OLD MUTUAL FUNDS II
4643 South Ulster Street, Suite 700
Denver, CO 80237
1-888-772-2888
November 30, 2011
Dear Shareholder:
A special meeting (the “Meeting”) of the shareholders of the Old Mutual High Yield Fund (formerly, Old Mutual Dwight High Yield Fund), a series of Old Mutual Funds II, will be held at 10:00 a.m., Mountain Time, at the offices of Old Mutual Capital, Inc. (“Old Mutual”), 4643 South Ulster Street, Suite 700, Denver, CO 80237 on December 28, 2011. The purpose of the Meeting is to vote on important proposals that affect the Old Mutual High Yield Fund and your investment in the Fund.
On October 1, 2011, the portfolio managers of the Old Mutual High Yield Fund transitioned from Dwight Asset Management Company, LLC (“Dwight”), to First Eagle Investment Management, LLC (“First Eagle”). In anticipation of the transition, the Board of Trustees of Old Mutual Funds II (the “Old Mutual Fund Board”) approved an interim sub-advisory agreement with First Eagle on behalf of the Old Mutual High Yield Fund to maintain continuity of the Fund’s portfolio management (the “Interim Agreement”). In connection with the transition of the portfolio management team to First Eagle and Old Mutual’s recently announced plan to exit the mutual fund asset management business, the Old Mutual Fund Board determined that a transition of the Old Mutual High Yield Fund to the First Eagle mutual fund platform by transferring the assets and liabilities of the Old Mutual High Yield Fund to the First Eagle High Yield Fund, a newly formed series of the First Eagle Funds with substantially the same investment objective and principal strategies as the Old Mutual High Yield Fund (the “Reorganization”), was in the best interests of the shareholders of the Old Mutual High Yield Fund.
The Old Mutual Fund Board has unanimously approved and recommends that you vote “FOR” the Reorganization proposal.
In addition, shareholders are being asked to approve the Interim Agreement so that First Eagle may receive the sub-advisory fees held in escrow for its services provided to the Old Mutual High Yield Fund under the Interim Agreement during the period October 1, 2011 through the earlier of the closing date of the Reorganization or 150 days from the effective date of the Interim Agreement.
The enclosed Proxy Statement/Prospectus describes these proposals and compares the Old Mutual High Yield Fund to the First Eagle High Fund. You should review these materials carefully.
Your vote is important no matter how many shares you own. Please take a moment after reviewing the enclosed materials to sign and return your proxy card in the enclosed postage paid return envelope. If you attend the Meeting, you may vote in person. If you have questions, please call us at 1-888-772-2888. You may also vote by telephone or through a website established for that purpose by following the instructions that appear on the enclosed proxy card. If we do not hear from you after a reasonable amount of time, you may receive a telephone call from our proxy solicitor, Broadridge Financial Services, Inc., reminding you to vote.
Sincerely,
/s/Julian F. Sluyters
Julian F. Sluyters
President
OLD MUTUAL FUNDS II
4643 South Ulster Street, Suite 700
Denver, CO 80237
1-888-772-2888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 28, 2011
A special meeting (the “Meeting”) of the shareholders of the Old Mutual High Yield Fund (formerly, Old Mutual Dwight High Yield Fund), a series of Old Mutual Funds II, will be held on December 28, 2011 at 10:00 a.m., Mountain Time, at the offices of Old Mutual Capital, Inc. (“Old Mutual”), 4643 South Ulster Street, Suite 700, Denver, CO 80237 for the following purpose:
1. To approve an Agreement and Plan of Reorganization between the Old Mutual High Yield Fund and the First Eagle High Yield Fund, a series of First Eagle Funds, providing for: (i) the transfer of all of the assets of the Old Mutual High Yield Fund to the First Eagle High Yield Fund and the assumption of the stated liabilities of the Old Mutual High Yield Fund by the First Eagle High Yield Fund in exchange for shares of the First Eagle High Yield Fund; (ii) the subsequent pro rata distribution of shares of the First Eagle High Yield Fund to the Old Mutual High Yield Fund shareholders, and (iii) the termination and complete liquidation of the Old Mutual High Yield Fund (the “Reorganization”); and
2. To approve an interim sub-advisory agreement by and between Old Mutual and First Eagle Investment Management, LLC (“First Eagle”), which is necessary for First Eagle to receive the sub-advisory fees held in escrow for its services provided to the Old Mutual High Yield Fund during the period October 1, 2011 through the earlier of the closing date the Reorganization or 150 days from the effective date of the Interim Agreement.
Shareholders of record as of the close of business on November 18, 2011 are entitled to notice of, and to vote at, the Meeting or any adjournment of the Meeting.
The Board of Trustees of Old Mutual Funds II (the “Old Mutual Fund Board”) requests that you vote your shares by completing the enclosed proxy card and returning it in the enclosed postage paid return envelope, or by voting by telephone or via the internet using the instructions on the proxy card.
The Old Mutual Fund Board recommends that you cast your vote FOR the Reorganization as described in the Proxy Statement/Prospectus.
Please sign and promptly return the proxy card in the postage paid return envelope regardless of the number of shares owned.
Kathryn L. Santoro
Vice President and Secretary
November 30, 2011
_______________________________
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND
AND VOTE ON THE PROPOSALS
_______________________________
We are providing you with this overview of the proposals on which your vote is requested. Please read the full text of the Proxy Statement/Prospectus, which contains additional information about the proposals, and keep it for future reference. Your vote is important.
Questions and Answers
Q. What am I being asked to vote upon?
A. You are being asked to approve transitioning the Old Mutual High Yield Fund to a new fund family. Specifically, as a shareholder of the Old Mutual High Yield Fund, you are being asked to consider and approve an Agreement and Plan of Reorganization (“Agreement”) pursuant to which the assets and liabilities of the Old Mutual High Yield Fund will be transferred to the First Eagle High Yield Fund, a new fund with the same portfolio management team, the same investment objective, and substantially similar principal investment strategies and risks as the Old Mutual High Yield Fund (the “Reorganization”). If shareholders of the Old Mutual High Yield Fund approve the Agreement, the shareholders will receive Class I shares of the First Eagle High Yield Fund in exchange for their Institutional Class shares of the Old Mutual High Yield Fund, and the outstanding Institutional Class shares of the Old Mutual High Yield Fund held by such shareholders will be terminated and cancelled as permitted by the organizational documents of Old Mutual Funds II and applicable law. The Old Mutual High Yield Fund will thereafter wind-up its affairs and be terminated and dissolve under applicable law and deregistered under the Investment Company Act of 1940, as amended (the “1940 Act”).
You are separately being asked to approve an Interim Agreement (defined below) so that First Eagle Investment Management, LLC (“First Eagle”) may receive the sub-advisory fees held in escrow for its services provided to the Old Mutual High Yield Fund under the Interim Agreement during the period October 1, 2011 through the earlier of the closing date of the Reorganization or 150 days from the effective date of the Interim Agreement.
Q. Why is the Reorganization being proposed?
A. On October 1, 2011, the portfolio managers of the Old Mutual High Yield Fund transitioned from Dwight Asset Management Company, LLC (“Dwight”), to First Eagle. In anticipation of the transition, the Board of Trustees of Old Mutual Funds II (the “Old Mutual Fund Board”) approved an interim sub-advisory agreement with First Eagle on behalf of the Old Mutual High Yield Fund (the “Interim Agreement”) to maintain continuity of the Fund’s portfolio management. In connection with the transition of the Fund’s portfolio management team to First Eagle and Old Mutual’s recently announced plan to exit the mutual fund asset management business, the Old Mutual Fund Board determined that a transition of the Old Mutual High Yield Fund to the First Eagle mutual fund platform by transferring the assets and liabilities of the Old Mutual High Yield Fund to the First Eagle High Yield Fund, a newly formed series of the First Eagle Funds trust with substantially the same investment objective and principal strategies as the Old Mutual High Yield Fund, was in the best interests of the shareholders of the Old Mutual High Yield Fund.
The First Eagle Funds trust is comprised of six separate investment portfolios. In addition to the First Eagle High Yield Fund, they are the First Eagle Global Fund, First Eagle Overseas Fund, First Eagle U.S. Value Fund, First Eagle Gold Fund and First Eagle Fund of America.
Q. What effect will the Reorganization have on me as a shareholder of the Old Mutual High Yield Fund?
A. Immediately after the Reorganization, you will own Class I shares of the First Eagle High Yield Fund that are equal in value to the Institutional Class shares of the Old Mutual High Yield Fund that you held immediately
prior to the closing of the Reorganization, subject to changes in value that may result from how each Fund prices its portfolio securities. The First Eagle High Yield Fund will be managed by the current portfolio management team of the Old Mutual High Yield Fund. Certain of the service providers to the First Eagle High Yield Fund are different than the service providers to the Old Mutual High Yield Fund and, as a result, the processes and mechanisms that shareholders who purchase shares directly from the Old Mutual High Yield Fund (and not through a financial intermediary) currently utilize to buy, redeem and exchange shares may change. In addition, certain investor services and investment privileges will be different. These differences are described in the Proxy Statement/Prospectus.
Q. Are there any significant differences between the investment objectives and principal investment strategies of the Old Mutual High Yield Fund and the First Eagle High Yield Fund?
A. No. The First Eagle High Yield Fund has the same investment objective and substantially similar principal investment strategies and risks as the Old Mutual High Yield Fund. However, the investment objective of the First Eagle High Yield Fund can be changed by the Board of Trustees of the First Eagle Funds, whereas the investment objective of the Old Mutual High Yield Fund can be changed only with shareholder approval. A description of this change can be found under the “Comparison of Investment Objectives and Principal Investment Strategies” section of the Proxy Statement/Prospectus.
Q. Will the portfolio managers of the Old Mutual High Yield Fund continue to manage the First Eagle High Yield Fund?
A. Yes. The portfolio management team responsible for the day-to-day investment management of the Old Mutual High Yield Fund, Edward B. Meigs and Sean M. Slein, will manage the assets of the First Eagle High Yield Fund.
Q. Are there any significant differences in the advisory fee or total annual fund operating expenses of the Old Mutual High Yield Fund and the First Eagle High Yield Fund?
A. At current asset levels, the advisory fee of the First Eagle High Yield Fund (0.70%) will be the same as the advisory fee of the Old Mutual High Yield Fund (0.70%). However, unlike the First Eagle High Yield Fund, the Old Mutual High Yield Fund has advisory fee breakpoints, meaning that as the Fund grows, the advisory fee paid by the Old Mutual High Yield Fund would be reduced, whereas the advisory fee for the First Eagle High Yield Fund would stay the same.
| Old Mutual High Yield Fund | | | First Eagle High Yield Fund | |
| $0 to less than $500 million | 0.70% | | All assets | 0.70% |
| $500 million to less than $1 billion | 0.675% | | | |
| $1 billion or greater | 0.650% | | | |
| | | | | |
First Eagle has agreed to waive its advisory fee and/or reimburse fund expenses of the First Eagle High Yield Fund through at least December 31, 2013 so that the First Eagle High Yield Fund’s total annual fund operating expenses for its Class I shares will be no greater than the total annual fund operating expenses of the Old Mutual High Yield Fund. After December 31, 2013, unless the fee waiver arrangement is extended by First Eagle, at current asset levels, the total annual fund operating expenses of the First Eagle High Yield Fund would be higher than the total annual fund operating expenses of the Old Mutual High Yield Fund. The expense limitation arrangement and a comparison of the gross and net total annual fund operating expenses of the Funds are described in the “Comparison of Fees and Expenses” section of the Proxy Statement/Prospectus.
In addition, both First Eagle and Old Mutual provide certain administrative and other services on behalf of the First Eagle High Yield Fund and the Old Mutual High Yield Fund, respectively. Old Mutual’s compensation for these services is included in the advisory fee paid by the Old Mutual High Yield Fund (0.70%) whereas First Eagle is entitled to reimbursement by the First Eagle High Yield Fund for costs (including personnel, compensation, overhead and other costs) related to those services up to a maximum annual rate of 0.05% of the value of the First Eagle High Yield Fund’s average daily net assets. After December 31, 2013, the First Eagle High Yield Fund will no longer reimburse these costs and instead will pay a fixed administrative services fee to First Eagle as an annual rate of 0.05% of the value of the Fund’s average daily net assets.
Q. Will there be any sales load, commission or other transactional fee in connection with the Reorganization?
A. No. The total value of the shares of the Old Mutual High Yield Fund that you own will be exchanged for shares of the First Eagle High Yield Fund without the imposition of any sales load, commission or other transactional fee.
Q. What are the expected federal income tax consequences of the Reorganization?
A. The Reorganization is intended to qualify as a tax-free reorganization for federal income tax purposes and the Old Mutual High Yield Fund will receive a legal opinion to the effect that the Reorganization should so qualify. Thus, while there can be no guarantee that the U.S. Internal Revenue Service will adopt a similar position, it is expected that shareholders will have no adverse federal income tax consequences as a result of the Reorganization. Shareholders should consult their tax adviser about state and local tax consequences of the Reorganization, if any, because the information about tax consequences in the Joint Proxy Statement/Prospectus relates to the federal income tax consequences of the Reorganization only.
Q. Why am I being asked to vote on an Interim Sub-Advisory Agreement?
A. The Old Mutual Fund Board approved the Interim Agreement in connection with the transfer of the Fund’s portfolio managers to First Eagle and following the termination of the sub-advisory agreement with the Fund’s prior sub-adviser. Under the Interim Agreement, which took effect on October 1, 2011, First Eagle is currently serving as investment sub-adviser to the Old Mutual High Yield Fund until the earlier of (i) 150 days following October 1, 2011 or (ii) the completion of the Reorganization. Compensation earned by First Eagle under the Interim Agreement is being held in escrow for a period of up to 150 days from the effective date of the Interim Agreement. The terms of the Interim Agreement, including the amount of compensation payable to First Eagle, are substantially identical to the terms of the sub-advisory agreement with the Fund’s prior sub-adviser, except for the effective date, termination date and fee escrow provisions. Approval of the Interim Agreement by the Old Mutual High Yield Fund’s shareholders is necessary for First Eagle to receive the amounts held in escrow for its services provided to the Old Mutual High Yield Fund under the Interim Agreement.
Q. Have the Old Mutual High Yield Fund’s Trustees considered the Reorganization, and how do they recommend that I vote?
A. The Trustees of Old Mutual Funds II, on behalf of the Old Mutual High Yield Fund, including the Trustees who are not “interested persons” (as defined in the 1940 Act) of Old Mutual Funds II, have carefully considered the Reorganization and unanimously recommend that you vote “FOR” the Reorganization. A summary of the considerations of the Trustees in making this recommendation is provided in the “Board Considerations” section of Proposal 1 of the Proxy Statement/Prospectus.
Q. What is the anticipated timing of the Reorganization?
A. A special meeting of shareholders of the Old Mutual High Yield Fund will be held on December 28, 2011 (the “Meeting”). If shareholders of the Old Mutual High Yield Fund approve the Reorganization, it is anticipated that the Reorganization will occur on or about December 30, 2011.
Q. What will happen if shareholders of the Old Mutual High Yield Fund do not approve the Reorganization or the Interim Agreement?
A. If the shareholders of the Old Mutual High Yield Fund do not approve the Reorganization, the Old Mutual Fund Board will consider other possible courses of action for the Fund. Old Mutual has stated that it does not intend to remain in the mutual fund asset management business in the long-term, so the Old Mutual Fund Board would need to seek a new investment adviser for the Old Mutual High Yield Fund, unless the Fund was otherwise merged or liquidated.
You should know that certain other funds on the Old Mutual fund platform and Old Mutual each own a large percentage of the shares of the Fund. Collectively, those shareholders will be able to determine the outcome of
the shareholder vote on the Reorganization, even though they may be expected to withdraw as shareholders prior to the Reorganization.
If shareholder of the Old Mutual High Yield Fund do not approve the Interim Agreement, then First Eagle will be entitled to receive only the lesser of the amount held in escrow for its services provided to the Old Mutual High Yield Fund under the Interim Agreement or its costs in providing such services.
Q. What if I do not wish to participate in the Reorganization?
A. If you do not wish to have the shares of the Old Mutual High Yield Fund exchanged for shares of the First Eagle High Yield Fund as part of a Reorganization that is approved by shareholders, you may redeem your shares prior to the consummation of the Reorganization. If you redeem your shares, you will incur any applicable redemption fee and if you hold shares in a taxable account, you will recognize a taxable gain or loss based on the difference between your tax basis in the shares and the amount you receive for them.
Q. Why are you sending me the Proxy Statement/Prospectus?
A. You are receiving a Proxy Statement/Prospectus because you own shares in the Old Mutual High Yield Fund and have the right to vote on the very important proposals described therein concerning the Fund. The Proxy Statement/Prospectus contains information that shareholders of the Old Mutual High Yield Fund should know before voting on the proposed Reorganization and the Interim Agreement. The document is both a proxy statement of the Old Mutual High Yield Fund and a prospectus for the First Eagle High Yield Fund.
Q. Will the Old Mutual High Yield Fund or the First Eagle High Yield Fund pay the costs of this proxy solicitation or any additional costs in connection with the proposed Reorganization?
A. No. The Old Mutual High Yield Fund will not bear any Reorganization-related costs. Old Mutual or its affiliates will bear all expenses arising in connection with the Reorganization except costs incurred in organizing the First Eagle High Yield Fund and registering its shares that will be issued in connection with the Reorganization. Such organizational and registration costs will be borne by the First Eagle High Yield Fund but are expected to be paid by First Eagle pursuant to applicable expense limitations in place for the First Eagle High Yield Fund.
Q. What is the required vote to approve the Proposals?
A. Shareholder approval of the Reorganization and the Interim Agreement requires the affirmative vote of the lesser of (i) 67% or more of the shares present at the Meeting, if the holders of 50% of the outstanding shares of the Fund are present or represented by proxy; or (ii) more than 50% of the outstanding shares of the Old Mutual High Yield Fund. The holders of one-third of the outstanding shares of the Old Mutual High Yield Fund entitled to vote at the Meeting shall constitute quorum.
Q. How do I vote my shares?
A. For your convenience, there are several ways you can vote:
· Voting by Telephone or the Internet: You may vote your shares quickly and easily by telephone or through a website established for that purpose by following the instructions that appear on the proxy card accompanying the Proxy Statement/Prospectus.
· Voting in Person: If you attend the Meeting, were the record owner of your shares on November 18, 2011 (the “Record Date”), and wish to vote in person, we will provide you with a ballot prior to the vote. However, if your shares were held in the name of your broker, bank or other nominee, you are required to bring a letter from the nominee indicating that you are the beneficial owner of the shares on the Record Date and authorizing you to vote.
· Voting by Proxy: Whether or not you plan to attend the Meeting, we urge you to complete, sign and date the enclosed proxy card and to return it promptly in the envelope provided. Returning the proxy card will not affect your right to attend the Meeting and vote. If you properly fill in and sign your proxy card and send it in time to vote at the Meeting, your “proxy” (the individuals
named on your proxy card) will vote your shares as you have directed. If you sign your proxy card but do not make specific choices, your proxy will vote your shares FOR the proposals, as recommended by the Old Mutual Fund Board, and in their best judgment on other matters. Your proxy will have the authority to vote and act on your behalf at any adjournment of the Meeting. If you authorize a proxy to vote for you, you may revoke the authorization at any time before it is exercised by sending in another proxy card with a later date or by notifying the Secretary of Old Mutual Funds II in writing to the address of Old Mutual Funds II set forth on the cover page of the Proxy Statement/Prospectus before the Meeting that you have revoked your proxy. In addition, although merely attending the Meeting will not revoke your proxy, if you are present at the Meeting you may withdraw your proxy and vote in person (provided that you have the required authorization for shares held through a broker or other nominee).
Q. Whom should I call for additional information about the Reorganization or the Proxy Statement/Prospectus?
A. If you need any assistance, or have any questions regarding the Reorganization or how to vote your shares, please call Broadridge Financial Services, Inc. at 1-877-348-4358.
Whether or not you plan to attend the Meeting in person, it is important that your shares be represented and voted at the Meeting. Your vote is important no matter how many shares of the Old Mutual High Yield Fund you own, and even if you sold your shares after the November 18, 2011 Record Date. Accordingly, please complete, sign and date the enclosed proxy card promptly or authorize your proxy by telephone or through the Internet. It is important that you vote your shares promptly in order to avoid the additional expense of further solicitation.
| OLD MUTUAL FUNDS II | FIRST EAGLE FUNDS |
4643 South Ulster Street, Suite 700 Denver, CO 80237 | 1345 Avenue of the Americas New York, New York 10105 |
| 1-888-772-2888 | 1-800-334-2143 |
PROXY STATEMENT AND PROSPECTUS
November 30, 2011
Introduction
This document contains information that shareholders of the Old Mutual High Yield Fund should know before voting on the proposed reorganization described herein, and should be retained for future reference. It is both the proxy statement of the Old Mutual High Yield Fund and a prospectus for the First Eagle High Yield Fund. The Old Mutual High Yield Fund is a series of Old Mutual Funds II, and the First Eagle High Yield Fund is a series of First Eagle Funds. We sometimes refer to the Old Mutual High Yield Fund and the First Eagle High Yield collectively as the “Funds” and to each fund individually as a “Fund.”
The meeting of the shareholders of the Old Mutual High Yield Fund (the “Meeting”) will be held at the offices of Old Mutual Capital, Inc. (“Old Mutual”), 4643 South Ulster Street, Suite 700, Denver, CO 80237 on December 28, 2011 at 10:00 a.m., Mountain Time. At the Meeting, shareholders of the Old Mutual High Yield Fund are being asked to consider the following proposals:
1. To approve an Agreement and Plan of Reorganization (the “Agreement”) under which the assets and liabilities of the Old Mutual High Yield Fund will be transferred to the First Eagle High Yield Fund; and
2. To approve an interim sub-advisory agreement (the “Interim Agreement”) by and between Old Mutual and First Eagle Investment Management, LLC (“First Eagle”), which is necessary for First Eagle to receive the sub-advisory fees held in escrow for its services provided to the Old Mutual High Yield Fund during the period October 1, 2011 through the earlier of the closing date of the Reorganization (defined below) or 150 days from the effective date of the Interim Agreement.
The reorganization of the Old Mutual High Yield Fund with and into the First Eagle High Yield Fund (the “Reorganization”) as described in the Agreement will involve three steps:
| | · | the transfer of the assets and liabilities of the Old Mutual High Yield Fund to the First Eagle High Yield Fund in exchange for shares of the First Eagle High Yield Fund having equivalent value to the net assets transferred; |
| | · | the pro rata distribution of Class I shares of the First Eagle High Yield Fund to the shareholders of Institutional Class shares of the Old Mutual High Yield Fund on the closing date of the Reorganization (“Closing Date”) and the termination and cancellation of the outstanding shares of the Old Mutual High Yield Fund held by such shareholders, as permitted by the organizational documents of Old Mutual Funds II and applicable law; and |
| | · | the winding up of the affairs of Old Mutual High Yield Fund and dissolution under applicable law and de-registration of the Old Mutual High Yield Fund under the Investment Company Act of 1940, as amended (the “1940 Act”). |
The total value of the Class I shares of the First Eagle High Yield Fund shares that you receive in the Reorganization will be the same as the total value of the Institutional Class shares of the Old Mutual High Yield Fund that you held immediately prior to the Reorganization, subject to changes in value that may result from how each Fund prices its portfolio securities. The Reorganization is anticipated to be a tax-free transaction, meaning that you should not be required to pay any federal income tax in connection with the Reorganization. No sales charges or redemption fees will be imposed in connection with the Reorganization and any minimum investment amounts will be waived.
The Board of Trustees of Old Mutual Funds II (the “Old Mutual Fund Board”) has fixed the close of business on November 18, 2011 as the record date (“Record Date”) for the determination of shareholders entitled to notice of and to vote at the Meeting and at any adjournment thereof. We intend to mail this Proxy Statement/Prospectus, the enclosed Notice of Special Meeting of Shareholders and the enclosed proxy card on or about the week of December 5, 2011 to all shareholders entitled to vote at the Meeting.
The Old Mutual Fund Board has approved the Agreement and the Reorganization and has determined that it is in the best interests of the Old Mutual High Yield Fund and its shareholders.
If shareholders of the Old Mutual High Yield Fund do not approve the Reorganization, the Old Mutual Fund Board will consider what further action is appropriate. Old Mutual has stated that it does not intend to remain in the mutual fund asset management business in the long-term, so the Old Mutual Fund Board would need to seek a new investment adviser for the Old Mutual High Yield Fund, unless the Fund was otherwise merged, reorganized or liquidated.
Additional information about the Funds is available in the:
| | · | Prospectus for the Old Mutual High Yield Fund; |
| | · | Annual and Semi-Annual Reports to shareholders of the Old Mutual High Yield Fund; |
| | · | Statement of Additional Information (“SAIs”) for the Old Mutual High Yield Fund; and |
| | · | SAI to this Proxy Statement/Prospectus. |
These documents are on file with the U.S. Securities and Exchange Commission (the “SEC”). The prospectus of the Old Mutual High Yield Fund dated July 26, 2011, as amended, is incorporated herein by reference and is legally deemed to be part of this Proxy Statement/Prospectus. The SAI to this Proxy Statement/Prospectus, dated the same date as this Proxy Statement/Prospectus, also is incorporated by reference and deemed to be part of this document. The Old Mutual High Yield Fund prospectus, the most recent Annual Report to Shareholders, containing audited financial statements for the most recent fiscal year, and the most recent Semi-Annual Report to Shareholders of the Old Mutual High Yield Fund have been previously mailed to shareholders and are available on Old Mutual’s web site at www.oldmutualfunds.com.
Copies of all of these documents are available upon request without charge by visiting, writing to or calling:
For Old Mutual High Yield Fund Documents: | For First Eagle High Yield Fund Documents: |
| OLD MUTUAL FUNDS | FIRST EAGLE FUNDS |
PO Box 219534 Kansas City, Missouri 64121-9534 | PO Box 219324 Kansas City, Missouri 64121-9324 |
| 1-888-772-2888 | 1-800-334-2143 |
You also may view or obtain these documents from the SEC’s Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549, or from the SEC’s website at www.sec.gov. Information on the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. You can also request copies of these materials, upon payment at the prescribed rates of the duplicating fee, by electronic request to the SEC’s e-mail address (publicinfo@sec.gov) or by writing to the SEC’s Public Reference Section at 100 F Street, N.E., Washington, D.C. 20549.
These securities have not been approved or disapproved by the SEC nor has the SEC passed upon the accuracy or adequacy of this Proxy Statement/Prospectus. Any representation to the contrary is a criminal offense. An investment in the Fund is not a deposit with a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. You may lose money by investing in the Fund.
| | Page |
| PROPOSAL 1: APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION | 1 |
Summary | 1 |
Reasons for the Reorganization | 1 |
Comparison of Investment Objective and Principal Investment Strategies | 2 |
Comparison of Principal Risks Associated with Investments in the Funds | 3 |
Comparison of Fundamental and Non-Fundamental Investment Restrictions | 4 |
Comparison of Fees and Expenses | 6 |
Comparison of Performance Information | 8 |
Comparison of Investment Advisers, Sub-Advisers and Distributors | 8 |
Comparison of Portfolio Managers | 9 |
Comparison of Other Service Providers | 10 |
Comparison of Share Classes and Distribution Arrangements | 10 |
Comparison of Purchase and Redemption Procedures | 11 |
Comparison of Exchange Privileges | 12 |
Comparison of Dividend and Distribution Policies and Fiscal Year | 13 |
Comparison of Business Structures, Shareholder Rights and Applicable Law | 13 |
Terms of the Reorganization | 15 |
Federal Income Tax Consequences | 17 |
| BOARD CONSIDERATIONS | 19 |
Required Vote | 20 |
| ADDITIONAL INFORMATION ABOUT THE FUNDS | 20 |
Where to Find More Information | 20 |
| PROPOSAL 2: APPROVAL OF AN INTERIM SUB-ADVISORY AGREEMENT | 20 |
The Interim Agreement | 20 |
Terms of the New Advisory Agreement if Approved | 21 |
Trustee and Officer Interests in Approval of the New Advisory Agreement | 21 |
Information about First Eagle | 21 |
| BOARD CONSIDERATIONS | 21 |
Required Vote | 21 |
| INFORMATION ON VOTING | 22 |
Voting Process | 22 |
Quorum Requirement and Adjournment | 22 |
Vote Necessary to Approve the Agreement and the Interim Agreement | 22 |
Proxy Solicitation | 23 |
Other Matters | 23 |
| CAPITALIZATION | 23 |
| OWNERSHIP OF SHARES | 24 |
Security Ownership of Large Shareholders | 24 |
Security Ownership of Management and Trustees | 24 |
| DISSENTERS’ RIGHTS | 24 |
| SHAREHOLDER PROPOSALS | 24 |
| INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION | 24 |
Exhibits
| EXHIBIT A Fundamental and Non-Fundamental Investment Restrictions of the Funds | A-1 |
| EXHIBIT B Additional Information About the First Eagle High Yield Fund | B-1 |
| EXHIBIT C Form of Agreement and Plan of Reorganization | C-1 |
| EXHIBIT D Ownership of the Old Mutual High Yield Fund | D-1 |
| EXHIBIT E Interim Sub-Advisory Agreement with First Eagle | E-1 |
PROPOSAL 1:
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
Summary
On October 1, 2011, the portfolio managers of the Old Mutual High Yield Fund transitioned from Dwight Asset Management Company, LLC (“Dwight”), to First Eagle Investment Management, LLC (“First Eagle”). In anticipation of the transition, the Old Mutual Fund Board approved the Interim Agreement with First Eagle on behalf of the Old Mutual High Yield Fund to maintain continuity of the Fund’s portfolio management.
On September 30, 2011, Old Mutual and First Eagle entered into an agreement whereby Old Mutual agreed to sell certain assets relating to the Old Mutual High Yield Fund to First Eagle in return for a cash payment (the “Transaction”). In connection with the Transaction, Old Mutual requested that the Old Mutual Fund Board approve the transition of the Old Mutual High Yield Fund onto the First Eagle mutual fund platform by transferring the assets and liabilities of the Old Mutual High Yield Fund to the First Eagle High Yield Fund, a newly formed series of First Eagle Funds. Old Mutual had previously announced that it was planning to exit the mutual fund asset management business.
After multiple meetings with Old Mutual and First Eagle, the Old Mutual Fund Board determined that a transition of the Old Mutual High Yield Fund to the First Eagle mutual fund platform was in the best interests of the shareholders of the Old Mutual High Yield Fund. The Old Mutual Fund Board unanimously voted to approve the Reorganization and to recommend that shareholders of the Old Mutual High Yield Fund vote “FOR” the Reorganization.
In the Reorganization, the Old Mutual High Yield Fund will transfer its assets and liabilities to the First Eagle High Yield Fund. The First Eagle High Yield Fund will then issue shares to the Old Mutual High Yield Fund, which will distribute such shares to shareholders of the Old Mutual High Yield Fund. Any shares you own of the Old Mutual High Yield Fund at the time of the Reorganization will be cancelled and you will receive shares of the First Eagle High Yield Fund having an aggregate value equal to the value of your shares of the Old Mutual High Yield Fund, subject to changes in value that may result from how each Fund prices its portfolio securities. It is expected that no gain or loss will be recognized by any shareholder of the Old Mutual High Yield Fund in connection with the Reorganization, as discussed below under “Federal Income Tax Consequences.” If approved by shareholders and certain other conditions are met, the Reorganization is expected to occur on or about December 30, 2011.
Reasons for the Reorganization
The Old Mutual Fund Board considered the proposed Reorganization and concluded that participation in the proposed Reorganization is in the best interests of the Old Mutual High Yield Fund and its shareholders. In reaching that conclusion, the Old Mutual Fund Board considered, among other things:
(1) there is not expected to be any diminution in the nature, quality and extent of portfolio management services provided to the Old Mutual High Yield Fund and its shareholders as a result of the Reorganization;
(2) the reputation, financial strength and resources of First Eagle;
(3) the First Eagle High Yield Fund has substantially the same investment objective, principal investment strategies and risks as the Old Mutual High Yield Fund;
(4) the portfolio managers currently managing the Old Mutual High Yield Fund will manage the First Eagle High Yield Fund after the Reorganization;
(5) the advisory fees charged by the First Eagle High Yield Fund are the same as the advisory fees charged by the Old Mutual High Yield Fund at current asset levels, although may be higher at higher asset levels, and First Eagle is entitled to reimbursement under its advisory agreement for providing certain administrative services to the First Eagle High Yield Fund for the first two years and thereafter an administrative fee;
(6) First Eagle will provide a two-year contractual guaranty that will limit the total annual fund operating expenses of the First Eagle High Yield Fund’s Class I shares to an amount no greater than the Old Mutual High Yield Fund’s total annual fund operating expenses prior to the Reorganization;
(7) the transition from the Old Mutual High Yield Fund’s current service providers to post-Reorganization service providers will not have any foreseeable adverse effect on shareholders;
(8) Old Mutual or its affiliates will bear all expenses arising in connection with the Reorganization except costs incurred in organizing the First Eagle High Yield Fund and registering its shares that will be issued in connection with the Reorganization. Such organizational and registration costs will be borne by the First Eagle High Yield Fund but are expected to be paid by First Eagle pursuant to applicable expense limitations in place for the First Eagle High Yield Fund;
(9) Shareholders are expected to face no adverse federal income tax consequences as a result of the Reorganization;
(10) the compensation to be received by Old Mutual from First Eagle in connection with the Reorganization; and
(11) First Eagle and Old Mutual have agreed to conduct and use reasonable best efforts to cause their affiliates to conduct their respective businesses in compliance with Section 15(f) of the 1940 Act.
For a more complete discussion of the factors considered by the Old Mutual Fund Board in approving the Reorganization, see the section entitled “Board Considerations” in this Proxy Statement/Prospectus.
Comparison of Investment Objective and Principal Investment Strategies
The First Eagle High Yield Fund recently was created specifically to acquire assets and assume liabilities of the Old Mutual High Yield Fund in the Reorganization. The First Eagle High Yield Fund has the same investment objective and substantially the same principal investment strategies as the Old Mutual High Yield Fund. The investment objective of each Fund is to provide investors with a high level of current income. The Old Mutual High Yield Fund’s investment objective is fundamental, meaning that the objective may not be changed without the approval of a majority of the Fund’s outstanding voting shares. The First Eagle High Yield Fund’s investment objective can be changed without shareholder approval, although no change is anticipated, and the Fund has a non-fundamental policy that requires shareholders to be notified at least 60 days in advance of any change in investment objective.
Each Fund seeks to achieve its investment objective by normally investing at least 80% of its net assets (plus any borrowings for investment purposes) in high-yield, below investment-grade securities (commonly referred to as “junk bonds”), including high-yield corporate bonds and loans, municipal bonds, mortgage-backed and asset backed securities, income-producing convertible securities, and preferred stocks. Each Fund may invest in unrated securities, including those deemed to be below investment grade by First Eagle, the investment sub-adviser of the Old Mutual High Yield Fund and the investment adviser of the First Eagle High Yield Fund; however, the First Eagle High Yield Fund’s principal investment strategies clarify that such unrated securities deemed to be below investment grade will be counted for purposes of the First Eagle High Yield Fund’s policy to invest 80% of its assets in high-yield, below investment-grade securities. Each Fund has a non-fundamental policy that requires shareholders to be notified a minimum of 60 days in advance of any change in the “80% of net assets” investment policy. Securities are generally considered below investment grade if they are rated lower than one of the four highest rating categories of a nationally recognized statistical rating organization (NRSRO). First Eagle may use internal ratings on securities that are not rated by an NRSRO.
Each Fund may invest its assets in securities of both U.S. and foreign issuers; however, the Old Mutual High Yield Fund’s principal investment strategies limit investments in foreign issuers to a maximum of 30% of the Fund’s assets in U.S. dollar denominated foreign debt obligations. Each Fund may invest in derivative instruments such as options, futures contracts and options on futures contracts, credit default swaps, and swaps and options on indices and may engage in certain investment techniques which create market exposure, such as dollar rolls.
The Old Mutual High Yield Fund seeks to maintain a minimum average credit quality for its investments at a rating of “B” (or equivalent) or higher from any NRSRO, and its investment duration typically ranges from 75% to 125% of the average duration of the Barclays Capital U.S. Corporate High-Yield Bond Index. The First Eagle High Yield Fund’s principal investment strategies do not set a minimum average credit quality or target duration for the Fund’s investments.
Comparison of Principal Risks Associated with Investments in the Funds
Like all investments in securities, you risk losing money by investing in either Fund. As described above, the Old Mutual High Yield Fund and the First Eagle High Yield Fund have the same investment objectives and substantially similar principal investment strategies and invest in substantially the same types of securities. As a result, the risks associated with an investment in the First Eagle High Yield Fund are substantially similar as the risks associated with an investment in the Old Mutual High Yield Fund. Because the First Eagle High Yield Fund’s principal investment strategies do not limit the Fund’s investments in foreign securities, the First Eagle High Yield Fund may be subject to a greater degree of foreign securities risk, to the extent so invested.
The principal risks of investing in each Fund are identified below.
Credit Risk. Each Fund is subject to credit risk. Credit risk is the risk that the issuer of a bond or other instrument will not be able to make payments of interest and principal when due. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also affect the value of the Fund’s investment in that issuer.
High Yield Risk. Each Fund is subject to high yield risk. Each Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) under normal market conditions in high yield securities (commonly known as “junk bonds”) which may be subject to greater levels of interest rate, credit (including issuer default) and liquidity risk than investment grade securities and may experience extreme price fluctuations.
High Portfolio Turnover Risk. The Funds’ investment strategies may result in high turnover rates. This may increase the Fund’s brokerage commission costs, which would reduce performance. Rapid portfolio turnover also exposes shareholders to a higher current realization of short-term gains, which could cause you to pay higher taxes.
Market Risk. Each Fund is subject to market risk. The value of each Fund’s portfolio holdings may fluctuate in response to events specific to the companies or markets in which the Fund invests, as well as economic, political, or social events in the United States or abroad.
Foreign Investment Risk. The Old Mutual High Yield Fund may invest up to 30% of its assets in U.S. dollar denominated foreign debt obligations, whereas the First Eagle High Yield Fund has no such limitations and, therefore, may be subject to a greater degree of foreign investment risk. Foreign investments can be susceptible to less politically and economically stable environments, foreign currency and exchange rate changes, and adverse changes to government regulations.
Convertible Security Risk. Each Fund is subject to convertible securities risk. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities may gain or lose value due to changes in the issuer’s operating results, financial condition and credit rating and changes in interest rates and other general economic, industry and market conditions.
Illiquid Investment Risk. Each Fund is subject to illiquid investments risk. The market for lower-quality debt securities, including junk bonds, is generally less liquid than the market for higher-quality debt securities. Holding illiquid securities restricts or otherwise limits the ability for the Fund to freely dispose of its investments for specific periods of time. The Fund might not be able to sell illiquid securities at its desired price or time.
Interest Rate Risk. Each Fund is subject to interest rate risk. Fluctuations in interest rates will affect the value of the Fund. An increase in interest rates tends to reduce the market value of debt securities, while a decline in interest rates tends to increase their values. Securities with longer durations tend to be more sensitive to interest rate changes than securities with shorter durations.
Prepayment Risk. Each Fund is subject to prepayment risk. This risk relates primarily to mortgage-backed securities. During a period of declining interest rates, homeowners may refinance their high-rate mortgages and prepay the principal. Cash from these prepayments flows through to prepay the mortgage-backed securities, necessitating reinvestment in bonds with lower interest rates, which may lower the returns to any fund invested in mortgage-backed securities.
Changes in Debt Ratings. Each Fund is subject to the risks associated with changes in credit ratings. If a rating agency gives a debt security a lower rating, the value of the security may decline because investors may demand a higher rate of return.
Derivatives Risk. Each Fund is subject to derivatives risk. Futures contracts or other “derivatives,” including hedging strategies, present risks related to their significant price volatility and risk of default by the counterparty to the contract.
In addition, the withdraw by certain large shareholders of the Old Mutual High Yield Fund, including certain other funds on the Old Mutual fund platform and Old Mutual, in connection with the Transaction will result in a smaller asset base of the First Eagle High Yield Fund following the withdrawals unless those withdrawals are offset by new investments. The withdrawals (unless offset by new investments) may require the sale of securities held by the Fund to satisfy the redemptions and the Fund would bear any transaction costs related to such sales. A smaller asset base may make it more difficult for First Eagle to invest in certain securities where the required investment is larger than the Fund’s available capital. In addition, a smaller asset base may increase the gross expenses of the First Eagle High Yield Fund. Any increase would be muted, however, for the first two years of operation by the expense limitation arrangement in place through December 31, 2013.
Comparison of Fundamental and Non-Fundamental Investment Restrictions
This section summarizes certain differences between the fundamental and non-fundamental investment restrictions of the Old Mutual High Yield Fund and those of the First Eagle High Yield Fund. Fundamental investment restrictions of a fund cannot be changed without shareholder approval. Non-fundamental investment restrictions of a fund can be changed by a fund’s board of trustees.
The 1940 Act requires and each Fund has fundamental investment restrictions relating to diversification, borrowing, issuing senior securities, underwriting, investing in real estate, investing in physical commodities, making loans, and concentrating in particular industries. The Old Mutual High Yield Fund and the First Eagle High Yield Fund generally have similar fundamental investment restrictions. Differences between the fundamental investment restrictions of the Funds are highlighted below and further described in Exhibit A of this Proxy Statement/Prospectus.
Fundamental Investment Restrictions:
Diversification and Issuer Concentration:
Each Fund has a similar fundamental investment restriction that requires the Fund to invest in a manner consistent with its classification as a “diversified” fund. A “diversified fund” is one in which, with respect to 75% of its total assets, (i) not more than 5% of the fund’s total assets are invested in the securities of any one issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities and securities issued by other investment companies), and (ii) the fund does not hold more than 10% of the outstanding voting securities of any one issuer.
Borrowing:
Each Fund has substantially the same fundamental investment restriction limiting the Fund’s ability to borrow money to the extent permitted by the 1940 Act, any rule, regulation or order under the 1940 Act, or any SEC staff interpretation thereof. Each Fund’s restriction effectively permits the Fund to borrow amounts up to 331/3% of its total assets. However, the Funds’ non-fundamental policies on borrowing do differ, as noted below.
Issuing Senior Securities:
Each Fund has substantially the same fundamental investment restriction prohibiting the issuance of senior
securities, except as permitted by the 1940 Act, any rule, regulation or order under the 1940 Act, or any SEC staff interpretation thereof. The 1940 Act defines a “senior security” as any bond, debenture, note, or similar obligation or instrument constituting a security and evidencing indebtedness, and any stock of a class having priority over any other class as to distribution of assets or payment of dividends.
Underwriting:
Each Fund has substantially the same fundamental investment restriction limiting the Fund’s ability to underwrite securities of other companies, but does not prevent the Fund from engaging in transactions involving the acquisition, disposition, or resale of its portfolio securities.
Industry Concentration:
Each Fund has substantially the same fundamental investment restriction limiting the Fund’s ability to invest more than 25% of its net assets in a single industry or group of industries. Each Fund’s restriction specifies that it does not limit the Fund’s investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments, or (iii) repurchase agreements collateralized by such obligations.
Investing in Real Estate:
Each Fund has substantially the same fundamental investment restriction limiting the Fund’s ability to invest directly in real estate. Each Fund’s restriction specifies that it does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
Investing in Physical Commodities:
Each Fund has a similar fundamental investment restriction that prohibits the Fund from purchasing or selling physical commodities. The Funds’ restrictions do not prevent the Funds from holding and selling physical commodities acquired as a result of ownership of securities or other instruments, investing in securities that are backed by physical commodities, or engaging in transactions involving futures or options on physical commodities. In addition, First Eagle High Yield Fund’s restriction does not prevent the Fund from purchasing or selling precious metals directly or purchasing or selling precious metal commodity contracts or options on such contracts.
Lending:
Each Fund has a similar fundamental investment restriction that prohibits the Fund from making personal loans or loans of its assets to persons who control or are under common control with the Fund, except as permitted under the 1940 Act, any rule, regulation or order under the 1940 Act, or any SEC Staff interpretation thereof.
Investing in Other Investment Companies:
The Old Mutual High Yield Fund has a fundamental investment restriction that states that the Fund may, notwithstanding any other fundamental investment restriction or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund. When a fund invests in another investment company, the fund bears its own fees and indirectly bears its proportionate share of the operating expenses of such investment company. The First Eagle High Yield Fund does not have a similar restriction, although neither Fund has any present intention to invest all of its assets in another investment company.
Non-Fundamental Investment Restrictions
Illiquid Securities:
The Old Mutual High Yield Fund has a non-fundamental investment restriction that limits the Fund’s investments in illiquid securities to 15% of the value of its net assets. The First Eagle High Yield Fund does not have a similar non-fundamental investment restriction, but follows the SEC’s guidance to limit its investments in illiquid securities to no more than 15% of the Fund’s assets.
Borrowing
Each Fund has a non-fundamental investment clarifying that the Fund may not borrow money in an amount exceeding 33⅓% of its total assets (including the amount borrowed) less liabilities (other than borrowings), and that the Fund may not purchase additional securities when borrowings exceed 5% of the its total assets. Each Fund’s
non-fundamental investment restriction does permit borrowing for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. However, the non-fundamental investment restrictions of the Funds differ in that the First Eagle High Yield Fund’s restriction permits borrowing as a means to incur leverage, whereas the Old Mutual High Yield Fund’s restriction prohibits the Fund from borrowing to incur leverage.
Investing in Other Investment Companies:
The Old Mutual High Yield Fund has a non-fundamental investment restriction limiting the Fund’s ability to invest in other investment companies except, that the Funds may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act; (ii) invest its assets in securities of other affiliated or unaffiliated money market funds as permitted by Rule 12d1-1 under the 1940 Act; and (iii) lend money to other affiliated Funds subject to the terms and conditions of any exemptive orders issued by the SEC on which such Fund may rely. The First Eagle High Yield Fund does not have a similar restriction but is subject to the limitations prescribed by the 1940 Act, the rules thereunder and applicable SEC staff interpretations thereof, or applicable exemptive relief granted by the SEC.
The Old Mutual High Yield Fund and the First Eagle High Yield Fund may be subject to other investment restrictions that are not identified above. The full list of the Old Mutual High Yield Fund's investment restrictions may be found in its SAI and the First Eagle High Yield Fund's investment restrictions may be found in the SAI related to this Joint Proxy Statement/Prospectus.
Comparison of Fees and Expenses
The following table compares the shareholder fees and annual operating expenses, expressed as a percentage of net assets (“expense ratios”), of the Old Mutual High Yield Fund with the shareholder fees and pro forma expense ratios of the First Eagle High Yield Fund. Pro forma expense ratios of the First Eagle High Yield Fund give effect to the Reorganization. The pro forma expense ratios shown project anticipated expenses but actual expenses may be greater or less than those shown.
Expense Tables:
| | | Old Mutual High Yield Fund (Target Fund) | | First Eagle High Yield Fund after Transaction with the Target Fund (pro forma combined) |
| | | Institutional Class | | Class I |
Shareholder Fees (fees paid directly from your investment) | | | | |
| Maximum Sales Charge (Load) Imposed on Purchases (as a % of offering price) | | None | | None |
| Maximum Deferred Sales (Load) (as a % of original purchase price) | | None | | None |
| Redemption/ Exchange Fee (as a % of amount redeemed or exchanged) | | 2.00% | | None |
| Maximum Account Fee (assessed annually on certain accounts under $1,000) | | $12.00 | | None |
Annual Fund Operating Expenses (expenses that you pay each year as a % of the value of your investment) | | | | |
| Management Fees | | 0.70% | | 0.70% |
| Distribution and/or Service (12b-1) Fees | | None | | None |
| Other Expenses | | 0.51% | | 0.55% |
| Acquired Fund Fees and Expenses | | 0.01% | | 0.01% |
| Total Annual Fund Operating Expenses | | 1.22% 1 | | 1.26% |
| Fee Waiver and/or Expense Reimbursement | | (0.41%) | | (0.45%) 4 |
| Total Annual Fund Operating Expenses after Fee Waiver/Expense Reimbursement | | 0.81% 2 | | 0.81% |
________________
| 1. | Total Annual Fund Operating Expenses do not correlate to the Ratio of Gross Expenses to Average Net Assets of the Old Mutual High Yield Fund stated in the Old Mutual High Yield Fund’s Financial Highlights, which reflects the operating expenses of the Fund and does not include Acquired Fund Fees and Expenses. |
| 2. | These are the expenses you should expect to pay as an investor in the Old Mutual High Yield Fund as a result of Old Mutual’s contractual agreement to waive through December 31, 2012 that portion, if any, of the annual management fee payable by the Fund and to pay certain expenses of the Fund to the extent necessary to ensure that the total annual operating expenses do not exceed 0.80% for Institutional Class shares of the Fund. The expense limitation agreement cannot be terminated before December 31, 2012, and may be amended or continued beyond December 31, 2012 by written agreement of the parties. The expense limitation excludes certain expenses which are described further in the “Comparison of Fees and Expenses – Expense Limitation Arrangements” section of this Proxy Statement/Prospectus. |
| 3. | The percentages shown are based on anticipated expenses of the First Eagle High Yield Fund for the current fiscal year. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. |
| 4. | Effective upon closing of the Reorganization, First Eagle has contractually agreed to waive its management fee and/or reimburse expenses, as allowed by law, so that the total annual operating expenses (excluding interest, taxes, dividend expenses, borrowing costs, “Acquired Fund Fees and Expenses,” interest expense relating to short sales and extraordinary expenses) of Class I shares do not exceed 0.80% until at least December 31, 2013. |
Expense Example
This example is intended to help you compare the costs of investing in the Old Mutual High Yield Fund and the First Eagle High Yield Fund with the cost of investing in other mutual funds. Pro forma combined costs of investing in the First Eagle High Yield Fund after giving effect to the reorganization of the Old Mutual High Yield Fund into the First Eagle High Yield Fund are also provided. All costs are based upon the information set forth in the fee table above.
The Example assumes that you invest $10,000 for the time periods indicated and shows the expenses that you would pay if you redeem all of your shares at the end of those time periods. The Example also assumes that your investment has a 5% return each year and that the operating expenses remain the same.
The Example reflects current fee waivers and expense reimbursements for the first year for the Old Mutual High Yield Fund and the first two years for the First Eagle High Yield Fund. Old Mutual has contractually agreed to waive all or a portion of the Old Mutual High Yield Fund's management fees or reimburse other expenses of the Fund through December 31, 2012. First Eagle has contractually agreed to waive advisory fees and/or reimburse expenses until at least December 31, 2013. Accordingly, the fee waivers and/or expense reimbursements applicable to the First Eagle High Yield Fund are not reflected in years three through ten of the table. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
| | With Redemption | | Without Redemption |
| | 1 Year | 3 Years | 5 Years | 10 Years | | 1 Year | 3 Years | 5 Years | 10 Years |
| Old Mutual High Yield Fund | | | | | | | | | |
| Institutional Class | $83 | $347 | $631 | $1,441 | | $83 | $347 | $631 | $1,441 |
| Pro Forma First Eagle High Yield Fund | | | | | | | | | |
| Class I | $82 | $306 | $601 | $1,439 | | $82 | $306 | $601 | $1,439 |
| | | | | | | | | | |
The Example is not a representation of past or future expenses. Each Fund’s actual expenses, and an investor’s direct and indirect expenses, may be more or less than those shown. The table and the assumption in the Example of a 5% annual return are required by regulations of the SEC applicable to all mutual funds. The 5% annual return is not a prediction of and does not represent the Old Mutual High Yield Fund’s or the First Eagle High Yield Fund’s projected or actual performance.
For further discussion regarding the Old Mutual Fund Board’s consideration of the fees and expenses of the Funds in approving the Reorganization, see the section entitled “Board Considerations” in this Proxy Statement/Prospectus.
Expense Limitation Arrangements. Old Mutual has contractually agreed to waive all or a portion of the Old Mutual High Yield Fund’s management fees and/or reimburse other expenses of the Old Mutual High Yield Fund so that the Fund’s total annual fund operating expenses do not exceed 0.80% of daily net assets (the “Old Mutual Expense Cap”). This contract will expire on December 31, 2012, unless extended by Old Mutual, and excludes interest, taxes, brokerage costs and commissions, dividends on short sales, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Fund’s business. First Eagle has contractually agreed to waive all or a portion of the First Eagle High Yield Fund’s advisory fees and/or reimburse expenses of the Fund so that the First Eagle High Yield Fund’s total annual fund operating expenses as to its Class I shares do not exceed 0.80% of daily net assets. This contract will expire on December 31, 2013, unless extended by First Eagle, and excludes interest, taxes, dividend expenses, borrowing costs, “Acquired Fund Fees and Expenses,” interest expense relating to short sales and extraordinary expenses.
The Old Mutual High Yield Fund’s expense limitation arrangement entitles Old Mutual to be reimbursed by the Fund for any management fees Old Mutual waives or Fund expenses that Old Mutual reimburses in any year where the Fund’s operating expenses are below the agreed upon expense cap and certain other conditions are met, including that the reimbursement is made within three years of such waiver or reimbursement. The First Eagle High Yield Fund’s expense limitation arrangement contains a similar reimbursement right. However, First Eagle will not be entitled to reimbursement of any amounts waived or reimbursed by Old Mutual prior to the Reorganization.
Portfolio Turnover:
Each Fund pays transaction costs, such as commissions, mark-ups or mark-downs, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect a Fund’s performance. During the most recent fiscal year, the Old Mutual High Yield Fund’s portfolio turnover rate was 145.96 % of the average value of its portfolio.
Comparison of Performance Information
The First Eagle High Yield Fund does not have any operating history or performance information, and it is expected that upon completion of the proposed Reorganization, the First Eagle High Yield Fund will adopt as its own the historical performance information of the Old Mutual High Yield Fund.
Comparison of Investment Advisers, Sub-Advisers and Distributors
Old Mutual High Yield Fund’s Adviser and Distributor. Old Mutual serves as the investment adviser and administrator of the Old Mutual High Yield Fund. Old Mutual Investment Partners, an affiliate of Old Mutual, serves as the Old Mutual High Yield Funds’ underwriter. Old Mutual is located at 4643 S. Ulster Street, Suite 700, Denver, Colorado 80237 and Old Mutual Investment Partners is located at 200 Clarendon Street, 53rd Floor, Boston, Massachusetts 02116. Both Old Mutual and Old Mutual Investment Partners are indirect, wholly owned subsidiaries of Old Mutual, plc, an international financial services firm based in London, England. As of August 31, 2011, Old Mutual had approximately $2.1 billion of mutual fund assets under management or supervision.
Old Mutual High Yield Fund’s Sub-Adviser. Old Mutual employs First Eagle as a sub-adviser to provide portfolio management services to the Old Mutual High Yield Fund. As sub-adviser, First Eagle is overseen by Old Mutual and ultimately by the Old Mutual Fund Board. Additional information about First Eagle is provided below.
First Eagle High Yield Fund’s Adviser and Distributor. First Eagle serves as the investment adviser of the First Eagle High Yield Fund. FEF Distributors, LLC (“FEF Distributors”), serves at the First Eagle High Yield Fund’s underwriter. Both First Eagle and FEF Distributors are located at 1345 Avenue of the Americas, New York, New York 10105. First Eagle is a subsidiary of Arnhold and S. Bleichroeder Holdings, Inc., a privately owned holding company organized under the laws of the state of Delaware. FEF Distributors is a wholly owned subsidiary
or First Eagle. As of August 31, 2011, First Eagle had approximately $60 billion of mutual fund assets under management or supervision.
Advisory Agreements. Except as described below, there are no material differences between the terms of the investment advisory agreement between First Eagle and the First Eagle High Yield Fund (the “First Eagle Advisory Agreement”) and the terms of the current advisory agreement between Old Mutual and the Old Mutual High Yield Fund (the “Old Mutual Advisory Agreement”). Both First Eagle and Old Mutual are responsible for continuously reviewing, supervising and administering the investment programs of the Fund for which they act as investment adviser and also ensuring compliance with such Fund’s investment policies and guidelines.
Fees. Pursuant to the First Eagle Advisory Agreement and Old Mutual Advisory Agreement, each of First Eagle and Old Mutual, respectively, is entitled to receive a fee with respect to the average daily net assets of the Fund for which it acts as investment adviser, which is computed and paid monthly. The advisory fees payable to First Eagle with respect to the First Eagle High Yield Fund and to Old Mutual with respect to the Old Mutual High Yield Fund are set forth in the table below.
| Old Mutual High Yield Fund | First Eagle High Yield Fund |
0.70% on $0 to less than $500 million; 0.675% on $500 million to less than $1.0 billion; and 0.65% on $1.0 billion or greater | 0.70% on all assets |
Administrative Services and Fees. In addition to providing advisory services to the Old Mutual High Yield Fund, Old Mutual provides administrative services under the Old Mutual Advisory Agreement. These administrative services include, among others, overseeing the administration of the Old Mutual High Yield Fund’s business and affairs, assisting the Old Mutual High Yield Fund in selecting, coordinating the activities of, supervising and acting as liaison with any other person or agent engaged by the Old Mutual High Yield Fund, assisting in developing, reviewing, maintaining and monitoring the effectiveness of the Old Mutual High Yield Fund’s accounting policies and procedures, assisting in developing, implementing and monitoring the Old Mutual High Yield Fund’s use of automated systems for purchase, sale, redemption and transfer of fund shares and the payment of sales charges and services fees and responding to all inquiries from the Old Mutual High Yield Fund’s shareholders or otherwise answering communications from such shareholders if such inquiries or communications are directed to Old Mutual. The advisory fee received by Old Mutual from the Old Mutual High Yield Fund includes compensation for these administrative services.
The First Eagle Advisory Agreement provides that First Eagle may perform certain administrative, accounting, operations, compliance and other services on behalf of the First Eagle High Yield Fund and the First Eagle High Yield Fund will reimburse First Eagle for costs (including personnel, compensation, overhead and other costs) related to those services. These reimbursements may not exceed an annual rate of 0.05% of the value of the First Eagle High Yield Fund’s average daily net assets, subject to any expense limitations. After December 31, 2013, the First Eagle High Yield Fund will no longer reimburse these costs and instead will pay a fixed administrative services fee to First Eagle as an annual rate of 0.05% of the value of the Fund’s average daily net assets.
Comparison of Portfolio Managers
The First Eagle High Yield Fund will be managed by same portfolio management team at First Eagle that currently manage the Old Mutual High Yield Fund, through First Eagle’s role as sub-adviser to the Old Mutual High Yield Fund, according to substantially the same investment objective and principal investment strategies as the Old Mutual High Yield Fund. As a result, the portfolio holdings of the Old Mutual High Yield Fund are not expected to change as a direct result of the Reorganization. A description of the employment history of the portfolio managers for the Funds is included in the Old Mutual High Yield Fund’s prospectus, which is incorporated herein by reference.
Comparison of Other Service Providers
The following table identifies the principal service providers that service the Old Mutual High Yield Fund and the First Eagle High Yield Fund:
| | Old Mutual High Yield Fund | First Eagle High Yield Fund |
| Accounting Services/Administrator: | Old Mutual Capital, Inc. | State Street Bank and Trust Company/ First Eagle |
| | | |
| Sub-Administrator | The Bank of New York Mellon | None |
| | | |
| Transfer Agent: | DST Systems, Inc. | DST Systems, Inc. |
| | | |
| Custodian: | The Bank of New York Mellon | State Street Bank and Trust Company |
| | | |
| Auditor: | PricewaterhouseCoopers, LLP | PricewaterhouseCoopers, LLP |
Comparison of Share Classes and Distribution Arrangements
Shares of the Old Mutual High Yield Fund will be reorganized into Class I shares of the First Eagle High Yield Fund, which are described below. The following section describes the different distribution arrangements and eligibility requirements among the share classes of the Funds.
Distribution Arrangements. As noted above, Old Mutual Investment Partners is the distributor and principal underwriter for the Old Mutual High Yield Fund’s shares, and FEF Distributors is the distributor and principal underwriter of the First Eagle High Yield Fund’s shares. Old Mutual Investment Partners and FEF Distributors offer shares of the Old Mutual High Yield Fund and the First Eagle High Yield Fund, respectively, on a continuous basis directly and through authorized financial intermediaries. Old Mutual Investment Partners and FEF Distributors are registered broker-dealers and members of the Financial Industry Regulatory Authority, Inc.
Class Structure. The Old Mutual High Yield Fund offers one class of shares, designated as Institutional Class shares. The First Eagle High Yield Fund offers three classes of shares, designated as Class A shares, Class C shares, and Class I shares. Old Mutual High Yield Fund shareholders will receive Class I shares of the First Eagle High Yield Fund in connection with the Reorganization and, therefore, Class A and Class C shares of the First Eagle High Yield Fund are not discussed in this Proxy Statement/Prospectus.
Eligibility Requirements. Institutional Class shares of the Old Mutual High Yield Fund are available for purchase by the following categories of eligible investors and require a minimum initial investment of at least $1 million: (i) a bank, trust company, or other type of depository institution purchasing shares for its own account; (ii) an insurance company, registered investment company, endowment, or foundation purchasing shares for its own account; (iii) pension or profit sharing plans or the custodian for such a plan; and (iv) qualified or non-qualified employee benefit plans. Other institutional investors may be eligible to purchase Institutional Class shares at the discretion of Old Mutual. Eligible investors may purchase Institutional Class shares with a minimum initial investment of $100,000 in a Fund, provided they sign a Letter of Intent committing them to increase that investment to a minimum investment of $1 million in that Fund within twelve months. The Old Mutual High Yield Fund reserve the right to close the Institutional Class accounts that do not meet the investment minimum, unless solely as a result of depreciation in share value. Registered investment companies advised by Old Mutual are not subject to the Institutional Class investment minimums.
Class I shares of the First Eagle High Yield Fund also require a minimum initial investment of at least $1 million, although the minimum may be waived for Class I shares for sponsors of 401(k) plans and wrap fee programs if approved by FEF Distributors. Accordingly, Class I shares of the First Eagle High Yield Fund are available for purchase by retail investors through a fee-based program with their investment adviser or broker dealer, through a 401(k) plan in which they participate, or, for certain institutional investors, through direct purchases from
FEF Distributors in quantities of $1 million or more. Authorized dealers and financial services firms may impose a charge for handling purchase transactions and may have particular requirements concerning purchases.
Sales Charges and Distribution Fees. Institutional Class shares of the Old Mutual High Yield Fund and Class I shares of the First Eagle High Yield are offered at NAV, without initial sales charges, contingent deferred sales charges, or distribution (12b-1) fees. You will not pay an initial sales charge and you will not be charged a CDSC on shares of the First Eagle High Yield Fund that you receive in connection with the Reorganization.
Additional information about the distribution arrangements and eligibility requirements to purchase Institutional Class shares of the Old Mutual High Yield Fund is available in the prospectus of the Old Mutual High Yield Fund, which is incorporated herein by reference. Additional information about the distribution arrangements, class structure, eligibility requirements, sales charges, and distribution plans of the First Eagle High Yield Fund is available in Exhibit B of this Proxy Statement/Prospectus.
Comparison of Purchase and Redemption Procedures
Purchase Procedures. The Old Mutual High Yield Fund and the First Eagle High Yield Fund each offer shares through their respective distributor on a continuous basis. Institutional Class shares of the Old Mutual High Yield Fund may be purchased through select broker-dealers and other financial institutions authorized to sell shares of the Fund or through the Fund’s transfer agent. Class I shares of the First Eagle Fund may be purchased through authorized dealers or through the Fund’s distributor, FEF Distributors. The purchase price of each share of the Old Mutual High Yield Fund and the First Eagle High Yield Fund is the NAV next determined after the order is received in good order by the Old Mutual High Yield Fund or First Eagle High Yield Fund or their respective agent.
Additional information regarding the purchase procedures of the Old Mutual High Yield Fund is available in the Fund’s prospectus, which is incorporated herein by reference. Additional information regarding the purchase procedures of the First Eagle High Yield Fund is available in Exhibit B of this Proxy Statement/Prospectus.
Investment Minimums. The Old Mutual High Yield Fund and the First Eagle High Yield Fund have established minimum investment amounts for Institutional Class shares and Class I shares, respectively. The investment minimums required to purchase Class I shares of the First Eagle High Yield Fund will be waived in connection with the Reorganization for any Old Mutual High Yield Fund shareholder whose account balance is less than the required minimum. The following table shows the investment minimums for Institutional Class shares of the Old Mutual High Yield Fund and Class I shares of the First Eagle High Yield Fund.
Old Mutual High Yield Fund Institutional Class | First Eagle High Yield Fund Class I |
| Initial Investment | Additional Investment | | Initial Investment | Additional Investment |
$1 million1, 2 | No minimum | | $1 million3 | $100 |
1 Eligible investors may also purchase Institutional Class shares with a minimum initial investment of $100,000 in the Fund, provided they sign a letter of intent committing them to increase that investment to a minimum investment of $1 million in the Fund within twelve months.
2 Registered investment companies advised by Old Mutual are not subject to the Old Mutual Funds’ Institutional Class investment minimums.
3 The current aggregate net asset value of a shareholder’s accounts in the First Eagle High Yield Fund may qualify for purposes of meeting the initial minimum investment amount for Class I shares of the Fund. The minimum may be waived for Class I shares for sponsors of 401(k) plans and wrap fee programs if approved by FEF Distributors. The minimum also will be waived for certain legacy investors who were invested in the Old Mutual High Yield Fund.
Redemption Procedures. Shares of each Fund may be redeemed on any day the NYSE is open for business. Redemption requests received by a Fund in good order by the Fund’s transfer agent or by a financial intermediary authorized to accept redemption orders on behalf of the Fund prior to the close of regular trading on the NYSE (normally 4 p.m. Eastern time) will be effected at the NAV per share determined on that day. Redemption
requests received after the close of regular trading on the NYSE will be effected at the Fund’s next calculated NAV.
Shareholders of the Old Mutual High Yield Fund may redeem shares by contacting the broker-dealer or other financial institution at which the shareholder maintains an account. Shareholders of the Old Mutual High Yield Fund may redeem shares by telephone, by mail, by wire, by ACH, through a systematic withdrawal plan, or via the Internet. Shareholders of the First Eagle High Yield Fund may redeem their shares through their authorized dealer or through FEF Distributors. Shareholders of the First Eagle High Yield Fund may redeem shares by telephone, by mail, by wire, by ACH, or through a systematic withdrawal plan.
Generally, both the Old Mutual High Yield Fund and the First Eagle High Yield Fund forward redemption proceeds as promptly as possible and, in any event, within seven days after the redemption order is received, provided that redemption proceeds for shares purchased by check or by ACH, as applicable, will be forwarded only upon collection of payment for such shares; collection of payment may take up to 15 days from the date of purchase.
The Old Mutual Funds may impose an annual $12.00 minimum account balance charge if the value of a shareholder’s account drops below $1,000. This fee does not apply to systematic investment plans or shareholders who consent to receive account statements and regulatory filings electronically. The shareholder will be allowed at least 60 days, after notice from the Old Mutual Funds, to make an additional investment to bring the account value up to at least $1,000 before the annual $12.00 minimum account fee is charged. The applicable minimum account charge will be imposed annually on any such account until the account is brought up to at least $1,000. For non-retirement accounts, if the value of a shareholder’s investment in a Fund falls below $500, the Old Mutual Funds may redeem the shares in the account and mail the proceeds to the shareholder. The shareholder will be provided 60 days’ prior notice of such redemption; the shares will not be redeemed if the shareholder purchases additional shares during the notice period to bring the account balance to at least $500.
The First Eagle High Yield Fund reserves the right to redeem shares in a Class I account if the value of the account drops below $100,000. However, shareholders of the First Eagle High Yield Fund will have at least 30 days to make an additional investment to bring the account value to the stated minimum before the redemption is processed.
Redemption Fees. The Old Mutual High Yield Fund charges a 2.00% redemption/exchange fee on total redemption proceeds of any shareholder redeeming or exchanging shares within ten days of purchase. In determining how long shares of a Fund have been held, Old Mutual assumes that shares held by the investor for the longest period of time will be sold first. The stated purpose of the redemption fee is to discourage market timing by those shareholders initiating redemptions or exchanges to take advantage of short-term market movements, to help minimize the impact the redemption or exchange may have on the performance of a Fund, to facilitate Fund management, and to offset certain transaction costs and other expenses a Fund incurs because of the redemption or exchange. For certain transactions listed in the Old Mutual Funds’ prospectuses the redemption fee is waived. The Fund will retain the redemption fee for the benefit of non-redeeming shareholders. The First Eagle High Yield Fund, in contrast, does not charge a redemption or exchange fee.
Additional information relating to redemption fees of the Old Mutual High Yield Fund is available in its prospectus, which is incorporated by reference. Additional information relating to redemption fees of the First Eagle High Yield Fund is available in Exhibit B to this Proxy Statement/Prospectus.
Comparison of Exchange Privileges
Institutional Class shares of the Old Mutual High Yield Fund may generally be exchanged for Institutional Class shares of another Old Mutual Fund at their respective NAVs. The minimum investment requirements and redemption fees, as stated above, also apply to exchanges. Shareholders of the Old Mutual High Yield Fund seeking to exchange their shares are subject to the exchange policies of the Old Mutual Fund into which they are seeking to exchange. In addition, the Old Mutual Fund into which a shareholder is seeking to exchange may have different investment objectives, principal investment strategies, risks, fees and other features of which shareholders should be aware before making an exchange. Additional information regarding the Old Mutual High Yield Fund’s exchange privileges is available in its prospectus, which is incorporated herein by reference.
To deter excessive short term trading activity by shareholders of the Old Mutual High Yield Fund, shareholders are generally limited to four exchanges out of an Old Mutual Fund per calendar year. The Funds’ exchange limits and excessive trading policies do not apply to certain transactions. The Old Mutual High Yield Fund reserves the right to reject or limit any order to purchase shares through exchange when they believe it is in the best interests of such Fund. A further description of the Old Mutual High Yield Fund’s policies related to deterring excessive short-term trading activity can be found in its prospectuses.
Class I shares of the First Eagle High Yield Fund may be exchanged for Class I shares of the First Eagle Global Fund, First Eagle Overseas Fund, First Eagle U.S. Value Fund and First Eagle Gold Fund, or for Class Y shares of the First Eagle Fund of America (if you are eligible) or Class A shares (if you are not eligible to invest in Class Y shares), at their respective NAVs. There is no charge for the exchange privilege; however, exchanging shareholders may be subject to different fees (includes fees charged on redemption of your shares), expenses and investment risks when you make an exchange, you should carefully review the description of the Fund into which you plan to exchange. Additional information regarding the First Eagle High Yield Fund’s exchange privileges is available in Exhibit B to this Proxy Statement/Prospectus.
An exchange of shares is treated for federal income tax purposes as a redemption (sale) of shares given in exchange by the shareholder, and an exchanging shareholder may, therefore, realize a taxable gain or loss in connection with the exchange.
Comparison of Dividend and Distribution Policies and Fiscal Year
Dividend and Distribution Policies. The Old Mutual High Yield Fund and the First Eagle High Yield Fund have the similar policies regarding the payment of dividends and distributions. The Old Mutual High Yield Fund pays dividends from net investment income monthly and pays distributions from its net realized capital gains at least annually, if available. The First Eagle High Yield Fund has a policy to make periodic distributions of net investment income and net realized capital gains, if any, but does not specify monthly distributions. Each Fund’s dividends and distributions will be reinvested in additional shares of the Fund, unless you instruct the Fund otherwise. Additional information regarding the dividend and distribution policies of the Old Mutual High Yield Fund is available in its prospectus. Additional information regarding the dividend and distribution policies of the First Eagle High Yield Fund is available in Exhibit B.
Fiscal Year. Each Fund’s fiscal year ends on March 31. It is anticipated that the First Eagle High Yield Fund may change its fiscal year end following the consummation of the Reorganization to avoid administrative and accounting complexities. As a result, the First Eagle High Yield Fund may deliver annual and semi-annual shareholder reports and updated prospectuses at a different time of the year than the Old Mutual High Yield Fund delivered this information.
Comparison of Business Structures, Shareholder Rights and Applicable Law
The following is a discussion of certain important provisions of the governing instruments and governing laws of the Old Mutual High Yield Fund and the First Eagle High Yield Fund, but is not a complete description thereof. Further information about each Fund’s governance structure is contained in the Fund’s SAI and its governing documents, which are on file with the SEC.
Shares. When issued and paid for in accordance with the prospectus, shares of both the Old Mutual High Yield Fund and the First Eagle High Yield Fund are fully paid and non-assessable, have no preemptive or subscription rights and are freely transferable. Each share of both the Old Mutual High Yield Fund and the First Eagle High Yield Fund represents an equal interest in such Fund. Shares of each Fund are entitled to receive their pro rata share of distributions of income and capital gains, if any, made with respect to that Fund as are declared by its Board, although such distributions may vary in amount among the classes of a Fund to reflect class-specific expenses. Such distributions may be in cash, in kind or in additional Fund shares. In any liquidation of the Old Mutual High Yield Fund or the First Eagle High Yield Fund, each shareholder is entitled to receive his or her pro rata share of the net assets of the Fund, after satisfaction of all outstanding liabilities and expenses of the Fund.
Organization and Governing Law. The Old Mutual High Yield Fund and the First Eagle High Yield Fund are each organized as a series of a Delaware statutory trust pursuant to the Delaware Statutory Trust Act. Each Fund is governed by its Declaration of Trust (a “Declaration”) and its By-Laws, both as amended, restated or supplemented from time to time, and its business and affairs are managed under the supervision of its Board of Trustees. Each Fund is subject to the federal securities laws, including the 1940 Act, and the rules and regulations promulgated by the SEC thereunder.
Shareholder Meetings and Rights of Shareholders to Call a Meeting. The Old Mutual High Yield Fund and the First Eagle High Yield Fund are not required to hold annual shareholders’ meetings under the Delaware Statutory Trust Act, or their respective Declarations or By-Laws.
The governing instruments of the Old Mutual High Yield Fund generally provide that special meetings of shareholders may be called for any purpose at any time by a majority of the Trustees. The governing instruments of the First Eagle High Yield Fund generally provide that a meeting of shareholders may be called at any time by the Trustees or by the President. The First Eagle High Yield Fund also provides that a special meeting of shareholders may be called for the purpose of voting on the removal of any Trustee upon the request of shareholders owning at least 10% of the outstanding shares entitled to vote.
Submission of Shareholder Proposals. The First Eagle High Yield Fund does not have provisions in its governing instruments requiring that a shareholder provide notice to the First Eagle High Yield Fund in advance of a shareholder meeting to enable the shareholder to present a proposal at such meeting, although the federal securities laws, which apply to all of the Funds, require that certain conditions be met to present any proposals at shareholder meetings, as described below under “Shareholder Proposals.” The By-Laws of the Old Mutual High Yield Fund require that certain conditions be met to present any shareholder proposals at a meeting of shareholders, including that notice be given to the Fund in advance of the shareholder meeting.
Quorum. For both the Old Mutual High Yield Fund and the First Eagle High Yield Fund, a quorum will exist if shareholders of one-third of the outstanding shares entitled to vote of the Fund are present at the meeting in person or by proxy.
Number of Votes. The governing instruments of both the Old Mutual High Yield Fund and the First Eagle High Yield Fund provide that each shareholder is entitled to one vote for each dollar (and each fractional dollar thereof) of NAV for each share that they hold. Neither the Old Mutual High Yield Fund’s governing instruments nor the First Eagle High Yield Fund’s governing instruments provide for cumulative voting.
Right to Vote. The 1940 Act provides that shareholders of each Fund have the power to vote with respect to certain matters: specifically, for the election of Trustees, the selection of auditors (under certain circumstances), approval of investment advisory agreements and plans of distribution, and amendments to policies, objectives or restrictions deemed to be fundamental. Shareholders of each Fund also have the right to vote on certain matters affecting the Fund or a particular share class thereof under their respective governing instruments and applicable state law. The following summarizes the matters on which Fund shareholders have a right to vote as well as the minimum shareholder vote required to approve the matter. For matters on which shareholders of a Fund do not have a right to vote, the Trustees of the Fund may nonetheless determine to submit the matter to shareholders for approval. If an approval is required by the 1940 Act, then, except for the election of trustees, the vote required by the 1940 Act is the lesser of (a) 67% or more of the shares present at the meeting, if the holders of more than 50% of the outstanding shares entitled to vote are present or represented by proxy; or (b) more than 50% of the outstanding shares entitled to vote.
Election and Removal of Directors/Trustees. The shareholders of the Funds are entitled to vote for the election and the removal of Trustees. For each Fund, Trustees are elected by a plurality vote (i.e., the nominees receiving the greatest number of votes are elected). For the Old Mutual High Yield Fund, any trustee may be removed by a vote of two-thirds of the outstanding shares of the Trust. For the First Eagle High Yield Fund, any trustee may be removed by a majority vote of the outstanding shares of the Trust as defined in the 1940 Act.
Amendment of Governing Instruments. Generally, the Trustees of each Fund have the right to amend, from time to time, the Declaration and By-Laws for the Funds. Shareholders of the Old Mutual High Yield Fund have the
right to vote on any amendments to the Declaration that would amend their voting powers. Any such amendment requires the vote of a majority of the outstanding shares entitled to vote. In addition, shareholders of the Old Mutual High Yield Fund also have the right to vote on any amendments to the Declaration that would reduce their rights to indemnification as shareholders. Any such amendment requires the vote of two-thirds of the outstanding shares entitled to vote. For the First Eagle High Yield Fund, shareholders have the right to vote on any amendment to the Declaration that would amend their voting powers.
Mergers and Reorganizations. The governing instruments of the Old Mutual High Yield Fund provide that a merger, consolidation or other reorganization of the Old Mutual High Yield Fund (other than primarily for the purpose of changing domicile or form of organization) requires the approval of the holders of a majority of the shares cast, if a quorum is present. The Declaration of the First Eagle High Yield Fund provides that any merger, consolidation or other reorganization of the Fund only requires the approval of the Trustees and not shareholders unless required by applicable law.
Liquidation of a Fund. The governing instruments of the Old Mutual High Yield Fund provide that a liquidation of the Fund (other than primarily for the purpose of changing domicile or form of organization) requires the approval of the holders of a majority of the shares cast when there are more than 100 shareholders of the Old Mutual High Yield Fund. The Declaration of the First Eagle High Yield Fund provides that the Fund may be liquidated by the vote of a majority of shares entitled to vote, or by the Trustees by written notice to the shareholders of the Fund.
Indemnification. The governing instruments of the Old Mutual High Yield Fund generally require the Funds to indemnify each of its Trustees, officers, employees and agents (“Covered Persons”) against all liabilities and expenses incurred by such Covered Person in connection with any proceeding to which such person is made a party or is threatened to be made a party by reason of the fact that such person is a Covered Person, except with respect to any matter to which it has been determined that (i) such Covered Person did not act in good faith in the reasonable belief that his or her actions were in or not opposed to the best interests of the Old Mutual High Yield Fund; (ii) the liability arose from such Covered Person’s willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office or the discharge of his or her functions (“Disqualifying Conduct”); or (iii) for a criminal proceeding, such Covered Person had reasonable cause to believe that his or her conduct was unlawful.
The Declaration of the First Eagle High Yield Fund generally provides for the indemnification of each of its Trustees, officers, employees and agents (“Agents”) against all liabilities and expenses incurred by any Agent in connection with any proceeding in which such person is made a party or otherwise or is threatened to be made a party by reason of being or having held such position with the First Eagle High Yield Fund, except with respect to any matter arising from his or her own Disqualifying Conduct. Such rights to indemnification are not exclusive and do not affect any other rights the Agent may have, including under any liability insurance policy.
Terms of the Reorganization
The terms and conditions under which the Reorganization may be consummated are set forth in the Agreement. Significant provisions of the Agreement are summarized below; however, this summary is qualified in its entirety by reference to the form of Agreement, a copy of which is attached as Exhibit C to this Proxy Statement/Prospectus.
With respect to the Reorganization, if shareholders of the Old Mutual High Yield Fund approve the Agreement and other closing conditions are satisfied, the assets of the Old Mutual High Yield Fund will be delivered to the First Eagle High Yield Fund’s custodian for the account of the First Eagle High Yield Fund, in exchange for the assumption by the First Eagle High Yield Fund of liabilities of the Old Mutual High Yield Fund and delivery by the First Eagle High Yield Fund to the holders of the issued and outstanding shares of the Old Mutual High Yield Fund of a number of shares of the First Eagle High Yield Fund (including, if applicable, fractional shares rounded to the nearest thousandth), having an aggregate NAV equal to the value of the net assets of the Old Mutual High Yield Fund so transferred, all determined and adjusted as provided in the Agreement. The value of your account with the First Eagle High Yield Fund immediately after the Reorganization will be the same as the value of your account
with the Old Mutual High Yield Fund immediately prior to the Reorganization, subject to changes in value that may result from how each Fund prices its portfolio securities.
In connection with the Reorganization, shareholders of Institutional Class shares of the Old Mutual High Yield Fund will receive Class I shares of the First Eagle High Yield Fund. Class I shares of the First Eagle High Yield are described under “Comparison of Share Classes and Distribution Arrangements” in this Proxy Statement/Prospectus and in Exhibit B to this Proxy Statement/Prospectus.
The Old Mutual High Yield Fund and the First Eagle High Yield Fund have made representations and warranties in the form of Agreement that are customary in matters such as the Reorganization.
If shareholders approve the Reorganization and if all of the closing conditions set forth in the Agreement are satisfied or waived, consummation of the Reorganization (the “Closing”) is expected to occur on or about December 30, 2011.
For a description of the vote required to approve the Agreement, see “Vote Necessary to Approve the Agreement” section of this Proxy Statement/Prospectus. Following receipt of the requisite shareholder vote in favor of the Reorganization, and as soon as reasonably practicable after the Closing, the outstanding shares of the Old Mutual High Yield Fund will be cancelled in accordance with its governing documents and applicable law.
The obligations of the First Eagle High Yield Fund and the Old Mutual High Yield Fund are subject to certain conditions, including the following conditions:
· the First Eagle High Yield Fund Registration Statement on Form N-14 under the Securities Act of 1933, as amended (the “1933 Act”) shall have been filed with the SEC and such Registration Statement shall have become effective, and no stop-order suspending the effectiveness of the Registration Statement shall have been issued;
· the shareholders of the Old Mutual High Yield Fund shall have approved the Agreement;
· the First Eagle High Yield Fund and Old Mutual High Yield Fund each have delivered an officer’s certificate certifying that all agreements and commitments set forth in the Agreement have been satisfied; and
· the First Eagle High Yield Fund and Old Mutual High Yield Fund each shall have received a legal opinion that the consummation of the transactions contemplated by the Agreement will not result in the recognition of gain or loss for federal income tax purposes for the Old Mutual High Yield Fund or its shareholders or the First Eagle High Yield Fund.
If shareholders of the Old Mutual High Yield Fund do not approve the Agreement or if the Reorganization does not otherwise close, the Old Mutual Fund Board will consider what additional action to take. Old Mutual has stated that it does not intend to remain in the mutual fund asset management business in the long-term, so the Old Mutual Fund Board would need to seek a new investment adviser for the Old Mutual High Yield Fund, unless the Fund was otherwise reorganized, merged or liquidated.
The Agreement may be terminated and the Reorganization may be abandoned at any time by mutual agreement of the parties, or by either party if the Closing does not occur on or before March 31, 2012 or if one or more of the parties shall have materially breached its obligations under the Agreement. The Agreement may be amended or modified in a writing signed by the parties to the Agreement.
First Eagle and Old Mutual have made certain covenants in the Transaction Agreement regarding compliance with Section 15(f) of the 1940 Act, which, in pertinent part, provides a safe harbor for the receipt by an investment adviser or any of its affiliated persons of any amount or benefit in connection with certain transactions, such as the Transaction, involving an assignment of an investment management services agreement as long as two conditions are satisfied.
The first condition requires that no “unfair burden” be imposed on the investment company as a result of the Transaction, or as a result of any express or implied terms, conditions or understandings applicable to the Transaction. The term “unfair burden,” as defined in the 1940 Act, includes any arrangement during the two-year period after the change in control whereby the investment adviser (or predecessor or successor investment adviser), or any interested person of any such investment adviser, receives or is entitled to receive any compensation, directly or indirectly, from such investment company or its security holders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of such investment company (other than bona fide ordinary fees for principal underwriting services). No such compensation arrangements are contemplated in the Transaction. First Eagle and Old Mutual have agreed to refrain from imposing or seeking to impose, for a period of two years after the closing of the Transaction, any “unfair burden” on the First Eagle High Yield Fund.
The second condition requires that, during the three-year period immediately following the closing of such transactions, at least 75% of the investment company’s board of directors or trustees not be “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the investment adviser or predecessor investment adviser. The First Eagle High Yield Fund’s Board of Trustees currently satisfies such 75% requirement. First Eagle has agreed with Old Mutual to use its reasonable best efforts to ensure continued satisfaction of the 75% requirement for the three-year period following the closing of the Transaction.
Federal Income Tax Consequences
The following is a general summary of the material U.S. federal income tax consequences of the Reorganization. It is based on the Code, applicable U.S. Treasury regulations, judicial authority and administrative rulings and practice, all as of the date hereof and all of which are subject to change, including changes with retroactive effect. The discussion below does not address any state, local or foreign tax consequences of the Reorganization. Your tax treatment may vary depending upon your particular situation. You also may be subject to special rules not discussed below if you are a certain kind of Old Mutual High Yield Fund shareholder, including, but not limited to an insurance company, a tax-exempt organization, a financial institution or broker-dealer, a person who is neither a citizen nor resident of the United States or entity that is not organized under the laws of the United States or a political subdivision thereof, a holder of Old Mutual High Yield Fund shares as part of a hedge, straddle or conversion transaction, a person that does not hold Old Mutual High Yield Fund shares as a capital asset at the time of the Reorganization, or an entity taxable as a partnership for U.S. federal income tax purposes.
The Reorganization is intended to be a tax-free reorganization pursuant to Section 368(a) of the Code. The principal federal income tax considerations that are expected to result from the Reorganization of the Old Mutual High Yield Fund with and into the First Eagle High Yield Fund are as follows:
· no gain or loss should be recognized by the Old Mutual High Yield Fund or the shareholders of the Old Mutual High Yield Fund as a result of the Reorganization;
· no gain or loss should be recognized by the First Eagle High Yield Fund as a result of the Reorganization;
· the aggregate tax basis of the shares of the First Eagle High Yield Fund to be received by a shareholder of the Old Mutual High Yield Fund should be the same as the shareholder’s aggregate tax basis of the shares of the Old Mutual High Yield Fund; and
· the holding period of the shares of the First Eagle High Yield Fund received by a shareholder of the Old Mutual High Yield should include the period that a shareholder held the shares of the Old Mutual High Yield (provided that such shares of the Old Mutual High Yield are capital assets in the hands of such shareholder as of the Closing).
Neither the Old Mutual High Yield Funds nor the First Eagle High Yield Funds have requested or will request an advance ruling from the IRS as to the federal tax consequences of the Reorganization. As a condition to Closing, Stradley Ronon Stevens & Young, LLP will render an opinion to the Old Mutual High Yield Fund and the First Eagle High Yield Fund as to the foregoing federal income tax consequences of the Reorganization, which
opinion will be conditioned upon, among other things, the accuracy, as of the Effective Time, of certain representations of the Old Mutual High Yield Fund and the First Eagle High Yield Fund upon which Stradley Ronon Stevens & Young, LLP will rely in rendering its opinion. Opinions of counsel are not binding upon the IRS or the courts. The qualification of a transaction as a tax-free reorganization pursuant to Section 368(a) of the Code depends on a number of factors, some or all of which may be subject to differing interpretations. If the Reorganization is consummated but the IRS or the courts determine that the Reorganization does not qualify as a tax-free reorganization under the Code, and thus is taxable, the Old Mutual High Yield Fund would recognize gain or loss on the transfer of its assets to the First Eagle High Yield Fund and each shareholder of the Old Mutual High Yield Fund would recognize a taxable gain or loss equal to the difference between its tax basis in its Old Mutual High Yield Fund shares and the fair market value of the shares of the First Eagle High Yield Fund it receives.
The foregoing opinion may state that no opinion is expressed as to the effect of the Reorganization on the Old Mutual High Yield Fund, the First Eagle High Yield Fund or any Old Mutual High Yield Fund shareholder with respect to any asset (including without limitation any stock held in a passive foreign investment company as defined in section 1297(a) of the Code or any contract described in Section 1256(b) of the Code) as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) regardless of whether such transfer would otherwise be a non-taxable transaction under the Code.
Prior to the closing of the Reorganization, the Old Mutual High Yield Fund will distribute to its shareholders any undistributed income and gains to the extent required to avoid entity level tax or as otherwise deemed desirable.
General Limitation on Capital Losses. Capital losses of a fund may be carried forward to succeeding tax years to offset future capital gains, except that capital losses that arise in taxable years beginning on or before December 22, 2010 may only be carried forward to each of the eight (8) taxable years succeeding the loss year. The amount of capital losses that can be carried forward is subject to an annual limitation if there is a more than 50% “change in ownership” of a fund. If, as is anticipated, at the time of the closing of the Reorganization the First Eagle High Yield Fund has either no assets or nominal assets incident to its organization, there will be no change of ownership of the Old Mutual High Yield Fund as a result of the Reorganization. However, the capital losses of the First Eagle High Yield Fund, as the successor in interest to the Old Mutual High Yield Fund, may subsequently become subject to an annual limitation as a result of sales of First Eagle High Yield Fund shares or other reorganization transactions in which the First Eagle High Yield Fund might engage post-Reorganization.
In addition, if the First Eagle High Yield Fund changes its fiscal year end following the consummation of a Reorganization as discussed under the heading, “Comparison of Dividend and Distribution Policies and Fiscal Years,” the short taxable year resulting from such a change in fiscal year is counted as one full year for purposes of the eight year carryforward period for capital losses that arise in taxable years beginning on or before December 22, 2010. This may cause the capital loss carryovers, if any, of the First Eagle High Yield Fund to expire earlier than they otherwise would.
Tracking Your Basis and Holding Period; State and Local Taxes. After the Reorganization, you will continue to be responsible for tracking the adjusted tax basis and holding period of your shares for federal income tax purposes. You should consult your tax adviser regarding the effect, if any, of the Reorganization in light of your individual circumstances. You should also consult your tax adviser about the state and local tax consequences, if any, of the Reorganization.
You are urged and advised to consult your own tax advisers as to the federal, state, local, foreign, and other tax consequences of the Reorganization in light of your individual circumstances including the applicability and effect of possible changes in any applicable tax laws.
BOARD CONSIDERATIONS
At multiple in-person and telephonic meetings held in the third and fourth quarters of 2011, the Old Mutual Fund Board discussed and ultimately approved the Reorganization. At these meetings, the Old Mutual Fund Board considered information provided by Old Mutual and First Eagle regarding, among other things: First Eagle’s organization and personnel; business strategy; ownership structure; financial strength; affiliations (including other asset management affiliations); asset management oversight and compliance practices and capabilities; and legal and regulatory matters. The Old Mutual Fund Board also considered the investment capabilities of First Eagle’s portfolio management team that would manage the First Eagle High Yield Fund, which was the same portfolio management team that managed the Old Mutual High Yield Fund. Emphasis during these meetings focused on maintaining consistency of management of the Old Mutual High Yield Fund in light of Old Mutual’s plan to exit the mutual fund asset management business. It was determined that the transition of the Old Mutual High Yield Fund to the First Eagle mutual fund platform, where the Fund would continue to be managed by its current portfolio management team, could bring additional value to the Old Mutual High Yield Fund shareholders over the long term. The parties discussed First Eagle’s financial resources, distribution strategy and capabilities, performance and experience.
The members of the Old Mutual Fund Board who are not “interested persons” of Old Mutual Funds II, as that term is defined in the 1940 Act, conferred separately with their independent counsel about the Transaction.
Old Mutual and Old Mutual (US) Holdings Inc. agreed to indemnify the independent Trustees of the Old Mutual Funds for any losses arising from the Reorganization and the termination of the investment advisory agreement with respect to the Old Mutual High Yield Fund, except to the extent either (a) the Trustee has acted with willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office with the Old Mutual Trusts, or (b) in the case of a criminal proceeding, that he had a reasonable cause to believe that his conduct was unlawful.
In connection with the Old Mutual Fund Board’s review of the Transaction, Old Mutual and First Eagle advised the Old Mutual Fund Board about a variety of matters, including, but not limited to:
(1) there is not expected to be any diminution in the nature, quality and extent of portfolio management services provided to the Old Mutual High Yield Fund and its shareholders as a result of the Reorganization;
(2) the reputation, financial strength and resources of First Eagle;
(3) the First Eagle High Yield Fund has substantially the same investment objective, principal investment strategies and risks as the Old Mutual High Yield Fund;
(4) the portfolio managers currently managing the Old Mutual High Yield Fund will manage the First Eagle High Yield Fund after the Reorganization;
(5) the advisory fees charged by the First Eagle High Yield Fund are the same as the advisory fees charged by the Old Mutual High Yield Fund at current asset levels, although may be higher at higher asset levels, and First Eagle is entitled to reimbursement under its advisory agreement for providing certain administrative services to the First Eagle High Yield Fund for the first two years and thereafter an administrative fee;
(6) First Eagle will provide a two-year contractual guaranty that will limit the total annual fund operating expenses of the First Eagle High Yield Fund’s Class I shares to an amount no greater than the Old Mutual High Yield Fund’s total annual fund operating expenses prior to the Reorganization;
(7) the transition from the Old Mutual High Yield Fund’s current service providers to post-Reorganization service providers will not have any foreseeable adverse effect on shareholders;
(8) Old Mutual or its affiliates will bear all expenses arising in connection with the Reorganization except costs incurred in organizing the First Eagle High Yield Fund and registering its shares that will be issued in connection with the Reorganization. Such organizational and registration costs will be borne by the First Eagle High
Yield Fund but are expected to be paid by First Eagle pursuant to applicable expense limitations in place for the First Eagle High Yield Fund;
(9) shareholders are expected to face no adverse federal income tax consequences as a result of the Reorganization;
(10) the compensation to be received by Old Mutual from First Eagle in connection with the Reorganization; and
(11) First Eagle and Old Mutual have agreed to conduct and use reasonable best efforts to cause their affiliates to conduct their respective businesses in compliance with Section 15(f) of the 1940 Act.
In its deliberations, the Old Mutual Fund Board considered all information it received, as described above, as well as advice and analysis from its counsel. The Old Mutual Fund Board considered the Transaction as a whole and the Reorganization and the impact of the Transaction and the Reorganization on the Old Mutual High Yield Fund and its shareholders. The Old Mutual Fund Board concluded, based on all of the information presented, that the Reorganization was in the best interests of the Old Mutual High Yield Fund and that shareholders will not be diluted as a result thereof, and to recommend that Old Mutual High Yield Fund shareholders approve the Reorganization.
Required Vote
Approval of the Agreement will require the affirmative vote of a “majority” of the outstanding voting securities of the Old Mutual High Yield Fund, as defined in the 1940 Act. See “Information on Voting – Vote Necessary to Approve the Agreement and Interim Agreement” below.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Where to Find More Information
Please refer to Exhibit B for more information about the distribution arrangements, share class structure, eligibility requirements, and sales charges of the First Eagle High Yield Fund, the pricing, purchase, redemption and exchange procedures of the First Eagle High Yield Fund, and dividends and distributions policies and tax consequences to shareholders of various transactions in shares of the First Eagle High Yield Fund.
For more information with respect to the Old Mutual High Yield Fund concerning the following topics, please refer to the following sections of the Old Mutual High Yield Fund prospectuses, which have been made a part of this Proxy Statement/Prospectus by reference: (i) see “Fund Summaries—Old Mutual High Yield Fund” for more information about the performance of the Old Mutual High Yield Fund; (ii) see “The Investment Adviser and Sub-Advisers” for more information about the management of the Old Mutual High Yield Fund; (iii) see “About Your Investment – Your Share Price” for more information about the pricing of shares of the Old Mutual High Yield Fund; (iv) see “Investing in the Funds—Distributions and Taxes” for more information about the Old Mutual High Yield Fund’s dividends and distributions policy and the tax consequences to shareholders of various transactions in shares of the Old Mutual High Yield Fund; and (v) see “Financial Highlights” for more information about the Old Mutual High Yield Fund’s financial performance.
PROPOSAL 2:
APPROVAL OF AN INTERIM SUB-ADVISORY AGREEMENT
The Interim Agreement
In connection with the transfer of the Old Mutual High Yield Fund’s portfolio management team to First Eagle on October 1, 2011, the Old Mutual Fund Board terminated the sub-advisory agreement with the Fund’s former sub-adviser and entered into the Interim Agreement with First Eagle. The Interim Agreement, which became effective on October 1, 2011, was put in place to maintain continuity of the Fund’s portfolio management during the period that board and shareholder approval was sought for the Reorganization. Although the substantive terms of the Interim Agreement are substantially identical to the previous sub-advisory agreement with the Fund’s former
sub-adviser ( the “Prior Agreement”), Rule 15a-4 under the 1940 Act requires that fees may be paid to the interim sub-adviser (First Eagle) only if shareholders approve a contract with the sub-adviser within 150 days of the effective date of the Interim Agreement. Absent shareholder approval, First Eagle will be entitled to the lesser of its costs incurred in performing the Interim Agreement and the total fees held in escrow pursuant to the Interim Agreement.
Terms of the New Advisory Agreement if Approved
The form of the Interim Agreement is attached as Exhibit E. The terms and conditions (including applicable advisory fees) of the Interim Agreement are identical to the sub-advisory agreement with the Fund’s prior sub-adviser (the “Prior Agreement”) except for the effective date, termination date and fee escrow provisions. The initial sole shareholder of the Old Mutual High Yield Fund approved the Prior Agreement, in accordance with the requirements of the 1940 Act, prior to the commencement of the Fund’s operations on November 19, 2007 and the Old Mutual Fund Board last approved the Prior Agreement on November 16, 2010. A discussion regarding the factors considered by the Old Mutual Fund Board in approving the most recent continuance of the Prior Agreement is available in the Old Mutual High Yield Fund’s Annual Report for the year ended March 31, 2011.
Trustee and Officer Interests in Approval of the New Advisory Agreement
The Old Mutual High Yield Fund’s Trustees, executive officers and associates have no substantial interest, directly or indirectly, in the approval of the Interim Agreement, other than to the extent that those Trustees, officers and associates may be employees of Old Mutual and, thus, have the potential to benefit from the transaction between Old Mutual and First Eagle which, if approved by shareholders, will result in the Reorganization.
Information about First Eagle
Information about First Eagle is included under Proposal 1 under “Comparison of Investment Advisers, Sub-Advisers and Distributors.”
BOARD CONSIDERATIONS
At an in-person meetings held on September 21, 2011, the Old Mutual Fund Board discussed and ultimately approved the Interim Agreement. At this meeting, and several preceding meetings, the Old Mutual Fund Board considered information provided by Old Mutual and First Eagle regarding, among other things: First Eagle’s organization and personnel; business strategy; ownership structure; financial strength; affiliations (including other asset management affiliations); asset management oversight and compliance practices and capabilities; and legal and regulatory matters. The Old Mutual Fund Board also considered the investment capabilities of First Eagle’s portfolio management team that would manage the Old Mutual High Yield Fund, which was the same portfolio management team as had been previously employed by the Old Mutual High Yield Fund’s prior sub-adviser. Emphasis during these meetings focused on maintaining consistency of management of the Old Mutual High Yield Fund. The Old Mutual Fund Board also considered that the Interim Agreement was substantially identical (except for certain provisions required by the 1940 Act) to the sub-advisory agreement with the Old Mutual High Yield Fund’s prior sub-adviser, which the Old Mutual Fund Board had approved the continuance of less than a year earlier. Based on the foregoing, it was determined that the Interim Agreement was an effective means to maintain continuity of portfolio management pending the closing of the Reorganization and should be approved.
Required Vote
Approval of the Interim Agreement will require the affirmative vote of a “majority” of the outstanding voting securities of the Old Mutual High Yield Fund, as defined in the 1940 Act. See “Information on Voting – Vote Necessary to Approve the Agreement and Interim Agreement” below.
INFORMATION ON VOTING
Voting Process
We are sending you this Proxy Statement/Prospectus and the enclosed proxy card because the Old Mutual Fund Board is soliciting your proxy to vote at the Meeting and at any adjournments of the Meeting. Old Mutual High Yield Fund shareholders may vote by appearing in person at the Meeting, however, you do not need to attend the Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, vote by telephone or vote through a website established for that purpose.
Shareholders of record of the Old Mutual High Yield Fund as of the close of business on the Record Date are entitled to vote at the Meeting. As of November 18, 2011, the following number of shares of the Old Mutual High Yield Fund were outstanding:
| Old Mutual High Yield Fund | Shares |
| Institutional Class | 905,414.021 |
Each share held entitles a shareholder to one vote for each dollar (and a proportionate fractional vote for each fractional dollar) of NAV of shares held by the shareholder.
Your proxy will have the authority to vote and act on your behalf at the Meeting and any adjournment of the Meeting. If you authorize a proxy to vote for you, you may revoke the authorization at any time before it is exercised by sending in another proxy card with a later date or by notifying the Secretary of Old Mutual Funds II in writing to the address of Old Mutual Funds II set forth on the cover page of the Proxy Statement/Prospectus before the Meeting that you have revoked your proxy. In addition, although merely attending the Meeting will not revoke your proxy, if you are present at the Meeting you may withdraw your proxy and vote in person. However, if your shares are held through a broker-dealer or other financial intermediary, you will need to obtain a “legal proxy” from them in order to vote your shares at the Meeting.
Quorum Requirement and Adjournment
A quorum of shareholders is necessary to hold a valid meeting of the Old Mutual High Yield Fund. The presence in person or by proxy of one-third of the outstanding shares of the Old Mutual High Yield Fund that are entitled to vote at the Meeting will constitute a quorum.
Proxies received prior to the Meeting on which no vote is indicated will be voted “FOR” the proposed Reorganization and Interim Agreement. Under the rules applicable to broker-dealers, if your broker holds your shares in its name, the broker will not be entitled to vote your shares if it has not received instructions from you. A “broker non-vote” occurs when a broker has not received voting instructions from a shareholder and is barred from voting the shares without shareholder instructions because the proposal is non-routine. The proposals described in this Proxy Statement/Prospectus are considered “non-routine” for purposes of determining broker non-votes.
Abstentions and broker non-votes will count as shares present at the Meeting for purposes of establishing a quorum. Except as noted below, if a quorum is not present at the Meeting or if a quorum is present but sufficient votes to approve a proposal are not received, the person(s) presiding over the Meeting or the persons named as proxies may propose one or more adjournments of the Meeting to allow for further solicitation of votes. The persons named as proxies will vote those proxies that they are entitled to vote in favor of such an adjournment, provided that they determine that such an adjournment and additional solicitation is reasonable and in the interest of shareholders based on a consideration of all relevant factors, including the percentage of votes then cast, the percentage of negative votes then cast, the nature of the proposed solicitation activities and the nature of the reasons for such further solicitation.
Vote Necessary to Approve the Agreement and the Interim Agreement
The Old Mutual Fund Board has unanimously approved the Reorganization, subject to shareholder approval.
Shareholder approval of the Reorganization and the Interim Agreement requires the affirmative vote of the lesser of (i) 67% or more of the shares present at the Meeting, if the holders of 50% of the outstanding shares of the Fund are present or represented by proxy; or (ii) more than 50% of the outstanding shares of the Old Mutual High Yield Fund. This voting standard is referred to in Proposals 1 and 2 as a “majority” of the outstanding voting securities of the Old Mutual High Yield Fund.
Abstentions and broker non-votes are not considered votes “FOR” the Reorganization or the Interim Agreement at the Meeting. As a result, abstentions and broker non-votes have the same effect as a vote against the Reorganization and the Interim Agreement because approval of the Reorganization requires the affirmative vote of a percentage of either the shares present at the Meeting or the outstanding shares of the Old Mutual High Yield Fund.
Proxy Solicitation
The Old Mutual High Yield Fund has engaged the services of Broadridge Financial Services, Inc. (“Solicitor”) to assist in the solicitation of proxies for the Meeting. Solicitor’s fees and costs are expected to be approximately $2,500. Proxies are expected to be solicited principally by mail, but the Old Mutual High Yield Fund or Solicitor may also solicit proxies by telephone, facsimile or personal interview. Although Broadridge representatives are permitted to answer questions about the voting process and may read any recommendation set forth in this Proxy Statement/Prospectus, they are not permitted to recommend to shareholders how to vote. The officers of the Old Mutual High Yield Fund will not receive any additional or special compensation for any such solicitation. Old Mutual or its affiliates will bear 100% of the Old Mutual High Yield Fund’s solicitation costs.
Under the agreement with Solicitor, Solicitor will be paid a project management fee as well as solicitation expenses incurred for reminder calls, outbound telephone voting, confirmation of telephone votes, inbound telephone contact, obtaining shareholders’ telephone numbers, and providing additional materials upon shareholder request.
Other Matters
The officers of the Old Mutual High Yield Fund are not aware of any matters to be presented at the Meeting other than as is discussed in this Proxy Statement/Prospectus. If any other matters properly come before the Meeting, the shares represented by proxies will be voted with respect thereto in accordance with their best judgment.
CAPITALIZATION
The following table sets forth the total net assets, number of shares outstanding, and NAV of the Funds before and after, if approved by shareholders, the Reorganization. This information is generally referred to as the “capitalization” of a Fund. The term “pro forma capitalization” means the expected capitalization of the First Eagle High Yield Fund if it is combined with the Old Mutual High Yield Fund. The following table is stated as of October 7, 2011 and assumes that the Reorganization has taken place. The capitalizations will be different on the Closing Date as a result of daily Fund share purchase, redemption, and market activity.
(unaudited) | Old Mutual High Yield Fund (Target Fund) | First Eagle High Yield Fund (Acquiring Fund)(1) | Pro Forma Adjustments(2) | First Eagle High Yield Fund (Pro forma)(2) |
| Net Assets: | | | | |
| Institutional Class | $ 8,670,525 | - | - | $ 8,670,525 (3) |
| Shares Outstanding: | | | | |
| Institutional Class | 939,039 | - | - | 939,039 (3) |
| Net Asset Value Per Share: | | | | |
| Institutional Class | $ 9.23 | - | - | $ 9.23 |
(1) The First Eagle High Yield Fund is a shell fund without any shares outstanding and, therefore, no estimated capitalization is available.
(2) The pro forma adjustments for costs associated with the Reorganization is $0 because these costs are expected to be paid by First Eagle pursuant to its expense limitation arrangement in place with the First Eagle High Yield Fund.
(3) Holders of Institutional Class shares of the Old Mutual High Yield Fund will receive Class I shares of the First Eagle High Yield Fund upon closing of the Reorganization.
OWNERSHIP OF SHARES
Security Ownership of Large Shareholders
A list of the name, address and percent ownership of each person who, as of November 18, 2011, to the knowledge of the Old Mutual High Yield Fund, owned 5% or more of the outstanding shares of a class of the Old Mutual High Yield Fund can be found at Exhibit D.
The First Eagle High Yield Fund is a newly organized shell fund created to acquire the assets and assume the accrued liabilities of the Old Mutual High Yield Fund. As of the date of this Proxy Statement/Prospectus, the First Eagle High Yield Fund does not have any shareholders.
Security Ownership of Management and Trustees
To the best of the knowledge of the Old Mutual High Yield Fund, the ownership of shares of the Old Mutual High Yield Fund by executive officers and trustees of the Fund as a group constituted less than 1% of the Old Mutual Fund as of November 18, 2011.
DISSENTERS’ RIGHTS
If the Reorganization is approved at the Meeting, Old Mutual High Yield Fund shareholders will not have the right to dissent and obtain payment of the fair value of their shares because the exercise of dissenters’ rights is subject to the forward pricing requirements of Rule 22c-1 under the 1940 Act, which supersedes state law. Shareholders of the Old Mutual High Yield Fund, however, have the right to redeem their shares at NAV subject to applicable CDSCs and/or redemption fees (if any) until the Closing Date of the Reorganization. After the Reorganization, Old Mutual High Yield Fund shareholders will hold shares of the First Eagle High Yield Fund, which may also be redeemed at NAV subject to applicable CDSCs and/or redemption fees (if any).
SHAREHOLDER PROPOSALS
A shareholder desiring to submit a proposal intended to be presented at any meeting of shareholders of the Old Mutual High Yield Fund hereafter called should send the proposal to the Old Mutual High Yield Fund at the Fund’s principal offices so that it is received within a reasonable time before the proxy materials are printed and mailed. If the proposed Reorganization is approved and completed, shareholders of the Old Mutual High Yield Fund will become shareholders of the First Eagle High Yield Fund and, thereafter, will be subject to the notice requirements of the First Eagle High Yield Fund. The mere submission of a proposal by a shareholder does not guarantee that such proposal will be included in the proxy statement because certain rules under the federal securities laws must be complied with before inclusion of the proposal is required. Also, the submission does not mean that the proposal will be presented at the Meeting. For a shareholder proposal to be considered at a shareholder meeting, it must be a proper matter for consideration under applicable law.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related SAI do not contain all the information set forth in the registration statements and the exhibits relating thereto filed by the Funds and, with respect to the Old Mutual High Yield Fund only, annual and semiannual reports filed by the Old Mutual High Yield Fund, as such documents have been filed with the SEC pursuant to the requirements of the 1933 Act and the 1940 Act, to which reference is hereby made. The SEC file number of Old Mutual Funds II, the registrant of the Old Mutual High Yield Fund, is 811-04391. The Old Mutual High Yield Fund’s prospectus is incorporated herein by reference. The SEC file number of the First Eagle Funds, the registrant of the First Eagle High Yield, is 811-7762.
Both Funds are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and the 1940 Act and in accordance therewith, each Fund files reports and other information with the SEC. Reports, proxy material, registration statements and other information filed (including the Registration Statement relating to the First Eagle High Yield Fund on Form N-14 of which this Proxy Statement/Prospectus is a part) may be inspected without charge at the SEC’s Public Reference Room, which is located at 100 F Street, N.E., Washington, DC 20549, or obtained free of charge from the SEC’s website at www.sec.gov. Information on the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. You can also request copies of these materials, upon payment at the prescribed rates of the duplicating fee, by electronic request to the SEC’s email address (publicinfo@sec.gov) or by writing to the SEC’s Public Reference Section at 100 F Street, N.E., Washington, D.C. 20549.
EXHIBIT A
FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT RESTRICTIONS OF THE FUNDS
| FUNDAMENTAL INVESTMENT RESTRICTIONS |
| Restriction | Old Mutual High Yield Fund (Target Fund) | First Eagle High Yield Fund (Acquiring Fund) |
| Diversification and Issuer Concentration | The Fund is a “diversified company” as defined in the 1940 Act. This means that each such Fund will not purchase the securities of any issuer if, as a result, such Fund would fail to be a diversified company within the meaning of the “1940 Act Laws, Interpretations, and Exemptions.”1 This restriction does not prevent the Funds from purchasing the securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations, and Exemptions. | The Fund may not change its sub-classification under the Investment Company Act from diversified to non-diversified. [The Fund has a non-fundamental restriction that further describing the limitations of a diversified fund with respect to concentrating investments in an issuer.] |
| Borrowing/ Issuing Senior Securities | The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations, and Exemptions. | The Fund may not borrow money or issue senior securities, as defined for purposes of the 1940 Act Laws, Interpretations and Exemptions, except as permitted by the 1940 Act Laws, Interpretations and Exemptions. |
| Underwriting | The Fund may not underwrite the securities of other issuers. This restriction does not prevent a Fund from engaging in transactions involving the acquisition, disposition, or resale of its portfolio securities, regardless of whether such Fund may be considered to be an underwriter under the Securities Act of 1933. | The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the Securities Act of 1933. |
| Industry Concentration | The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act, Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit a Fund’s investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments or (iii) repurchase agreements collateralized by such obligations. In complying with this restriction, a Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security. | The Fund may not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act, Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund’s investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments or (iii) repurchase agreements collateralized by such obligations. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security. |
| Investing in Real Estate | The Fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent a | The Fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund |
| | | |
1The defined term “1940 Act Laws, Interpretations, and Exemptions” means the 1940 Act and the rules and regulations promulgated thereunder, as such statutes, rules, and regulations are amended from time to time or are interpreted from time to time by the staff of the SEC and any exemptive order or similar relief granted to the Funds.
| FUNDAMENTAL INVESTMENT RESTRICTIONS |
| Restriction | Old Mutual High Yield Fund (Target Fund) | First Eagle High Yield Fund (Acquiring Fund) |
| | Fund from investing in issuers that invest, deal or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein. | from investing in issuers that invest, deal or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein. |
| Investing in Commodities | The Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent a Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities in accordance with applicable law and without registering as a commodity pool operator under the Commodity Exchange Act. | The Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments or as otherwise discussed below. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities in accordance with applicable law and without registering as a commodity pool operator under the Commodity Exchange Act. Nor does this restriction prevent the Fund from purchasing or selling precious metals directly or purchasing or selling precious metal commodity contracts or options on such contracts. |
| Lending of Funds and Securities | The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent a Fund from, among other things, purchasing debt obligations, entering repurchase agreements, loaning its assets to broker-dealers or institutional investors or investing in loans, including assignments and participation interests. | The Fund may not make loans except to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering repurchase agreements, loaning its assets to broker-dealers or institutional investors or investing in loans, including assignments and participation interests. |
| Investing in Securities of Other Investment Companies | The Fund may, notwithstanding any other fundamental investment policy or restriction, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objective, policies, and restrictions as the Fund. | [No fundamental or non-fundamental investment restriction] |
| | | |
| NON-FUNDAMENTAL INVESTMENT RESTRICTIONS |
| Restriction | Old Mutual High Yield Fund (Target Fund) | First Eagle High Yield Fund (Acquiring Fund) |
| Illiquid Securities | The Fund may not invest more than 15% of its net assets in illiquid securities. This limitation does not include any Rule 144A restricted security that has been determined by, or pursuant to procedures established by, the Board, based on trading markets for such security, to be liquid. | [No non-fundamental investment restriction, but the Fund is subject to SEC guidance limiting investments in illiquid securities to no more than 15% of a fund’s assets.] |
| Diversification and Issuer | [Corresponding limitations included in fundamental investment restriction regarding diversification and | The Fund may not, with respect to 75% of its total assets, purchase securities of any issuer (other than securities issued or guaranteed by the U.S. |
| | | |
| NON-FUNDAMENTAL INVESTMENT RESTRICTIONS |
| Restriction | Old Mutual High Yield Fund (Target Fund) | First Eagle High Yield Fund (Acquiring Fund) |
| Concentration | issuer concentration] | Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund’s total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. |
| Borrowing | In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33⅓% of its total assets (including the amount borrowed) less liabilities (other than borrowings). A Fund may borrow from banks, broker-dealers or a portfolio of another registered investment company whose investment adviser Old Mutual or whose investment adviser is controlling, controlled by, or under common control with Old Mutual (“Affiliated Fund”) on such terms and conditions as the SEC may require in an exemptive order on which the Funds may rely. A Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. A Fund may not purchase additional securities when borrowings exceed 5% of the Fund’s total assets. | The Fund may not borrow money in an amount that exceeds 33⅓% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow as a means to incur leverage, for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when borrowings exceed 5% of the its total assets. |
| Industry Concentration | In complying with the fundamental restriction regarding industry concentration, the Fund may invest up to (but not including) 25% of its total assets in the securities of issuers whose principal business activities are in the same industry. For purposes of this limitation, supranational organizations, such as The World Bank, the European Union and the European Coal and Steel Community, are deemed to be issuers conducting their principal business activities in the same industry; state and municipal governments and their agencies and authorities are not deemed to be industries; utility companies will be divided according to their services (e.g., gas distribution, gas transmission, electric and telephone will each be considered a separate industry); and financial service companies will be classified according to the end users of their services (e.g., automobile finance, bank finance and diversified finance). | The Fund may not invest more than 25% of its total assets in the securities of issuers whose principal business activities are in the same industry. For purposes of this limitation, supranational organizations, such as the World Bank, the European Union and the European Coal and Steel Community, are deemed to be issuers conducting their principal business activities in the same industry; state and municipal governments and their agencies and authorities are not deemed to be industries; utility companies will be divided according to their services (e.g., gas distribution, gas transmission, electric and telephone will each be considered a separate industry); and financial service companies will be classified according to the end users of their services (e.g., automobile finance, bank finance and diversified finance). |
| Lending | In complying with the fundamental restriction with regard to making loans, the Fund may lend up to 33⅓% of its total assets and may lend money to other Affiliated Funds, on such terms and conditions as the SEC may require in an exemptive order on which a | The Fund may not lend more than 33⅓% of its total assets. |
| | | |
| NON-FUNDAMENTAL INVESTMENT RESTRICTIONS |
| Restriction | Old Mutual High Yield Fund (Target Fund) | First Eagle High Yield Fund (Acquiring Fund) |
| | Fund may rely. | |
| Investing in Securities of Other Investment Companies | Notwithstanding the fundamental restriction with regard to investing all assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and restrictions as the Fund. A Fund may (i) purchase securities of other investment companies as permitted by Section 12 (d)(1) of the 1940 Act; (ii) invest its assets in securities of other affiliated or unaffiliated money market funds as permitted by Rule 12d1-1 under the 1940 Act; and (iii) lend money to other Affiliated Funds, subject to the terms and conditions of any exemptive orders issued by the SEC on which the Funds may rely. The Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act. | [No non-fundamental investment restriction] |
| | | |
| | | |
EXHIBIT B
ADDITIONAL INFORMATION ABOUT THE FIRST EAGLE HIGH YIELD FUND
About Your Investment
The Distributor reserves the right to limit the purchase of the Fund’s shares when it is in the best interest of the Fund.
The Trust and the Distributor reserve the right to refuse any share purchase order for any reason they deem appropriate. For example, the Trust or Distributor may reject purchase orders due to nonpayment, and they may refuse orders from investors identified as money-laundering risks and those responsible for potentially disruptive trading practices, such as “market timing.” Share purchases are not binding on the Trust or the Distributor (and accordingly may be rejected) until they are confirmed as paid by the Fund’s transfer agent, DST. All payments must be made in U.S. dollars, and all checks must be drawn on U.S. banks.
No cash or cash equivalents (such as travelers’ checks, cashiers’ checks, bankers’ “official checks” or money orders) will be accepted. As a condition of this offering, if an investor’s purchase is canceled due to nonpayment or because his or her check or Automated Clearing House (“ACH”) transfer does not clear, the investor will be responsible for any loss the fund may incur as a result thereof. In limited circumstances, completed purchases also may be cancelled when the Distributor or transfer agent receives satisfactory instructions that a trade order was placed in error.
Anti-Money Laundering Compliance
The Trust and the Distributor are required to comply with various anti-money laundering laws and regulations. Consequently, the Trust or the Distributor may request additional information from you to verify your identity and source of funds. For individual investors, such information typically will include name, address, date of birth, and Social Security number. Such information also may include requests for documents such as driver’s license or other government-issued identification. For entity investors, such information typically will include name, principal business address, taxpayer identification number, corporate documents such as articles of incorporation, trust or partnership agreements, by laws and similar documents, and also may include requests for documents confirming the authority and identity of those having control over the entity or its trading.
If the Trust or Distributor believes the information submitted does not provide adequate identity verification, it reserves the right to reject the establishment of your account or close the account at its current net asset value. If, at any time, the Trust believes an investor may be involved in suspicious activity, or if certain account information matches data on government lists of suspicious persons, the Trust or Distributor may choose not to establish a new account or may be required to “freeze” an account. They also may be required to provide a governmental agency or another financial institution with information about transactions that have occurred in a shareholder’s account or to transfer monies received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency. In some circumstances, the law may not permit the Trust or the Distributor to inform the investor it has taken the actions described above.
How Fund Share Prices Are Calculated
The net asset value for each share class of the Fund is determined as of the close of trading on the New York Stock Exchange (NYSE), normally 4 p.m. Eastern time on each day the NYSE is open for trading. Net asset value for purchase or sale orders which are received by the Fund on any business day before the close of regular trading on the NYSE will be calculated as of that same day. If the purchase or sale request
is received on a business day after the close of regular trading on the NYSE, or on a non-business day (weekend or financial market holiday), net asset value will be calculated as of the close of regular trading on the next business day. For each share class of the Fund, the net asset value is computed by dividing the total current value of its assets (less its total liabilities) by the total number of shares outstanding. Because the Fund may invest in securities listed on foreign exchanges that may trade on weekends or other days when the Fund does not price their shares, the Fund’s share values may change on days when shareholders will not be able to purchase or redeem shares.
The Fund uses pricing services to identify the market prices of publicly traded securities in their portfolios. When market prices are determined to be “stale” due to limited market activity for a particular holding, or in other circumstances when market prices are unavailable (such as for private placements) or determined to be unreliable, such holdings may be “fair valued,” according to procedures approved by the Board of Trustees. Additionally, with respect to foreign holdings, specifically in circumstances leading the Adviser to believe that significant events occurring after the close of a foreign market have materially affected the value of the Fund’s holdings in that market, such holdings will be fair valued to reflect the events in accordance with procedures approved by the Board. Also according to procedures approved by the Board, in deciding whether a particular foreign investment should be fair valued, the Adviser will consider several factors, including developments in foreign markets, the performance of U.S. securities markets, and security-specific events. The Fund may have significant non-U.S. holdings.
The Distributor may authorize certain dealers to receive on its behalf purchase and redemption orders (“authorized dealers”). In turn, these authorized dealers may designate other intermediaries to receive purchase and redemption orders on the Distributor’s behalf (“designated intermediaries”). Orders for shares received by DST, authorized dealers, or designated intermediaries prior to the close of trading on the NYSE will be processed based on that day’s net asset value determined as of the close of trading on the NYSE that day. If an order is received by DST, an authorized dealer, or a designated intermediary after the close of the NYSE, it will be priced the next day the NYSE is open for trading.
Purchases Through Dealers and Financial Intermediaries
You may purchase the Fund’s shares from selected securities dealers with whom the Distributor has sales agreements. You also may obtain additional new account applications from such authorized dealers. For a list of authorized dealers, please contact the Distributor at 800.747.2008. Authorized dealers and financial services firms are responsible for promptly transmitting purchase orders to FEF Distributors and for monitoring applicable breakpoint or sales charge reductions for their accounts. Certain broker dealers or financial services firms may purchase shares at their net asset value, without a sales commission, and charge investors a transaction charge or other advisory fee through a wrap-fee or similar program.
Class A shares of the Fund are sold with a front-end sales commission and an annual distribution (Rule 12b-1) fee. Class C shares of the Fund are sold with a “level-load” (consisting of an annual distribution, (Rule 12b-1) fee and an annual service fee. Class I shares of the Fund are sold primarily to investors purchasing through a fee-based program with their investment adviser or broker dealer, through a 401(k) plan in which they participate, or, for certain institutional investors, through direct purchases from the Distributor in quantities of $1 million or more. Authorized dealers and financial services firms may impose a charge for handling purchase transactions and may have particular requirements concerning purchases. Contact your authorized dealer or financial services firm for more information.
If you purchase the Fund though a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of the Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your financial adviser to recommend the Fund over another investment. Ask your individual financial adviser or visit your financial intermediary website for more information.
Public Offering Price of Class A Shares
The public offering price of Class A shares equals the net asset value per share plus a sales charge. The Class A sales charges are as follows:
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| CLASS A SHARES DOLLARS INVESTED | | SALES CHARGE AS A PERCENTAGE OF | | DEALER ALLOWANCE AS A PERCENTAGE OF OFFERING PRICE |
| | OFFERING PRICE | | NET AMOUNT INVESTED |
| |
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| Less than $100,000 | | | | 4.50 | | | | | 4.71 | | | | | 4.00 | |
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| $100,000 but less than $250,000 | | | | 3.50 | | | | | 3.63 | | | | | 3.00 | |
| |
| $250,000 but less than $500,000 | | | | 2.50 | | | | | 2.56 | | | | | 2.25 | |
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| $500,000 but less than $1,000,000 | | | | 2.00 | | | | | 2.04 | | | | | 1.75 | |
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| $1,000,000 and over | | | | 0.00 | | | | | 0.00 | | | | | 0.00 | |
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Sales charges for investors residing outside the United States may vary from those listed above.
The Distributor re-allows discounts to selected dealers with whom it has sales agreements and is entitled to retain the balance over dealer discounts. The Distributor may re-allow the entire sales load, and, as described in Distribution & Shareholder Services Expenses, may provide additional promotional incentives to dealers selling the Fund’s shares. In some instances, the entire reallowance or incentive may be offered only to certain dealers that have sold or may sell significant amounts of the Fund’s shares. Authorized dealers to whom substantially the entire sales charge is reallowed may be deemed to be underwriters, according to the definition under the Securities Act of 1933.
Class A Contingent Deferred Sales Charge
There is no initial sales charge on purchases of Class A shares of the Fund aggregating $1 million or more. The Distributor may pay dealers of record “finder’s fee” commissions of up to 1.00% of purchases of Class A shares not previously subject to a front-end sales charge or dealer commission paid by the investor.*
* Dealers should call the Distributor at 800.747.2008 to discuss the further terms that apply to this commission.
These finder’s fee commissions will be paid only with respect to purchases (i) aggregating (on a single trade date) $1 million or more by any “person,” which term includes any account having the same mailing address or tax identification number; (ii) accounts with completed letters of intention of $1 million or more; and (iii) certain employer sponsored retirement plans investing through an omnibus account making any single purchase of Class A shares of $1 million or more. Subsequent purchases will need to aggregate $1 million or more to be eligible for this commission (and appropriate documentation will be required to verify additional aggregations).
Finder’s fee commissions also may be paid under certain other circumstances. Your dealer will advise you if any such commissions are paid with respect to your account. If you redeem any shares as to which such a finder’s fee commission was paid within 18 months of the end of the calendar month of their purchase, a contingent deferred sales charge (called the “Class A contingent deferred sales charge”) may be deducted from the redemption proceeds. The Class A contingent deferred sales charge will not exceed 1.00% of the lesser of (i) the aggregate net asset value of the redeemed shares at the time of redemption (excluding shares purchased with reinvested dividends or capital gain distributions), or (ii) the original net asset value of the redeemed shares.
If you are investing through a retirement plan, your plan administrator can advise you whether such a finder’s fee commission has been charged against the plan. If so, the plan may be subject to the Class A contingent deferred sales charge if fully redeemed within 18 months of the end of the calendar month of the relevant share purchase.
In determining whether a Class A contingent deferred sales charge is payable when shares are redeemed, shares that are not subject to the sales charge, including those purchased with reinvested dividends and capital gains, will be redeemed first. The remaining shares will be redeemed in the order in which you purchased them.
The Class A contingent deferred sales charge is not charged on Class A exchanges. However, if the shares acquired by exchange are redeemed within 18 calendar months of the end of the calendar month in which the exchanged shares were originally purchased, then the Class A contingent deferred sales charges will apply.
The Class A contingent deferred sales charge will be in addition to any applicable redemption fee described in Once You Become a Shareholder—Redemption Fee.
Reducing the Sales Charge
As the table in Public Offering Price of Class A Shares shows, larger investments in Class A shares of the Fund will reduce the sales charge on the investment, resulting in what are frequently called sales charge “breakpoints.” To claim a breakpoint or other reduced sales charge, notify your dealer, the Distributor or DST at the time of purchase that one of the following applies (including, if relevant, the existence of all accounts or balances applicable to the calculation of any breakpoints or other sales charge reductions):
| | · | Aggregation. The sales charge schedule applies to the total amount invested in Class A shares by any “person,” which, for purposes of calculating sales charges, includes any account having the same mailing address or tax identification number. Therefore, if you purchase shares for several accounts at the same time, you may combine these investments into a single transaction to reduce the applicable sales charge. You may not combine individual accounts with corporate/partnership accounts for purposes of reducing the sales charge. |
| | · | Rights of Accumulation. If you already are a First Eagle Funds shareholder, you may purchase Class A shares at a reduced sales charge by combining the amount being invested with the current net asset value of any share class you already own. If the current net asset value of the qualifying shares already held plus the net asset value of the current purchase exceeds a point in the sales charge schedule at which the charge is reduced, the entire current purchase is eligible for the reduced sales charge. To take advantage of your rights of accumulation, notify your dealer, the Distributor or DST at the time of purchase. |
| | · | Letter of Intention. You may qualify for a reduced sales charge by completing the Letter of Intention contained in the New Account Application or a form for this purpose, which you may obtain by contacting the Trust at 800.334.2143. This process allows you to combine aggregate purchases of Class A shares of the Fund during a 13-month period, for purposes of calculating the applicable sales charge. Shares you currently own will be credited as purchases toward the completion of the Letter of Intention at their net asset value on the date the letter is executed. No retroactive adjustments will be made. For each investment you make, you must notify your dealer, the Distributor or DST that such a letter is on file along with all account numbers associated with the letter. The letter is not a binding obligation. Nevertheless, 5% of the amount specified in the Letter of Intention will be held in escrow, and if your purchases are less than the amount specified, you must remit to the appropriate Fund an amount equal to the difference between the sales charge |
paid and the sales charge applicable to the total purchases actually made. If you do not remit the payment within 20 days after written request, the Trust will redeem an appropriate number of escrowed shares to realize the difference. The sales charge applicable to the investment will not be higher than if you had not submitted a Letter of Intention. Either you (subject to these escrow rules) or the Trust may cancel the arrangement at will.
| | · | Sales at Net Asset Value. Class A shares of the Fund can be sold at net asset value (without a sales charge) to: |
| | o | registered representatives or employees of authorized dealers; or the immediate family members of such persons; or any trust, pension, profit-sharing or other benefit plan for only such persons; |
| | o | banks or trust companies or their affiliates, when the bank, trust company or affiliate is authorized to make investment decisions on behalf of a client; |
| | o | investment advisers and financial planners who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services; |
| | o | clients of such investment advisers and financial planners who place trades for their own accounts, if the accounts are linked to the master account of the investment adviser or financial planner on the books and records of the broker, agent, investment adviser or financial institution; |
| | o | institutional (e.g., generally not broker-directed or broker-advised) retirement and deferred compensation plans and trusts used to fund those plans, including, but not limited to, those defined in Section 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code and “rabbi trusts.” Investors nonetheless may be charged a fee if they effect transactions in Class A shares through a broker or agent; and |
| | o | current officers, trustees, directors, and employees of the Trust, the Adviser, ASB Holdings, FEF Distributors, employees of certain firms providing services to the Fund (such as the custodian and the shareholder servicing agent), and to the immediate family members of any such persons or to any trust, pension, profit-sharing or other benefit plan for only such persons. |
The Fund also may issue Class A shares at net asset value in connection with the acquisition of or merger or consolidation with another investment company. At the Distributor’s discretion, the sales of Class A shares at net asset value may require written assurance that the purchase is being made for investment purposes and the shares will not be resold except through redemption. If required, you must provide such notice to the Distributor or DST at the time of purchase on a form available from the Trust.
Reinstatement Privilege
You are entitled to a one-time per account privilege to reinvest in Class A shares of any First Eagle Fund the proceeds of a full or partial redemption of shares from the Fund (and the same account) at the then-applicable net asset value per share without payment of a sales charge. To exercise this privilege, you must submit to the Distributor or DST, within 90 calendar days after the redemption, a written request for reinstatement and a check or bank wire in an amount not exceeding the redemption proceeds.
You also may transfer an investment in the Fund to an IRA or other tax-qualified retirement plan account in the same First Eagle Fund without paying a sales charge. Nevertheless, such a transfer involves redeeming
the Fund’s shares and reinvesting the proceeds, which may involve a taxable transaction for income tax purposes.
Please note that reinstatement will not prevent recognition of a gain realized on the redemption, and a loss may be disallowed for tax purposes. The gain or loss resulting from the redemption may be affected by exercising the reinstatement privilege if you held the redeemed shares for 90 days or less, or if you reinvest within 30 days.
Purchasing Level-Load Class C Shares
You may purchase Level-load Class C shares of the Fund through an investment professional at net asset value. You do not have to pay sales charges on Class C shares, but you may have to pay a contingent deferred sales charge equal to 1.00% of the original purchase price or the current market value, whichever is less (the Class C contingent deferred sales charge), on shares you sell or redeem within the first year of purchase.
Class C shares are also available through 401(k) plans. If you purchase Class C shares in connection with wrap programs and participant directed retirement plans, such as 401(k) plans, you will not be subject to a front-end sales commission or a Class C contingent deferred sales charge.
Class C shares of the Fund carries an annual 0.25% service fee and an annual 0.75% distribution (Rule 12b-1) fee. Because the service and Rule 12b-1 fees are paid from your investment on an ongoing basis, over time these fees ultimately may cost more than paying other types of sales charges. The distribution plans and agreements adopted by the Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940 are described in Distribution and Shareholder Services Expenses.
In addition to the fees described above, the underwriter normally pays to distributors of Fund shares a separate initial 1.00% fee on the sale of Class C shares. The Class C contingent deferred sales charge is intended to compensate the underwriter for these payments, if investors hold shares for less than one year. Distributors of Class C shares that are not subject to a Class C contingent deferred sales charge will be paid the distribution and service fees on a quarterly basis.
The Class C contingent deferred sales charge is in addition to any applicable redemption fee described under Once You Become a Shareholder—Redemption Fee.
Distribution and Shareholder Services Expenses
The shares of the Fund are offered to investors, in states and countries in which such offer is lawful, either through selected securities dealers or directly by FEF Distributors, the Fund’s principal underwriter. Like the Adviser, FEF Distributors is a subsidiary of ASB Holdings. Class A shares of the Fund are subject to the front-end sales charges described in About Your Investment—Public Offering Price of Class A Shares.
The Fund has adopted distribution plans and agreements pursuant to Rule 12b-1 (the “Plans”) under the Investment Company Act of 1940. Under the Plans, the Fund pays FEF Distributors the following annual distribution-related and service fees.
| | · | Class A shares: 0.25% of the share class’s average daily net assets. |
| | · | Class C shares: 1.00% of the share class’s average daily net assets (distribution and service fees). |
FEF Distributors is paid these distribution-related and service fees on a monthly basis. FEF Distributors is obligated to use these collected fees to pay qualifying dealers for their assistance in distributing the Fund’s shares, shareholder services and other expenses, such as advertising costs and the printing and distribution
of prospectuses to prospective investors. However, FEF Distributors will not pay dealers 12b-1, distribution-related and service fees for any quarter in which a dealer has less than $50,000 in First Eagle Fund accounts. FEF Distributors or its affiliates bear distribution expenses to the extent they are not covered by payments under the Plans. Any distribution expenses incurred by FEF Distributors or its affiliates in the Fund’s fiscal year that are not reimbursed from payments accrued during that fiscal year will not be carried over for payment in any subsequent year. Class I shares of the Fund does not participate in the Plans and is not charged with any portion of the payments made under the Plans. Because the fees are paid from Fund assets on an ongoing basis, over time these fees will increase the cost of your investment in the Fund and ultimately may cost more than paying other types of sales charges.
Certain broker dealers or other third-parties hold their accounts in “street name” and perform the services normally handled by DST Systems Inc. (“DST”), the Fund’s transfer agent. These services may include client statements, tax reporting, order-processing and client relations. As a result, these third parties may charge the Fund for these services. Sub-transfer agency fees paid by the Fund are, in aggregate, no more than what the Fund’s per account charge (as calculated by the Advisor) would have been had DST performed similar services. Arrangements may involve a per-account fee, an asset-based fee, a sales-based fee or, in some cases, a combination of the three. These fees, which comprise a substantial portion of the Fund’s ongoing expenses, are directly attributable to shareholder services performed by the relevant party. (While the Adviser and the Distributor consider these to be payments for services rendered, they represent an additional business relationship between these sub-transfer agents and the Fund that often results, at least in part, from past or present sales of Fund shares by the sub-transfer agents or their affiliates.)
Revenue Sharing
The Distributor, Adviser or an affiliate may make cash payments from their own resources to broker dealers or financial intermediaries for various reasons. These payments, often referred to as “revenue sharing,” may support the delivery of services to the Fund or shareholders in the Fund, including transaction processing and sub-accounting services.
These payments also may serve as an incentive to sell Fund shares and/or to promote shareholder retention. As such, the payments may go to firms providing various marketing support or other promotional services relating to the Fund, including advertising and sales meetings, as well as inclusion of the Fund in various promotional and sales programs. Marketing support services also may include business planning assistance, broker dealer education about the Fund and shareholder financial planning assistance.
Revenue sharing payments may include any portion of the sub-transfer agency fees (described in the preceding section) that exceed the costs of similar services provided by the Fund’s transfer agent. They also may include any other payment requirement of a broker dealer or another third-party intermediary, including certain agreed upon “finder’s fees” as described in greater detail under Public Offering Price of Class A Shares—Class A Contingent Deferred Sales Charge. The Distributor, Adviser or an affiliate pay all such payments out of its (or their) own resources. Such payments are in addition to any Rule 12b-1 payments described elsewhere in this Prospectus. Revenue sharing payments may be structured as: (i) a percentage of sales; (ii) a percentage of net assets; (iii) a fixed dollar amount; or (iv) some combination of any of these. In many cases, revenue sharing arrangements may be viewed as encouraging sales activity or retention of assets in the Fund. Generally, any revenue sharing or similar payments are requested by the party receiving them, often as a condition of distribution, but they are subject to negotiation as to their structure and scope.
The Distributor, Adviser or an affiliate also may pay from their own resources for travel and other expenses, including lodging, entertainment and meals, incurred by brokers for attending diligence or informational meetings with the Fund’s investment professionals. The Distributor, Adviser or an affiliate also may pay for costs of organizing and holding such meetings and also may make payments to or on
behalf of brokers for other types of events, including pre-approved conferences, seminars or sales or training programs (and payments for travel, lodging, etc.), and may provide small gifts and/or entertainment as permitted by applicable rules.
Please be aware that revenue sharing arrangements or other payments to intermediaries could create incentives on the part of the parties receiving the payments to more positively consider the Fund relative to mutual funds either not making payments of this nature or making smaller such payments. A shareholder or prospective investor with questions regarding revenue sharing or other such payments may obtain more details by contacting his or her broker representative or other financial intermediary directly. The Fund’s Statement of Additional Information includes a listing of certain parties receiving revenue sharing payments in respect of the Fund.
To facilitate the handling of shareholder transactions, the Fund uses a bookshare account plan for shareholder accounts. DST, as the Fund’s transfer agent, automatically opens and maintains an account for each shareholder of the Fund directly registered with the Fund. All your interests in shares, full and fractional (rounded to three decimal places), are reflected in your book account. After any purchase, DST mails you a confirmation indicating the amount of full and fractional shares purchased, the price per share and a statement of your account. DST will not issue stock certificates for the shares of the Fund.
We can deliver your account statements and fund financial reports electronically. If you are a registered user of FirstEagleFunds.com, you can consent to the electronic delivery of these documents by logging on and changing your mailing preference under “eDelivery.” (Should you later wish to receive these documents by mail you can revoke your electronic consent at any time, and we will begin to send paper copies of these documents within 30 days of receiving your notice.)
Where To Send Your Application
You may purchase Fund shares through the Distributor by mailing a check made payable to First Eagle Funds along with the completed New Account Application to First Eagle Funds, P.O. Box 219324, Kansas City, MO 64121-9324. You also may purchase shares through the Distributor by ACH transfer or by bank wire. Please call 800.334.2143 to establish and administer the ACH purchase option, and please call prior to wiring any funds.
You may purchase the Fund’s shares through selected securities dealers with whom the Distributor has sales agreements. You may obtain additional New Account Applications from these authorized dealers. For a list of authorized dealers, please call the Distributor at 800.747.2008. Authorized dealers and financial services firms may charge you a transaction fee in addition to any applicable sales loads. Authorized dealers and financial services firms are responsible for promptly transmitting purchase orders to the Distributor.
Due to the high cost of maintaining smaller accounts, the Trust reserves the right to redeem shares in any account if, as the result of a withdrawal, the value of that account drops below $2,500. This does not apply to accounts participating in the Automatic Investment Program or to retirement accounts. The Trust also reserves the right to redeem shares in the Class I account of the Fund, if the value of that Class I account drops below $100,000. You will have at least 30 days to make an additional investment to bring the account value to the stated minimum before the redemption is processed.
Automatic Investment Program
You may make semimonthly, monthly or quarterly investments of $100 (or more) in shares of the Fund automatically from a checking or savings account on or about the fifth and/or 20th of the month. Upon written authorization, DST will debit your designated bank account as indicated and use the proceeds to purchase Fund shares. Because your bank must provide approval for the transfer process, establishing an Automatic Investment Program may take at least 30 days. You must indicate your desire to establish an Automatic Investment Program on the New Account Application or Special Options Form. You also must include a check (minimum of $100, if a new account is being established), a savings account deposit slip or savings account statement. Shares purchased through Automatic Investment Program payments are subject to the redemption restrictions for recent purchases described in Once You Become a Shareholder—Redemption of Shares. The Trust may amend or cease to offer the Automatic Investment Program at any time.
Once You Become a Shareholder
After you have opened an account with us, you can exchange or sell your shares to meet your changing investment goals or other needs.
You may exchange some or all of your shares of the Fund for shares of another Fund within First Eagle Funds, subject to limitations described elsewhere in this Prospectus and in the following paragraphs in respect of the Fund or share classes closed to new investors. You may exchange:
| | · | Class A shares of the Fund for Class A shares of the Global Fund, Overseas Fund, U.S. Value Fund, Gold Fund or Fund of America; |
| | · | Class C shares of the Fund for Class C shares of the Global Fund, Overseas Fund, U.S. Value Fund, Gold Fund or Fund of America; and |
| | · | Class I shares of the Fund for Class I shares of the Global Fund, Overseas Fund, U.S. Value Fund and Gold Fund or for Class Y shares of the Fund of America (if you are eligible) or Class A shares (if you are not eligible to invest in Class Y shares). |
Shares will be exchanged at their net asset value, computed as of the close of trading on the NYSE (normally 4 p.m. Eastern time). Share exchange orders received after the close of trading on a particular day will be exchanged at the next day’s close of trading net asset value. There is no charge for the exchange privilege. In addition, because you may be subject to different fees (includes fees charged on redemption of your shares), expenses and investment risks when you make an exchange, you should carefully review the description of the Fund into which you plan to exchange. Also, exchanges may constitute a taxable event for U.S. federal income tax purposes. For additional information concerning exchanges or to initiate exchanges, contact the Trust at 800.334.2143.
Exchanges may be limited in the case of shares to be exchanged for those of a Fund or share class closed to new investors. In addition, the Fund depends on cooperation from intermediaries in reviewing certain accounts (such as those of retirement plan sponsors, wrap program sponsors and certain omnibus position holders) for short-term trading practices, which limits the Fund’s ability to monitor the frequency of exchanges by those investing through such accounts (see the Short Term Trading Policies section).
Automatic Exchange Program
If you wish to automatically exchange shares of one Fund for shares of another on a monthly basis, you can do so via the Automatic Exchange Program. The minimum exchange amount is $100. If the balance in the account you are exchanging from falls below the designated automatic exchange amount, all remaining shares will be exchanged, and the program will be discontinued. All conditions with respect to exchange transactions apply, as discussed in Exchanging Your Shares.
Conversion
You may convert Class A shares of the Fund having an aggregate value of $1 million or more into Class I shares of the same fund. Class A shares of the Fund held through certain “wrap fee” programs and 401(k) plans also may be eligible to be converted to Class I shares. Under limited circumstances, certain conversions of Class C shares also may be available. All conversions will take place at net asset value and shall not result in the realization of income or gain for federal income tax purposes. For additional information concerning conversions, or to initiate a conversion, contact your dealer, financial intermediary or the First Eagle Funds at 800.334.2143. More information concerning conversions is also available in the Statement of Additional Information, which is available upon request (see back cover).
Dividend Direction Plan
You may elect to have income dividends and capital gains distributions reinvested, without sales charges, into any share class of the Fund in which you have an existing account and maintain a minimum account balance. All reinvested dividends and distributions remain taxable for U.S. federal income tax purposes as though received in cash. For further information about dividend reinvestment, contact DST by telephone at 800.334.2143.
You have the right to redeem all or any part of your Fund shares for cash at their net asset value next computed after proper receipt of the redemption request. You may redeem via telephone through your authorized dealer or FEF Distributors. Shares held in the dealer’s “street name” must be redeemed through the dealer, as described in the following paragraph.
Redemptions through Dealers
If you have an account with an authorized dealer you may submit a redemption request to that dealer. Authorized dealers are responsible for promptly transmitting your redemption requests to the Distributor. Dealers may impose a charge for handling redemption transactions, and they may have particular requirements concerning redemptions. Accordingly, shareholders should contact their authorized dealers for more information.
Redemptions through FEF Distributors
You may redeem your Fund shares through FEF Distributors by transmitting written redemption instructions to First Eagle Funds, P.O. Box 219324, Kansas City, MO 64121-9324. Redemption requests must meet all the following requirements to be considered in the proper form:
| | · | Written and signed instructions must be received from the registered owner(s). |
| | · | A letter or a stock power signed by the registered owner(s) must include a signature guarantee by an acceptable guarantor. A guarantee is required for redemptions greater than $100,000 to be paid by check or when you want the redemption proceeds sent to an address other than the address of record, to a person other than the registered shareholder(s) for the account or to a bank account number other than the one previously designated. A signature guarantee is not required for any amount redeemed by ACH transfer or bank wire, as long as you previously designated a bank. |
| | · | In the case of shares held in the name of a corporation, trust, fiduciary or partnership, DST must receive evidence of authority to sign and a stock power with signature(s) guaranteed. |
Redemption Proceeds
Payment of the redemption price will generally be made within three business days after receipt of the redemption request in proper form. The Trust will not mail redemption proceeds for any shares until checks or ACH transfers received in payment for those shares have cleared, which may take up to 15 days. The Trust normally pays redemption proceeds in the form of a check. If you wish to avoid any such delays, you should purchase your shares via bank wire. You also may have your proceeds sent to your bank account by ACH transfer or bank wire, as long as you identified your bank on the New Account Application or Special Options Form. Proceeds sent by ACH transfer generally will be credited to your account on the second business day after the redemption. Proceeds sent by bank wire should be credited on the business day following the redemption, but there is a wire fee that will be deducted from such proceeds. Ask your financial professional for more information.
Redemptions in Kind
The Fund normally pays redemption proceeds in cash up to $250,000 or 1% of the Fund’s total value, whichever is less. The Trust reserves the right to make higher redemption payments in the form of marketable securities or, as needed, other traded assets, which is known as a “redemption in kind.” You must pay any applicable commissions or other fees when selling these assets.
Short-Term Trading Policies
The Fund is not a vehicle for frequent traders. Frequent trading (including exchanging) of Fund shares, also known as “market timing,” may increase Fund transaction and administration costs and otherwise negatively affect the Fund’s investment program, possibly diluting the Fund’s value to its longer-term investors. For example, short-term investments moving in and out of the Fund may (i) prompt otherwise unnecessary purchases and sales of portfolio securities, thus increasing brokerage costs; (ii) affect the level of cash held by the Fund over time; (iii) affect taxable gains and losses realized by the Fund; or (iv) distract a portfolio manager from the Fund’s longer-term investment strategy.
The Fund may be particularly susceptible to these risks due to its significant investments in foreign securities or due to the nature of its portfolio holdings. Foreign securities and any relatively illiquid or volatile securities are considered those most likely to be subject to inappropriate short-term trading strategies.
The policies described below are one means applied by the Fund to deter undesirable short-term trading. Pursuant to procedures approved by the Board of Trustees, the Fund also routinely reviews shareholder trades to seek to identify and deter inappropriate trading. Specifically, the Fund seeks to identify the types of transactions that may be harmful, either on an individual basis or as part of a pattern. In certain circumstances, and on occasion even involving a trade or exchange for which no redemption fee is assessed, the Fund may deem a single trade or exchange inappropriate and subject to these procedures. When the Fund identifies inappropriate trading activities, the Fund will suspend trading and exchange privileges or close the relevant account. At the discretion of the Fund, such a suspension or account closure may be temporary or permanent and may or may not be subject to appeal.
The Fund also may deem investors potential short-term traders (and subject to trading suspensions or account closures without advance notice) based on information unrelated to the specific trades in the investors’ accounts. For example, the Fund may obtain information linking an account to an account
previously suspended or closed for inappropriate trading. In addition, a reliable third party may report short-term trading concerns regarding a particular account to the Fund.
The Fund cannot guarantee to identify or prevent every instance of inappropriate trading. Nonetheless, the Fund’s guiding principle is trading deemed not in the interests of longer-term Fund shareholders will be actively deterred and, when possible, prevented.
In most cases the Fund depends on cooperation from intermediaries in reviewing certain accounts, thereby limiting the Fund’s ability to monitor and discourage inappropriate trading. Although the Fund is committed to seeking the cooperation of intermediaries, the Fund often does not have immediate access to individual account-level activity for those investing through an intermediary (and generally must request information about this account activity rather than receiving it automatically). In addition, not all intermediaries maintain the types of sophisticated transaction tracking systems that permit them to apply the types of reviews applied by the Fund. The Fund does not have any arrangements intended to permit trading in contravention of the policies described in this section. The Fund may modify the short-term trading policies at any time.
The Fund does not charge a redemption fee. The Fund also does not charge a redemption fee upon an exchange of the Fund’s shares for the shares of another First Eagle Fund. However, if you choose to exchange your shares in the Fund for another First Eagle Fund you should be familiar with the redemption fee policies of that Fund as certain First Eagle Funds do charge redemption fees.
Telephone Privileges
Unless you make contrary instructions on the New Account Application or Special Options Form, you will be entitled to make telephone redemptions, exchanges, conversions and account maintenance requests if you have a preauthorized form on file with the transfer agent. Neither the Fund nor its agents will be liable for following instructions communicated by telephone that the Trust or its agents believe are genuine. The Trust will employ reasonable procedures to confirm the instructions are genuine. Such procedures may include (i) written confirmation of telephone transactions; (ii) tape recording telephone conversations; or (iii) requiring specific personal information prior to acting upon telephone instructions.
Any owner(s), trustee(s) or other fiduciary entity named in the account registration, investment professional of record and/or other parties who can provide specific personal information will be allowed to initiate telephone transactions. Personal information may include a combination of the following items: (i) the Fund and account number, (ii) the account registration, (iii) the Social Security or tax identification number on the account, (iv) the address of record, (v) designated bank account information and (vi) any other information deemed appropriate to allow access to the account.
Telephone redemption requests received by the Trust or its agents (including authorized dealers, retirement plan administrators or other intermediaries) prior to the close of business on the NYSE on any business day will be processed that day. Such requests received after the close of business on the NYSE will be effective the following business day. Shareholders may not make redemption requests by telephone if the proceeds will be wired to a bank account number or mailed to an address other than the one previously designated by the shareholder. There is a $100,000 maximum for telephone redemptions by check. Certain retirement accounts are not eligible for all the telephone privileges referenced above. Please call 800.334.2143 for more information on telephone privileges.
Systematic Withdrawal Plan
If you own Fund shares with a current net asset value of $10,000 or more, you may use those shares to establish a Systematic Withdrawal Plan that executes withdrawals monthly or quarterly. A check in a stated amount of at least $50 will be mailed to you on or about the third, 15th, or 25th day of the month. You may not take dividends and distributions on shares invested through a Systematic Withdrawal Plan in cash; instead, you must reinvest them, which will occur at net asset value. The Fund’s shares will be redeemed as necessary to meet withdrawal payments. Withdrawals in excess of dividends and distributions will reduce and may deplete the invested principal, which may result in a gain or loss for tax purposes. It may be inefficient to purchase additional shares while concurrently withdrawing shares, due to the sales charges incurred on purchases. Accordingly, you may not maintain a Systematic Withdrawal Plan while simultaneously making regular purchases. If you establish a new account by check within 15 days of an expected withdrawal date, the Fund will not begin withdrawals until the following month, due to the Fund’s 15-day hold on check purchases. The Fund may amend or cease to offer the Systematic Withdrawal Plan at any time.
The Trust offers a variety of plans that allow investors to save for retirement and defer taxes on any investment income. These offerings include IRAs, Roth IRAs, SEPs, and SIMPLE IRAs. All investors may not realize the tax benefits of these plans. Therefore, you should consult your tax adviser regarding your eligibility.
Retirement plans may purchase Class I shares of the Fund, provided they meet the minimum initial investment amount of $1 million in an omnibus or pooled account within the Fund and will not require the Fund to pay any type of administrative fee or payment per participant account to any third party. Retirement plans requiring the payment of such fees may purchase Class A shares of the Fund without an initial sales charge. If a “finder’s fee” was paid, such a plan may be subject to a Class A contingent deferred sales charge on these investments. See About Your Investment—Public Offering Price of Class A Shares—Class A Contingent Deferred Sales Charge.
Information on Dividends, Distributions and Taxes
It is the Fund’s policy to make periodic distributions of net investment income and net realized capital gains, if any. Unless you elect otherwise, your ordinary income dividends and capital gain distributions will be reinvested in additional shares of the same share class of the Fund at net asset value calculated as of the payment date. The Fund pays ordinary income dividends and capital gains distributions on a per-share basis. As a result, on the ex-dividend date of such a payment, the net asset value of the Fund will be reduced by the amount of the payment.
The Fund intends to qualify and has elected to be treated as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended. To qualify, the Fund must meet certain income, diversification and distribution requirements. As a regulated investment company, the Fund generally will not be subject to federal income or excise taxes on ordinary income and capital gains distributed to shareholders within applicable time limits, although foreign-source income received by the Fund may be subject to foreign withholding taxes.
In general, you will be taxed on the ordinary income dividends and capital gains distributions you receive from the Fund, whether you take them as additional shares or in cash. Capital gains distributions may be taxed at different rates, depending on the types of appreciated assets and the length of time the Fund holds the appreciated assets. For example, while capital gain distributions with respect to gain on the sale of appreciated assets held by the Fund for more than one year generally will be taxed to individual shareholders at a rate of 15% for taxable years beginning on or before December 31, 2012, capital gain distributions with respect to the sale of collectibles (such as gold bullion) held by the Fund for more than
one year will be taxed to individual shareholders at a rate of 28%. For taxable years beginning on or before December 31, 2012, certain ordinary income dividends paid by the Fund to non-corporate shareholders (including individuals) may be eligible for preferential tax treatment at the rate applied to long-term capital gains. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by the Fund in October, November or December with a record date in such a month and paid by the Fund during January of the following calendar year.
Tax issues can be complicated. Exchanges of Fund shares are treated as sales and purchases and are subject to taxes. Please consult your tax adviser about federal, state, or local tax consequences or with any other tax questions you may have.
By February 15 of each year, we will send you a statement showing the tax status of your dividends and distributions for the prior year. There may be tax consequences for shareholders who are nonresident aliens or foreign entities. Please see the Statement of Additional Information for more information.
Privacy Notice for Individual Shareholders
The Trust is committed to protecting your privacy. We are providing you with this privacy notice to inform you of how we handle your personal information that we collect and may disclose to our affiliates. If the Trust changes its information practices, we will provide you with notice of any material changes. This privacy policy supersedes any of our previous policies relating to the information you disclose to us.
Why this Privacy Policy Applies to You
You obtained a financial product or service from or through us for personal, family or household purposes when you opened a shareholder account with the Trust, and are therefore covered by this privacy policy.
What We do to Protect Your Personal Information
We protect personal information provided to us by our individual shareholders according to strict standards of security and confidentiality. These standards apply to both our physical facilities and any online services we may provide. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard consumer information. We permit only authorized individuals, who are trained in the proper handling of individual shareholder information and need to access this information to do their job, to have access to this information.
Personal Information that We Collect and May Disclose
As part of providing you with the Trust’s products and services, we may obtain nonpublic personal information about you from the following sources:
| | · | Information we receive from you on subscription applications or other forms, such as your name, address, telephone number, Social Security number, occupation, assets and income; |
| | · | Information about your transactions with us, our affiliates, or unaffiliated third parties, such as your account balances, payment history and account activity; and |
| | · | Information from public records we may access in the ordinary course of business. |
Categories of Affiliates to Whom We May Disclose Personal Information
We may share personal information about you with affiliates. Our affiliates do business under names that include Arnhold and S. Bleichroeder Holdings, Inc., First Eagle Investment Management, LLC, and FEF Distributors, LLC.
You May Limit Marketing Solicitations By Choosing To Opt Out
We offer you the right to opt out from many types of marketing by our affiliates based on your personal information that we collect and share in accordance with this privacy policy. To limit those marketing solicitations, you may call 800.334.2143 indicating your desire not to receive marketing from our affiliates. Should you choose to opt out, your choice will remain in our records until you notify us otherwise, although we may choose to contact you in the future to modify your preference.
When We May Disclose Your Personal Information to Unaffiliated Third Parties
We will only share your personal information collected, as described above, with unaffiliated third parties:
| | · | When you authorize us to process or service a transaction or product (unaffiliated third parties in this instance may include service providers such as the Trust’s distributors, registrar and transfer agent for shareholder transactions, and other parties providing individual shareholder servicing, accounting and recordkeeping services); |
| | · | With companies that perform sales and marketing services on our behalf with whom we have agreements to protect the confidentiality of your information and to use the information only for the purposes for which we disclose the information to them; or |
| | · | When required by law to disclose such information to appropriate authorities. |
We do not otherwise provide information about you to outside firms, organizations or individuals except to our attorneys, accountants and auditors and as permitted by law.
What We do with Personal Information about Our Former Customers
If you decide to discontinue doing business with us, the Trust will continue to adhere to this privacy policy with respect to the information we have in our possession about you and your account following the termination of our shareholder relationship.
How to Reach First Eagle High Yield Fund
You can send all requests for information or transactions to:
Regular Mail:
First Eagle Funds
P.O. Box 219324
Kansas City, MO 64121-9324
or
Overnight Mail:
First Eagle Funds
c/o DST Systems, Inc.
330 West 9th Street
Kansas City, MO 64105-1807
You can contact us by telephone at 800.334.2143.
Please visit us online at www.firsteaglefunds.com
Useful Shareholder Information
How to Obtain Our Shareholder Reports
We will send you copies of our annual and semi-annual reports on a regular basis, once you become a shareholder. The annual reports discuss the market conditions and investment strategies that significantly affected the Fund’s performance during the last fiscal year. They also contain audited financial statements by the First Eagle Funds’ independent accountants.
How to Obtain Our Statement of Additional Information
The Statement of Additional Information (SAI), which is referenced in this Prospectus, is available to you without charge. To obtain a copy, please contact us via mail or phone, or visit our website (www.firsteaglefunds.com). In addition, you may visit the Securities and Exchange Commission’s (SEC’s) website (www.sec.gov) to view the SAI and other information. Also, you can obtain copies of the SAI by sending your request and fee to the SEC’s Public Reference Section, Washington, D.C. 20549-0102, or by e-mail to publicinfo@sec.gov. You also may review and copy information about the Funds, including the SAI, at the SEC’s Public Reference Room in Washington, D.C. To find out more about the public reference room, call the SEC at 202.551.8090.
Distributor
FEF Distributors, LLC
1345 Avenue of the Americas
New York, NY 10105
Investment Adviser
First Eagle Investment Management, LLC
1345 Avenue of the Americas
New York, NY 10105
The Old Mutual High Yield Fund will be the accounting survivor and the First Eagle High Yield Fund will adopt the financial statements and financial history of the Old Mutual High Yield Fund upon the consummation of the Reorganization.
EXHIBIT C
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is adopted as of this ___ day of __________, 2011 by and among (i) Old Mutual Funds II, an open-end registered investment company (the “Target Entity”) on behalf of the Old Mutual High Yield Fund, its series portfolio (the “Target Fund”); (ii) Old Mutual Capital, Inc. (“Target Adviser”); (iii) First Eagle Funds, an open-end registered investment company (the “Acquiring Entity”), on behalf of the First Eagle High Yield Fund, its series portfolio (the “Acquiring Fund”); and (vi) First Eagle Investment Management, LLC (“Acquiring Adviser”).
WHEREAS, Target Adviser and Old Mutual (US) Holdings Inc. entered into a definitive agreement dated September 30, 2011 (the “Transaction Agreement”) to sell certain assets relating to the Target Fund to Acquiring Adviser (referred to herein as the “Corporate Transaction”);
WHEREAS, in connection with the Corporate Transaction, the parties hereto intend for the Acquiring Fund and the Target Fund to enter into a transaction pursuant to which: (i) the Acquiring Fund will acquire the Assets and Liabilities (defined in Section 1.1) of the Target Fund in exchange for the corresponding class of shares of the Acquiring Fund of equal value to the Net Assets (defined in Section 1.1) of the Target Fund being acquired, and (ii) the Target Fund will distribute such shares of the Acquiring Fund to shareholders of the corresponding class of the Target Fund, in complete liquidation and termination of the Target Fund, all upon the terms and conditions hereinafter set forth in this Agreement (the “Reorganization”). The Acquiring Fund is, and will be immediately prior to Closing (defined in Section 3.1), a shell series, without assets (other than seed capital) or liabilities, created for the purpose of acquiring the assets and liabilities of the Target Fund;
WHEREAS, the Target Entity and the Acquiring Entity each is an open-end, registered investment company of the management type; and
WHEREAS, this Agreement is intended to be and is adopted as a plan of reorganization and liquidation with respect to the Reorganization within the meaning of Section 368(a)(1) of the United States Internal Revenue Code of 1986, as amended (“Code”).
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
| 1. | DESCRIPTION OF THE REORGANIZATION |
1.1. Provided that all conditions precedent to the Reorganization set forth herein have been satisfied as of the Closing Date (defined in Section 3.1), and based on the representations and warranties each party provides to the others, the Target Entity and Acquiring Entity each agree to take the following steps with respect to the Reorganization, the parties to which and class of shares to be issued in connection with which are set forth in Exhibit A:
(a) The Target Fund shall transfer all of its Assets, as defined and set forth in Section 1.1(b), to the Acquiring Fund, and the Acquiring Fund in exchange therefor shall assume the Liabilities, as defined and set forth in Section 1.1(c), and deliver to the Target
Fund the number of full and fractional Acquiring Fund shares determined in the manner set forth in Section 2.
(b) The assets of the Target Fund to be transferred to the Acquiring Fund shall consist of all assets, property and goodwill, including, without limitation, all cash, securities, commodities and futures interests, claims (whether absolute or contingent, known or unknown, accrued or unaccrued and including, without limitation, any interest in pending or future legal claims in connection with past or present portfolio holdings, whether in the form of class action claims, opt-out or other direct litigation claims, or regulator or government-established investor recovery fund claims, and any and all resulting recoveries) and dividends or interest receivable that are owned by the Target Fund and any deferred or prepaid expenses shown as an asset on the books of the Target Fund on the Closing Date, except for cash, bank deposits or cash equivalent securities in an amount necessary to pay the estimated costs of extinguishing any Excluded Liabilities (as defined in Section 1.1(c)) and cash in an amount necessary to pay any distributions pursuant to Section 7.1(g) (collectively, “Assets”).
(c) The Acquiring Fund shall assume all of the liabilities of the Target Fund, whether accrued or contingent, known or unknown, existing at the Closing Date in connection with the acquisition of the Assets and subsequent liquidation and dissolution of the Target Fund, except for the Target Fund’s Excluded Liabilities (as defined below), if any, pursuant to this Agreement (“Liabilities”). The Target Fund will use its best efforts to disclose to the Acquiring Adviser and to discharge all known Liabilities prior to or at the Valuation Date (as defined in Section 2.1(a)) to the extent possible and consistent with its own investment objectives and policies and normal business operations. If prior to the Closing Date the Acquiring Entity identifies a liability that the Acquiring Entity and the Target Entity mutually agree should not be assumed by the Acquiring Fund, such liability shall be excluded from the definition of Liabilities hereunder and shall be listed on a Schedule of Excluded Liabilities to be signed by the Acquiring Entity and the Target Entity at Closing and attached to this Agreement as Schedule 1.1(c) (the “Excluded Liabilities”). Notwithstanding the foregoing, no liability of the Target Fund shall be excluded if in the reasonable judgment of the Target Fund’s tax counsel such exclusion would prevent the Reorganization from qualifying as a tax-free reorganization within the meaning of Section 368(a)(1)(F) of the Code. The Assets minus the Liabilities of the Target Fund shall be referred to herein as the Target Fund’s “Net Assets.”
(d) As soon as is reasonably practicable after the Closing, the Target Fund will distribute to its shareholders of record (“Target Fund Shareholders”) the shares of the Acquiring Fund of the corresponding class received by the Target Fund pursuant to Section 1.1(a), as set forth in Exhibit A, on a pro rata basis within that class, and without further notice the outstanding shares of the Target Fund will be redeemed and cancelled as permitted by its charter and applicable law, and the Target Fund will as promptly as practicable completely liquidate and dissolve. Such distribution and liquidation will be accomplished, with respect to each class of the Target Fund’s shares, by the transfer of the Acquiring Fund shares of the corresponding class then credited to the account of the Target Fund on the books of the Acquiring Fund to open accounts on the share records of
the Acquiring Fund in the names of the Target Fund Shareholders of the class. The aggregate net asset value of the Acquiring Fund shares to be so credited to the Target Fund Shareholders shall be equal to the aggregate net asset value of the Target Fund’s shares owned by the Target Fund Shareholders on the Valuation Date. The Acquiring Fund shall not issue certificates representing shares in connection with such exchange.
(e) Ownership of Acquiring Fund shares will be shown on its books, as such are maintained by the Acquiring Fund’s transfer agent.
2.1. With respect to the Reorganization:
(a) The value of the Target Fund’s Assets shall be the value of such Assets computed as of immediately after the close of regular trading on the New York Stock Exchange (“NYSE”), which shall reflect the declaration of any dividends, on the business day immediately preceding the Closing Date (the “Valuation Date”), using the Target Fund’s valuation procedures established by the Target Entity’s Board of Trustees, which shall be provided to the Acquiring Fund prior to the Valuation Date.
(b) The net asset value per share of each class of the Acquiring Fund shares issued in connection with the Reorganization shall be the net asset value per share of the corresponding class of the Target Fund as of the close of business on the Valuation Date.
(c) The number of shares issued of each class of the Acquiring Fund (including fractional shares, if any, rounded to the nearest thousandth) in exchange for the Target Fund’s Net Assets shall equal the number of shares of the corresponding class of the Target Fund outstanding as of the Valuation Time.
(d) All computations of value shall be made by the Target Fund’s designated recordkeeping agent using the valuation procedures described in this Section 2 and shall be subject to review by the Acquiring Fund’s recordkeeping agent.
| 3. | CLOSING AND CLOSING DATE |
3.1. The Reorganization shall close on December 30, 2011 or such other date as the parties may agree (the “Closing Date”). All acts taking place at the closing of the Reorganization (“Closing”) shall be deemed to take place simultaneously as of immediately prior to the opening of regular trading on the NYSE on the Closing Date of the Reorganization unless otherwise agreed to by the parties (the “Closing Time”). The Closing of the Reorganization shall be held in person, by facsimile, email or such other communication means as the parties may reasonably agree.
3.2. With respect to the Reorganization:
(a) The Target Fund’s portfolio securities, investments or other assets that are represented by a certificate or other written instrument shall be transferred and delivered by the Target Fund as of the Closing Date to the Acquiring Fund’s Custodian for the
account of the Acquiring Fund duly endorsed in proper form for transfer and in such condition as to constitute good delivery thereof. The Target Fund shall direct the Target Fund’s custodian (the “Target Custodian”) to deliver to the Acquiring Fund’s Custodian as of the Closing Date by book entry, in accordance with the customary practices of Target Custodian and any securities depository (as defined in Rule 17f-4 under the Investment Company Act of 1940, as amended (the “1940 Act”)), in which the Assets are deposited, the Target Fund’s portfolio securities and instruments so held. The cash to be transferred by the Target Fund shall be delivered to the Acquiring Fund’s Custodian by wire transfer of federal funds or other appropriate means on the Closing Date. If the Target Fund is unable to make such delivery on the Closing Date in the manner contemplated by this Section for the reason that any of such securities or other investments purchased prior to the Closing Date have not yet been delivered to the Target Fund or its broker, then the Acquiring Fund may, in its sole discretion, waive the delivery requirements of this Section with respect to said undelivered securities or other investments if the Target Fund has, by or on the Closing Date, delivered to the Acquiring Fund or its Custodian executed copies of an agreement of assignment and escrow and due bills executed on behalf of said broker or brokers, together with such other documents as may be required by the Acquiring Fund or its Custodian, such as brokers’ confirmation slips.
(b) The Target Entity shall direct the Target Custodian for the Target Fund to deliver to the Acquiring Fund at the Closing, or promptly thereafter, consistent with commercially reasonable standards, a certificate of an authorized officer stating that (i) except as permitted by Section 3.2(a), the Assets have been delivered in proper form to the Acquiring Fund no later than the Closing Time on the Closing Date, and (ii) all necessary taxes in connection with the delivery of the Assets, including all applicable Federal, state and foreign stock transfer stamps, if any, have been paid or provision for payment has been made.
(c) At such time prior to the Closing Date as the parties mutually agree, the Target Fund shall provide (i) instructions and related information to the Acquiring Fund or its transfer agent with respect to the Target Fund Shareholders, including names, addresses, dividend reinvestment elections and tax withholding status of the Target Fund Shareholders as of the date agreed upon (such information to be updated as of the Closing Date, as necessary) and (ii) the information and documentation maintained by the Target Fund or its agents relating to the identification and verification of the Target Fund Shareholders under the USA PATRIOT ACT and other applicable anti-money laundering laws, rules and regulations (the “AML Documentation”) and such other information as the Acquiring Fund may reasonably request. The Acquiring Fund and its transfer agent shall have no obligation to inquire as to the validity, propriety or correctness of any such instruction, information or documentation, but shall, in each case, assume that such instruction, information or documentation is valid, proper, correct and complete.
(d) The Target Entity shall direct the transfer agent for the Target Fund (the “Target Transfer Agent”) to deliver to the Acquiring Fund at the Closing a certificate of an authorized officer stating that its records, as provided to the Acquiring Entity, contain the names and addresses of the Target Fund Shareholders and the number of outstanding
shares of each class owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver to the Secretary of the Target Fund a confirmation evidencing the Acquiring Fund shares to be credited on the Closing Date, or provide other evidence satisfactory to the Target Entity that such Acquiring Fund shares have been credited to the Target Fund Shareholders’ accounts on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, certificates, if any, receipts or other documents as such other party or its counsel may reasonably request.
(e) In the event that on the Valuation Date or the Closing Date (a) the NYSE or another primary trading market for portfolio securities of the Target Fund (each, an “Exchange”) shall be closed to trading or trading thereupon shall be restricted, or (b) trading or the reporting of trading on such Exchange or elsewhere shall be disrupted so that, in the judgment of the Board of Trustees of the Acquiring Entity or the Target Entity or the authorized officers of either of such entities, accurate appraisal of the value of the net assets of the Acquiring Fund or the Target Fund, respectively, is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored.
| 4. | REPRESENTATIONS AND WARRANTIES |
4.1. The Target Entity, on behalf of itself or, where applicable the Target Fund, represents and warrants to the Acquiring Entity and Acquiring Fund as follows:
(a) The Target Fund is duly organized as a series of the Target Entity, which is a statutory trust duly formed under, validly existing and in good standing under the laws of the State of Delaware, with power under the Target Entity’s governing documents (including bylaws), as applicable (“Governing Documents”), to own all of its Assets, to carry on its business as it is now being conducted and to enter into this Agreement and perform its obligations hereunder;
(b) The Target Entity is a registered investment company classified as a management company of the open-end type, and its registration with the U.S. Securities and Exchange Commission (the “Commission”) as an investment company under the 1940 Act, and the registration of the shares of the Target Fund under the Securities Act of 1933, as amended (“1933 Act”), are in full force and effect;
(c) No consent, approval, authorization, or order of any court or governmental authority or the Financial Industry Regulatory Authority (“FINRA”) is required for the consummation by the Target Fund and the Target Entity of the transactions contemplated herein, except such as have been or will be (at or prior to the Closing Date) obtained under the 1933 Act, the Securities Exchange Act of 1934, as amended (“1934 Act”), the 1940 Act and state securities laws;
(d) The current prospectus and statement of additional information of the Target Fund and each prospectus and statement of additional information of the Target Fund used at all times between July 26, 2011 and the date of this Agreement conforms or
conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading;
(e) The Target Fund is in compliance in all material respects with the applicable investment policies and restrictions set forth in the Target Fund’s prospectus and statement of additional information and the value of the net assets of the Target Fund is determined using portfolio valuation methods that comply in all material respects with the requirements of the 1940 Act and the rules and regulations of the Commission thereunder and the pricing and valuation policies of the Target Fund and there have been no known material miscalculations of the net asset value of the Target Fund or the net asset value per share of the Target Fund during the three month period preceding the date hereof which would have a material adverse effect on such Target Fund or its properties or assets;
(f) Except as otherwise disclosed to and accepted, in writing, by or on behalf of the Acquiring Fund, the Target Fund will on the Closing Date have good title to the Assets and full right, power, and authority to sell, assign, transfer and deliver such Assets free of adverse claims, including any liens or other encumbrances, and upon delivery and payment for such Assets, the Acquiring Fund will acquire good title thereto, free of adverse claims and subject to no restrictions on the full transfer thereof, including, without limitation, such restrictions as might arise under the 1933 Act, provided that the Acquiring Fund will acquire Assets that are segregated as collateral for the Target Fund’s derivative positions (if any), including without limitation, as collateral for swap positions and as margin for futures positions, subject to such segregation and liens that apply to such Assets;
(g) Except as otherwise disclosed to and accepted, in writing, by or on behalf of the Acquiring Fund, the Target Fund is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in (i) a material violation of the Target Entity’s Governing Documents or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Target Fund or the Target Entity is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any lien, encumbrance, penalty, or additional fee under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Target Fund or Target Entity is a party or by which it is bound;
(h) Except as otherwise disclosed to and accepted, in writing, by or on behalf of the Acquiring Fund, all material contracts or other commitments of the Target Fund (other than this Agreement) will terminate with respect to the Target Fund without liability to the Target Fund or may otherwise be assigned to the Acquiring Fund without the payment of any fee (penalty or otherwise) or acceleration of any obligations of the Target Fund on or prior to the Closing Date;
(i) Except as otherwise disclosed to and accepted, in writing, by or on behalf of the Acquiring Fund, no litigation or administrative proceeding or investigation of or before any court, tribunal, arbitrator, governmental body or FINRA is presently pending or, to the Target Fund’s knowledge, threatened against the Target Entity or the Target Fund that, if adversely determined, would materially and adversely affect the Target Fund’s financial condition or the conduct of its business. The Target Fund and the Target Entity, without any special investigation or inquiry, know of no facts that might form the basis for the institution of such proceedings and neither the Target Entity nor the Target Fund is a party to or subject to the provisions of any order, decree or judgment of any court, governmental body or FINRA that materially and adversely affects its business or its ability to consummate the transactions herein contemplated;
(j) The financial statements of the Target Fund for the Target Fund’s most recently completed fiscal year have been audited by the independent registered public accounting firm identified in the Target Fund’s prospectus or statement of additional information included in the Target Fund’s registration statement on Form N-1A (the “Prospectus” and “Statement of Additional Information”). Such statements, as well as the unaudited, semi-annual financial statements for the semi-annual period next succeeding the Target Fund’s most recently completed fiscal year, if any, were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) consistently applied, and such statements (copies of which have been furnished or made available to the Acquiring Fund) present fairly, in all material respects, the financial condition of the Target Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Target Fund required to be reflected on a balance sheet (including the notes thereto) in accordance with GAAP as of such date not disclosed therein;
(k) Since the last day of the Target Fund’s most recently completed fiscal year, there has not been any material adverse change in the Target Fund’s financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, except as otherwise disclosed to and accepted by the Acquiring Fund in writing. For the purposes of this subparagraph, a decline in net asset value due to declines in market values of securities held by the Target Fund, the redemption of the Target Fund’s shares by shareholders of the Target Fund or the discharge of the Target Fund’s ordinary course liabilities shall not constitute a material adverse change;
(l) On the Closing Date, all material Returns (as defined below) of the Target Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be true, correct and complete in all material respects, and all Taxes (as defined below) shown as due or claimed to be due by any government entity shall have been paid or provision has been made for the payment thereof. To the Target Fund’s knowledge, no such Return is currently under audit by any Federal, state, local or foreign Tax authority; no assessment has been asserted with respect to such Returns; there are no levies, liens or other encumbrances on the Target Fund or its assets resulting from the non-payment of any Taxes; no waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending; and adequate provision has been made in the Target Fund financial statements for all Taxes in respect
of all periods ended on or before the date of such financial statements. As used in this Agreement, “Tax” or “Taxes” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including, but not limited to, withholding on amounts paid to or by any person), together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority (domestic or foreign) responsible for the imposition of any such tax. “Return” means reports, returns, information returns, elections, agreements, declarations, or other documents of any nature or kind (including any attached schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any claim for refund, amended return or declaration of estimated Taxes (and including any amendments with respect thereto);
(m) The Target Fund has elected to be a regulated investment company under Subchapter M of the Code and is a fund that is treated as a separate corporation under Section 851(g) of the Code. The Target Fund has qualified for treatment as a regulated investment company for each taxable year since inception that has ended prior to the Closing Date and will have satisfied the requirements of Part I of Subchapter M of the Code to maintain such qualification for the period beginning on the first day of its current taxable year and ending on the Closing Date. On or before the Closing Date, unless the Reorganization qualifies as a “reorganization” under Section 368(a)(1)(F) of the Code, the Target Fund shall have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders (i) all of the Target Fund’s investment company taxable income for the taxable year ended prior to the Closing Date and substantially all of such investment company taxable income for the final taxable year ending with its complete liquidation (in each case determined without regard to any deductions for dividends paid); (ii) all of the Target Fund’s net capital gain recognized in its taxable year ended prior to the Closing Date and substantially all of any such net capital gain recognized in such final taxable year (in each case after reduction for any capital loss carryover); and (iii) at least 90 percent of the excess, if any, of the Target Fund’s interest income excludible from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for the taxable year prior to the Closing Date and at least 90 percent of such net tax-exempt income for such final taxable year;
(n) All issued and outstanding shares of the Target Fund are, and on the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Target Entity and, in every state where offered or sold, such offers and sales have been in compliance in all material respects with applicable registration and/or notice requirements of the 1933 Act and state and District of Columbia securities laws. All of the issued and outstanding shares of the Target Fund will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the Target Transfer Agent, on behalf of the Target Fund. The Target Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Target Fund, nor is there outstanding any security convertible into any of the Target Fund’s shares;
(o) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action, if any, on the part of the trustees, as applicable, of the Target Entity and, subject to the approval of the shareholders of the Target Fund and the due authorization, execution and delivery of this Agreement by the other parties hereto, this Agreement will constitute a valid and binding obligation of the Target Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
(p) The combined proxy statement and prospectus and statement of additional information (collectively, the “Proxy Statement/Prospectus”) to be included in the Acquiring Entity ’s registration statement on Form N-14 (the “N-14 Registration Statement”) and filed in connection with this Agreement, and the documents incorporated therein by reference and any amendment or supplement thereto insofar as they relate to the Target Entity or the Target Fund, each comply or will comply in all material respects with the applicable requirements of the 1933 Act, 1934 Act and the 1940 Act and the applicable rules and regulations of the SEC thereunder on the effective date of such N-14 Registration Statement. Each of the Proxy Statement/Prospectus, N-14 Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto, insofar as it relates to the Target Entity or the Target Fund, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not materially misleading on the effective date of such N-14 Registration Statement; provided, however, that the Target Entity makes no representations or warranties as to the information contained in the Proxy Statement/Prospectus, N-14 Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto in reliance upon and in conformity with information relating to the Acquiring Entity or the Acquiring Fund, including information furnished by the Acquiring Entity to the Target Fund specifically for use in connection with the Proxy Statement/Prospectus, N-14 Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto or otherwise publicly available on the Acquiring Entity’s website or the SEC’s public disclosure system;
(q) The books and records of the Target Fund are true and correct in all material respects and contain no material omissions with respect to information required to be maintained under the laws, rules and regulations applicable to the Target Fund;
(r) The Target Entity is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code; and
(s) The Target Fund has no unamortized or unpaid organizational fees or expenses.
4.2. The Acquiring Entity, on behalf of itself or, where applicable, the Acquiring Fund, represents and warrants to the Target Entity and Target Fund as follows:
(a) The Acquiring Fund is duly organized as a series of the Acquiring Entity, which is a statutory trust duly formed, validly existing, and in good standing under the laws of the State of Delaware, with power under its Agreement and Declaration of Trust, as amended (the “Agreement and Declaration of Trust”), to own all of its properties and assets and to carry on its business as it is now being, and as it is contemplated to be, conducted and to enter into this Agreement and perform its obligations hereunder;
(b) The Acquiring Entity is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act and the registration of shares of the Acquiring Fund under the 1933 Act are in full force and effect;
(c) No consent, approval, authorization, or order of any court, governmental authority or FINRA is required for the consummation by the Acquiring Fund of the transactions contemplated herein, except such as have been or will be (at or prior to the Closing Date) obtained under the 1933 Act, the 1934 Act, the 1940 Act and state securities laws;
(d) The prospectus and statement of additional information of the Acquiring Fund will conform at the time of their use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading;
(e) On the Closing Date, the Acquiring Fund will have no assets other than nominal capital contributed by Acquiring Adviser or its affiliates;
(f) Except as otherwise disclosed in writing to and accepted by or on behalf of the Target Fund, the Acquiring Fund is not engaged currently, and the execution, delivery and performance of this Agreement will not result, in (i) a material violation of the Acquiring Entity’s Agreement and Declaration of Trust or by-laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquiring Fund or the Acquiring Entity is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any lien, encumbrance, penalty, or additional fee under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquiring Fund or the Acquiring Entity is a party or by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by or on behalf of the Target Fund, no litigation or administrative proceeding or investigation of or before any court, tribunal, arbitrator, governmental body or FINRA is presently pending or, to the Acquiring Fund’s knowledge, threatened against the Acquiring Entity or the Acquiring Fund that, if adversely determined, would materially and adversely affect the Acquiring Fund’s financial condition or the conduct of its business. The Acquiring Fund and the Acquiring Entity, without any special investigation or inquiry, know of no facts
that might form the basis for the institution of such proceedings and neither the Acquiring Entity nor the Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court, governmental body or FINRA that materially and adversely affects its business or its ability to consummate the transactions herein contemplated;
(h) The Acquiring Fund is, and will be at the time of Closing, a new series portfolio of the Acquiring Entity created within the last 12 months, without assets (other than seed capital) or liabilities, formed for the purpose of receiving the Assets and assuming the Liabilities of the Target Fund in connection with the Reorganization and, accordingly, the Acquiring Fund has not prepared books of account and related records or financial statements or issued any shares except those issued in a private placement to Acquiring Adviser or its affiliate to secure any required initial shareholder approvals;
(i) On the Closing Date, all material Returns of the Acquiring Fund required by law to have been filed by such date, if any (including any extensions), shall have been filed and are or will be true, correct and complete in all material respects, and all Taxes shown as due or claimed to be due by any government entity shall have been paid or provision has been made for the payment thereof. To the Acquiring Fund’s knowledge, no such Return is currently under audit by any Federal, state, local or foreign Tax authority; no assessment has been asserted with respect to such Returns; there are no levies, liens or other encumbrances on the Acquiring Fund or its assets resulting from the non-payment of any Taxes; and no waivers of the time to assess any such Taxes are outstanding nor are any written requests for such waivers pending;
(j) The Acquiring Fund was formed for the purpose of the Reorganization and intends to elect to be a regulated investment company under Subchapter M of the Code and is a fund that is treated as a separate corporation under Section 851(g) of the Code. The Acquiring Fund has qualified for treatment as a regulated investment company for each taxable year since inception that has ended prior to the Closing Date and will satisfy the requirements of Part I of Subchapter M of the Code to maintain qualification as a regulated investment company beginning on the first day of its current taxable year. The Acquiring Fund has no earnings or profits accumulated in any taxable year in which the provisions of Subchapter M of the Code did not apply to it;
(k) The Acquiring Fund does not have and will not have outstanding as of the Closing Date any options, warrants or other rights to subscribe for or purchase any Acquiring Fund shares (other than rights presented by this contract), nor is there outstanding any security convertible into any Acquiring Fund shares;
(l) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action, if any, on the part of the trustees of the Acquiring Entity, on behalf of the Acquiring Fund, and subject to the approval of shareholders of the Target Fund and the due authorization, execution and delivery of the Agreement by the other parties thereto, this Agreement will constitute a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
(m) The shares of the Acquiring Fund to be issued and delivered to the Target Fund, for the account of the Target Fund Shareholders, pursuant to the terms of this Agreement, will on the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Fund shares, and, upon receipt of the Target Fund’s Assets in accordance with the terms of this Agreement, will be fully paid and non-assessable by the Acquiring Entity;
(n) The Acquiring Entity is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code;
(o) The Acquiring Fund has no unamortized or unpaid organizational fees or expenses for which it does not expect to be reimbursed by Acquiring Adviser or its affiliates; and
(p) As of the effective date of the N-14 Registration Statement, the date of the meeting of shareholders of the Target Fund and the Closing Date, the information relating to the Acquiring Entity or the Acquiring Fund in the N-14 Registration Statement, including information furnished by the Acquiring Entity to the Target Fund specifically for use in connection with the Proxy Statement/Prospectus, N-14 Registration Statement and the documents incorporated therein by reference and any amendment or supplement thereto or otherwise publicly available on the Acquiring Entity’s website or the SEC’s public disclosure system, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not misleading; provided, however, that the representations and warranties in this subparagraph shall not apply to statements in or omissions from the N-14 Registration Statement made in reasonable reliance upon and in conformity with information that was furnished by the Target Fund for use therein.
| 5. | COVENANTS OF THE ACQUIRING FUND AND THE TARGET FUND |
5.1. With respect to the Reorganization:
(a) The Acquiring Fund and the Target Fund each: (i) will operate its business in the ordinary course and substantially in accordance with past practices between the date hereof and the Closing Date for the Reorganization, it being understood that such ordinary course of business may include the declaration and payment of customary dividends and distributions, and any other distribution that may be advisable, and (ii) shall use its reasonable best efforts to preserve intact its business organization and material assets and maintain the rights, franchises and business and customer relations necessary to conduct the business operations of the Acquiring Fund or the Target Fund, as appropriate, in the ordinary course in all material respects.
(b) The parties hereto shall cooperate in preparing, and the Acquiring Entity shall file with the Commission, the N-14 Registration Statement on Form N-14 under the
1933 Act which shall properly register the Acquiring Fund shares to be issued in connection with the Reorganization and include a proxy statement with respect to the votes of the shareholders of the Target Fund to approve the Reorganization.
(c) The Target Entity will call a meeting of the shareholders of the Target Fund to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein. The Target Entity shall, through its board of trustees, if considered by such trustees to be consistent with their fiduciary obligations, recommend to the shareholders of the Target Fund approval of this Agreement.
(d) The Target Fund covenants that the Acquiring Fund shares to be issued pursuant to this Agreement are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement.
(e) If reasonably requested by the Acquiring Fund, the Target Entity will provide the Acquiring Fund with (1) a statement of the respective tax basis and holding period of all investments to be transferred by the Target Fund to the Acquiring Fund, (2) a copy (which may be in electronic form) of the shareholder ledger accounts including, without limitation, the name, address and taxpayer identification number of each shareholder of record, the number of shares of beneficial interest held by each shareholder, the dividend reinvestment elections applicable to each shareholder, and the backup withholding and nonresident alien withholding certifications, notices or records on file with the Target Fund with respect to each shareholder, for all of the shareholders of record of the Target Fund as of the close of business on the Valuation Date, who are to become holders of the Acquiring Fund as a result of the transfer of Assets (the “Target Fund Shareholder Documentation”), certified by its transfer agent or its President or Vice-President to the best of their knowledge and belief, and (3) the tax books and records of the Target Fund for purposes of preparing any returns required by law to be filed for tax periods ending after the Closing Date.The information to be provided under (1) of this sub-section shall be provided as soon as reasonably practicable after the Closing and the information to be provided under (2) and (3) of this sub-section shall be provided at or prior to the Closing.
(f) Subject to the provisions of this Agreement, the Acquiring Fund and the Target Fund will each take, or cause to be taken, all action, and do or cause to be done all things, reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement.
(g) As soon as is reasonably practicable after the Closing, the Target Fund will make one or more liquidating distributions to its shareholders consisting of the applicable class of shares of the Acquiring Fund received at the Closing, as set forth in Section 1.1(d) hereof.
(h) The Acquiring Fund and the Target Fund shall each use their reasonable best efforts prior to Closing to fulfill or obtain the fulfillment of the conditions precedent to effect the transactions contemplated by this Agreement.
(i) The Target Fund shall, from time to time, as and when reasonably requested by the Acquiring Fund, execute and deliver or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action, as the Acquiring Fund may reasonably deem necessary or desirable in order to vest in and confirm the Acquiring Fund’s title to and possession of all the Assets and otherwise to carry out the intent and purpose of this Agreement.
(j) The Acquiring Fund will use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state blue sky or securities laws as may be necessary in order to continue its operations after the Closing Date.
(k) It is the intention of the parties that the Reorganization will qualify as a reorganization with the meaning of Section 368(a) of the Code. None of the parties to this Agreement shall take any action or cause any action to be taken (including, without limitation the filing of any tax return) that is inconsistent with such treatment or results in the failure of a Reorganization to qualify as a reorganization with the meaning of Section 368(a) of the Code.
(l) Any reporting responsibility of the Target Fund, including, but not limited to, the responsibility for filing regulatory reports, tax returns relating to tax periods ending on or prior to the Closing Date (whether due before or after the Closing Date), or other documents with the Commission, any state securities commission, and any Federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Target Fund.
(m) If reasonably requested by the Acquiring Fund, the Target Fund on or prior to the signing of this Agreement or within a reasonable period after the Closing, the Target Fund shall have delivered to the Acquiring Fund copies of: (1) the federal, state and local income tax returns filed by or on behalf of the Target Fund for the prior three (3) taxable years, and (2) any organizational documents, including without limitation, the declarations of trust, articles of incorporation and bylaws.
| 6. | CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET FUND |
6.1. The obligations of the Target Entity, on behalf of the Target Fund, to consummate the transactions provided for herein shall be subject, at the Target Fund’s election, to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions:
(a) All representations and warranties of the Acquiring Fund and the Acquiring Entity contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date;
(b) The Acquiring Entity shall have delivered to the Target Fund on the Closing Date a certificate executed in its name by its President or Vice President and
Treasurer, in form and substance reasonably satisfactory to Target Fund and dated as of the Closing Date, to the effect that the representations and warranties of or with respect to the Acquiring Fund made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement;
(c) The Acquiring Entity and the Acquiring Fund shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be performed or complied with by the Acquiring Entity and the Acquiring Fund, on or before the Closing Date;
(d) The Target Fund and the Acquiring Fund shall have agreed on the number of full and fractional shares of each class of the Acquiring Fund to be issued in connection with the Reorganization after such number has been calculated in accordance with Section 1.1 hereto; and
(e) The Target Entity shall have received on the Closing Date the opinion of Shearman & Sterling, LLP (“Counsel”), counsel to the Acquiring Entity (which may rely on certificates of officers or trustees of the Acquiring Entity), dated as of the Closing Date, covering the following points:
(i) The Acquiring Entity is a statutory trust duly formed, validly existing and in good standing under the laws of the State of Delaware and has the trust power to own all of the Acquiring Fund’s properties and assets and to conduct its business, including that of the Acquiring Fund, as described in its organizational documents or in the most recently filed registration statement of the Acquiring Fund;
(ii) The Acquiring Entity is a registered investment company classified as a management company of the open-end type with respect to each series of shares it offers, including the Acquiring Fund, under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect;
(iii) The Agreement has been duly authorized by the Acquiring Entity on behalf of the Acquiring Fund and, assuming due authorization, execution and delivery of the Agreement by the other parties thereto, is a valid and binding obligation of the Acquiring Entity, on behalf of the Acquiring Fund, enforceable against it in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership, moratorium and other similar laws relating to or affecting creditors' rights generally, general equity principles (whether considered in a proceeding in equity or at law) and to an implied covenant of good faith and fair dealing;
(iv) The Acquiring Fund shares to be issued to the Target Fund Shareholders as provided by this Agreement are duly authorized, upon such delivery will be validly issued and upon receipt of the Target Fund’s Assets will be fully paid and non assessable by the Acquiring Entity and no shareholder of the Acquiring Fund has any preemptive rights to subscription or purchase in respect thereof; and
(v) The execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of
the Acquiring Entity’s Agreement and Declaration of Trust or By-Laws or a breach or default under any agreement pertaining to the Acquiring Fund identified as an exhibit in Part C of the registration statement on Form N-1A last filed by Acquiring Entity or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any such agreement.
| 7. | CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND |
7.1. The obligations of the Acquiring Entity, on behalf of the Acquiring Fund, to complete the transactions provided for herein shall be subject, at the Acquiring Fund’s election, to the performance by the Target Fund of all of the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions:
(a) All representations and warranties of the Target Entity and the Target Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date;
(b) The Target Entity, on behalf of the Target Fund, shall have delivered to the Acquiring Entity on the Closing Date (i) a statement of the Target Fund’s Assets, together with a list of portfolio securities of the Target Fund, as of the Closing Date, certified by the Treasurer of the Target Entity, (ii) the Target Fund Shareholder Documentation, (iii) the AML Documentation and (iv) to the extent permitted by applicable law, all information pertaining to, or necessary or useful in the calculation or demonstration of, the investment performance of the Target Fund;
(c) The Target Entity shall have delivered to the Acquiring Entity on the Closing Date a certificate executed in its name by its President or Vice President and Treasurer, in form and substance satisfactory to the Acquiring Fund and dated as of the Closing Date, to the effect that the representations and warranties of or with respect to the Target Fund made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the Acquiring Fund shall reasonably request;
(d) The Target Custodian and the Target Transfer Agent shall have delivered the certificates contemplated by Sections 3.2(b) (if available at the Closing) and 3.2(d) of this Agreement, respectively, and the Target Transfer Agent or the Target Fund’s President or Vice President shall have delivered the certificate contemplated by Section 5.1(e) of this Agreement, each duly executed by an authorized officer of the Target Custodian, the Target Transfer Agent, the Target Fund’s President or the Target Fund’s Vice President, as applicable;
(e) The Target Entity and the Target Fund shall have performed all of the covenants and complied with all of the provisions required by this Agreement to be
performed or complied with by the Target Entity and the Target Fund, on or before the Closing Date;
(f) The Target Fund and the Acquiring Fund shall have agreed on the number of full and fractional shares of each class of the Acquiring Fund set forth on Exhibit A hereto to be issued in connection with the Reorganization after such number has been calculated in accordance with Section 1.1 hereto;
(g) On or before the Closing Date, unless the Reorganization qualifies as a “reorganization” under Section 368(a)(1)(F) of the Code, the Target Fund shall have declared and paid a dividend or dividends which, together with all previous such dividends, shall have the effect of distributing to its shareholders (i) all of the Target Fund’s investment company taxable income for the taxable year ended prior to the Closing Date and substantially all of such investment company taxable income for the final taxable year ending with its complete liquidation (in each case determined without regard to any deductions for dividends paid); (ii) all of the Target Fund’s net capital gain recognized in its taxable year ended prior to the Closing Date and substantially all of any such net capital gain recognized in such final taxable year (in each case after reduction for any capital loss carryover); and (iii) at least 90 percent of the excess, if any, of the Target Fund’s interest income excludible from gross income under Section 103(a) of the Code over its deductions disallowed under Sections 265 and 171(a)(2) of the Code for the taxable year prior to the Closing Date and at least 90 percent of such net tax-exempt income for such final taxable year; and
(h) The Acquiring Entity shall have received on the Closing Date the opinion of Stradley, Ronon, Stevens & Young, LLP, counsel to the Target Entity (which may rely on certificates of officers or trustees of the Target Entity), covering the following points:
(i) The Target Entity is a statutory trust duly formed, validly existing and in good standing under the laws of the State of Delaware, and has the trust power to own all of Target Fund’s properties and assets, and to conduct its business, including that of the Target Fund, as described in its organizational documents or in the most recently filed registration statement of the Target Fund;
(ii) The Target Entity is a registered investment company classified as a management company of the open-end type with respect to itself and, if applicable, each series of shares it offers, including the Target Fund, under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect;
(iii) The Agreement has been duly authorized by the Target Entity on behalf of Target Fund and, assuming due authorization, execution and delivery of the Agreement by the other parties thereto, is a valid and binding obligation of the Target Entity, on behalf of the Target Fund, enforceable against the Target Entity in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership, moratorium and other similar laws relating to or affecting creditors' rights generally, general equity principles (whether considered in a
proceeding in equity or at law) and to an implied covenant of good faith and fair dealing; and
(iv) The execution and delivery of the Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of, as appropriate, the Target Entity’s Governing Documents or a breach or default under any agreement pertaining to the Target Fund identified as an exhibit in Part C of the registration statement on Form N-1A last filed by Target Entity or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty under any such agreement.
| 8. | FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE TARGET FUND |
If any of the conditions set forth below have not been satisfied on or before the Closing Date with respect to the Target Fund or the Acquiring Fund, the Acquiring Entity or Target Entity, respectively, shall, at its option, not be required to consummate the transactions contemplated by this Agreement:
8.1. The Agreement shall have been approved by the requisite vote of the holders of the outstanding shares of the Target Fund in accordance with the provisions of the Target Entity’s Governing Documents, applicable law of the jurisdiction in which the Target Entity is organized and the 1940 Act, and certified copies of the voting record from the proxy solicitor or other written correspondence evidencing such approval shall have been delivered to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the Target Fund nor the Acquiring Fund may waive the conditions set forth in this Section 8.1;
8.2. The Agreement and transactions contemplated herein shall have been approved by the board of trustees of the Target Entity and the board of trustees of the Acquiring Entity and each party shall have delivered to the other party a copy of the resolutions approving this Agreement and the transactions contemplated in connection herewith adopted by such party’s board of trustees, certified by the Secretary or equivalent officer. Notwithstanding anything herein to the contrary, neither the Target Fund nor the Acquiring Fund may waive the conditions set forth in this Section 8.2;
8.3. On the Closing Date, no action, suit or other proceeding shall be pending or, to the Target Entity’s or the Acquiring Entity’s knowledge, threatened before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement, the transactions contemplated herein or the Corporate Transaction;
8.4. All consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities deemed necessary by the Acquiring Fund or Target Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Target Fund, provided that either party hereto may for itself waive any of such conditions;
8.5. The N-14 Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act;
8.6. The Target Entity and the Acquiring Entity shall have received on or before the Closing Date an opinion of Counsel in form and substance reasonably acceptable to the Target Entity and the Acquiring Entity, as to the matters set forth on Schedule 8.6. Such opinion shall be based on customary assumptions and on representations contained in certificates of officers of the Target Entity, the Acquiring Entity and others, and the officers of the Target Entity and the Acquiring Entity shall use their best efforts to make available such truthful certificates. The foregoing opinion may state that no opinion is expressed as to the effect of the Reorganization on the Target Fund, the Acquiring Fund or any Target Fund shareholder with respect to any asset (including without limitation any stock held in a passive foreign investment company as defined in section 1297(a) of the Code or any contract described in Section 1256(b) of the Code) as to which any unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) regardless of whether such transfer would otherwise be a non-taxable transaction under the Code.
| 9. | BROKERAGE FEES AND EXPENSES |
9.1. The parties hereto represent and warrant to each other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein.
9.2. Target Adviser will bear and/or reimburse the Acquiring Adviser for the expenses relating to the Reorganization, as set forth in Section 11.2 of the Transaction Agreement. The costs of the Reorganization shall include, but not be limited to, preparation, printing and distribution of the N-14 Registration Statement for the Reorganization (including the prospectus/proxy statement contained therein), legal fees, accounting fees, and expenses of soliciting shareholders and holding shareholders’ meetings. Costs associated with organizing the Acquiring Fund shall be borne by the Acquiring Adviser.
| 10. | COOPERATION AND EXCHANGE OF INFORMATION |
Prior to the Closing and for a reasonable time thereafter, the Target Entity and the Acquiring Entity will provide each other and their respective representatives with such cooperation, assistance and information as is reasonably necessary (i) for the filing of any Tax Return, for the preparation for any audit, and for the prosecution or defense of any claim, suit or proceeding relating to any proposed adjustment, or (ii) for any financial accounting purpose.
11. INDEMNIFICATION
11.1. With respect to the Reorganization, the Acquiring Entity, out of the assets of the Acquiring Fund, and Acquiring Adviser agree to indemnify and hold harmless the Target Entity and each of the Target Entity’s officers and trustees from and against any and all losses, claims,
damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which, jointly and severally, the Target Entity or any of its trustees or officers may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on any breach by the Acquiring Entity, on behalf of the Acquiring Fund, of any of its representations, warranties, covenants or agreements set forth in this Agreement.
11.2. With respect to the Reorganization, Target Adviser agrees to indemnify and hold harmless the Acquiring Entity and its officers and trustees from and against any and all losses, claims, damages, liabilities or expenses (including, without limitation, the payment of reasonable legal fees and reasonable costs of investigation) to which, jointly and severally, the Acquiring Entity or any of its trustees or officers may become subject, insofar as such loss, claim, damage, liability or expense (or actions with respect thereto) arises out of or is based on any breach by the Target Entity, on behalf of the Target Fund, of any of its representations, warranties, covenants or agreements set forth in this Agreement.
| 12. | ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES AND COVENANTS |
12.1. Except as described in Section 9.2, each party agrees that no party has made any representation, warranty or covenant not set forth herein and that this Agreement constitutes the entire agreement between the parties.
12.2. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated hereunder for a period of one (1) year.
This Agreement may be terminated and the transactions contemplated hereby may be abandoned by (i) mutual agreement of the parties; or (ii) by either the Acquiring Entity or the Target Entity if the Closing shall not have occurred on or before March 31, 2012, unless such date is extended by mutual agreement of the Acquiring Entity and the Target Entity; or (iii) by any party if one or more other parties shall have materially breached its obligations under this Agreement or made a material misrepresentation herein or in connection herewith. In the event of any such termination, this Agreement shall become void and there shall be no liability hereunder on the part of any party or their respective trustees or officers, except for (i) any such material breach or intentional misrepresentation or (ii) the parties’ respective obligations under Section 11, as to each of which all remedies at law or in equity of the party adversely affected shall survive.
This Agreement may be amended, modified or supplemented in a writing signed by the parties hereto to be bound by such Amendment.
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by facsimile, personal service or prepaid or certified mail addressed to:
For the Target Entity:
Joan R. Gulinello, Esq.
Old Mutual Asset Management
200 Clarendon Street, 53rd Floor
Boston, MA 02116
Telephone No.: (617) 369-7379
Facsimile No.: (617) 369-7479
E-mail: jgulinello@oldmutualus.com
With a copy (which shall not constitute notice) to:
Matthew R. DiClemente, Esq.
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
Telephone: (215) 564-8173
Facsimile No.: (215) 564-8120
E-mail: mdiclemente@stradley.com
For the Acquiring Entity
First Eagle Funds
c/o First Eagle Investment Management, LLC
1345 Avenue of the Americas
New York, New York 10105
Fax: 212-698-3271
Attn: General Counsel
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Fax: 646-848-4668
Attn: Nathan Greene
For Acquiring Adviser:
First Eagle Investment Management, LLC
1345 Avenue of the Americas
New York, New York 10105
Fax: 212-698-3271
Attn: General Counsel
| 16. | HEADINGS; GOVERNING LAW; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY |
16.1. The Article and Section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
16.2. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware and applicable Federal law, without regard to its principles of conflicts of laws.
16.3. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
16.4. This agreement may be executed in any number of counterparts, each of which shall be considered an original.
16.5. It is expressly agreed that the obligations of the parties hereunder shall not be binding upon any of their respective trustees, shareholders, nominees, officers, agents, or employees personally, but, except as provided in Sections 9.2, 11.1 and 11.2 hereof, shall bind only the property of the applicable Target Fund or the applicable Acquiring Fund as provided in the Governing Documents of the applicable Target Entity or the Agreement and Declaration of Trust of the applicable Acquiring Entity, respectively. The execution and delivery by such officers shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be approved on behalf of the Acquiring Fund and Target Fund.
Old Mutual Funds II, on behalf of Old Mutual High Yield Fund By: _________________________________ Name: Title: | | First Eagle Trust, on behalf of First Eagle High Yield Fund By: _________________________________ Name: Title: |
Old Mutual Capital, Inc. By: _________________________________ Name: Title: | | First Eagle Investment Management, LLC By: _________________________________ Name: Title: |
| | | |
EXHIBIT A
CHART OF REORGANIZATION
| Acquiring Fund (and share classes) and Acquiring Entity | | Target Fund (and share classes) and Target Entity |
First Eagle High Yield Fund, a series of First Eagle Funds Class I shares | | Old Mutual High Yield Fund, a series of Old Mutual Funds II Institutional Class shares |
Schedule 1.2(c)
Excluded Liabilities
None
Schedule 8.6
Tax Opinions
With respect to the Reorganization:
(i) The acquisition by the Acquiring Fund of all of the assets of the Target Fund, as provided for in the Agreement, in exchange solely for Acquiring Fund shares and the assumption by the Acquiring Fund of all of the liabilities of the Target Fund, followed by the distribution by the Target Fund to its shareholders of the Acquiring Fund shares in complete liquidation of the Target Fund, should qualify as a reorganization within the meaning of Section 368(a)(1) of the Code, and the Target Fund and the Acquiring Fund each should be a “party to the reorganization” within the meaning of Section 368(b) of the Code.
(ii) No gain or loss should be recognized by the Target Fund upon the transfer of all of its assets to, and assumption of all of its liabilities by, the Acquiring Fund in exchange solely for Acquiring Fund shares pursuant to Section 361(a) and Section 357(a) of the Code.
(iii) No gain or loss will be recognized by the Acquiring Fund upon the receipt by it of all of the assets of the Target Fund in exchange solely for the assumption of all of the liabilities of the Target Fund and issuance of the Acquiring Fund shares pursuant to Section 1032(a) of the Code.
(iv) No gain or loss should be recognized by the Target Fund upon the distribution of the Acquiring Fund shares by the Target Fund to its shareholders in complete liquidation (in pursuance of the Agreement) pursuant to Section 361(c)(1) of the Code.
(v) The tax basis of the assets of the Target Fund received by the Acquiring Fund should be the same as the tax basis of such assets in the hands of the Target Fund immediately prior to the exchange pursuant to Section 362(b) of the Code.
(vi) The holding periods of the assets of the Target Fund in the hands of the Acquiring Fund should include the periods during which such assets were held by the Target Fund pursuant to Section 1223(2) of the Code.
(vii) No gain or loss should be recognized by the shareholders of the Target Fund upon the exchange of all of their Target Fund shares for the Acquiring Fund shares pursuant to Section 354(a) of the Code.
(viii) The aggregate tax basis of the Acquiring Fund shares to be received by each shareholder of the Target Fund should be the same as the aggregate tax basis of Target Fund shares surrendered in exchange therefor pursuant to Section 358(a)(1) of the Code.
(ix) The holding period of Acquiring Fund shares received by a shareholder of the Target Fund should include the holding period of the Target Fund shares surrendered in exchange therefor, provided that the shareholder held Target Fund shares as a capital asset on the date of the exchange pursuant to Section 1223(1) of the Code.
EXHIBIT D
OWNERSHIP OF THE OLD MUTUAL HIGH YIELD FUND
Significant Holders
Listed below is the name, address and percent ownership of each person who, as of November 18, 2011, to the best knowledge of the Old Mutual High Yield Fund owned 5% or more of the outstanding shares of the Old Mutual High Yield Fund. A shareholder who owns beneficially 25% or more of the outstanding securities of the Old Mutual High Yield Fund is presumed to “control” the fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
Name and Address | Percent Owned of Record* |
MILLPENCIL (US) LP C/O OLD MUTUAL US HOLDINGS INC ATTN FINANCE DEPARTMENT 200 CLARENDON ST FL 53 BOSTON MA 02116-5045 | 43.40% |
| | |
NATIONAL FINANCIAL SERVICES CORP 200 LIBERTY ST ONE WORLD FIN CNTR ATTN MUTUAL FUNDS DEPT 5TH FL NEW YORK NY 10281 | 21.24% |
| | |
OLD MUTUAL ASSET ALLOCATION BALANCED PORTFOLIO 4643 S ULSTER ST STE 700 DENVER CO 80237-2865 | 17.58% |
| | |
OLD MUTUAL ASSET ALLOCATION CONSERVATIVE PORTFOLIO 4643 S ULSTER ST STE 700 DENVER CO 80237-2865 | 8.92% |
| | |
CHARLES SCHWAB & CO INC SPECIAL CUSTODY A/C FBO CUSTOMERS 101 MONTGOMERY ST SAN FRANCISCO CA 94104-4151 | 8.85% |
__________
*Old Mutual has no knowledge of whether all or any portion of the shares owned of record are also owned beneficially.
EXHIBIT E
INTERIM SUB-ADVISORY AGREEMENT WITH FIRST EAGLE
INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of October, 2011 by and among Old Mutual Capital, Inc. (the “Adviser”), First Eagle Investment Management, LLC (the “Sub-Adviser”), and Old Mutual Funds II, a Delaware statutory trust (the “Trust”), on behalf of the Old Mutual Dwight High Yield Fund (the “Portfolio”).
WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, the Adviser currently provides investment management services to the Portfolio pursuant to that certain investment management agreement between the Trust and the Adviser, and Dwight Asset Management Company LLC (“Dwight”) currently provides investment sub-advisory services to the Portfolio pursuant to that certain investment sub-advisory agreement between the Trust, the Adviser, and Dwight (the “Prior Sub-Advisory Agreement”);
WHEREAS, the Board of Trustees of the Trust has terminated the Prior Sub-Advisory Agreement and the Board of Trustees of the Trust, including a majority of the independent trustees, has appointed the Sub-Adviser as the new investment sub-adviser to the Portfolio;
WHEREAS, the Adviser and the Trust each desire to retain the Sub-Adviser to provide investment advisory services to the Trust in connection with the management of the Portfolio, and the Sub-Adviser is willing to render such investment advisory services to the Portfolio under this Agreement until a new investment advisory and/or sub-advisory agreement is approved by the Trustees of the Trust and the shareholders of the Portfolio as required by Section 15 of the 1940 Act;
WHEREAS, upon termination of the Prior Sub-Advisory Agreement, the Portfolio’s name will change from Old Mutual Dwight High Yield Fund to Old Mutual High Yield Fund;
WHEREAS, the Portfolio, the Adviser and the Sub-Adviser desire to comply with the provisions of Rule 15a-4 including subsection (b) thereof under the 1940 Act; and
WHEREAS, the Trustees of the Trust, including a majority of those Trustees who are not interested persons of the Trust, have found that the scope and quality of services to be provided to the Trust under this Agreement will be at least equivalent to the scope and quality of services provided under the Prior Sub-Advisory Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision and oversight by the Adviser and the Trust’s Board of Trustees, the Sub-Adviser shall manage (i) the investment operations of the Portfolio, and (ii) the composition of such assets, including the purchase, retention and disposition thereof, in accordance with the Protfolio’s investment objectives, policies and restrictions as stated in the Portfolio’s Prospectus(es) (such Prospectus(es) and Statement(s) of Additional Information as currently in effect and as amended or supplemented from time to time, being herein called the “Prospectus”), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of the Portfolio’s investments and determine from time to time what investments and securities will be purchased, retained or sold by the Portfolio and what portion of the assets will be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under this Agreement, the Sub-Adviser shall act in conformity with the Trust’s Agreement and Declaration of Trust and the Prospectus and with the instructions and directions of the Adviser and of the Board of Trustees and will conform and comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and all other applicable federal and state laws and regulations, as each is amended from time to time.
(3) The Sub-Adviser shall determine the securities to be purchased or sold with respect to the Portfolio and will place orders with or through such persons, brokers or dealers to carry out the policy with respect to brokerage set forth in the Portfolio’s Registration Statement (as defined herein) and Prospectus or as the Board of Trustees or the Adviser may direct from time to time, in conformity with federal securities laws. In providing the Portfolio with investment supervision, the Sub-Adviser will give primary consideration to securing the most favorable price and efficient execution. Within the framework of this policy, the Sub-Adviser may consider the financial responsibility, research and investment information and other services provided by brokers or dealers who may effect or be a party to any such transaction or other transactions to which the Sub-Adviser’s other clients may be a party. It is understood that it is desirable for the Portfolio that the Sub-Adviser have access to (i) supplemental investment and market research and (ii) security and economic analysis provided by brokers who may execute brokerage transactions at a higher cost to the Portfolio than may result when allocating brokerage to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, the Sub-Adviser is authorized to place orders for the purchase and sale of securities on behalf of the Portfolio with brokers, subject to review by the Trust’s Board of Trustees from time to time with respect to the extent and continuation of this practice. It is understood that the services provided by such brokers may be useful to the Sub-Adviser in connection with the Sub-Adviser’s services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a security to be in the best interest of the Portfolio as well as other clients of the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and regulations, may but shall be under no obligation to, aggregate the securities to be so purchased or sold in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Sub-Adviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Portfolio in question and to such other clients.
(4) The Sub-Adviser at its expense will make available to the Trustees of the Trust and the Adviser at reasonable times its portfolio managers and other appropriate personnel, either in person or, at the mutual convenience of the Adviser and the Sub-Adviser, by telephone, in order to review the investment policies, performance and other investment related information regarding the Portfolio and to consult with the Trustees of the Trust and Adviser regarding the Portfolio’s investment affairs, including economic, statistical and investment matters related to the Sub-Adviser’s duties hereunder, and will provide periodic reports to the Adviser relating to the investment strategies it employs. The Sub-Adviser and its personnel shall also cooperate fully with counsel and auditors for, and the Chief Compliance Officers of, the Adviser and the Trust.
(5) In accordance with procedures adopted by the Trustees of the Trust, as amended from time to time, the Sub-Adviser is responsible for assisting in the fair valuation of all Portfolio securities. The Sub-Adviser will use its reasonable efforts to provide, based upon its own expertise, and to arrange with parties independent of the Sub-Adviser such as broker-dealers for the provision of, valuation information or prices for securities for which prices are deemed by the Adviser or Trust’s administrator not to be readily available in the ordinary course of business from an automated
pricing service. In addition, the Sub-Adviser will assist the Fund and its agents in determining whether prices obtained for valuation purposes accurately reflect market price information relating to the assets of the Portfolio at such times as the Adviser shall reasonably request, including but not limited to, the hours after the close of a securities market and prior to the daily determination of a Fund’s net asset value per share.
(6) The Sub-Adviser at its expense will provide the Adviser and/or the Trust’s Chief Compliance Officer with such compliance reports relating to its duties under this Agreement as may be requested from time to time. Notwithstanding the foregoing, the Sub-Adviser will promptly report to the Adviser any material violations of the federal securities laws (as defined in Rule 38a-1 of the 1940 Act) that it is or should be aware of or of any material violation of the Sub-Adviser’s compliance policies and procedures that pertain to the Portfolio, as well as any change in portfolio manager(s) of the Portfolio.
(7) Unless otherwise directed by the Adviser or the Trust’s Board of Trustees, the Sub-Adviser will vote all proxies received in accordance with the Trust’s proxy voting policy or, if the Sub-Adviser has a proxy voting policy approved by the Trust’s Board of Trustees, the Sub-Adviser’s proxy voting policy. The Adviser shall instruct the Portfolio’s custodian to forward or cause to be forwarded to the Sub-Adviser all relevant proxy solicitation materials. The Sub-Adviser shall maintain and shall forward to the Fund or its designated agent such proxy voting information as is necessary for the Fund to timely file proxy voting results in accordance with Rule 30b1-4 of the 1940 Act.
(8) The Sub-Adviser represents and warrants that it has adopted a code of ethics meeting the requirements of Rule 17j-1 under the 1940 Act and the requirements of Rule 204A-1 under the Investment Advisers Act of 1940 and has provided the Adviser and the Trustees of the Fund a copy of such code of ethics, together with evidence of its adoption, and will promptly provide copies of any changes thereto, together with evidence of their adoption. Upon request of the Adviser, but in any event no less frequently than annually, the Sub-Adviser will supply the Adviser a written report that (A) describes any issues arising under the code of ethics or procedures since the Sub-Adviser’s last report, including but not limited to material violations of the code of ethics or procedures and sanctions imposed in response to the material violations; and (B) certifies that the procedures contained in the Sub-Adviser’s code of ethics are reasonably designed to prevent “access persons” from violating the code of ethics.
(9) The Sub-Adviser will review draft reports to shareholders and other documents provided or available to it and provide comments on a timely basis. In addition, the Sub-Adviser and each officer and portfolio manager thereof designated by the Adviser will provide on a timely basis such certifications or sub-certifications as the Adviser may reasonably request in order to support and facilitate certifications required to be provided by the Trust’s Principal Executive Officer and Principal Accounting Officer.
(10) The Sub-Adviser shall maintain all books and records with respect to the Portfolio’s portfolio transactions required by subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and shall render to the Trust’s Board of Trustees such periodic and special reports as the Trust’s Board of Trustees may reasonably request.
(11) The Sub-Adviser shall provide the Portfolio’s Custodian on each business day with information relating to all transactions concerning the Portfolio’s assets and shall provide the Adviser with such information upon request of the Adviser.
(12) (a) The investment management services provided by the Sub-Adviser under this Agreement are not to be deemed exclusive and the Sub-Adviser shall be free to render similar services to others, as long as such services do not impair the services rendered to the Adviser or the Trust.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be furnished through the medium of any of the Sub-Adviser’s officers or employees. It is understood that the Sub-Adviser may obtain certain administrative services, including, without limitation, services relating to trade reconciliation and the production of client reports, in carrying out its obligations under this Agreement.
(c) The Sub-Adviser shall keep the Portfolio’s books and records required to be maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement and shall timely furnish to the Adviser all information relating to the Sub-Adviser’s services under this Agreement needed by the Adviser to keep the other books and records of the Portfolio required by Rule 31a-1 under the 1940 Act. The Sub-Adviser agrees that all records that it maintains on behalf of the Portfolio are property of the Portfolio and the Sub-Adviser will surrender promptly to the Portfolio any of such records upon that Portfolio’s request; provided, however, that the Sub-Adviser may retain a copy of such records. The Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are required to be maintained by it pursuant to paragraph l(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be provided to the Portfolio pursuant to the Advisory Agreement and shall oversee and review the Sub-Adviser’s performance of its duties under this Agreement. The Adviser represents and warrants that the Board of Trustees of the Portfolio satisfies the fund governance standards defined in rule Rule 0-1(a)(7) of the 1940 Act.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following documents and will deliver to it all future amendments and supplements, if any:
(a) Agreement and Declaration of Trust, as filed with the Secretary of State of Delaware (such Agreement and Declaration of Trust as in effect on the date of this Agreement, and as amended from time to time, are herein called the “Agreement and Declaration of Trust”);
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this Agreement, and as amended from time to time, are herein called the “By-Laws”);
(c) Certified resolutions of the Trust’s Board of Trustees authorizing the appointment of the Sub-Adviser and approving the form of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of 1933, as amended on Form N-1A (the “Registration Statement”) as filed with the Securities and Exchange Commission (the “Commission”) relating to the Portfolio and shares of the Portfolio’s beneficial shares, and all amendments thereto;
(e) Notification of Registration of the Portfolio under the 1940 Act on Form N-8A as filed with the Commission, and all amendments thereto; and
(f) Prospectus of the Portfolio.
4. For the services to be provided by the Sub-Adviser pursuant to this Agreement for the Portfolio, the Adviser will pay to the Sub-Adviser as full compensation therefore a fee at an annual rate equal to the
percentage of the Portfolio’s average daily net assets listed on Schedule A (net of 50% of any waivers, reimbursement payments, supermarket fees and alliance fees waived, reimbursed or paid by the Adviser in respect of the Portfolio). This fee will be paid to the Sub-Adviser from the Adviser’s advisory fee for the Portfolio. Such compensation will be paid to the Sub-Adviser upon approval of a new contract with the Sub-Adviser by a majority of the Portfolio’s outstanding voting securities (as defined in the 1940 Act), or to the extent such compensation is paid prior to such approval, will be held in an interest-bearing escrow account for the Portfolio in accordance with a separate Escrow Agreement. If a majority of the Portfolio’s outstanding voting securities (as defined in the 1940 Act) approve a new contract with the Sub-Adviser (to provide investment advisory services to the Portfolio or a successor) by the end of the 150-day period commencing on the Commencement Date (defined below), the amount in the escrow account (including interest earned) will be paid to the Adviser, and the Adviser will pay to the Sub-Adviser the fee specified herein, upon the date of such approval by the Portfolio. If a majority of the Portfolio’s outstanding voting securities do not approve such a contract with the Sub-Adviser by the end of such 150 day period, the Sub-Adviser shall be paid, out of the escrow account, the lesser of: (i) any costs incurred in performing the interim contract (plus interest earned on that amount while in escrow); or (ii) the total amount in the escrow account (plus interest earned). Notwithstanding the foregoing, If a majority of the Portfolio’s outstanding voting securities do not approve an investment advisory contract with the Sub-Adviser by the end of such 150 day period, the Sub-Adviser shall be paid, out of the escrow, the amount in the escrow account (including interest earned), to the extent permitted under the Rule 15a-4(b)(1) under the 1940 Act.
To the extent that the Adviser is reimbursed by the Trust for any waived fees or reimbursed expenses pursuant to the terms of a separate expense limitation agreement between the Trust and the Adviser, the Adviser will pay to the Sub-Adviser its pro-rata share of any such reimbursed amount.
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss suffered by the Portfolio or the Adviser in connection with performance of its obligations under this Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services (in which case any award of damages shall be limited to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful misfeasance, bad faith or gross negligence on the Sub-Adviser’s part in the performance of its duties or from reckless disregard of its obligations and duties under this Agreement, except as may otherwise be provided under provisions of applicable state law which cannot be waived or modified hereby.
6. This Agreement shall commence on the date on which the Prior Sub-Advisory Agreement is terminated (the “Commencement Date”) and continue until, the sooner of the date: (i) with respect to the Portfolio, the date when a new investment advisory or sub-advisory agreement is approved by the Trustees and a majority (as defined in the 1940 Act) of the Portfolio’s outstanding voting securities (as defined in the 1940 Act); or (ii) One hundred and fifty (150) days from the Commencement Date. Once the Portfolio receives approval from a majority of the outstanding voting securities as required by section (i) above, the Portfolio will be deemed to have terminated this Agreement and be governed by the new investment advisory and/or sub-advisory agreements. Notwithstanding the foregoing, this Agreement may be terminated (a) at any time without penalty by the Trust upon the vote of a majority of the Trustees or by vote of the majority of the Portfolio’s outstanding voting securities, (b) by the Adviser at any time without penalty, on not more than 60 days’ nor less than 30 days’ written notice to the other parties, or (c) by the Sub-Adviser at any time, without the payment of any penalty, on 90 days’ written notice to the other parties. This Agreement shall terminate automatically and immediately in the event of its assignment. As used in this Section 6, the terms “assignment” and “vote of a majority of the outstanding voting securities” shall have the respective meanings set forth in the 1940 Act and the rules and regulations thereunder, subject to such exceptions as may be granted by the Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the Sub-Adviser’s partners, officers, or employees to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any business, whether of a similar or dissimilar nature, nor limit or restrict the Sub-Adviser’s right to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the Sub-Adviser at its principal office all prospectuses, proxy statements, reports to shareholders, sales literature or other materials prepared for distribution to shareholders of the Portfolio, the Trust or the public that refers to the Sub-Adviser or its clients in any way prior to use thereof and not to use material if the Sub-Adviser reasonably objects in writing within five business days (or such other period as may be mutually agreed upon) after receipt thereof. The Sub-Adviser’s right to object to such materials is limited to the portions of such materials that expressly relate to the Sub-Adviser, its services and its clients. The Adviser agrees to use its reasonable best efforts to ensure that materials prepared by its employees or agents or its affiliates that refer to the Sub-Adviser or its clients in any way are consistent with those materials previously approved by the Sub-Adviser as referenced in the first sentence of this paragraph. Sales literature may be furnished to the Sub-Adviser by first-class mail, electronic mail or overnight delivery service, facsimile transmission equipment or hand delivery.
9. No Trustee or Shareholder of the Trust shall be personally liable for any debts, liabilities, obligations or expenses incurred by or contracted for under this Agreement.
10. No provisions of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until approved by the vote of the majority of the outstanding voting securities of the Portfolio.
11. This Agreement shall be governed by the laws of the state of Delaware; provided, however, that nothing herein shall be construed as being inconsistent with the 1940 Act.
12. This Agreement embodies the entire agreement and understanding among the parties hereto, and supersedes all prior agreements and understandings relating to this Agreement’s subject matter. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; all such counterparts shall together, constitute only one instrument.
13. Should any part of this Agreement be held invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors.
14. Any notice, advice or report to be given pursuant to this Agreement shall be delivered or mailed:
To the Adviser at:
4643 South Ulster Street, Suite 700
Denver, CO 80237
To the Sub-Adviser at:
1345 Avenue of the Americas
New York, NY 10105-4300
To the Trust or the Portfolio at:
4643 South Ulster Street, Suite 700
Denver, CO 80237
15. Where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is altered by a rule, regulation or order of the Commission, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order.
16. As required by certain exemptive rules under the 1940 Act, the Sub-Adviser is prohibited from consulting with the entities listed below concerning transactions for the Portfolio in securities or other assets:
1. other Sub-Advisers to the Portfolio
2. other Sub-Advisers to a Trust portfolio
3. other Sub-Advisers to a portfolio under common control with the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first written above.
| | OLD MUTUAL CAPITAL, INC. | | OLD MUTUAL FUNDS II |
| | | | |
| By: | | By: | |
| Name: | Julian F. Sluyters | Name: | Julian F. Sluyters |
| Title: | President | Title: | President |
| | | | |
| | | | |
| | FIRST EAGLE INVESTMENT MANAGEMENT, LLC | | |
| | | | |
| By: | | | |
| Name: | | | |
| Title: | | | |
SCHEDULE A
TO
INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
AMONG
FIRST EAGLE INVESTMENT MANAGEMENT, LLC
OLD MUTUAL CAPITAL, INC.
AND
OLD MUTUAL FUNDS II
DATED OCTOBER 1, 2011
| | | Sub-Advisory Fee Breakpoint Asset Thresholds |
| FUND | | $0 to less than $500 million | | $500 million to less than $1 billion | | $1.0 billion or greater |
| Old Mutual High Yield Fund | | 0.350% | | 0.338% | | 0.325% |
Breakpoints will be calculated based on the total assets of the Fund.
