production | | | |
14,200 | 90,945 | 105,145 | Cabot Oil & Gas Corp | 809 | 5,181 | 5,990 |
- | 38,728 | 38,728 | Penn Virginia Corp | - | 2,033 | 2,033 |
- | 13,863 | 13,863 | Petroleum Development Corp (b) | - | 1,043 | 1,043 |
- | 40,263 | 40,263 | Petroquest Energy Inc (b) | - | 837 | 837 |
- | 58,623 | 58,623 | St Mary Land & Exploration Co | - | 2,563 | 2,563 |
29,900 | 26,322 | 56,222 | Stone Energy Corp (a)(b)* | 1,822 | 1,604 | 3,426 |
21,300 | 28,132 | 49,432 | Swift Energy Co (b)* | 1,110 | 1,467 | 2,577 |
24,400 | 43,852 | 68,252 | Unit Corp (b)* | 1,550 | 2,785 | 4,335 |
| | | 0.96% Oil Field Machinery & Equipment | | | |
- | 18,984 | 18,984 | CARBO Ceramics Inc | - | 902 | 902 |
11,200 | 25,426 | 36,626 | Dril-Quip Inc (b)* | 640 | 1,453 | 2,093 |
- | 10,182 | 10,182 | Gulf Island Fabrication Inc | - | 403 | 403 |
7,800 | 13,618 | 21,418 | Lufkin Industries Inc (a)* | 589 | 1,027 | 1,616 |
- | 17,345 | 17,345 | NATCO Group Inc (a)(b) | - | 878 | 878 |
| | | 0.13% Oil Refining & Marketing | | | |
18,800 | - | 18,800 | Holly Corp* | 780 | - | 780 |
| | | 0.37% Paper & Related Products | | | |
- | 36,522 | 36,522 | Buckeye Technologies Inc (b) | - | 315 | 315 |
- | 13,908 | 13,908 | Neenah Paper Inc | - | 319 | 319 |
- | 31,116 | 31,116 | Rock-Tenn Co | - | 1,056 | 1,056 |
- | 14,411 | 14,411 | Schweitzer-Mauduit International Inc | - | 319 | 319 |
- | 46,743 | 46,743 | Wausau Paper Corp | - | 362 | 362 |
| | | 0.16% Pharmacy Services | | | |
- | 34,594 | 34,594 | HealthExtras Inc (a)(b) | - | 976 | 976 |
| | | 0.05% Physical Therapy & Rehabilitation Centers | | | |
- | 16,778 | 16,778 | RehabCare Group Inc (b) | - | 285 | 285 |
| | | 0.91% Physician Practice Management | | | |
- | 33,406 | 33,406 | Healthways Inc (a)(b) | - | 1,220 | 1,220 |
- | 19,955 | 19,955 | Matria Healthcare Inc (a)(b) | - | 509 | 509 |
11,700 | 45,135 | 56,835 | Pediatrix Medical Group Inc (b)* | 796 | 3,070 | 3,866 |
| | | 0.10% Poultry | | | |
- | 14,308 | 14,308 | Sanderson Farms Inc | - | 596 | 596 |
| | | 0.27% Power Converter & Supply Equipment | | | |
55,500 | 33,270 | 88,770 | Advanced Energy Industries Inc (b)* | 777 | 465 | 1,242 |
- | 23,875 | 23,875 | C&D Technologies Inc (a)(b) | - | 132 | 132 |
- | 28,273 | 28,273 | Magnetek Inc (b) | - | 99 | 99 |
- | 17,815 | 17,815 | Vicor Corp | - | 215 | 215 |
| | | 0.23% Printing - Commercial | | | |
- | 24,472 | 24,472 | Bowne & Co Inc | - | 407 | 407 |
7,300 | 10,297 | 17,597 | Consolidated Graphics Inc (b)* | 425 | 599 | 1,024 |
| | | 2.22% Property & Casualty Insurance | | | |
- | 15,070 | 15,070 | Infinity Property & Casualty Corp | - | 584 | 584 |
- | 14,281 | 14,281 | LandAmerica Financial Group Inc (a) | - | 410 | 410 |
16,400 | 12,402 | 28,802 | Navigators Group Inc (b)* | 804 | 608 | 1,412 |
35,500 | 54,317 | 89,817 | Philadelphia Consolidated Holding Co (b)* | 1,309 | 2,003 | 3,312 |
10,400 | 29,957 | 40,357 | ProAssurance Corp (b)* | 549 | 1,583 | 2,132 |
5,100 | 16,868 | 21,968 | RLI Corp | 245 | 810 | 1,055 |
- | 15,056 | 15,056 | Safety Insurance Group Inc | - | 540 | 540 |
- | 7,310 | 7,310 | SCPIE Holdings Inc (b) | - | 203 | 203 |
30,700 | - | 30,700 | SeaBright Insurance Holdings Inc (b)* | 476 | - | 476 |
- | 50,111 | 50,111 | Selective Insurance Group | - | 1,068 | 1,068 |
- | 16,774 | 16,774 | Stewart Information Services Corp (a) | - | 411 | 411 |
- | 18,762 | 18,762 | Tower Group Inc | - | 441 | 441 |
11,000 | 34,517 | 45,517 | Zenith National Insurance Corp* | 409 | 1,282 | 1,691 |
| | | 1.80% Publicly Traded Investment Fund | | | |
- | 178,150 | 178,150 | iShares S&P SmallCap 600 Index Fund | - | 11,129 | 11,129 |
| | | 0.03% Publishing - Newspapers | | | |
- | 16,357 | 16,357 | AH Belo Corp | - | 159 | 159 |
| | | 0.14% Racetracks | | | |
20,600 | - | 20,600 | International Speedway Corp* | 874 | - | 874 |
| | | 0.01% Radio | | | |
- | 75,471 | 75,471 | Radio One Inc (b) | - | 75 | 75 |
| | | 0.13% Real Estate Operator & Developer | | | |
- | 33,119 | 33,119 | Forestar Real Estate Group Inc (a)(b) | - | 825 | 825 |
| | | 0.25% Recreational Vehicles | | | |
- | 11,177 | 11,177 | Arctic Cat Inc (a) | - | 85 | 85 |
- | 31,276 | 31,276 | Polaris Industries Inc (a) | - | 1,456 | 1,456 |
| | | 0.96% REITS - Apartments | | | |
- | 23,739 | 23,739 | Essex Property Trust Inc | - | 2,825 | 2,825 |
- | 30,344 | 30,344 | Home Properties Inc (a) | - | 1,595 | 1,595 |
4,900 | 23,977 | 28,877 | Mid-America Apartment Communities Inc | 260 | 1,271 | 1,531 |
| | | 0.73% REITS - Diversified | | | |
- | 43,992 | 43,992 | Colonial Properties Trust | - | 1,066 | 1,066 |
- | 28,063 | 28,063 | Entertainment Properties Trust | - | 1,498 | 1,498 |
21,300 | 57,044 | 78,344 | Lexington Realty Trust (a)* | 307 | 821 | 1,128 |
- | 14,241 | 14,241 | PS Business Parks Inc | - | 815 | 815 |
| | | 0.67% REITS - Healthcare | | | |
- | 18,870 | 18,870 | LTC Properties Inc | - | 514 | 514 |
64,700 | 60,093 | 124,793 | Medical Properties Trust Inc (a)* | 786 | 730 | 1,516 |
- | 88,278 | 88,278 | Senior Housing Properties Trust | - | 2,114 | 2,114 |
| | | 0.31% REITS - Hotels | | | |
88,700 | - | 88,700 | Ashford Hospitality Trust Inc* | 513 | - | 513 |
- | 88,158 | 88,158 | DiamondRock Hospitality Co | - | 1,124 | 1,124 |
20,700 | - | 20,700 | FelCor Lodging Trust Inc (a)* | 261 | - | 261 |
| | | 0.80% REITS - Office Property | | | |
19,400 | 66,317 | 85,717 | BioMed Realty Trust Inc* | 505 | 1,724 | 2,229 |
- | 30,596 | 30,596 | Kilroy Realty Corp | - | 1,601 | 1,601 |
13,700 | 14,161 | 27,861 | Parkway Properties Inc/MD (a)* | 543 | 562 | 1,105 |
| | | 0.20% REITS - Regional Malls | | | |
11,500 | - | 11,500 | CBL & Associates Properties Inc* | 282 | - | 282 |
- | 36,561 | 36,561 | Pennsylvania Real Estate Investment Trust (a) | - | 921 | 921 |
| | | 0.59% REITS - Shopping Centers | | | |
- | 29,938 | 29,938 | Acadia Realty Trust | - | 768 | 768 |
33,500 | - | 33,500 | Cedar Shopping Centers Inc (a)* | 419 | - | 419 |
- | 54,484 | 54,484 | Inland Real Estate Corp | - | 880 | 880 |
- | 26,956 | 26,956 | Kite Realty Group Trust | - | 366 | 366 |
- | 29,152 | 29,152 | Tanger Factory Outlet Centers | - | 1,176 | 1,176 |
| | | 0.31% REITS - Single Tenant | | | |
17,200 | 67,473 | 84,673 | National Retail Properties Inc | 394 | 1,546 | 1,940 |
| | | 0.32% REITS - Storage | | | |
- | 61,780 | 61,780 | Extra Space Storage Inc | - | 1,040 | 1,040 |
- | 20,247 | 20,247 | Sovran Self Storage Inc | - | 905 | 905 |
| | | 0.26% REITS - Warehouse & Industrial | | | |
5,600 | 22,143 | 27,743 | EastGroup Properties Inc | 267 | 1,056 | 1,323 |
9,900 | - | 9,900 | First Industrial Realty Trust Inc (a)* | 299 | - | 299 |
| | | 0.38% Rental - Auto & Equipment | | | |
11,900 | 49,870 | 61,770 | Aaron Rents Inc* | 296 | 1,242 | 1,538 |
36,700 | - | 36,700 | Rent-A-Center Inc/TX (b)* | 790 | - | 790 |
| | | 0.52% Research & Development | | | |
8,100 | 11,958 | 20,058 | Kendle International Inc (a)(b)* | 346 | 510 | 856 |
16,800 | 52,343 | 69,143 | Parexel International Corp (b)* | 427 | 1,330 | 1,757 |
8,900 | 17,690 | 26,590 | PharmaNet Development Group Inc (a)(b)* | 212 | 422 | 634 |
| | | 1.80% Retail - Apparel & Shoe | | | |
- | 41,156 | 41,156 | Brown Shoe Co Inc | - | 686 | 686 |
5,800 | - | 5,800 | Buckle Inc/The* | 282 | - | 282 |
- | 27,343 | 27,343 | Cato Corp/The | - | 443 | 443 |
- | 19,431 | 19,431 | Charlotte Russe Holding Inc (b) | - | 309 | 309 |
- | 21,914 | 21,914 | Childrens Place Retail Stores Inc/The (a)(b) | - | 509 | 509 |
- | 33,092 | 33,092 | Christopher & Banks Corp | - | 392 | 392 |
- | 42,018 | 42,018 | Dress Barn Inc (a)(b) | - | 566 | 566 |
- | 44,925 | 44,925 | Finish Line | - | 295 | 295 |
- | 21,205 | 21,205 | Genesco Inc (a)(b) | - | 470 | 470 |
36,800 | 26,662 | 63,462 | Gymboree Corp (b)* | 1,590 | 1,152 | 2,742 |
- | 40,545 | 40,545 | HOT Topic Inc (b) | - | 215 | 215 |
12,400 | 16,910 | 29,310 | Jos A Bank Clothiers Inc (a)(b)* | 303 | 413 | 716 |
- | 48,697 | 48,697 | Men's Wearhouse Inc | - | 1,297 | 1,297 |
- | 116,158 | 116,158 | Quiksilver Inc (a)(b) | - | 1,130 | 1,130 |
- | 35,537 | 35,537 | Stage Stores Inc | - | 559 | 559 |
- | 24,025 | 24,025 | Stein Mart Inc (a) | - | 128 | 128 |
- | 22,976 | 22,976 | Tween Brands Inc (b) | - | 437 | 437 |
| | | 0.06% Retail - Auto Parts | | | |
- | 38,624 | 38,624 | PEP Boys-Manny Moe & Jack (a) | - | 345 | 345 |
| | | 0.20% Retail - Automobile | | | |
- | 21,499 | 21,499 | Group 1 Automotive Inc (a) | - | 574 | 574 |
- | 14,863 | 14,863 | Lithia Motors Inc (a) | - | 134 | 134 |
- | 27,371 | 27,371 | Sonic Automotive Inc | - | 555 | 555 |
| | | 0.02% Retail - Bedding | | | |
- | 41,508 | 41,508 | Select Comfort Corp (a)(b) | - | 125 | 125 |
| | | 0.09% Retail - Computer Equipment | | | |
- | 45,325 | 45,325 | Insight Enterprises Inc (b) | - | 547 | 547 |
| | | 0.18% Retail - Convenience Store | | | |
- | 47,171 | 47,171 | Casey's General Stores Inc | - | 1,044 | 1,044 |
8,600 | - | 8,600 | Pantry Inc/The (b)* | 93 | - | 93 |
| | | 0.09% Retail - Discount | | | |
- | 37,485 | 37,485 | Fred's Inc | - | 416 | 416 |
- | 28,002 | 28,002 | Tuesday Morning Corp (a) | - | 152 | 152 |
| | | 0.25% Retail - Drug Store | | | |
8,500 | 29,476 | 37,976 | Longs Drug Stores Corp | 341 | 1,181 | 1,522 |
| | | 0.07% Retail - Fabric Store | | | |
- | 23,189 | 23,189 | Jo-Ann Stores Inc (a)(b) | - | 439 | 439 |
| | | 0.18% Retail - Gardening Products | | | |
- | 30,371 | 30,371 | Tractor Supply Co (b) | - | 1,080 | 1,080 |
| | | 0.03% Retail - Home Furnishings | | | |
- | 20,309 | 20,309 | Haverty Furniture Cos Inc | - | 185 | 185 |
| | | 0.20% Retail - Jewelry | | | |
- | 17,957 | 17,957 | Movado Group Inc | - | 392 | 392 |
- | 39,763 | 39,763 | Zale Corp (a)(b) | - | 824 | 824 |
| | | 0.03% Retail - Leisure Products | | | |
- | 17,082 | 17,082 | MarineMax Inc (a)(b) | - | 195 | 195 |
| | | 0.08% Retail - Office Supplies | | | |
- | 16,036 | 16,036 | School Specialty Inc (a)(b) | - | 472 | 472 |
| | | 0.34% Retail - Pawn Shops | | | |
8,700 | 27,172 | 35,872 | Cash America International Inc* | 355 | 1,108 | 1,463 |
22,100 | - | 22,100 | Ezcorp Inc (b)* | 268 | - | 268 |
- | 25,435 | 25,435 | First Cash Financial Services Inc (b) | - | 378 | 378 |
| | | 0.11% Retail - Petroleum Products | | | |
- | 26,589 | 26,589 | World Fuel Services Corp | - | 653 | 653 |
| | | 2.26% Retail - Restaurants | | | |
- | 14,306 | 14,306 | Buffalo Wild Wings Inc (a)(b | - | 440 | 440 |
23,900 | 23,840 | 47,740 | California Pizza Kitchen Inc (a)(b)* | 372 | 372 | 744 |
8,500 | 24,782 | 33,282 | CEC Entertainment Inc (b)* | 316 | 922 | 1,238 |
- | 50,867 | 50,867 | CKE Restaurants Inc | - | 533 | 533 |
6,600 | 13,979 | 20,579 | Ihop Corp * | 308 | 652 | 960 |
45,900 | 55,414 | 101,314 | Jack in the Box Inc (b)* | 1,228 | 1,482 | 2,710 |
15,700 | 11,565 | 27,265 | Landry's Restaurants Inc (a)* | 251 | 185 | 436 |
- | 20,608 | 20,608 | O'Charleys Inc | - | 239 | 239 |
- | 28,018 | 28,018 | Panera Bread Co (a)(b) | - | 1,464 | 1,464 |
26,300 | 19,321 | 45,621 | Papa John's International Inc (b)* | 710 | 522 | 1,232 |
- | 22,487 | 22,487 | PF Chang's China Bistro Inc (a)(b) | - | 698 | 698 |
- | 15,641 | 15,641 | Red Robin Gourmet Burgers Inc (a)(b) | - | 642 | 642 |
- | 18,510 | 18,510 | Ruth's Chris Steak House Inc (a)(b) | - | 136 | 136 |
- | 56,563 | 56,563 | Sonic Corp (b) | - | 1,244 | 1,244 |
- | 26,505 | 26,505 | Steak N Shake Co/The (a)(b) | - | 209 | 209 |
- | 50,167 | 50,167 | Texas Roadhouse Inc (a)(b) | - | 592 | 592 |
- | 58,681 | 58,681 | Triarc Cos Inc (a) | - | 417 | 417 |
| | | 0.25% Retail - Sporting Goods | | | |
- | 20,393 | 20,393 | Big 5 Sporting Goods Corp (a) | - | 188 | 188 |
- | 36,773 | 36,773 | Cabela's Inc (a)(b) | - | 498 | 498 |
- | 26,419 | 26,419 | Hibbett Sports Inc (a)(b) | - | 482 | 482 |
- | 16,726 | 16,726 | Zumiez Inc (a)(b) | - | 350 | 350 |
| | | 0.23% Retirement & Aged Care | | | |
86,300 | - | 86,300 | Five Star Quality Care Inc (a)(b)* | 518 | - | 518 |
- | 41,669 | 41,669 | Sunrise Senior Living Inc (a)(b) | - | 894 | 894 |
| | | 0.05% Rubber & Plastic Products | | | |
- | 26,178 | 26,178 | Myers Industries Inc | - | 329 | 329 |
| | | 0.45% Savings & Loans - Thrifts | | | |
- | 16,474 | 16,474 | Anchor Bancorp Wisconsin Inc | - | 250 | 250 |
- | 38,597 | 38,597 | BankAtlantic Bancorp Inc | - | 119 | 119 |
- | 29,186 | 29,186 | BankUnited Financial Corp (a) | - | 115 | 115 |
- | 54,172 | 54,172 | Brookline Bancorp Inc | - | 585 | 585 |
19,300 | 23,342 | 42,642 | Dime Community Bancshares* | 360 | 436 | 796 |
- | 18,136 | 18,136 | Downey Financial Corp (a) | - | 256 | 256 |
- | 12,723 | 12,723 | FirstFed Financial Corp (a)(b) | - | 194 | 194 |
- | 34,199 | 34,199 | Flagstar Bancorp Inc (a) | - | 209 | 209 |
- | 23,600 | 23,600 | Franklin Bank Corp/Houston TX (a)(b) | - | 37 | 37 |
- | 33,029 | 33,029 | Guaranty Financial Group Inc (a)(b) | - | 253 | 253 |
| | | 0.04% Schools | | | |
- | 19,496 | 19,496 | Universal Technical Institute Inc (a)(b) | - | 221 | 221 |
| | | 0.19% Schools - Day Care | | | |
- | 24,456 | 24,456 | Bright Horizons Family Solutions Inc (a)(b | - | 1,159 | 1,159 |
| | | 0.30% Seismic Data Collection | | | |
8,500 | - | 8,500 | Dawson Geophysical Co (b)* | 615 | - | 615 |
- | 76,944 | 76,944 | ION Geophysical Corp (a)(b) | - | 1,226 | 1,226 |
| | | 0.38% Semiconductor Component - Integrated Circuits | | | |
- | 43,305 | 43,305 | Exar Corp (a)(b) | - | 365 | 365 |
- | 48,057 | 48,057 | Micrel Inc | - | 472 | 472 |
- | 24,365 | 24,365 | Pericom Semiconductor Corp (b) | - | 415 | 415 |
15,400 | 21,721 | 37,121 | Standard Microsystems Corp (b)* | 457 | 644 | 1,101 |
| | | 1.81% Semiconductor Equipment | | | |
- | 30,868 | 30,868 | ATMI Inc (b) | - | 909 | 909 |
- | 95,114 | 95,114 | Axcelis Technologies Inc (a)(b) | - | 514 | 514 |
- | 60,988 | 60,988 | Brooks Automation Inc (a)(b) | - | 632 | 632 |
9,700 | 22,041 | 31,741 | Cabot Microelectronics Corp (a)(b)* | 330 | 750 | 1,080 |
- | 21,447 | 21,447 | Cohu Inc | - | 373 | 373 |
- | 49,646 | 49,646 | Kulicke & Soffa Industries Inc (a)(b) | - | 327 | 327 |
45,600 | 42,618 | 88,218 | MKS Instruments Inc (b)* | 1,042 | 974 | 2,016 |
- | 38,963 | 38,963 | Photronics Inc (a)(b) | - | 413 | 413 |
29,900 | 28,367 | 58,267 | Rudolph Technologies Inc (a)(b)* | 304 | 288 | 592 |
- | 21,740 | 21,740 | Ultratech Inc (b) | - | 310 | 310 |
27,100 | 70,598 | 97,698 | Varian Semiconductor Equipment Associates Inc (b)* | 993 | 2,586 | 3,579 |
- | 29,642 | 29,642 | Veeco Instruments Inc (a)(b) | - | 558 | 558 |
| | | 0.25% Steel - Producers | | | |
14,300 | - | 14,300 | Carpenter Technology Corp* | 733 | - | 733 |
8,000 | - | 8,000 | Olympic Steel Inc* | 410 | - | 410 |
5,300 | - | 5,300 | Schnitzer Steel Industries Inc* | 466 | - | 466 |
| | | 0.01% Steel - Specialty | | | |
- | 11,549 | 11,549 | Material Sciences Corp (b) | - | 92 | 92 |
| | | 0.26% Steel Pipe & Tube | | | |
- | 16,175 | 16,175 | Valmont Industries Inc | - | 1,593 | 1,593 |
| | | 0.11% Storage & Warehousing | | | |
- | 32,205 | 32,205 | Mobile Mini Inc (a)(b) | - | 684 | 684 |
| | | 0.65% Telecommunication Equipment | | | |
- | 11,710 | 11,710 | Applied Signal Technology Inc | - | 134 | 134 |
- | 125,854 | 125,854 | Arris Group Inc (b) | - | 1,019 | 1,019 |
40,800 | 22,524 | 63,324 | Comtech Telecommunications Corp (a)(b)* | 1,580 | 872 | 2,452 |
- | 24,257 | 24,257 | Ditech Networks Inc (a)(b) | - | 69 | 69 |
- | 27,172 | 27,172 | Network Equipment Technologies Inc (a)(b) | - | 177 | 177 |
- | 42,771 | 42,771 | Symmetricom Inc (a)(b) | - | 184 | 184 |
- | 12,238 | 12,238 | Tollgrade Communications Inc (b) | - | 62 | 62 |
| | | 0.12% Telecommunication Equipment - Fiber Optics | | | |
- | 86,787 | 86,787 | Harmonic Inc (b) | - | 718 | 718 |
| | | 0.12% Telecommunication Services | | | |
- | 83,011 | 83,011 | Fairpoint Communications Inc | - | 765 | 765 |
| | | 0.08% Telephone - Integrated | | | |
57,200 | - | 57,200 | Cincinnati Bell Inc (b)* | 265 | - | 265 |
- | 42,041 | 42,041 | General Communication Inc (a)(b) | - | 261 | 261 |
| | | 0.04% Textile - Apparel | | | |
- | 10,546 | 10,546 | Perry Ellis International Inc (b) | - | 241 | 241 |
| | | 0.02% Therapeutics | | | |
- | 30,949 | 30,949 | Theragenics Corp (b) | - | 132 | 132 |
| | | 0.08% Tobacco | | | |
- | 82,772 | 82,772 | Alliance One International Inc (b) | - | 509 | 509 |
| | | 0.20% Tools - Hand Held | | | | |
16,100 | - | 16,100 | Snap-On Inc* | 955 | | - | 955 |
| | | 0.21% Toys | | | | |
11,700 | 26,626 | 38,326 | Jakks Pacific Inc (a)(b)* | 275 | | 625 | 900 |
14,000 | - | 14,000 | Marvel Entertainment Inc (b)* | 402 | | - | 402 |
| | | 0.91% Transport - Marine | | | | |
9,000 | - | 9,000 | Gulfmark Offshore Inc (b)* | 538 | | - | 538 |
42,500 | 49,978 | 92,478 | Kirby Corp (b)* | 2,331 | | 2,741 | 5,072 |
| | | 0.38% Transport - Services | | | | |
- | 22,234 | 22,234 | Bristow Group Inc (b) | - | | 1,173 | 1,173 |
- | 35,009 | 35,009 | HUB Group Inc (b) | - | | 1,144 | 1,144 |
| | | 1.11% Transport - Truck | | | | |
- | 23,409 | 23,409 | Arkansas Best Corp | - | | 924 | 924 |
- | 26,796 | 26,796 | Forward Air Corp | - | | 914 | 914 |
- | 52,774 | 52,774 | Heartland Express Inc (a) | - | | 816 | 816 |
- | 53,625 | 53,625 | Knight Transportation Inc (a) | - | | 911 | 911 |
- | 48,846 | 48,846 | Landstar System Inc | - | | 2,538 | 2,538 |
- | 26,359 | 26,359 | Old Dominion Freight Line Inc (a)(b | - | | 809 | 809 |
| | | 0.04% Veterinary Products | | | | |
- | 22,600 | 22,600 | PetMed Express Inc (a)(b) | - | | 254 | 254 |
| | | 0.04% Vitamins & Nutrition Products | | | | |
- | 14,522 | 14,522 | Mannatech Inc (a) | - | | 95 | 95 |
- | 7,804 | 7,804 | USANA Health Sciences Inc (a)(b) | - | | 152 | 152 |
| | | 0.09% Water | | | | |
- | 15,997 | 15,997 | American States Water Co | - | | 560 | 560 |
| | | 0.11% Web Portals | | | | |
- | 63,154 | 63,154 | United Online Inc | - | | 674 | 674 |
| | | 0.40% Wire & Cable Products | | | | |
16,500 | 41,048 | 57,548 | Belden Inc* | 557 | | 1,385 | 1,942 |
8,200 | - | 8,200 | General Cable Corp (a)(b)* | 549 | | - | 549 |
| | | 0.20% Wireless Equipment | | | | |
20,900 | - | 20,900 | InterDigital Inc (a)(b)* | 424 | | - | 424 |
- | 30,471 | 30,471 | Novatel Wireless Inc (a)(b) | - | | 272 | 272 |
- | 24,654 | 24,654 | Viasat Inc (b) | - | | 545 | 545 |
|
|
| | | TOTAL COMMON STOCKS | 135,180 | | 477,092 | 612,272 |
|
Principal Amount (000's) | | Value (000's) |
| | | REPURCHASE AGREEMENTS | | | | |
| | | Finance - Investment Banker & Broker | | | | |
29,341 | - | 29,341 | Morgan Stanley Repurchase Agreement; 1.98% dated 04/30/08 maturing 05/01/08 (collateralized by U.S. Government Agency Issues; $29,659,000; 0.00% - 7.625%; dated 05/12/08 - 03/14/36) (d) | 29,339 | | - | 29,339 |
| | | | | | |
| | | Money Center Banks | | | | |
- | 87,272 | 87,272 | Deutsche Bank Repurchase Agreement; 1.98% dated 04/30/08 maturing 05/01/08 (collateralized by U.S. Government Agency Issues; $88,270,000; 0.00% - 5.50%; dated 05/09/08 - 04/18/19) (d) | - | | 87,267 | 87,267 |
| | | | | | |
- | 1,713 | 1,713
| Investment in Joint Trading Account; Bank of America Repurchase Agreement; 1.94% dated 04/30/2008 maturing 05/01/2008 (collateralized by Federal Home Loan Bank Agency Issue $1,764,000; 2.19%; dated 01/23/09) | - | | 1,713 | 1,713 |
|
|
- | 1,713 | 1,713 | Investment in Joint Trading Account; Deutsche Bank Repurchase Agreement; 1.97% dated 04/30/2008 maturing 05/01/2008 (collateralized by Sovereign Agency Issues; $1,764,000; 0.00% - 5.36%; dated 05/16/08 - 04/15/18) | - | | 1,713 | 1,713 |
| | | | | | |
|
|
| | | 19.46% TOTAL REPURCHASE AGREEMENTS | $ 29,339 | $ 90,693 | $ 120,032 |
|
|
| | | Total Investments | $ 164,519 | $ 567,785 | $ 732,304 |
| | | -18.72% Liabilities in Excess of Other Assets, Net | (28,637) | | (86,839) | (115,476) |
|
|
| | | TOTAL NET ASSETS - 100.00% | $ 135,882 | $ 480,946 | $ 616,828 |
|
|
|
| | (a) | Security or a portion of the security was on loan at the end of the period. | | | |
| | (b) | Non-Income Producing Security | | | | |
| | (c) | Security or a portion of the security was pledged to cover margin requirements for futures |
| | | contracts. At the end of the period, the value of these securities totaled $371 or 0.06% of net assets. |
| | (d) | Security was purchased with the cash proceeds from securities loans | |
|
Unrealized Appreciation (Depreciation) |
| | | Unrealized Appreciation | $ 12,748 | $ 74,463 | $ 87,211 |
| | | Unrealized Depreciation | (18,222) | | (90,197) | (108,419) |
|
|
| | | Net Unrealized Appreciation (Depreciation) | (5,474) | | (15,734) | (21,208) |
| | | Cost for federal income tax purposes | 169,993 | | 583,519 | 753,512 |
| | | All dollar amounts are shown in thousands (000's) | | |
|
Futures Contracts |
| | | Buy: | S&P SmallCap 600 eMini; June 2008 |
| | | Number of Contracts | -- | | 93 | 93 |
| | | Original Value | $ -- | $ 3,222 | $ 3,222 |
| | | Current Market Value | $ -- | $ 3,530 | $ 3,530 |
| | | Unrealized Appreciation/(Depreciation) | $ -- | $ 308 | $ 308 |
| | | All dollar amounts are shown in thousands (000's | | | | |
Portfolio Summary (unaudited) |
|
Sector | | Percent |
|
Financial | | 35.09% |
Industrial | | 20.73% |
Consumer, Non-cyclical | | 17.23% |
Consumer, Cyclical | | 13.12% |
Energy | | 9.66% |
Technology | | 9.44% |
Utilities | | 4.52% |
Communications | | 4.27% |
Basic Materials | | 2.85% |
Funds | | 1.81% |
Liabilities in Excess of Other Assets, Net | | -18.72% |
|
|
TOTAL NET ASSETS | | 100.00% |
|
Other Assets Summary (unaudited) | | |
|
Asset Type | | Percent |
|
Futures | | 0.57% |
* | Security or a portion of the secuirty held by SmallCap Blend Fund I will need to be disposed of prior to the Acquisition in order to meet |
| the investment policies and restrictions of the SmallCap S&P 600 Index Fund. |
Pro Forma Notes to Financial Statements |
April 30, 2008 |
(unaudited) |
1. Description of the Funds
SmallCap Blend Fund I and SmallCap S&P 600 Index Fund are series of Principal Funds, Inc. (the “Fund”). The Fund is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
2. Basis of Combination
On June 9, 2008, the Board of Directors of Principal Funds, Inc., SmallCap Blend Fund I approved an Agreement and Plan of Reorganization (the “Reorganization”) whereby, subject to approval by the shareholders of SmallCap Blend Fund I, SmallCap S&P 600 Index Fund will acquire all the assets of SmallCap Blend Fund I subject to the liabilities of such fund, in exchange for a number of shares equal to the pro rata net assets of SmallCap S&P 600 Index Fund.
The Reorganization will be accounted for by the method of accounting for taxable mergers of investment companies. The pro forma combined financial statements are presented for the information of the reader and may not necessarily be representative of what the actual combined financial statements would have been had the Reorganization occurred at April 30, 2008. The unaudited pro forma schedules of investments and statements of assets and liabilities reflect the financial position of SmallCap Blend Fund I and SmallCap S&P 600 Index Fund at April 30, 2008. The unaudited pro forma statements of operations reflect the results of operations of SmallCap Blend Fund I and SmallCap S&P 600 Index Fund for the twelve months ended April 30, 2008. The statements have been derived from the Funds’ respective books and records utilized in calculating daily net asset value at the dates indicated above for SmallCap Blend Fund I and SmallCap S&P 600 Index Fund under U.S. generally accepted accounting principles. In accordance with U.S. generally accepted accounting principles, the fair value of the assets of SmallCap Blend Fund I will become the cost basis of such assets transferred to the SmallCap S&P 600 Index Fund on the date of the combination and the results of operations of SmallCap S&P 600 Index Fund for pre-combination periods will not be restated.
The pro forma schedules of investments and statements of assets and liabilities and operations should be read in conjunction with the historical financial statements of the Funds incorporated by reference in the Statements of Additional Information.
3. Significant Accounting Policies
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
4. Security Valuation
SmallCap Blend Fund I and SmallCap S&P 600 Index Fund value securities for which market quotations are readily available at market value, which is determined using the last reported sale price. If no sales are reported, as is regularly the case for some securities traded over-the-counter, securities are valued using the last reported bid price or an evaluated bid price provided by a pricing service. Pricing services use electronic modeling techniques that incorporate security characteristics, market conditions and dealer-supplied valuations to determine an evaluated bid price. When reliable market quotations are not considered to be readily available, which may be the case, for example, with respect to restricted securities, certain debt securities, preferred stocks, and foreign securities, the investments are valued at their fair value as determined in good faith by Principal Management Corporation (the “Manager”) under procedures established and periodically reviewed by the Fund’s Board of Directors.
Short-term securities are valued at amortized cost, which approximates market. Under the amortized cost method, a security is valued by applying a constant yield to maturity of the difference between the principal amount due at maturity and the cost of the security to the Funds.
5. Futures Contracts
SmallCap Blend Fund I and SmallCap S&P 600 Index Fund may enter into futures contracts for both hedging and non-hedging purposes. Initial margin deposits are made by cash deposits or segregation of specific securities as may be required by the exchange on which the transaction was conducted. Pursuant to the contracts, the Funds agree to receive from or pay to the broker, an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin” and are recorded by the Funds as a variation margin receivable or payable on futures contracts. During the period the futures contracts are open, daily changes in the value of the contracts are recognized as unrealized gains or losses. These unrealized gains or losses are included as a component of net unrealized appreciation (depreciation) of investments on the statements of assets and liabilities. When the contracts are closed, the Funds recognize a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds’ cost basis in the contract.
Pro Forma Notes to Financial Statements |
April 30, 2008 |
(unaudited) |
6. Repurchase Agreements
The Funds may invest in repurchase agreements that are fully collateralized, typically by U.S. government or U.S. government agency securities. It is the Funds’ policy that its custodian takes possession of the underlying collateral securities. The fair value of the collateral is at all times at least equal to the total amount of the repurchase obligation. In the event of default on the obligation to repurchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event the seller of a repurchase agreement defaults, the Funds could experience delays in the realization of the collateral.
7. Capital Shares
The pro forma net asset value per share assumes issuance of shares of SmallCap S&P 600 Index Fund that would have been issued at April 30, 2008, in connection with the Reorganization. The number of shares assumed to be issued is equal to the net assets of SmallCap Blend Fund I, as of April 30, 2008, divided by the net asset value per share of the SmallCap S&P 600 Index Fund as of April 30, 2008. The pro forma number of shares outstanding, by class, for the combined fund can be found on the statement of assets and liabilities.
8. Pro Forma Adjustments
The accompanying pro forma financial statements reflect changes in fund shares as if the Reorganization had taken place on April 30, 2008. The expenses of the SmallCap Blend Fund I were adjusted assuming the fee structure of the SmallCap S&P 600 Index Fund was in effect for the twelve months ended April 30, 2008.
9. Distributions
No provision for federal income taxes is considered necessary because each fund is qualified as a “regulated investment company” under the Internal Revenue Code and intends to distribute each year substantially all of its net investment income and realized capital gains to shareholders.
PART C
OTHER INFORMATION
Item 15. Indemnification
Under Section 2-418 of the Maryland General Corporation Law, with respect to any proceedings against a present or former director, officer, agent or employee (a "corporate representative") of the Registrant, the Registrant may indemnify the corporate representative against judgments, fines, penalties, and amounts paid in settlement, and against expenses, including attorneys' fees, if such expenses were actually incurred by the corporate representative in connection with the proceeding, unless it is established that:
(i) The act or omission of the corporate representative was material to the matter giving rise to the proceeding; and
1. | Was committed in bad faith; or |
2. | Was the result of active and deliberate dishonesty; or |
(ii) The corporate representative actually received an improper personal benefit in money, property, or services; or
(iii) In the case of any criminal proceeding, the corporate representative had reasonable cause to believe that the act or omission was unlawful.
If a proceeding is brought by or on behalf of the Registrant, however, the Registrant may not indemnify a corporate representative who has been adjudged to be liable to the Registrant. Under the Registrant's Articles of Incorporation and Bylaws, directors and officers of the Registrant are entitled to indemnification by the Registrant to the fullest extent permitted under Maryland law and the Investment Company Act of 1940. Reference is made to Article VI, Section 7 of the Registrant's Articles of Incorporation, Article 12 of the Registrant's Bylaws and Section 2-418 of the Maryland General Corporation Law.
The Registrant has agreed to indemnify, defend and hold the Distributor, its officers and directors, and any person who controls the Distributor within the meaning of Section 15 of the Securities Act of 1933, free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Distributor, its officers, directors or any such controlling person may incur under the Securities Act of 1933, or under common law or otherwise, arising out of or based upon any untrue statement of a material fact contained in the Registrant's registration statement or prospectus or arising out of or based upon any alleged omission to state a material fact required to be stated in either thereof or necessary to make the statements in either thereof not misleading, except insofar as such claims, demands, liabilities or expenses arise out of or are based upon any such untrue statement or omission made in conformity with information furnished in writing by the Distributor to the Registrant for use in the Registrant's registration statement or prospectus: provided, however, that this indemnity agreement, to the extent that it might require indemnity of any person who is also an officer or director of the Registrant or who controls the Registrant within the meaning of Section 15 of the Securities Act of 1933, shall not inure to the benefit of such officer, director or controlling person unless a court of competent jurisdiction shall determine, or it shall have been determined by controlling precedent that such result would not be against public policy as expressed in the Securities Act of 1933, and further provided, that in no event shall anything contained herein be so construed as to protect the Distributor against any liability to the Registrant or to its security holders to which the Distributor would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence, in the performance of its duties, or by reason of its reckless disregard
of its obligations under this Agreement. The Registrant's agreement to indemnify the Distributor, its officers and directors and any such controlling person as aforesaid is expressly conditioned upon the Registrant being promptly notified of any action brought against the Distributor, its officers or directors, or any such controlling person, such notification to be given by letter or telegram addressed to the Registrant.
Item 16. Exhibits.
Unless otherwise stated, all filing references are to File No. 33-59474
(1) | a. | Articles of Amendment and Restatement (filed 4/12/96) |
| b. | Articles of Amendment and Restatement (filed 9/22/00) |
| c. | Articles of Amendment and Restatement dated 6/14/02 (filed 12/30/02) |
| d. | Articles of Amendment dated 5/23/05 (filed 9/8/05) |
| e. | Articles of Amendment dated 9/30/05 (filed 11/22/05) |
| f. | Articles of Amendment dated 7/7/06 (Incorporated by reference from exhibit #1(2)b |
| | to registration statement No. 333-137477 filed on Form N-14 on 9/20/06) |
| g. | Articles of Amendment dated 06/04/08 (filed 07/17/08) |
|
| h. | Articles of Amendment (filed 9/12/97) |
|
| i. | Certificate of Correction dated 9/14/00 (filed 9/22/00) |
| j. | Certificate of Correction dated 12/13/00 (filed 10/12/01) |
|
| k. | Articles Supplementary dated 12/11/00 (filed 10/12/01) |
| l. | Articles Supplementary dated 3/12/01 (filed 10/12/01) |
| m. | Articles Supplementary dated 4/16/02 (filed 12/30/02) |
| n. | Articles Supplementary dated 9/25/02 (filed 12/30/02) |
| o. | Articles Supplementary dated 2/5/03 (filed 02/26/03) |
| p. | Articles Supplementary dated 4/30/03 (filed 9/11/03) |
| q. | Articles Supplementary dated 6/10/03 (filed 9/11/03) |
| r. | Articles Supplementary dated 9/9/03 (filed 9/11/03) |
| s. | Articles Supplementary dated 11/6/03 (filed 12/15/03) |
| t. | Articles Supplementary dated 1/29/04 (filed 2/26/04) |
| u. | Articles Supplementary dated 3/8/04 (filed 7/27/04) |
| v. | Articles Supplementary dated 6/14/04 (filed 9/27/04) |
| w. | Articles Supplementary dated 9/13/04 (filed 12/13/04) |
| x. | Articles Supplementary dated 10/1/04 (filed 12/13/04) |
| y. | Articles Supplementary dated 12/13/04 (filed 2/28/05) |
| z. | Articles Supplementary dated 2/4/05 (filed 5/16/05) |
| aa. | Articles Supplementary dated 2/24/05 (filed 5/16/05) |
| bb. | Articles Supplementary dated 5/6/05 (filed 9/8/05) |
| cc. | Articles Supplementary dated 12/20/05 (filed 2/28/06) |
| dd. | Articles Supplementary dated 9/20/06 (Incorporated by reference from exhibit #1(4)t |
| | to registration statement No. 333-137477 filed on Form N-14 on 9/20/06) |
| ee. | Articles Supplementary dated 1/12/07 (filed 1/16/07) |
| ff. | Articles Supplementary dated 1/22/07 (filed 07/18/07 |
| gg. | Articles Supplementary dated 7/24/07 (filed 9/28/07) |
| hh. | Articles Supplementary dated 09/13/07 (filed 12/14/07) |
| ii. | Articles Supplementary dated 1/3/08 (filed 03/05/08) |
| jj. | Articles Supplementary dated 3/13/08 (filed 05/01/08) |
| kk. | Articles Supplementary dated 06/23/08 (filed 07/17/08) |
|
(2) | By-laws (filed 12/29/05) |
|
(3) | N/A | |
(4) | Forms of Plans of Reorganization (filed herewith as Appendix A to the Proxy |
| Statement/Prospectus) | |
|
(5) | Included in Exhibits 1 and 2 hereto. |
|
(6) | (1) | a. | Management Agreement (filed 9/12/97) |
| | b. | 1st Amendment to the Management Agreement (filed 9/22/00) |
| | c. | Management Agreement (filed 12/5/00) |
| | d. | Amendment to Management Agreement dated 9/9/02(filed 12/30/02) |
| | e. | Amendment to Management Agreement dated 3/11/02 (filed 02/26/03) |
| | f. | Amendment to Management Agreement dated 12/10/02 (filed 02/26/03) |
| | g. | Amendment to Management Agreement dated 10/22/03 (filed 12/15/03) |
| | h. | Amendment to Management Agreement dated 3/8/04 (filed 6/1/04) |
| | i. | Amendment to Management Agreement dated 6/14/04 (filed 9/27/04) |
| | j. | Amendment to Management Agreement dated 7/29/04 (filed 9/27/04) |
| | k. | Amendment to Management Agreement dated 9/13/04 (filed 9/27/04) |
| | l. | Amendment to Management Agreement dated 12/13/04 (filed 2/28/05) |
| | m. | Amendment to Management Agreement dated 1/1/05 (filed 2/28/05) |
| | n. | Amendment to Management Agreement dated 9/30/05 (filed 11/22/05) |
| | o. | Amendment to Management Agreement dated 1/12/07 (filed 1/16/07) |
| | p. | Amendment to Management Agreement dated 9/12/07 (filed 9/28/07) |
| | q. | Amendment to Management Agreement dated 10/01/07 (filed 12/14/07) |
| | r. | Amendment to Management Agreement dated 10/31/07 (filed 12/14/07) |
| | s. | Amendment to Management Agreement dated 2/7/08 (filed 05/01/08) |
|
| (2) | a. | American Century Sub-Advisory Agreement (filed 12/5/00) |
| | b. | Amended & Restated Sub-Adv Agreement with Amer. Century (filed 9/11/03) |
| | c. | Amended & Restated Sub-Adv Agreement with Amer. Century (filed 9/27/04) |
| | d. | Amended & Restated Sub-Adv Agreement with Amer. Century dated |
| | | 6/13/05 (filed 9/8/05) |
| | e. | Amended & Restated Sub-Adv Agreement with Amer. Century dated |
| | | 9/19/06 (Incorporated by reference from exhibit #6(3)e to registration |
| | | statement No. 333-137477 filed on Form N-14 on 10/6/06) |
|
| (3) | a. | Ark Asset Management Sub-Advisory Agreement (filed 2/27/01) |
| | b. | Amended & Restated Sub-Adv Agreement with Ark (filed 9/11/03) |
|
| (4) | a. | AXA Rosenberg Investment Management LLC Sub-Advisory Agreement |
| | | dated | ** |
|
| (5) | a. | Barrow Hanley Sub-Advisory Agreement dtd 7/12/05 (filed 9/8/05) |
|
| (6) | a. | Bernstein Sub-Advisory Agreement (filed 12/5/00) |
| | b. | Amendment to Bernstein Sub-Advisory Agreement dated 3/28/03 (filed |
| | | 9/11/03) | |
| | c. | Amended & Restated Bernstein Sub-Advisory Agreement dated 7/1/04 (filed |
| | | 9/27/04) | |
|
| (7) | a. | Causeway Capital Management LLC Sub-Advisory Agreement dated |
| | | | ** |
|
| |
|
| (8) | a. | Columbus Circle Investors Sub-Advisory Agreement dated 1/5/05 (filed |
| | | 9/8/05) | |
| | b. | Amended & Restated Sub-Adv Agreement with Columbus Circle dated |
| | | 9/15/05 (filed 10/20/06) |
| c. | Amended & Restated Sub-Adv Agreement with Columbus Circle dated |
| | 12/15/06 (filed 1/16/07) |
|
(9) | a. | Dimensional Fund Advisors Sub-Advisory Agreement (filed 6/1/04) |
|
(10) | a. | Edge Asset Management Sub-Advisory Agreement dated 1/12/07 (filed |
| | 1/16/07) |
|
(11) | a. | Emerald Advisors, Inc. Sub-Advisory Agreement (filed 9/27/04) |
|
(12) | a. | Essex Investment Management Company, LLC. Sub-Advisory Agreement |
| | dated 6/30/06 (filed 10/20/06) |
|
(13) | a. | Goldman Sachs Sub-Advisory Agreement(filed 12/30/02) |
| b. | Amended & Restated Sub-Adv Agreement with Goldman Sachs (filed |
| | 9/11/03) |
| c. | Amended & Restated Goldman Sachs Sub-Advisory Agreement dated |
| | 11/20/03 (filed 12/15/03) |
| d. | Amended & Restated Goldman Sachs Sub-Advisory Agreement dated |
| | 6/30/04 (filed 2/28/05) |
|
(14) | a. | Jacobs Levy Equity Management, Inc. Sub-Advisory Agreement dated |
| | 6/15/06 (filed 10/20/06) |
| b. | Amended & Restated Sub-Advisory Agreement with Jacobs Levy dated |
| | 1/2/08 (filed 03/05/08) |
|
(15) | a. | JP Morgan Sub-Advisory Agreement (filed 12/30/02) |
| b. | Amended & Restated Sub-Adv Agreement with JP Morgan (filed 9/11/03) |
| c. | Amended & Restated Sub-Adv Agreement with JP Morgan dated 7/18/07 |
| | (filed 9/28/07) |
|
(16) | a. | Lehman Brothers dated 7/18/07 (filed 9/28/07) |
|
(17) | a. | Los Angeles Capital Management Sub-Advisory Agreement (filed 9/27/04) |
| b. | Amended & Restated Sub-Adv Agreement with LA Capital dated 9/12/05 |
| | (filed 11/22/05) |
|
(18) | a. | MacKay Shields LLC Sub-Advisory Agreement dated 1/2/08 (filed 03/05/08) |
|
(19) | a. | Mazama Capital Management Sub-Advisory Agreement (filed 6/1/04) |
|
(20) | a. | Mellon Equity Associates LLP Sub-Advisory Agreement dtd 12/21/04 (filed |
| | 2/28/05) |
| b. | Amended & Restated Sub-Adv Agreement with Mellon Equity dated 8/8/05 |
| | (filed 11/22/05) |
| c. | Amended & Restated Sub-Adv Agreement with Mellon Capital dated 1/1/08 |
| | (filed 3/28/08) |
|
(21) | a. | Neuberger Berman Sub-Advisory Agreement (filed 12/5/00) |
| b. | Amended & Restated Sub-Adv Agreement with Neuberger Berman (filed |
| | 9/11/03) |
| c. | Amended & Restated Sub-Advisory Agreement with Neuberger Berman |
| | dated 10/31/03 (filed 12/15/03) |
| d. | Amended & Restated Sub-Advisory Agreement with Neuberger Berman |
| | dated 7/1/04 (filed 2/28/05) |
(22) | a. | Pacific Investment Management Company LLC Sub-Advisory Agreement |
| | dated | ** |
|
(23) | a. | Principal Global Investors Sub-Advisory Agreement (filed 12/30/02) |
| b. | Amended and Restated PGI Sub-Advisory Agreement (filed 02/26/03) |
| c. | Amended & Restated Sub-Adv Agreement with PGI (filed 9/11/03) |
| d. | Amended & Restated Sub-Adv Agreement with PGI (filed 6/1/04) |
| e. | Amended & Restated Sub-Adv Agreement with PGI dtd 7-29-04 (filed |
| | 9/27/04) | |
| f. | Amended & Restated Sub-Adv Agreement with PGI dtd 9-13-04 (filed |
| | 12/13/04) | |
| g. | Amended & Restated Sub-Adv Agreement with PGI dtd 12-13-04 (filed |
| | 9/8/05) | |
| h. | Amended & Restated Sub-Adv Agreement with PGI dtd 7-1-05 (filed 9/8/05) |
| i. | Sub-Sub-Advisory Agreement with Spectrum dtd 7/1/2005 (filed 12/29/05) |
| j. | Sub-Sub-Advisory Agreement with Post dtd 7/1/2005 (filed 12/29/05) |
| k. | Amended & Restated Sub-Adv Agreement with PGI dtd 3/1/06 (filed 2/28/06) |
|
(24) | a. | Principal Capital Real Estate Investors Sub-Advisory Agreement (filed |
| | 2/27/01) | |
| b. | 1st Amendment to the PCREI Sub-Advisory Agreement (filed 10/12/01) |
| c. | 2nd Amendment to the PCREI Sub-Advisory Agreement (filed 10/12/01) |
| d. | Amended & Restated Sub-Adv Agreement with PCREI (filed 9/11/03) |
| e. | Amended & Restated Sub-Adv Agreement with PREI dated 9/12/05 (filed |
| | 12/29/05) | |
| f. | Amended & Restated Sub-Adv Agreement with PREI dated 1/1/06 (filed |
| | 2/28/06) | |
| g. | Amended & Restated Sub-Adv Agreement with PREI dated 10/1/07 (filed |
| | 9/28/07) | |
|
(25) | a. | Pyramis Global Advisors, LLC dated 1/1/07 (filed 1/16/07) |
|
(26) | a. | Spectrum Sub-Advisory Agreement (filed 04/29/02) |
| b. | Amended & Restated Sub-Adv Agreement with Spectrum (filed 9/11/03) |
| c. | Amended & Restated Sub-Adv Agreement with Spectrum dated 9/12/05 |
| | (filed 12/29/05) | |
|
(27) | a. | T. Rowe Price Sub-Advisory Agreement dated 3/8/04 (filed 6/1/04) |
| b. | Amended & Restated Sub-Adv Agreement with T. Rowe Price dated 8/24/04 |
| | (filed 9/27/04) | |
| c. | Amended & Restated Sub-Adv Agreement with T. Rowe Price dated 8/1/05 |
| | (filed 12/29/05) | |
| d. | Amended & Restated Sub-Adv Agreement with T. Rowe Price dated 8/1/06 |
| | (filed 10/20/06) | |
|
(28) | a. | Turner Sub-Advisory Agreement (filed 12/5/00) |
| b. | Amended & Restated Sub-Adv Agreement with Turner dated 10/31/07. (filed |
| | 12/14/07) | |
|
(29) | a. | UBS Global Asset Management Sub-Advisory Agreement (filed 04/29/02) |
| b. | Amended & Restated Sub-Adv Agreement with UBS (filed 9/11/03) |
| c. | Amended & Restated Sub-Adv Agreement with UBS dated 4/1/04 filed |
| | 6/1/04) | |
|
(30) | a. | Vaughan Nelson Investment Management Sub-Advisory Agreement dtd |
| | 9/21/05 (filed 11/22/05) |
| (31) | a. | Van Kampen Sub-Advisory Agreement dated 1/12/07 (filed 1/16/07) |
| | b. | Amended & Restated Sub-Adv Agreement with Van Kampen dated 4/1/07 |
| | | (filed 7/18/07)(filed 9/28/07) |
|
| (32) | a. | Westwood Management Corporation Sub-Advisory Agreement dated |
| | | 7/15/08 (filed 07/17/08) |
|
(7) | (1) | a. | Distribution Agreement (filed 4/12/96) |
| | b. | 1st Amendment to the Distribution Agreement (filed 9/22/00) |
| | c. | Distribution Agreement (filed 9/22/00) |
| | d. | Distribution Plan and Agreement (Select Class)(filed 12/30/02) |
| | e. | Amended and Restated Distribution Plan and Agreement (Select Class)(filed |
| | | 12/30/02) |
| | f. | Amended and Restated Distribution Plan and Agreement (Advisors Select |
| | | Class)(filed 12/30/02) |
| | g. | Amended and Restated Distribution Plan and Agreement (Advisors |
| | | Preferred Class)(filed 12/30/02) |
| | h. | Amended and Restated Distribution Plan and Agreement (Class J)(filed |
| | | 12/30/02) |
| | i. | Amended and Restated Distribution Agreement (filed 12/30/02) |
| | j. | Amendment to Distribution Plan and Agreement (Advisors Preferred Class) |
| | | (filed 02/26/03) |
| | k. | Amendment to Distribution Plan and Agreement (Advisors Select Class) |
| | | (filed 02/26/03) |
| | l. | Amendment to Distribution Plan and Agreement (Select Class) (filed |
| | | 02/26/03) |
| | m. | Amendment to Distribution Agreement dtd 03/02 (filed 02/26/03) |
| | n. | Amendment to Distribution Agreement dtd 12/02 (filed 02/26/03) |
| | o. | Amended & Restated Distribution Agreement dtd 10/22/03 (filed 12/15/03) |
| | p. | Amended & Restated Distribution Agreement dtd 6/14/04 (filed 9/27/04) |
| | q. | Amended & Restated Distribution Agreement dtd 2/24/05 (filed 9/8/05) |
| | r. | Distribution Agreement (Class A, B and C) dtd 1/12/07 (filed 1/16/07) |
| | s. | Distribution Agreement (Instl and J) dtd 1/12/07 (filed 1/16/07) |
| | t. | Distribution Agreement (Class A, B, C, J, Institutional, Advisors Preferred, |
| | | Preferred, Advisors Select, Select, Advisors Signature Classes) dtd 3/11/08 |
| | | (filed 05/01/08) |
|
(8) | Not Applicable | |
|
(9) | (1) | a. | Domestic Portfolio Custodian Agreement with Bank of New York (filed |
| | | 4/12/96) |
| | b. | Domestic Funds Custodian Agreement with Bank of New York (filed 12/5/00) |
| | c. | Domestic and Global Custodian Agreement with Bank of New York (filed |
| | | 11/22/05) |
|
(10) | Rule 12b-1 Plan |
| (1) | R-3 f/k/a Advisors Preferred Plan (filed 9/22/2000) |
| | a. | Amended & Restated dtd 9/9/02 (filed 12/30/02) |
| | b. | Amended & Restated dtd 3/11/04 (filed 3/14/04) |
| | c. | Amended & Restated dtd 6/14/04 (filed 9/27/04) |
| | d. | Amended & Restated dtd 9/13/04 (filed 9/27/04) |
| | e. | Amended & Restated dtd 12/13/04 (filed 2/28/05) |
| | f. | Amended & Restated dtd 9/30/05 (filed 11/22/05 |
| g. | Amended & Restated dtd 9/11/06 (Incorporated by reference from exhibit |
| | #10(1)g to registration statement No. 333-137477 filed on Form N-14 on |
| | 10/6/06) |
| h. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| i. | Amended & Restated dtd 3/11/08 (filed 05/01/08) |
|
(2) | R-2 f/k/a Advisors Select Plan (filed 9/22/2000) |
| a. | Amended & Restated dtd 9/9/02 (filed 12/30/02) |
| b. | Amended & Restated dtd 3/11/04 (filed 3/14/04) |
| c. | Amended & Restated dtd 6/14/04 (filed 9/27/04) |
| d. | Amended & Restated dtd 9/13/04 (filed 9/27/04) |
| e. | Amended & Restated dtd 12/13/04 (filed 2/28/05) |
| f. | Amended & Restated dtd 9/30/05 (filed 11/22/05) |
| g. | Amended & Restated dtd 9/11/06 (Incorporated by reference from exhibit |
| | #10(2)g to registration statement No. 333-137477 filed on Form N-14 on |
| | 10/6/06) |
| h. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| i. | Amended & Restated dtd 3/11/08 (filed 05/01/08) |
|
(3) | R-4 f/k/a Select Plan (filed 12/30/02) |
| a. | Amended & Restated dtd 9/9/02 (filed 12/30/02) |
| b. | Amended & Restated dtd 3/11/04 (filed 3/14/04) |
| c. | Amended & Restated dtd 6/14/04 (filed 9/27/04) |
| d. | Amended & Restated dtd 9/13/04 (filed 9/27/04) |
| e. | Amended & Restated dtd 12/13/04 (filed 2/28/05) |
| f. | Amended & Restated dtd 9/30/05 (filed 11/22/05) |
| g. | Amended & Restated dtd 9/11/06 (Incorporated by reference from exhibit |
| | #10(3)g to registration statement No. 333-137477 filed on Form N-14 on |
| | 10/6/06) |
| h. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| i. | Amended & Restated dtd 3/11/08 (filed 05/01/08) |
|
(4) | Class J Plan (filed 12/30/02) |
| a. | Amended & Restated dtd 9/9/02 (filed 12/30/02) |
| b. | Amended & Restated dtd 9/13/04 (filed 9/27/04) |
| c. | Amended & Restated dtd 12/13/04 (filed 2/28/05) |
| d. | Amended & Restated dtd 9/30/05 (filed 11/22/05) |
| e. | Amended & Restated dtd 9/11/06 (Incorporated by reference from exhibit |
| | #10(4)e to registration statement No. 333-137477 filed on Form N-14 on |
| | 10/6/06) |
| f. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| g. | Amended & Restated dtd 1/1/08 (filed 03/05/08) |
| h. | Amended & Restated dtd 1/1/08 (filed 05/01/08) |
| i. | Amended & Restated dtd 3/11/08 (filed 05/01/08) |
|
(5) | R-1 f/k/a Advisors Signature Plan (filed 12/13/04) |
| a. | Amended & Restated dtd 9/13/04 (filed 9/27/04) |
| b. | Amended & Restated dtd 12/13/04 (filed 2/28/05) |
| c. | Amended & Restated dtd 9/30/05 (filed 11/22/05) |
| d. | Amended & Restated dtd 9/11/06 (Incorporated by reference from exhibit |
| | #10(5)d to registration statement No. 333-137477 filed on Form N-14 on |
| | 10/6/06) |
| e. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| f. | Amended & Restated dtd 3/11/08 (filed 5/01/08) |
|
(6) | Class A Plan (filed 2/28/05) |
| | a. | Amended & Restated dtd 9/30/05 (filed 11/22/05) |
| | b. | Amended & Restated dtd 12/1/05 (Incorporated by reference from exhibit |
| | | #10(6)b to registration statement No. 333-137477 filed on Form N-14 on |
| | | 9/20/06) |
| | c. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| | d. | Amended & Restated dtd 10/01/07 (filed 12/14/07) |
|
| (7) | Class B Plan (filed 2/28/05) |
| | a. | Amended & Restated dtd 9/30/05 (filed 11/22/05) |
| | b. | Amended & Restated dtd 12/1/05 (Incorporated by reference from exhibit |
| | | #10(7)b to registration statement No. 333-137477 filed on Form N-14 on |
| | | 9/20/06) |
| | c. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| | d. | Amended & Restated dtd 3/13/07 (filed 12/14/07) |
|
| (8) | Class C Plan |
| | a. | dated 9/11/06 (Incorporated by reference from exhibit #10(8)a to registration |
| | | statement No. 333-137477 filed on Form N-14 on 10/6/06) |
| | b. | Amended & Restated dtd 1/12/07 (filed 1/16/07) |
| | c. | Amended & Restated dtd 10/01/07 (filed 12/14/07) |
|
| (9) | Class S Plan dtd 5/1/08 (filed 05/01/08) |
|
(11) | Opinion and Consent of counsel, regarding legality of issuance of shares and other matters * |
|
(12) | Not Applicable |
|
(13) | Not Applicable | |
|
(14) | Consent of Independent Registered Public Accountants |
| (a) | Consent of Ernst & Young LLP * |
|
(15) | Not Applicable | |
|
(16) | (a) | Powers of Attorney* |
|
(17) | (a) | Prospectuses of Principal Funds, Inc. dated February 29, 2008, as supplemented |
| | (filed June 17, 2008) |
|
| (b) | Statement of Additional Information of Principal Funds, Inc. dated May 1, 2008, |
| | as supplemented (filed June 17, 2008) |
|
| (c) | Annual Report of Principal Funds, Inc. for the fiscal year ended October 31, 2007 |
| | (filed December 28, 2007) |
|
| (d) | Semi-Annual Report of Principal Funds, Inc. for the period ended April 30, 2008 |
| | (filed July 7, 2008) |
|
* | Filed herein. | |
** | To be filed by amendment. |
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this Registration Statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering prospectus will contain the information called for by the applicable registration form for re-offerings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act of 1933, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file a post-effective amendment to this Registration Statement which will include an opinion of counsel regarding the tax consequences of the proposed reorganization.
Pursuant to the requirements of the Securities Act of 1933, the Registrant, Principal Funds, Inc., has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Des Moines and State of Iowa, on the 8th day of September, 2008.
| Principal Funds, Inc. (Registrant) |
| By /s/ R. C. Eucher ______________________________________ R. C. Eucher Director, Vice Chairman and Chief Executive Officer |
Attest:
/s/ Beth Wilson ______________________________________ Beth Wilson Vice President and Secretary |
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature | Title | Date |
|
/s/ R. C. Eucher | Director, Vice Chairman | September 8, 2008 |
R. C. Eucher | and Chief Executive | |
| Officer (Principal | |
| Executive Officer) | |
|
/s/ L. A. Rasmussen | Vice President, | September 8, 2008 |
L. A. Rasmussen | Controller and Chief | |
| Financial Officer | |
| (Principal Financial Officer and Controller) | |
|
(L. D. Zimpleman)* | Director and | September 8, 2008 |
L. D. Zimpleman | Chairman of the Board | |
|
/s/ M. J. Beer | Executive Vice President | September 8, 2008 |
M. J. Beer | | |
|
(E. Ballantine)* | Director | September 8, 2008 |
E. Ballantine | | |
|
(K. Blake)* | Director | September 8, 2008 |
K. Blake | | |
|
(C. Damos)* | Director | September 8, 2008 |
C. Damos | | |
|
(R. W. Gilbert)* | Director | September 8, 2008 |
R. W. Gilbert | | |
|
(M. A. Grimmett)* | Director | September 8, 2008 |
M. A. Grimmett | | |
|
(F. S. Hirsch)* | Director | September 8, 2008 |
F. S. Hirsch | | |
|
(W. C. Kimball)* | | |
W. C. Kimball | Director | September 8, 2008 |
|
(B. A. Lukavsky)* | Director | | September 8, 2008 |
B. A. Lukavsky | | | |
|
(W. G. Papesh)* | Director | | September 8, 2008 |
W. G. Papesh | | | |
|
(D. Pavelich)* | Director | | September 8, 2008 |
D. Pavelich | | | |
|
| | *By | /s/ M. J. Beer |
| | | M. J. Beer |
| | | Executive Vice President |
| | | |
| | | Pursuant to Powers of Attorney filed herewith. |
EXHIBIT INDEX |
Exhibit No. | Description |
4 | Forms of Plans of Reorganization (filed herewith as Appendix A to the Proxy |
| Statement/Prospectus) |
| |
11 | Opinion and Consent of counsel regarding legality of issuance of shares and other matters |
| |
14(a) | Consent of Ernst & Young LLP, Independent Registered Public Accountants |
| |
16(a) | Powers of Attorney |