AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 2015
1933 Act File No. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO.
GALLERY TRUST
(Exact Name of Registrant as Specified in Charter)
One Freedom Valley Drive
Oaks, Pennsylvania, 19456
(Address of Principal Executive Offices, Zip Code)
1-800-932-7781
(Registrant's Telephone Number)
Michael Beattie
c/o SEI Corporation
One Freedom Valley Drive
Oaks, Pennsylvania 19456
(Name and Address of Agent for Service)
Copy to:
Sean Graber, Esquire Dianne M. Descoteaux, Esquire
Morgan, Lewis & Bockius LLP c/o SEI Investments
1701 Market Street One Freedom Valley Drive
Philadelphia, Pennsylvania 19103 Oaks, Pennsylvania 19456
Title of Securities being Registered: Shares of the Mondrian International
Equity Fund.
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933, as
amended.
No filing fee is required under the Securities Act of 1933, as amended, because
an indefinite number of shares of beneficial interest have previously been
registered pursuant to Section 24(f) of the Investment Company Act of 1940, as
amended.
It is proposed that this filing will become effective on January 21, 2016
pursuant to Rule 488 under the Securities Act of 1933, as amended.
DELAWARE POOLED(R) TRUST
2005 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103
(800) 523-1918
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE INTERNATIONAL EQUITY PORTFOLIO
TO BE HELD ON MARCH [8], 2016
A special meeting (the "Meeting") of the shareholders of The
International Equity Portfolio (the "Target Fund"), a series of Delaware
Pooled(R) Trust (the "Target Trust") will be held on March [8], 2016 at [3:00
p.m.], at [the offices of Stradley Ronon Stevens & Young, LLP, 2005 Market
Street, 26th Floor, Philadelphia, Pennsylvania 19103] to vote on the following
proposal (the "Proposal"), and any other matters that may properly come before
the Meeting or any adjournment or postponement thereof:
PROPOSAL: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN THE
TARGET FUND AND THE MONDRIAN INTERNATIONAL EQUITY FUND (THE
"ACQUIRING FUND") A NEWLY CREATED SERIES OF GALLERY TRUST (THE
"ACQUIRING TRUST"), PROVIDING FOR: (A) THE ACQUISITION OF ALL OF
THE ASSETS AND ASSUMPTION OF ALL OF THE LIABILITIES OF THE TARGET
FUND BY THE ACQUIRING FUND IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND; (B) THE DISTRIBUTION OF SUCH SHARES TO THE
SHAREHOLDERS OF THE TARGET FUND; AND (C) THE LIQUIDATION AND
TERMINATION OF THE TARGET FUND (THE "REORGANIZATION").
Target Fund shareholders of record as of the close of business on
[December 31, 2015], are entitled to notice of, and to vote at, the Meeting or
any adjournment of the Meeting. The Proposal will be effected only if the
Target Fund's shareholders approve the Proposal.
The Board of Trustees of the Target Trust (the "Target 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 TARGET FUND BOARD RECOMMENDS THAT YOU CAST YOUR VOTE "FOR" THE
PROPOSAL AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
If you are voting by mail, please sign and promptly return the proxy
card in the postage paid return envelope regardless of the number of shares
owned.
Proxy card instructions may be revoked at any time before they are
exercised by submitting a written notice of revocation or a subsequently
executed proxy card or by attending the Meeting and voting in person.
By order of the Board of Trustees,
[Signature]
Shawn K. Lytle
President, Chief Executive Officer and Trustee
January [ ], 2016
THE INTERNATIONAL EQUITY PORTFOLIO, MONDRIAN INTERNATIONAL EQUITY FUND,
A SERIES OF A SERIES OF
DELAWARE POOLED(R) TRUST GALLERY TRUST
2005 MARKET STREET ONE FREEDOM VALLEY DRIVE
PHILADELPHIA, PENNSYLVANIA 19103 OAKS, PENNSYLVANIA 19456
(800) 523-1918 (800) 932-7781
PROXY STATEMENT/PROSPECTUS
JANUARY [ ], 2016
INTRODUCTION
This Proxy Statement/Prospectus contains information that
shareholders of The International Equity Portfolio (the "Target Fund"), a
series of Delaware Pooled(R) Trust (the "Target Trust"), should know before
voting on the proposed reorganization that is described herein, and should be
retained for future reference. This document is both the proxy statement of the
Target Fund and also a prospectus for the Mondrian International Equity Fund
(the "Acquiring Fund" and, together with the Target Fund, the "Funds"), a newly
created series of Gallery Trust (the "Acquiring Trust"). The Target Fund and
the Acquiring Fund are each a series of separate registered open-end management
investment companies.
A special meeting of the shareholders of the Target Fund (the
"Meeting") will be held [at the offices of Stradley Ronon Stevens & Young, LLP,
2005 Market Street, 26th Floor, Philadelphia, Pennsylvania 19103] on March [8],
2016 at [3:00 p.m.]. At the Meeting, shareholders of the Target Fund will be
asked to consider the following proposal (the "Proposal"), and any other
matters that may properly come before the Meeting or any adjournment or
postponement thereof:
PROPOSAL: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION (THE "AGREEMENT")
BETWEEN THE TARGET FUND AND THE ACQUIRING FUND, PROVIDING FOR:
(a) THE ACQUISITION OF ALL OF THE ASSETS AND ASSUMPTION OF ALL OF
THE LIABILITIES OF THE TARGET FUND BY THE ACQUIRING FUND IN
EXCHANGE FOR SHARES OF THE ACQUIRING FUND; (b) THE DISTRIBUTION
OF SUCH SHARES TO THE SHAREHOLDERS OF THE TARGET FUND; AND (c)
THE LIQUIDATION AND TERMINATION OF THE TARGET FUND (THE
"REORGANIZATION").
The total dollar value of the Acquiring Fund shares that shareholders
will receive in the Reorganization will be the same as the total dollar value
of the shares of the Target Fund that shareholders hold immediately prior to
the Reorganization. The Reorganization is anticipated to be a tax-free
transaction, meaning that shareholders are not expected to be required to pay
any federal income tax in connection with the Reorganization. For more
detailed information about the federal income tax consequences of the
Reorganization, please refer to the section titled "Federal Income Tax
Considerations" below.
The Board of Trustees of the Target Fund (the "Target Fund Board")
has fixed the close of business on [December 31, 2015] as the record date
("Record Date") for the determination of Target Fund shareholders entitled to
notice of and to vote at the Meeting and at any adjournment thereof.
Shareholders of the Target Fund on the Record Date will be entitled to one vote
for each share of the Target Fund held (and a proportionate fractional vote for
each fractional share). This Proxy Statement/Prospectus, the enclosed Notice of
Special Meeting of Shareholders, and the enclosed proxy card will be mailed on
or about January [ ], 2016, to all shareholders eligible to vote on the
Proposal.
1
The Target Fund Board has approved the Agreement and has determined
that the Reorganization is in the best interests of the Target Fund and will
not dilute the interests of the existing shareholders of the Target Fund.
Accordingly, the Target Fund Board recommends that shareholders of the Target
Fund vote "FOR" the Proposal. If shareholders of the Target Fund do not approve
the Proposal, the Target Fund Board will consider what further action is
appropriate for the Target Fund.
Additional information about the Funds is available in the following:
1. Prospectus dated February 27, 2015 for the Target Fund ("Target Fund
Prospectus");
2. Supplement dated December 11, 2015 to the Target Fund Prospectus;
3. Statement of Additional Information dated February 27, 2015 for the
Target Fund ("Target Fund SAI");
4. Supplement dated April 8, 2015 to the Target Fund SAI;
5. Supplement dated April 22, 2015 to the Target Fund SAI;
6. Prospectus dated January [ ], 2016 for the Acquiring Fund ("Acquiring
Fund Prospectus");
7. Statement of Additional Information dated January [ ], 2016 for the
Acquiring Fund ("Acquiring Fund SAI"); and
8. The audited financial statements and related report of the
independent public accounting firm included in the Target Fund Annual
Report to Shareholders for the fiscal year ended October 31, 2015
("Target Fund Annual Report").
The financial highlights for the Target Fund contained in the Target
Fund Annual Report are included in this Proxy Statement/Prospectus as Exhibit C.
These documents are on file with the Securities and Exchange
Commission (the "SEC"). The Target Fund Prospectus is incorporated herein by
reference and is legally deemed to be part of this Proxy Statement/Prospectus.
A copy of the Acquiring Fund Prospectus accompanies this Proxy
Statement/Prospectus and is incorporated herein by reference and is legally
deemed to be part of this Proxy Statement/Prospectus. The SAI to this Proxy
Statement/Prospectus also is incorporated herein by reference and is legally
deemed to be part of this Proxy Statement/Prospectus. The Target Fund
Prospectus, Target Fund SAI and Target Fund Annual Report are available on the
Target Fund's website at delawareinvestments.com/institutional/literature.
Copies of these documents are also available at no cost by calling 800-231-8002
or by sending an e-mail request to CSSUPPORTTEAM@DELINVEST.COM. Copies of the
Acquiring Fund SAI are available at no charge by writing to the Acquiring Fund,
One Freedom Valley Drive, Oaks, Pennsylvania 19456, or by calling [ ].
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.
20549-1520, or from the SEC's website at www.sec.gov.
2
Information on the operation of the SEC's Public Reference Room may be obtained
by calling the SEC at (202) 551-8090. 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 the Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C. 20549-1520.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUNDS 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 FUNDS.
3
TABLE OF CONTENTS
PAGE
SUMMARY OF KEY INFORMATION .............................................................. X
Why are you sending me the Proxy Statement/Prospectus? ................................ X
On what am I being asked to vote? ..................................................... X
What are the reasons for the proposed Reorganization? ................................. X
Has my Fund's Board of Trustees approved the Reorganization? .......................... X
What effect will the Reorganization have on me as a shareholder? ...................... X
How do the Funds' investment objectives, principal investment strategies and
principal risks compare? ............................................................. X
How do the Funds' expenses compare? ................................................... X
How do the performance records of the Funds compare? .................................. X
How do the investment advisers and distributors of the Funds compare? ................. X
How do the Funds' other service providers compare? .................................... X
How do the Funds' purchase and redemption procedures and exchange policies
compare? ............................................................................. X
How do the Funds' sales charges and distribution arrangements compare? ................ X
Will the Acquiring Fund have different portfolio managers than the Target Fund? ....... X
Will there be any tax consequences resulting from the Reorganization? ................. X
Will my dividends be affected by the Reorganization? .................................. X
When is the Reorganization expected to occur? ......................................... X
How do I vote on the Reorganization? .................................................. X
What will happen if shareholders of the Target Fund do not approve the
Reorganization? ...................................................................... X
What if I do not wish to participate in the Reorganization? ........................... X
Where can I find more information about the Funds and the Reorganization? ............. X
ADDITIONAL INFORMATION ABOUT THE FUNDS .................................................. X
Comparison of Principal Investment Strategies ......................................... X
Comparison of Principal Risks of Investing in the Funds ............................... X
Comparison of Fundamental and Non-Fundamental Investment Restrictions ................. X
Comparison of Shareholder Rights ...................................................... X
THE PROPOSED REORGANIZATION ............................................................. X
Summary of Agreement and Plan of Reorganization ....................................... X
Board Considerations in Approving the Reorganization .................................. X
Federal Income Tax Considerations ..................................................... X
Costs of the Reorganization ........................................................... X
VOTING INFORMATION ...................................................................... X
Proxy Statement/Prospectus ............................................................ X
Quorum Requirement and Adjournment .................................................... X
Vote Necessary to Approve the Proposal ................................................ X
Proxy Solicitation .................................................................... X
Share Ownership by Large Shareholders, Management and Trustees ........................ X
OTHER MATTERS ........................................................................... X
Capitalization ........................................................................ X
Dissenters' Rights .................................................................... X
Shareholder Proposals ................................................................. X
EXHIBITS
EXHIBIT A Ownership of the Target Fund .................................................. A-1
EXHIBIT B Form of Agreement and Plan of Reorganization .................................. B-1
EXHIBIT C Financial Highlights .......................................................... C-1
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS REGARDING THE
REORGANIZATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR
RELATED SOLICITATION MATERIALS ON FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION, AND YOU SHOULD NOT RELY ON SUCH OTHER INFORMATION OR
REPRESENTATIONS.
5
SUMMARY OF KEY INFORMATION
The following is a summary of certain information contained elsewhere
in this Proxy Statement/Prospectus, in the Agreement, and/or in the
prospectuses and SAIs of the Funds. Shareholders should read the entire Proxy
Statement/Prospectus, the Acquiring Fund Prospectus (which accompanies this
Proxy Statement/Prospectus), the Target Fund Prospectus, the Acquiring Fund
SAI, and the Target Fund SAI carefully for more complete information.
WHY ARE YOU SENDING ME THE PROXY STATEMENT/PROSPECTUS?
You are receiving this Proxy Statement/Prospectus because you own
shares in the Target Fund as of the Record Date and have the right to vote on
the very important proposal described herein concerning the Target Fund. This
Proxy Statement/Prospectus contains information that shareholders of the Target
Fund should know before voting on the Proposal. This document is both a proxy
statement of the Target Fund and also a prospectus for the Acquiring Fund.
ON WHAT AM I BEING ASKED TO VOTE?
You are being asked to approve transitioning the Target Fund to a new
fund family. Specifically, as a Target Fund shareholder, you are being asked to
vote on the approval of the Agreement providing for the Reorganization of the
Target Fund. The Agreement provides for the: (i) acquisition by the Acquiring
Trust, on behalf of the Acquiring Fund, of all of the property, assets and
goodwill of the Target Fund, in exchange solely for shares of the Acquiring
Fund; (ii) the assumption by the Acquiring Trust, on behalf of the Acquiring
Fund, of all of the liabilities of the Target Fund; (iii) the distribution of
the shares of the Acquiring Fund to the shareholders of the Target Fund
according to their respective interests in complete liquidation of the Target
Fund; and (iv) the dissolution of the Target Fund as soon as practicable after
the Reorganization. As a result of the Reorganization (if approved by
shareholders), a Target Fund shareholder will become a shareholder of the
Acquiring Fund and shareholders of the Target Fund will receive shares in the
Acquiring Fund having a total dollar value equal to the total dollar value of
the shares such shareholder held in the Target Fund immediately prior to the
Reorganization.
WHAT ARE THE REASONS FOR THE PROPOSED REORGANIZATION?
The proposed Reorganization would enable Mondrian Investment Partners
Limited ("Mondrian"), the investment sub-adviser of the Target Fund and the
investment adviser of the Acquiring Fund, to serve as the sole investment
adviser with respect to the assets that you have invested in the Target Fund,
by transferring such assets to the Acquiring Fund. The proposed Reorganization
would, in turn, result in a reduction in management fees and provide Mondrian
with the opportunity to create future economies of scale that could benefit
shareholders if certain fixed costs can be spread across a larger asset base.
In considering the Reorganization and the Agreement, the Target Fund
Board considered these and other factors in concluding that the Reorganization
would be in the best interest of the Target Fund and its shareholders. The
Target Fund Board's considerations are described in more detail in the "THE
PROPOSED REORGANIZATION -- Board Considerations in Approving the
Reorganization" section below.
HAS MY FUND'S BOARD OF TRUSTEES APPROVED THE REORGANIZATION?
Yes. The Target Fund Board has carefully reviewed the Proposal and
unanimously approved the Agreement and the Reorganization. THE BOARD RECOMMENDS
THAT SHAREHOLDERS OF THE TARGET FUND VOTE "FOR" THE PROPOSAL.
6
WHAT EFFECT WILL THE REORGANIZATION HAVE ON ME AS A SHAREHOLDER?
Immediately after the Reorganization, you will hold shares of the
Acquiring Fund having a total dollar value equal to the dollar value of the
shares of the Target Fund that you held immediately prior to the closing of the
Reorganization. The principal differences between the Target Fund and the
Acquiring Fund are described in this Proxy Statement/Prospectus. The Acquiring
Fund Prospectus that accompanies this Proxy Statement/Prospectus contains
additional information about the Acquiring Fund.
HOW DO THE FUNDS' INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
PRINCIPAL RISKS COMPARE?
The Acquiring Fund and the Target Fund have substantially the same
investment objective, as described below. Each Fund's investment objective is
classified as non-fundamental, which means that the Target Fund's investment
objective can be changed by the Target Fund Board without shareholder approval,
and the Acquiring Fund's investment objective can be changed by the Board of
Trustees of the Acquiring Fund (the "Acquiring Fund Board") without shareholder
approval.
INVESTMENT OBJECTIVES
TARGET FUND ACQUIRING FUND
The Target Fund seeks maximum The Acquiring Fund seeks long-term
long-term total return. total return.
The principal investment strategies of the Acquiring Fund are
substantially the same as the principal investment strategies of the Target
Fund. Under normal circumstances, both Funds invest at least 80% of their net
assets, plus any borrowings for investment purposes, in equity securities, and
invest at least 40% of their total assets in securities of non-U.S. companies.
In addition, both Funds may invest in forward foreign currency exchange
contracts and foreign fixed income securities, and are managed by Mondrian
using the same investment process. The Target Fund Prospectus indicates that
the Target Fund may invest up to 30% of its net assets in securities of issuers
in the commercial banking industry, but such investments have generally not
been a principal investment strategy of the Target Fund.
As a result, although the Funds describe them differently, the
principal risks of owning shares of the Acquiring Fund are the same as the
principal risks of owning shares of the Target Fund.
The sections below entitled "ADDITIONAL INFORMATION ABOUT THE FUNDS
-- Comparison of Principal Investment Strategies" and "ADDITIONAL INFORMATION
ABOUT THE FUNDS -- Comparison of the Principal Risks of Investing in the Funds"
compare the principal investment strategies and principal risks of the Target
Fund and the Acquiring Fund.
HOW DO THE FUNDS' EXPENSES COMPARE?
The following table compares the annual operating expenses, expressed
as a percentage of net assets ("expense ratios"), of the Target Fund with the
PRO FORMA expense ratio of the Acquiring Fund. The expense ratios of the Target
Fund and the Acquiring Fund are expected to be substantially the same, without
taking into account the Acquiring Fund's contractual expense limitation (as
described below). The PRO FORMA expense ratios show projected estimated
expenses, but actual expenses may be higher or lower than those shown.
7
CURRENT PRO FORMA
TARGET FUND ACQUIRING FUND
SHAREHOLDER FEES (fees paid directly from your
investments)
Redemption Fee (as a percentage of amount redeemed, None 2.00%
if shares redeemed have been held for less than 30
days)
ANNUAL FUND OPERATING EXPENSES (expenses that you
pay each year as a percentage of the value of your
investment)(1)
Management Fees ..................................... 0.75% 0.70%
Other Expenses ...................................... 0.13% 0.18%
Total Annual Fund Operating Expenses ................ 0.88% 0.88%
Less Fee Waiver and/or Expense Reimbursement ........ None (0.09)%
Total Annual Fund Operating Expenses After Fee ...... 0.88% 0.79%(2)
Waiver and/or Expense Reimbursement
----------
(1) The Target Fund expense ratio reflects annual fund operating expenses for
the fiscal year ended October 31, 2015. The PRO FORMA Acquiring Fund
expenses are based on estimated amounts for the current fiscal year, after
giving effect to the Reorganization, but do not include the estimated costs
of the Reorganization as neither the Target Fund nor the Acquiring Fund
will bear any Reorganization costs.
(2) Mondrian has contractually agreed to waive fees and reimburse expenses to
the extent necessary to keep Total Annual Fund Operating Expenses
(excluding interest, taxes, brokerage commissions, acquired fund fees and
expenses and non-routine expenses (collectively, "excluded expenses")) from
exceeding 0.79% of the Acquiring Fund's average daily net assets until
February 28, 2019. This agreement may be terminated: (i) by the Acquiring
Fund Board, for any reason at any time; or (ii) by Mondrian, upon ninety
(90) days' prior written notice to the Acquiring Fund, effective as of the
close of business on February 28, 2019.
EXAMPLE
The Example is intended to help you compare the costs of investing in
the Target Fund and the Acquiring Fund with the cost of investing in other
mutual funds. The Example assumes that you invest $10,000 for the time periods
indicated and then either redeem or do not redeem your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the operating expenses (including capped expenses for the
Acquiring Fund for the period described in the footnote to the fee table)
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
TARGET FUND ....................... $90 $281 $488 $1084
ACQUIRING FUND (PRO FORMA) ........ $81 $252 $459 $1057
For further discussion regarding the Target Fund Board's
consideration of the fees and expenses of the Funds in approving the
Reorganization, see the section entitled "THE PROPOSED REORGANIZATION - Board
Considerations in Approving the Reorganization" in this Proxy
Statement/Prospectus.
PORTFOLIO TURNOVER
Each Fund pays transaction costs, such as commissions, 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 expense examples
shown above, affect each Fund's performance.
8
During the fiscal year ended October 31, 2015, the Target Fund's
portfolio turnover rate was 28% of the average value of its portfolio. No
portfolio turnover information is included here for the Acquiring Fund because
the Acquiring Fund has not yet commenced operations.
HOW DO THE PERFORMANCE RECORDS OF THE FUNDS COMPARE? [TO BE UPDATED FOR PERIOD
ENDING DECEMBER 31, 2015]
If the Reorganization is approved, the Acquiring Fund will assume the
performance history of the Target Fund. The Acquiring Fund does not have
performance history because it has not yet commenced operations.
The bar chart and table below provide some indication of the risks of
investing in the Target Fund by showing changes in the Target Fund's
performance from year to year and by showing how the Target Fund's average
annual total returns for the 1-, 5-, and 10-year periods compare with those of
a broad measure of market performance. The Target Fund's past performance
(before and after taxes) is not necessarily an indication of how it will
perform in the future. The returns reflect any expense caps in effect during
these periods. The returns would be lower without the expense caps. You may
obtain the Target Fund's most recently available month-end performance by
calling 800-231-8002 or by visiting the Target Fund's website at
delawareinvestments.com/institutional.
YEAR-BY-YEAR TOTAL RETURN
----------------
2005 12.84%
----------------
2006 30.34%
----------------
2007 11.38%
----------------
2008 -36.95%
----------------
2009 21.38%
----------------
2010 2.57%
----------------
2011 -3.76%
----------------
2012 9.53%
----------------
2013 22.13%
----------------
2014 -2.83%
----------------
During the periods illustrated in this bar chart, the Target Fund's
highest quarterly return was 20.51% for the quarter ended June 30, 2009 and its
lowest quarterly return was -17.17% for the quarter ended March 31, 2009.
Year to date performance (before taxes) as of 9/30/15: -5.27%
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2014
Actual after-tax returns depend on the investor's individual tax
situation and may differ from the returns shown. After-tax returns are not
relevant for shares held in tax-deferred investment vehicles such as
employer-sponsored 401(k) plans and individual retirement accounts (IRAs). The
after-tax returns shown are calculated using the highest individual federal
marginal income tax rates in effect during the Target Fund's lifetime and do
not reflect the impact of state and local taxes.
9
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Return before taxes (2.83)% 5.11% 4.87%
--------------------------------------------------------------------------------
Return after taxes on distributions (3.75)% 4.37% 3.56%
--------------------------------------------------------------------------------
Return after taxes on distributions and (0.59)% 4.10% 4.11%
sale of fund shares
--------------------------------------------------------------------------------
MSCI EAFE Index (gross returns)
(reflects no deduction for fees, (4.48)% 5.81% 4.91%
expenses, or taxes)
--------------------------------------------------------------------------------
MSCI EAFE Index (net returns)
(reflects no deduction for fees or (4.90)% 5.33% 4.43%
expenses)
--------------------------------------------------------------------------------
HOW DO THE INVESTMENT ADVISERS AND DISTRIBUTORS OF THE FUNDS COMPARE?
INVESTMENT ADVISERS. Delaware Management Company ("DMC") serves as the
investment adviser, and Mondrian serves as the investment sub-adviser, of the
Target Fund. Mondrian serves as the investment adviser of the Acquiring Fund.
DMC, located at 2005 Market Street, Philadelphia, PA, 19103, is a series of
Delaware Management Business Trust, which is a subsidiary of Delaware
Management Holdings, Inc. ("DMHI"). DMHI is a wholly owned subsidiary of
Macquarie Group Ltd. Together, DMC and the subsidiaries of DMHI manage, as of
December 31, 2015, more than $[ ] billion in assets, including mutual funds,
separate accounts, and other investment vehicles.
Mondrian, a limited company organized under the laws of England and Wales in
1990, is located at 10 Gresham Street, 5th Floor, London, England EC2V 7JD.
Mondrian is 100% employee owned through Atlantic Value Investment Partnership
LP. As of December 31, 2015, Mondrian had approximately $[ ] in assets under
management.
ADVISORY FEES. The contractual advisory fee of the Acquiring Fund (0.70%) is
lower than the contractual advisory fee of the Target Fund (0.75%) .
DISTRIBUTORS. Delaware Distributors, L.P., an affiliate of DMC, acts as the
distributor of shares of the Target Fund. The address of Delaware Distributors,
L.P. is 2005 Market Street, Philadelphia, PA 19103. SEI Investments
Distribution Co. acts as the distributor of shares of the Acquiring Fund. The
address of SEI Investments Distribution Co. is One Freedom Valley Drive, Oaks,
Pennsylvania 19456.
HOW DO THE FUNDS' OTHER SERVICE PROVIDERS COMPARE?
The following table identifies the other principal service providers
of the Target Fund and the Acquiring Fund:
TARGET FUND ACQUIRING FUND
----------- --------------
Accounting
Services/Administrator: Bank of New York Mellon SEI Investments Global Funds
Services
Transfer Agent: Delaware Investments Fund Atlantic Fund Services, LLC
Services Company
Custodian: Bank of New York Mellon Brown Brothers Harriman & Co.
Auditor: PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
10
HOW DO THE FUNDS' PURCHASE AND REDEMPTION PROCEDURES AND EXCHANGE POLICIES
COMPARE?
You may purchase or redeem shares of either Fund on any day that the
New York Stock Exchange ("NYSE") is open for business. The Target Fund is
closed to new investors, but existing shareholders may continue to purchase
shares. There are no minimums for subsequent investments in the Target Fund
where the aggregate $1 million minimum initial investment for the Target Trust
has been satisfied. After the Reorganization, the Acquiring Fund will be open
to both new investors and existing shareholders. To purchase shares of the
Acquiring Fund for the first time, you must invest at least $1 million.
Subsequent investments in the Acquiring Fund must be at least $100.
In an effort to discourage short-term trading and defray costs
incurred by shareholders as a result of short-term trading, the Acquiring Fund
charges a 2.00% redemption fee on redemptions of shares that have been held for
less than 30 days. The Target Fund does not charge a redemption fee.
Target Fund shares may be exchanged for shares of the other series of
the Target Trust, or, if certain eligibility requirements are satisfied,
institutional class shares of other Delaware Investments([R]) Funds. Acquiring
Fund shares do not have an exchange privilege because Mondrian does not serve
as the investment adviser to other mutual funds.
For more information on the purchase and redemption procedures and
exchange policies of the Funds, see the Funds' respective prospectuses.
HOW DO THE FUNDS' SALES CHARGES AND DISTRIBUTION ARRANGEMENTS COMPARE?
Neither Fund imposes sales charges or is subject to a distribution
and/or shareholder servicing plan.
WILL THE ACQUIRING FUND HAVE DIFFERENT PORTFOLIO MANAGERS THAN THE TARGET
FUND?
No. The portfolio management team of the Target Fund is the same as
the portfolio management team of the Acquiring Fund. The Acquiring Fund
Prospectus that accompanies this Proxy Statement/Prospectus provides
biographical information about the key individuals that comprise the portfolio
management team.
WILL THERE BE ANY TAX CONSEQUENCES RESULTING FROM THE REORGANIZATION?
The Reorganization is designed to qualify as a tax-free
reorganization for federal income tax purposes and the Target Fund anticipates
receiving a legal opinion to that effect, although there can be no assurance
that the Internal Revenue Service ("IRS") will adopt a similar position. This
means that the shareholders of the Target Fund will recognize no gain or loss
for federal income tax purposes upon the exchange of all of their shares in the
Target Fund for shares in the Acquiring Fund. Shareholders should consult their
tax adviser about state and local tax consequences of the Reorganization, if
any, because the information about tax consequences in this Proxy
Statement/Prospectus relates only to the federal income tax consequences of the
Reorganization.
For more detailed information about the federal income tax
consequences of the Reorganization, please refer to the section titled "THE
PROPOSED REORGANIZATION -- Federal Income Tax Considerations" below.
WILL MY DIVIDENDS BE AFFECTED BY THE REORGANIZATION?
No. Each Fund generally distributes its net investment income, and
makes distributions of its net realized capital gains, if any, annually.
11
WHEN IS THE REORGANIZATION EXPECTED TO OCCUR?
If shareholders of the Target Fund approve the Reorganization, it is
anticipated that the Reorganization will occur on or around [March 14, 2016].
HOW DO I VOTE ON THE REORGANIZATION?
There are several ways you can vote your shares, including in person
at the Meeting, by mail, by telephone, or via the Internet. The proxy card that
accompanies this Proxy Statement/Prospectus provides detailed instructions on
how you may vote your shares. If you properly fill in and sign your proxy card
and send it to us 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 Proposal, as recommended by the Target Fund Board, and in
their best judgment on other matters.
WHAT WILL HAPPEN IF SHAREHOLDERS OF THE TARGET FUND DO NOT APPROVE THE
REORGANIZATION?
If the shareholders of the Target Fund do not approve the
Reorganization, the Target Fund Board will consider other possible courses of
action for the Target Fund. The Reorganization may not close unless certain
conditions are met. If such conditions are not met, the Reorganization will not
be consummated, even if Target Fund shareholders approve the Reorganization,
and the Target Fund will not be combined with the Acquiring Fund.
WHAT IF I DO NOT WISH TO PARTICIPATE IN THE REORGANIZATION?
If you do not wish to have your shares of the Target Fund exchanged
for shares of the Acquiring Fund as part of the Reorganization, you may redeem
your shares prior to the consummation of the Reorganization. If you redeem your
shares, 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.
WHERE CAN I FIND MORE INFORMATION ABOUT THE FUNDS AND THE REORGANIZATION?
Additional information about the Funds can be found in their
respective prospectuses and SAIs. The remainder of this Proxy
Statement/Prospectus contains additional information about the Funds and the
Reorganization. You are encouraged to read the entire document. If you need any
assistance, or have any questions regarding the Reorganization or how to vote,
please call [Computershare Fund Services ("Computershare"), the Target Fund's
proxy solicitor, at [ ]].
ADDITIONAL INFORMATION ABOUT THE FUNDS
COMPARISON OF PRINCIPAL INVESTMENT STRATEGIES
The following section describes the principal investment strategies
of the Target Fund and the principal investment strategies of the Acquiring
Fund, which are substantially the same. In addition to the principal investment
strategies described below, each Fund is also subject to certain additional
investment policies and limitations, which are described in each Fund's
prospectus and SAI. The cover page of this Proxy Statement/Prospectus describes
how you can obtain copies of these documents. A comparison of
12
the principal risks associated with the Funds' investment strategies is
described below under "Comparison of Principal Risks of Investing in the
Funds."
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TARGET FUND ACQUIRING FUND
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Under normal circumstances, the Target Fund will invest Under normal circumstances, the Acquiring Fund invests
at least 80% of its net assets, plus any borrowings for at least 80% of its net assets, plus any borrowings for
investment purposes, in equity securities (80% Policy). investment purposes, in equity securities. This
The Target Fund's 80% Policy may be changed without investment policy can be changed by the Acquiring
shareholder approval. However, shareholders will be Fund upon 60 days' prior written notice to shareholders.
given notice at least 60 days prior to any such change.
Equity securities include, but are not to be limited to, Equity securities include, but are not limited to, common
common stocks, securities convertible into common stocks, preferred stocks, convertible securities, rights
stock, securities having common stock characteristics, and warrants, and depositary receipts (including
such as rights and warrants to purchase common stocks, American Depositary Receipts (ADRs), European
and preferred securities. The Target Fund may invest in Depositary Receipts (EDRs) and Global Depositary
sponsored or unsponsored American Depositary Receipts (GDRs)), which are certificates typically issued
Receipts (ADRs), European Depositary Receipts (EDRs) by a bank or trust company that represent ownership
and Global Depositary Receipts (GDRs). To the extent interests in securities of non-U.S. or U.S. companies.
that the Target Fund invests in convertible debt Equity securities also include participatory notes, which
securities, those securities will be purchased on the basis are derivative instruments with economic characteristics
of their equity characteristics, and ratings of those similar to equity securities, designed to replicate equity
securities, if any, will not be an important factor in their exposure in certain foreign markets where direct
selection. investment is either impossible or difficult due to local
investment restrictions. The Acquiring Fund may invest
in securities of companies with any market
capitalization, and, to the extent that the Acquiring Fund
invests in convertible securities, those securities may
have any credit rating.
The Target Fund invests primarily in equity securities of Under normal circumstances, the Acquiring Fund invests
companies that are organized, have a majority of their in at least three countries, and invests at least 40% of its
assets, or derive most of their operating income outside total assets in securities of non-U.S. companies. This
the U.S., and that, in the opinion of the Target Fund's investment policy can be changed by the Acquiring
portfolio managers are undervalued at the time of Fund upon 60 days' prior written notice to shareholders.
purchase based on its fundamental analysis. Investments The Acquiring Fund considers a company to be a non-
will be made mainly in marketable securities of U.S. company if: (i) at least 50% of the company's
companies located in developed countries. The Target assets are located outside of the U.S.; (ii) at least 50% of
Fund may invest up to 10% of its total assets in the company's revenue or operating income is generated
emerging market securities. Under normal outside of the U.S.; or (iii) the company is organized or
circumstances, the Target Fund will invest at least 40% maintains its principal place of business outside of the
of its total assets in securities of non-U.S. issuers. This U.S. The Acquiring Fund will primarily invest in
policy is in addition to the 80% Policy. companies located in developed countries, but may
invest up to 10% of its total assets in emerging market
securities.
Currency considerations carry a special risk for a The Acquiring Fund may utilize derivatives, principally
portfolio of international securities, and the portfolio forward foreign currency exchange contracts, to seek to
managers use a purchasing power parity approach to hedge (i.e. offset) currency risk. In addition, the
evaluate currency risk. In this regard, the Target Fund Acquiring Fund may, from time to time, hold non-U.S.
may actively carry on hedging activities, and may invest currencies in order to facilitate or expedite settlement of
in forward foreign currency exchange contracts to hedge portfolio transactions, or to minimize the impact of
currency risks associated with the purchase of individual currency value fluctuations.
securities denominated in a particular currency. The
Target Fund may purchase or sell foreign currencies in
order to facilitate or expedite settlement of portfolio
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13
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TARGET FUND ACQUIRING FUND
------------------------------------------------------------------------------------------------------------------------------------
transactions and to minimize the impact of currency
value fluctuations.
The portfolio managers' approach in selecting In selecting investments to buy and sell for the
investments for the Target Fund is oriented to individual Acquiring Fund, Mondrian conducts research on a
stock selection and is value driven. In selecting stocks global basis in an effort to identify companies that are
for the Target Fund, the portfolio managers consider undervalued in the market and have the potential for
movement in the price of individual securities, and the long-term total return. The center of the research effort
impact of currency adjustment on a U.S.-domiciled, is a dividend discount methodology, through which
dollar-based investor. The portfolio managers also Mondrian projects companies' future dividends and
conduct research on a global basis in an effort to identify discounts them back to their present value. Mondrian
securities that have the potential for long-term total then compares the present values to the companies'
return. The center of the research effort is a value- respective market prices and allocates the Acquiring
oriented dividend discount methodology applied to Fund's assets to those stocks that the dividend discount
individual securities and market analysis that isolates methodology suggests are most undervalued.
value across country boundaries. This approach focuses
on future anticipated dividends and discounts the value
of those dividends back to what they would be worth if
they were being paid today. Comparisons of the values
of different possible investments are then made. The
portfolio managers' approach is long-term in orientation,
and it is expected that the annual turnover rate of the
Target Fund will not exceed 75% under normal
circumstances.
In an international portfolio, currency returns can be an Mondrian, furthermore, uses a purchasing power parity
integral component of an investment's total return. The approach to manage the Acquiring Fund's currency
portfolio managers will use a purchasing power parity exposure. Purchasing power parity theory states that, in
approach to assess the value of individual currencies. the long-run, the exchange rates between the U.S. dollar
Purchasing power parity attempts to identify the amount and non-U.S. currencies should be such that the U.S.
of goods and services that a dollar will buy in the U.S. dollar buys the same amount of goods and services in
and compares that to the amount of a foreign currency the U.S. as it buys in non-U.S. countries. Mondrian may
required to buy the same amount of goods and services adjust its investments in a particular non-U.S. currency,
in another country. Eventually, currencies should trade including securities or derivatives tied thereto, when it
at levels that would make it possible for the dollar to buy believes that the purchasing power of the U.S. dollar
the same amount of goods and services overseas as in indicates that the non-U.S. currency is overvalued or
the United States. When the dollar buys less, the foreign undervalued relative to the U.S. dollar.
currency may be overvalued. When the dollar buys
more, the foreign currency may be undervalued.
Securities available in an undervalued currency may
offer greater return potential and may be an attractive
investment.
The Target Fund may make limited use (not more than The Acquiring Fund may make limited use of foreign
15% of its assets) of foreign fixed income securities fixed income securities when, in Mondrian's opinion,
when, in the portfolio managers' opinion, attractive they present more attractive investment opportunities
opportunities exist relative to those available through than equity securities. The foreign fixed income
equity securities or the short-term investments described securities in which the Acquiring Fund may invest may
above. The foreign fixed income securities in which the be U.S. dollar or foreign currency denominated, and may
Target Fund may invest may be U.S. dollar or foreign include obligations of foreign governments, foreign
currency denominated, including the euro, and may government agencies, supranational organizations, or
include obligations of foreign governments, foreign corporations.
government agencies, supranational organizations or
corporations, and other private entities. Such
governmental fixed income securities will be, at the time
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14
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TARGET FUND ACQUIRING FUND
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of purchase, of the highest quality (for example, AAA
by S&P or Aaa by Moody's) or of comparable quality.
Corporate fixed income securities will be, at the time of
purchase, rated in one of the top two rating categories
(for example, AAA and AA by S&P or Aaa and Aa by
Moody's) or of comparable quality.
From time to time, the Target Fund may invest up to
30% of its net assets in securities of issuers in the
commercial banking industry; to the extent the Target
invests 30% of its net assets in such securities, it may be
slightly more sensitive to movement in the commercial
banking industry.
Additionally, the Target Fund may, from time to time,
hold its assets in cash (which may be U.S. dollars or
foreign currencies, including the euro), or may invest in
short-term debt securities or other money market
instruments. Except when the portfolio managers believe
a temporary defensive approach is appropriate, the
Target Fund generally will not hold more than 5% of its
assets in cash or such short-term instruments.
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COMPARISON OF PRINCIPAL RISKS OF INVESTING IN THE FUNDS
The principal risks of investing in the Acquiring Fund are discussed
below. Although the Funds present their risks differently, the principal risks
of the Target Fund and the Acquiring Fund are effectively the same, because the
principal investment strategies of the Funds are substantially the same.
EQUITY RISK -- Since it purchases equity securities, the Acquiring Fund is
subject to the risk that stock prices may fall over short or extended periods
of time. Historically, the equity market has moved in cycles, and the value of
the Acquiring Fund's securities may fluctuate from day to day. Individual
companies may report poor results or be negatively affected by industry and/or
economic trends and developments. The prices of securities issued by such
companies may suffer a decline in response. These factors contribute to price
volatility, which is the principal risk of investing in the Acquiring Fund.
PREFERRED STOCKS RISK -- Preferred stocks are sensitive to interest rate
changes, and are also subject to equity risk, which is the risk that stock
prices will fall over short or extended periods of time. The rights of
preferred stocks on the distribution of a company's assets in the event of a
liquidation are generally subordinate to the rights associated with a company's
debt securities.
CONVERTIBLE SECURITIES RISK -- The value of a convertible security is
influenced by changes in interest rates (with investment value declining as
interest rates increase and increasing as interest rates decline) and the
credit standing of the issuer. The price of a convertible security will also
normally vary in some proportion to changes in the price of the underlying
common stock because of the conversion or exercise feature.
RIGHTS AND WARRANTS RISK -- Investments in rights or warrants involve the risk
of loss of the purchase value of a right or warrant if the right to subscribe
to additional shares is not exercised prior to the right's or warrant's
expiration. Also, the purchase of rights and/or warrants involves the risk that
the effective price paid for the right and/or warrant added to the subscription
price of the underlying security may
15
exceed the market price of the underlying security in instances such as those
where there is no movement in the price of the underlying security.
FOREIGN COMPANY RISK -- Investing in foreign companies, including direct
investments and investments through depositary receipts, poses additional risks
since political and economic events unique to a country or region will affect
those markets and their issuers. These risks will not necessarily affect the
U.S. economy or similar issuers located in the U.S. Securities of foreign
companies may not be registered with the SEC and foreign companies are
generally not subject to the regulatory controls imposed on U.S. issuers and,
as a consequence, there is generally less publically available information
about foreign securities than is available about domestic securities. Income
from foreign securities owned by the Acquiring Fund may be reduced by a
withholding tax at the source, which tax would reduce income received from the
securities comprising the portfolio. Foreign securities may also be more
difficult to value than securities of U.S. issuers. While depositary receipts
provide an alternative to directly purchasing the underlying foreign securities
in their respective national markets and currencies, investments in depositary
receipts continue to be subject to many of the risks associated with investing
directly in foreign securities.
EMERGING MARKETS SECURITIES RISK -- The Acquiring Fund's investments in
emerging markets securities are considered speculative and subject to
heightened risks in addition to the general risks of investing in foreign
securities. Unlike more established markets, emerging markets may have
governments that are less stable, markets that are less liquid and economies
that are less developed. In addition, the securities markets of emerging market
countries may consist of companies with smaller market capitalizations and may
suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible restrictions on repatriation
of investment income and capital. Furthermore, foreign investors may be
required to register the proceeds of sales, and future economic or political
crises could lead to price controls, forced mergers, expropriation or
confiscatory taxation, seizure, nationalization or creation of government
monopolies.
FOREIGN SOVEREIGN DEBT SECURITIES RISK -- The Acquiring Fund's investments in
foreign sovereign debt securities are subject to the risks that: (i) the
governmental entity that controls the repayment of sovereign debt may not be
willing or able to repay the principal and/or interest when it becomes due, due
to factors such as debt service burden, political constraints, cash flow
problems and other national economic factors; (ii) governments may default on
their debt securities, which may require holders of such securities to
participate in debt rescheduling or additional lending to defaulting
governments; and (iii) there is no bankruptcy proceeding by which defaulted
sovereign debt may be collected in whole or in part.
FOREIGN GOVERNMENT AGENCIES RISK -- Bonds issued by government agencies,
subdivisions or instrumentalities of foreign governments are generally backed
only by the general creditworthiness and reputation of the entity issuing the
bonds and may not be backed by the full faith and credit of the foreign
government. Moreover, a foreign government that explicitly provides its full
faith and credit to a particular entity may be, due to changed circumstances,
unable or unwilling to provide that support. A foreign government agency's
operations and financial condition are influenced by the foreign government's
economic and other policies.
SUPRANATIONAL ENTITIES RISK -- Government members, or "stockholders," usually
make initial capital contributions to a supranational entity and in many cases
are committed to make additional capital contributions if the supranational
entity is unable to repay its borrowings. There is no guarantee, however, that
one or more stockholders of the supranational entity will continue to make any
necessary additional capital contributions. If such contributions are not made,
the entity may be unable to pay interest or repay principal on its debt
securities, and the Acquiring Fund may lose money on such investments.
16
FOREIGN CURRENCY RISK -- As a result of the Acquiring Fund's investments in
securities denominated in, and/or receiving revenues in, foreign currencies,
the Acquiring Fund will be subject to currency risk. Currency risk is the risk
that foreign currencies will decline in value relative to the U.S. dollar or,
in the case of hedging positions, that the U.S. dollar will decline in value
relative to the currency hedged. In either event, the dollar value of an
investment in the Acquiring Fund would be adversely affected.
DERIVATIVES RISK -- The Acquiring Fund's use of forward contracts and
participatory notes is subject to market risk, correlation risk, credit risk,
valuation risk and liquidity risk. Market risk is the risk that the market
value of an investment may move up and down, sometimes rapidly and
unpredictably. Correlation risk is the risk that changes in the value of the
derivative may not correlate perfectly or at all with the underlying asset,
rate or index. Credit risk is the risk that the counterparty to a derivative
contract will default or otherwise become unable to honor a financial
obligation. Valuation risk is the risk that the derivative may be difficult to
value. Liquidity risk is described below. The Acquiring Fund's use of forwards
is also subject to leverage risk and hedging risk. Leverage risk is the risk
that the use of leverage may amplify the effects of market volatility on the
Acquiring Fund's share price and may also cause the Acquiring Fund to liquidate
portfolio positions when it would not be advantageous to do so in order to
satisfy its obligations. Hedging risk is the risk that derivatives instruments
used for hedging purposes may also limit any potential gain that may result
from the increase in value of the hedged asset. To the extent that the
Acquiring Fund engages in hedging strategies, there can be no assurance that
such strategy will be effective or that there will be a hedge in place at any
given time. Each of these risks could cause the Acquiring Fund to lose more
than the principal amount invested in a derivative instrument.
FIXED INCOME RISK -- Fixed income securities are subject to a number of risks,
including credit and interest rate risks. Credit risk is the risk that the
issuer or obligor will not make timely payments of principal and interest.
Changes in an issuer's credit rating or the market's perception of an issuer's
creditworthiness may also affect the value of the Acquiring Fund's investment
in that issuer. Interest rate risk is the risk that the value of a fixed income
security will fall when interest rates rise. In general, the longer the
maturity of a fixed income security, the more likely its value will decline
when interest rates rise.
CORPORATE FIXED INCOME SECURITIES RISK -- Corporate fixed income securities
respond to economic developments, especially changes in interest rates, as well
as perceptions of the creditworthiness and business prospects of individual
issuers.
LIQUIDITY RISK -- Certain securities may be difficult or impossible to sell at
the time and the price that the Acquiring Fund would like. The Acquiring Fund
may have to lower the price, sell other securities instead or forgo an
investment opportunity, any of which could have a negative effect on Fund
management or performance.
LARGE PURCHASE AND REDEMPTION RISK --Large purchases or redemptions of the
Acquiring Fund's shares may force the Acquiring Fund to purchase or sell
securities at times when it would not otherwise do so, and may cause the
Acquiring Fund's portfolio turnover rate and transaction costs to rise, which
may negatively affect the Acquiring Fund's performance and have adverse tax
consequences for Acquiring Fund shareholders.
COMPARISON OF FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
The 1940 Act requires registered investment companies, such as the
Funds, to adopt fundamental policies with respect to concentration of
investments in securities of issuers in particular industries, borrowing,
issuing senior securities, lending, investments in commodities, investments in
real estate, underwriting securities and diversification (if applicable).
Fundamental policies cannot be changed without approval by the vote of a
majority of the outstanding shares of a Fund. The phrase "majority of the
outstanding shares" means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding shares, whichever is less. Non-fundamental policies may be changed
17
by a Fund's Board of Trustees without shareholder approval. A comparison of the
Target Fund's and the Acquiring Fund's fundamental and non-fundamental policies
is provided below.
The Acquiring Fund has adopted fundamental policies that generally
limit its investments only as required by the 1940 Act, the rules and
regulations thereunder or any exemption therefrom, so as to avoid the need to
seek shareholder approval to change a fundamental policy in connection with an
amendment or new interpretation of such statute, rules or regulations. The
Target Fund's fundamental policies do not always provide the same level of
flexibility, but, as described below, any differences between the Funds'
policies are not expected to materially impact the operations of the Funds.
FUNDAMENTAL POLICIES
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TARGET FUND ACQUIRING FUND IMPACT OF DIFFERENCES
-------------------------------------------------------------------------------------------------------------------------
CONCENTRATION The Target Fund shall not The Acquiring Fund may not Although the Target
make any investment that will concentrate investments in a Fund's fundamental
result in the concentration (as particular industry or group policy indicates that it
that term might be defined in of industries, as concentration may invest up to 30% of
the 1940 Act, any rule or order is defined under the 1940 Act, the value of its net
thereunder, or SEC staff the rules and regulations assets in the securities
interpretation thereof) of its thereunder or any exemption of issuers that conduct
investments in the securities of therefrom, as such statute, their principal business
issuers all of which conduct rules or regulations may be activities in the
their principal business amended or interpreted from commercial banking
activities in the same industry, time to time, except that the industry, the Target
except the Target Fund may Acquiring Fund may invest Fund has generally not
invest up to 30% of the value of without limitation in securities concentrated its
its net assets in the securities of issued or guaranteed by the investments in such
issuers that conduct their U.S. government, its agencies securities.
principal business activities in or instrumentalities and
the commercial banking repurchase agreements
industry. This restriction does involving such securities or
not apply to obligations issued tax-exempt obligations of state
or guaranteed by the U.S. or municipal governments and
government, its agencies and their political subdivisions.
instrumentalities, or in tax-
exempt certificates of deposit.
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BORROWING AND The Target Fund shall not The Acquiring Fund may The Acquiring Fund is
SENIOR SECURITIES borrow money, except as a borrow money or issue senior not subject to certain of
temporary measure for securities (as defined under the borrowing
extraordinary purposes or to the 1940 Act), except as restrictions imposed by
facilitate redemptions. Any prohibited under the 1940 Act, the Target Fund's
borrowing will be done from a the rules and regulations fundamental policy, but
bank and to the extent that such thereunder or any exemption the differences between
borrowing exceeds 5% of the therefrom, as such statute, the policies are not
value of its respective net rules or regulations may be expected to materially
assets, asset coverage of at least amended or interpreted from impact the operations of
300% is required. In the event time to time. the Funds.
that such asset coverage shall at
any time fall below 300%, the
Target Fund shall, within three
days thereafter (not including
Sunday or holidays) or such
longer period as the SEC may
prescribe by rules and
regulations, reduce the amount
of its borrowings to such an
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18
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TARGET FUND ACQUIRING FUND IMPACT OF DIFFERENCES
-------------------------------------------------------------------------------------------------------------------------
extent that the asset coverage of
such borrowings shall be at
least 300%. No investment
securities will be purchased
while the Target Fund has an
outstanding borrowing. The
Target Fund will not pledge
more than 10% of its respective
net assets. The Target Fund will
not issue senior securities (as
defined in the 1940 Act),
except for notes to banks.
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LENDING The Target Fund shall not make The Acquiring Fund may No material difference.
personal loans or loans of its make loans, except as
assets to persons who control or prohibited under the 1940 Act,
are under common control with the rules and regulations
the Target Fund, except as the thereunder or any exemption
1940 Act, any rule or order therefrom, as such statute,
thereunder, or SEC staff rules or regulations may be
interpretation thereof, may amended or interpreted from
permit. This restriction does not time to time.
prevent the Target Fund from,
among other things, purchasing
debt obligations, entering into
repurchase agreements, loaning
its assets to broker-dealers or
institutional investors, or
investing in loans, including
assignments and participation
interests.
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COMMODITIES AND The Target Fund shall not The Acquiring Fund may The Acquiring Fund's
REAL ESTATE purchase or sell commodities or purchase or sell commodities fundamental policy with
commodity contracts. or real estate, except as respect to commodities,
prohibited under the 1940 Act, along with its non-
The Target Fund shall not the rules and regulations fundamental policy with
purchase or sell real estate or thereunder or any respect to commodities,
real estate limited partnerships, exemption therefrom, as such permits the Acquiring
but this shall not otherwise statute, rules or regulations Fund to invest in certain
prevent the Target Fund from may be amended or derivative instruments
investing in securities secured interpreted from time to time. that may be considered
by real estate or interests to be commodities. The
therein. Target Fund's
fundamental policy with
respect to commodities
is more limiting.
There is no material
difference between the
Acquiring Fund's
fundamental and non-
fundamental policies
with respect to real
estate, taken together,
and the Target Fund's
fundamental policy with
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19
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TARGET FUND ACQUIRING FUND IMPACT OF DIFFERENCES
-------------------------------------------------------------------------------------------------------------------------
respect to real estate.
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UNDERWRITING The Target Fund shall not The Acquiring Fund may The difference between
engage in the underwriting of underwrite securities issued by the policies is not
securities of other issuers, other persons, except as expected to materially
except that in connection with prohibited under the 1940 Act, impact the operations of
the disposition of a security, the the rules and regulations the Funds.
Target Fund may be deemed to thereunder or any
be an "underwriter" as that term exemption therefrom, as such
is defined in the Securities Act statute, rules or regulations
of 1933, as amended. may be amended or
interpreted from time to time.
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DIVERSIFICATION As to 75% of its total assets, the The Acquiring Fund may No material difference.
Target Fund shall not invest purchase securities of an
more than 5% of its total assets issuer, except if such purchase
in the securities of any one would cause the Acquiring
issuer (other than obligations Fund to fail to satisfy the
issued or guaranteed by the diversification requirement for
U.S. government, its agencies a diversified management
or instrumentalities). company under the 1940 Act,
the rules or regulations
thereunder or any exemption
therefrom, as such statute,
rules or regulations may be
amended or interpreted from
time to time.
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OTHER The Target Fund shall not enter None Although the Acquiring
into futures contracts or options Fund is not subject to
thereon. The Target Fund shall the investment
not make short sales of restrictions imposed by
securities, or purchase the Target Fund's other
securities on margin. fundamental policies, to
the extent that the
The Target Fund shall not Acquiring Fund
purchase or retain the securities engages in investment
of any issuer that has an officer, activities that are
director or security holder who prohibited by the Target
is a director or officer of the Fund's other
Target Trust or of DMC or fundamental policies,
Mondrian if, or so long as, the such activities are not
directors and officers of the expected to materially
Target Trust and of the impact the operations of
investment advisers together the Acquiring Fund.
own beneficially more than 5%
of any class of securities of
such issuer.
The Target Fund shall not
invest in interests in oil, gas,
and other mineral leases or
other mineral exploration or
development programs.
The Target Fund may not invest
in warrants if such warrants,
valued at the lower of cost or
-------------------------------------------------------------------------------------------------------------------------
20
-------------------------------------------------------------------------------------------------------------------------
TARGET FUND ACQUIRING FUND IMPACT OF DIFFERENCES
-------------------------------------------------------------------------------------------------------------------------
market, would exceed 5% of
the value of the Target Fund's
net assets. Included within such
amount, but not to exceed 2%
of the Target Fund's net assets,
may be warrants that are not
listed on the New York Stock
Exchange or American Stock
Exchange. Warrants acquired
by the Target Fund in units or
attached to securities may be
deemed to be without value.
-------------------------------------------------------------------------------------------------------------------------
NON-FUNDAMENTAL POLICIES
-------------------------------------------------------------------------------------------------------------------------
TARGET FUND ACQUIRING FUND IMPACT OF DIFFERENCES
-------------------------------------------------------------------------------------------------------------------------
COMMODITIES AND None The Acquiring Fund may See above discussion
REAL ESTATE purchase or sell financial and regarding impact of
physical commodities, differences between the
commodity contracts based on commodities and real
(or relating to) physical estate fundamental
commodities or financial policies.
commodities and securities
and derivative instruments
whose values are derived from
(in whole or in part) physical
commodities or financial
commodities.
The Acquiring Fund may not
invest in unmarketable
interests in real estate limited
partnerships or invest directly
in real estate. For the
avoidance of doubt, the
foregoing policy does not
prevent the Acquiring Fund
from, among other things;
purchasing marketable
securities of companies that
deal in real estate or interests
therein (including REITs).
-------------------------------------------------------------------------------------------------------------------------
ILLIQUID SECURITIES The Target Fund may not invest The Acquiring Fund may not The Acquiring Fund's
more than 10% of its net assets purchase an investment if, as a non-fundamental policy
in securities that it cannot sell result, more than 15% of the is consistent with
or dispose of in the ordinary value of the Acquiring Fund's current SEC guidelines,
course of business within seven net assets would be invested in but the difference
days at approximately the value illiquid securities. between the policies is
at which the Target Fund has not expected to
valued the investment. materially impact the
operations of the Funds.
-------------------------------------------------------------------------------------------------------------------------
21
Both the Target Fund and the Acquiring Fund may be subject to other
investment restrictions that are not identified above. A full description of
the Target Fund's and the Acquiring Fund's investment policies and restrictions
may be found in the respective prospectuses and SAIs.
COMPARISON OF SHAREHOLDER RIGHTS
The Target Fund is a series of the Target Trust, and the Acquiring
Fund is a series of the Acquiring Trust, each of which is a Delaware statutory
trust. The Target Fund is governed by an Agreement and Declaration of Trust
dated December 17, 1998, as amended from time to time ("Target Fund
Declaration"), its bylaws and Delaware law. The Acquiring Fund is governed by an
Agreement and Declaration of Trust dated August 25, 2015, as amended and
restated September 17, 2015 ("Acquiring Fund Declaration"), its bylaws and
Delaware law. The governing instruments are similar but not identical to one
another, and therefore shareholders of the Funds may have different rights.
Additional information about each Fund's governing instruments is provided
below.
SHARES. The trustees of the Target Fund and the Acquiring Fund each have the
power to issue shares without shareholder approval. The governing instruments
of the Target Fund and the Acquiring Fund indicate that the amount of shares
that the Target Fund and the Acquiring Fund each may issue is unlimited. Shares
of the Target Fund and the Acquiring Fund have no preemptive rights.
SHAREHOLDER MEETINGS. Neither Fund is required to hold annual meetings of
shareholders. Shareholder meetings may be called by the president, chairperson
of the Board, or the Board of either Fund. Except as required by the 1940 Act,
shareholders of the Funds are not entitled to call shareholder meetings.
VOTING RIGHTS. The 1940 Act provides that shareholders of the Target Fund and
the Acquiring 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. The governing instruments of the Target Fund and the Acquiring
Fund provide that shareholders have the right to vote (a) for the election and
removal of trustees, including filling any vacancies on a Board, at a meeting
called for that purpose by the Board, or, to the extent provided by the 1940
Act, the shareholders; (b) to approve additional matters as may be required by
law, the governing instruments, or any registration statement filed with the
SEC or any state, or (c) on such other matters as the trustees may consider
necessary or desirable.
The governing instruments of the Target Fund and the Acquiring Fund further
provide that each shareholder is entitled to one vote for each full share held,
and a fractional vote for each fractional share held, and that each Fund will
vote separately on matters relating solely to it. Shareholders of the Target
Fund and the Acquiring Fund are not entitled to cumulative voting in the
election of trustees.
QUORUM AND VOTING. The governing instruments of the Target Fund and the
Acquiring Fund provide that, except as otherwise required by the 1940 Act or
other applicable law, thirty-three and one-third percent (33[]%) of the shares
present in person or represented by proxy and entitled to vote at a shareholder
meeting shall constitute a quorum and, if a quorum is present at any meeting, a
majority of the shares voted decide any question, except a plurality vote is
necessary for the election of trustees. 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.
SUBMISSION OF SHAREHOLDER PROPOSALS. The Target Fund and the Acquiring Fund do
not have provisions in their governing instruments that require shareholders to
provide advance notice to the Target Fund or Acquiring Fund, as applicable, in
order to present a proposal at a shareholder meeting. Nonetheless, the federal
securities laws, which apply to the Acquiring Fund and the Target Fund, require
that certain conditions be met to present any proposal at a shareholder
meeting. The matters to be considered and brought before an annual or special
meeting of shareholders of the Target Fund and the Acquiring Fund are limited
to only those matters, including the nomination and election of trustees, that
are properly brought before the meeting. These requirements are intended to
provide the Target Fund Board or the Acquiring Fund Board the opportunity to
better evaluate the proposal and provide additional information to shareholders
for their consideration in connection with the proposal. Failure to satisfy
the
22
requirements of these advance notice provisions means that a shareholder may
not be able to present a proposal at an annual or special shareholder meeting.
DERIVATIVE ACTIONS. Under the Delaware Statutory Trust Act, a shareholder may
bring a derivative action if trustees with authority to do so have refused to
bring the action or if a demand upon the trustees to bring the action is not
likely to succeed. A shareholder may bring a derivative action only if the
shareholder is a shareholder at the time the action is brought and: (1) was a
shareholder at the time of the transaction complained about or (2) acquired the
status of shareholder by operation of law or pursuant to the governing
instruments from a person who was a shareholder at the time of the
transaction.
The governing instruments of the Acquiring Fund provide that shareholders
owning at least 10% of the Acquiring Fund must join in bringing a derivative
action, and that Acquiring Fund shareholders will be barred from commencing a
derivative action if the Acquiring Fund Board determines that the action would
not be in the best interests of the Acquiring Fund.
AMENDMENT OF GOVERNING INSTRUMENTS. Except as otherwise required by applicable
law, the Target Fund Board and the Acquiring Fund Board generally have the
right to amend the governing instruments without shareholder approval.
Shareholder approval is required for an amendment to the Target Fund
Declaration which would adversely affect to a material degree the rights and
preferences of Target Fund shares, and for an amendment to the Acquiring Fund
Declaration that would affect the shareholders' right to vote. The bylaws of
either Fund may be amended, and/or restated at any time, without shareholder
approval.
LIABILITY OF SHAREHOLDERS. The governing instruments for the Target Fund and
the Acquiring Fund generally provide that shareholders will not be subject to
personal liability for the obligations of a Fund, and provide for
indemnification if any shareholder is personally held liable for the
obligations of a Fund.
THE PROPOSED REORGANIZATION
SUMMARY OF AGREEMENT AND PLAN OF REORGANIZATION
The terms and conditions under which the Reorganization is expected
to be consummated are set forth in the Agreement. A summary of all material
provisions of the Agreement is provided below. While this summary is qualified
in its entirety by reference to the form of Agreement, a copy of which is
attached as Exhibit B to this Proxy Statement/Prospectus, shareholders still
should read the below summary carefully.
With respect to the Reorganization, if shareholders of the Target
Fund approve the Agreement and other closing conditions are satisfied, the
assets of the Target Fund will be delivered to the Acquiring Fund's custodian
for the account of the Acquiring Fund in exchange for the assumption by the
Acquiring Fund of the liabilities of the Target Fund and delivery by the
Acquiring Fund to the Target Fund for further delivery to the holders of record
as of the Effective Time (as defined below) of the issued and outstanding
shares of the Target Fund of a number of shares of the Acquiring Fund
(including, if applicable, fractional shares rounded to the nearest
thousandth), having an aggregate net asset value equal to the value of the net
assets of the Target Fund so transferred, all determined and adjusted as
provided in the Agreement. The value of your account with the Acquiring Fund
immediately after the Reorganization is expected to be the same or
substantially the same as the value of your account with the Target Fund
immediately prior to the Reorganization.
The Target Fund and the Acquiring Fund will be required to make
representations and warranties 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
23
occur on or around [March 14, 2016] (the "Closing Date"), immediately prior to
the opening of regular trading on the New York Stock Exchange on the Closing
Date (the "Effective Time").
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 Target Fund will be terminated in accordance with its
governing documents and applicable law.
The obligations of the Acquiring Fund and the Target Fund are subject
to the following conditions, among others:
o the Acquiring Fund Registration Statement on Form N-14 under 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;
o the shareholders of the Target Fund shall have approved the
Agreement;
o the Acquiring Fund and Target Fund have each delivered an officer's
certificate certifying that all agreements and commitments set forth
in the Agreement have been satisfied; and
o the Acquiring Fund and Target Fund shall each 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 Target Fund or its shareholders or
the Acquiring Fund.
If shareholders of the Target Fund do not approve the Agreement or if
the Reorganization does not otherwise close, the Target Fund Board will consider
what additional action to take. The Agreement may be terminated and the
Reorganization may be abandoned at any time prior to Closing by mutual agreement
of the parties. The Agreement may be amended or modified in a writing signed by
the parties to the Agreement.
Section 15(f) of the 1940 Act provides a non-exclusive safe
harbor under which an investment adviser to a registered investment company (or
an affiliated person of such investment adviser) may receive any amount or
benefit in connection with a sale of any interest in such investment adviser
that results in an assignment of an advisory contract with the investment
company if the following two conditions are satisfied: (1) for a period of three
years after the transaction, at least 75% of the board of the investment company
(or its successor) cannot be "interested persons" (as defined in the 1940 Act)
of the investment adviser or predecessor adviser of the investment company (or
its successor); and (2) no "unfair burden" may be imposed on the investment
company as a result of the transaction or any express or implied terms,
conditions or understandings applicable thereto. The term "unfair burden," as
defined in the 1940 Act, includes any arrangement, during the two-year period
after the transaction occurs, whereby the investment adviser, or predecessor or
successor adviser, or any interested person of any such adviser, receives or is
entitled to receive any compensation, directly or indirectly (a) from the
investment company or its security holders (other than compensation for bona
fide investment advisory or other services), or (b) from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company (other than bona fide ordinary compensation
for principal underwriting services). While no interest in DMC is being sold in
connection with the Reorganization, Mondrian has agreed to use all commercially
reasonable efforts to ensure that the Reorganization will comply with the safe
harbor provisions of Section 15(f) of the 1940 Act.
BOARD CONSIDERATIONS IN APPROVING THE REORGANIZATION
The Target Fund Board considered the Reorganization at a meeting held
on November 18-19, 2015 and the Target Fund Board, including a majority of the
Trustees who are not "interested persons" of the Target Trust as that term is
defined in the 1940 Act ("Independent Trustees"), approved the Agreement. In
approving the Reorganization, the Target Fund Board determined that: (i)
participation in the Reorganization is in the best interest of the Target Fund
and its shareholders; and (ii) the interests of the Target Fund's shareholders
will not be diluted as a result of the Reorganization.
In making these determinations, the Target Fund Board reviewed and
considered information provided to them to assist them in evaluating the
Reorganization, such as information relating to: the terms of the Agreement;
the Acquiring Fund's investment objectives, strategies and risks; the Acquiring
Fund's fee structure, as compared to the Target Fund's fee structure; the
Acquiring Fund's investment adviser and other service providers; the fact that
the Acquiring Fund's investment adviser, Mondrian, has had long history in
subadvising the Target Fund; the federal income tax consequences of the
Reorganization; the costs anticipated to be incurred in connection with the
Reorganizations and the fact that Mondrian would be responsible for absorbing
such costs; the greater potential to achieve economies of scale; and
recommendations of DMC, among other relevant information. The Target Fund Board
also considered the payments to be made to DMC by Mondrian under the Transition
and Support Services Agreement in connection with the Reorganization. In
addition, the Independent Trustees were advised by independent legal counsel in
their considerations of the Agreement and the Reorganization.
24
The Trustees did not find it practicable to, and did not, assign
relative weights to the specific factors considered in reaching their
conclusions and determinations to approve the Agreement. Rather, the approval
determinations were made on the basis of each Trustee's business judgment after
consideration of all of the factors taken in their entirety. Although not meant
to be all-inclusive, the following were some of the factors considered by the
Target Fund Board in making their determination:
o the investment objective of the Target Fund is substantially similar to
the investment objective of the Acquiring Fund, and the investment strategies
and policies of the Target Fund are substantially similar to the investment
strategies and policies of the Acquiring Fund;
o the portfolio managers who subadvise the Target Fund will serve as the
portfolio managers of the Acquiring Fund;
o the current management fee rate for the Acquiring Fund is lower than the
management fee of the Target Fund;
o Mondrian has agreed to limit the operating expenses of the Acquiring Fund
to 0.79% of average daily net assets until February 28, 2019, which is lower
than the expense ratio of 0.88% of average daily net assets for the Target Fund
for the fiscal year ended October 31, 2015.
o the Target Fund is currently closed to new investors, while the Acquiring
Fund will be open to new investors, providing for greater opportunities for
economies of scale benefits to shareholders;
o the reasonableness of the terms and conditions in the Agreement;
o the Reorganization is intended to be tax-free for U. S. federal income
tax purposes for the Target Fund and shareholders of the Target Fund; and
o Mondrian, not the Target Fund or the Acquiring Fund, will pay all costs
associated with the Reorganization.
After evaluating all of the information and factors above, as well as
other information and factors relevant to the proposed Reorganization, the
Target Fund Board concluded that the terms of the Agreement were reasonable and
that, in light of the lower fees and expenses likely to be realized by
shareholders of the Acquiring Fund, among other considerations, the
Reorganization was in the best interests of the shareholders of the Target
Fund. Therefore, the Target Fund Board determined to approve the Reorganization
and directed that the Agreement be submitted to shareholders of the Target Fund
for approval.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material U.S. federal
income tax considerations of the Reorganization and is based upon the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
existing U.S. Treasury Regulations thereunder, current administrative rulings
of the IRS and published judicial decisions, all of which are subject to
change. These considerations are general in nature and individual shareholders
should consult their own tax advisers as to the federal, state, local, and
foreign tax considerations applicable to them and their individual
circumstances. These same considerations generally do not apply to shareholders
who hold their shares in a tax-deferred account.
The Reorganization is intended to be a tax-free reorganization
pursuant to Section 368(a)(1)(F) of the Code. The principal federal income tax
considerations that are expected to result from the Reorganization of the
Target Fund into the Acquiring Fund are as follows:
25
o no gain or loss will be recognized by the Target Fund or the shareholders
of the Target Fund as a direct result of the Reorganization;
o no gain or loss will be recognized by the Acquiring Fund as a direct
result of the Reorganization;
o the aggregate tax basis of the shares of the Acquiring Fund to be received
by a shareholder of the Target Fund will be the same as the shareholder's
aggregate tax basis of the shares of the Target Fund immediately before the
Reorganization;
o the holding period of the shares of the Acquiring Fund received by a
shareholder of the Target Fund will include the period that a shareholder
held the shares of the Target Fund (provided that such shares of the Target
Fund are capital assets in the hands of such shareholder as of the
Closing);
o the basis of the assets of the Target Fund received by the Acquiring Fund
will be the same as the basis of these assets in the hands of the Target
Fund immediately prior to the exchange; and
o the holding period of the assets of the Target Fund received by the
Acquiring Fund will include the period during which such assets were held
by the Target Fund.
Neither the Target Fund nor the Acquiring Fund 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, Morgan, Lewis & Bockius LLP will
render a favorable opinion to the Target Fund and the Acquiring 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 Closing
Date, of certain representations of the Target Fund and the Acquiring Fund upon
which Morgan, Lewis & Bockius LLP will rely in rendering its opinion. Such
opinion of counsel may state that no opinion is expressed as to the effect of
the Reorganization on the Target Fund, Acquiring Fund, or any Target Fund
shareholder with respect to any transferred asset as to which any unrealized
gain or loss is required to be recognized for federal income tax purposes at
the end of a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting. A copy of the opinion will be filed with
the SEC and will be available for public inspection.
Opinions of counsel are not binding upon the IRS or the courts. 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 Target Fund would recognize gain or loss on the
transfer of its assets to the Acquiring Fund and each shareholder of the Target
Fund would recognize a taxable gain or loss equal to the difference between its
tax basis in the Target Fund shares and the fair market value of the shares of
the Acquiring Fund it receives.
The tax attributes, including capital loss carryovers, of the Target
Fund move to the Acquiring Fund in the Reorganization. The ability of the
Acquiring Fund to carry forward capital losses (if any) of the Target Fund and
use such losses to offset future gains will not be limited materially as a
direct result of the Reorganization.
You should consult your tax adviser regarding the U.S. federal income
tax consequences to you, if any, of the Reorganization in light of your
particular circumstances, as well as the state and local tax consequences, if
any, of the Reorganization because this discussion is only a general summary of
certain federal income tax consequences.
COSTS OF THE REORGANIZATION
The Reorganization costs, including any costs directly associated
with preparing, filing, printing, and distributing to the shareholders of the
Target Fund all materials relating to this Proxy Statement/Prospectus and
soliciting shareholder votes, as well as the conversion costs associated with
the
26
Reorganization, will be borne by Mondrian or an affiliate. Neither the Target
Fund nor the Acquiring Fund will bear any costs related to the Reorganization.
The costs related to the Reorganization include, but are not limited to, costs
associated with organizing the Acquiring Fund, 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 Target Fund shareholders and
holding shareholder meetings.
BOARD RECOMMENDATION
The Target Fund Board unanimously recommends that shareholders of the
Target Fund approve the proposed Reorganization.
VOTING INFORMATION
PROXY STATEMENT/PROSPECTUS
You are receiving this Proxy Statement/Prospectus and the enclosed
proxy card because the Target Fund Board is soliciting your proxy to vote at
the Meeting and at any adjournments of the Meeting. This Proxy
Statement/Prospectus gives you information about the business to be conducted
at the Meeting. Target Fund shareholders may vote by appearing in person at the
Meeting and following the instructions below. You do not need to attend the
Meeting to vote. Instead, you may simply complete, sign, and return the
enclosed proxy card or vote by telephone or through a website established for
that purpose.
This Proxy Statement/Prospectus, the enclosed Notice of Special
Meeting of Shareholders, and the enclosed proxy card are expected to be mailed
on or about January [ ], 2016, to all shareholders entitled to vote.
Shareholders of record of the Target Fund as of the close of business on
[December 31, 2015] (the "Record Date"), are entitled to vote at the Meeting.
The number of outstanding shares of the Target Fund on [December 31, 2015] was
[ ]. Each share is entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held.
Proxies will have the authority to vote and act on behalf of
shareholders at any adjournment of the Meeting. If a proxy is authorized to
vote for a shareholder, the shareholder 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 the Target Fund in writing at the address of
the Target Fund set forth on the cover page of the Proxy Statement/Prospectus
before the Meeting that the shareholder has revoked its proxy. In addition,
although merely attending the Meeting will not revoke your proxy, if a
shareholder is present at the Meeting, the shareholder may withdraw the 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.
Executed proxies received prior to the Meeting on which no vote is
indicated will be voted "FOR" the Proposal.
QUORUM REQUIREMENT AND ADJOURNMENT
A "Quorum" is the minimum number of shares that must be present in
order to conduct the Meeting. A Quorum means one-third (33 1/3%) of the shares
of the Target Fund that are entitled to vote at the Meeting, present in person
or represented by proxy.
If sufficient votes to approve the Proposal are not received by the
date of the Meeting or any reconvened Meeting following an adjournment, the
Meeting or reconvened Meeting may be adjourned to
27
permit further solicitations of proxies. The persons named as proxies on the
enclosed proxy cards will vote their proxies in their discretion on questions
of adjournment and any other items (other than the Proposal) that properly come
before the Meeting. A majority of the votes cast by shareholders of a Fund
present in person or by proxy at the Meeting (whether or not sufficient to
constitute a quorum) may adjourn the Meeting. The Meeting may also be adjourned
by the Chairperson of the Meeting.
Abstentions and broker non-votes will be counted for purposes of
determining whether a quorum is present at the Meeting. Abstentions and broker
non-votes will have the same effect as a vote "AGAINST" the Proposal because an
absolute percentage of affirmative votes is required to approve the Proposal.
Broker non-votes are proxies from brokers or nominees that indicate that they
have not received voting instructions from the beneficial owner or other person
entitled to vote shares on a particular matter for which the brokers or
nominees do not have discretionary authority to vote, such as the Proposal.
VOTE NECESSARY TO APPROVE THE PROPOSAL
The Proposal must be approved by a 1940 Act Majority vote of the
outstanding voting securities of the Target Fund. A "1940 Act Majority" of the
outstanding voting securities of a fund means the lesser of (i) 67% or more of
the voting securities of the fund that are present in person or by proxy at a
meeting if holders of shares representing more than 50% of the outstanding
voting securities of the fund are present in person or by proxy or (ii) more
than 50% of the outstanding voting securities of the fund.
PROXY SOLICITATION
The Target Fund has engaged the services of [Computershare] to assist
in the solicitation of proxies for the Meeting, at an estimated cost of
$[7,000].
In addition to solicitations by mail, solicitations also may be made
by advertisement, telephone, telegram, facsimile transmission or other
electronic media, or personal contacts. The Target Fund will request
broker/dealer firms, custodians, nominees, and fiduciaries to forward proxy
materials to the beneficial owners of the shares of record.
In addition to solicitations by mail, officers and employees of the
Target Fund, DMC, Mondrian and their affiliates may, without extra pay, conduct
additional solicitations by telephone, telecopy, and personal interviews. The
Target Fund expects that any solicitations will be primarily by mail, but also
may include telephone, telecopy, or oral solicitations.
As the Meeting date approaches, you may receive a telephone call from
a representative of [Computershare] if your votes have not yet been received.
Proxies that are obtained telephonically will be recorded in accordance with
the procedures described below. These procedures are designed to ensure that
both the identity of the shareholder casting the vote and the voting
instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the
[Computershare] representative is required to ask for each shareholder's full
name and address, and to confirm that the shareholder has received the proxy
materials in the mail. If the shareholder is a corporation or other entity, the
[Computershare] representative is required to ask for the person's title and
confirmation that the person is authorized to direct the voting of the shares.
If the information elicited matches the information previously provided to
[Computershare], then the [Computershare] representative has the responsibility
to explain the voting process, read the Proposal listed on the proxy card, and
ask for the shareholder's instructions on the Proposal. Although the
[Computershare] representative is permitted to answer questions about the
process, he or she is not permitted to recommend to the shareholder how to
vote, other than to read any recommendation set forth in this Proxy
Statement/Prospectus. [Computershare] will record the shareholder's
instructions on the card. Within 72 hours, the shareholder will be sent a
letter or mailgram
28
to confirm his or her vote and asking the shareholder to call [Computershare]
immediately if his or her instructions are not correctly reflected in the
confirmation.
SHARE OWNERSHIP BY LARGE SHAREHOLDERS, MANAGEMENT AND TRUSTEES
A list of the name, address, and percent ownership of each person
who, as of [December 31, 2015], to the knowledge of the Target Fund, owned 5%
or more of the outstanding shares of the Target Fund can be found at Exhibit
A.
To the best of the knowledge of the Target Trust, the ownership of
shares of the Target Fund by executive officers and Trustees of the Target Fund
as a group constituted less than 1% of the shares of the Target Fund as of
[December 31, 2015].
OTHER MATTERS
CAPITALIZATION
The following table shows the capitalization of the Target Fund as of
October 31, 2015 and of the Acquiring Fund on a PRO FORMA combined basis
(unaudited) as of October 31, 2015, giving effect to the proposed
Reorganization. The following is an example of the number of shares of the
Acquiring Fund that would be exchanged for the shares of the Target Fund if the
Reorganization was consummated on October 31, 2015, and does not reflect the
number of shares or value of shares that would actually be received if the
Reorganization occurred on the Closing Date.
The capitalizations of the Target Fund and the Acquiring Fund are
likely to be different on the Closing Date as a result of daily share purchase,
redemption, and market activity.
---------------------------------------------------------------------------------------------
TARGET FUND ACQUIRING PRO FORMA PRO FORMA
FUND ADJUSTMENTS(1) COMBINED
---------------------------------------------------------------------------------------------
Net Assets $358,380,937 $ -- $ -- $358,380,937
---------------------------------------------------------------------------------------------
Shares Outstanding 25,167,620 -- -- 25,167,620
---------------------------------------------------------------------------------------------
Net Asset Value Per $14.24 $ -- $ -- $14.24
Share
---------------------------------------------------------------------------------------------
(1) Mondrian or an affiliate will bear all of the Reorganization expenses.
Accordingly, no adjustments have been made for any expenses expected to be
incurred in connection with the Reorganization.
DISSENTERS' RIGHTS
If the Reorganization is approved at the Meeting, Target 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 Target Fund, however, have the right
to redeem their shares at net asset value until the Closing Date of the
Reorganization. After the Reorganization, Target Fund shareholders will hold
shares of the Acquiring Fund, which may also be redeemed at net asset value,
subject to redemption fees if the Acquiring Fund shares redeemed are held for
less than 30 days.
29
SHAREHOLDER PROPOSALS
The governing instruments of the Target Trust do not require that the
Target Fund hold annual meetings of shareholders. The Target Fund is, however,
required to call meetings of shareholders in accordance with the requirements
of the 1940 Act to seek approval of new or material amendments to advisory
arrangements or of a change in the fundamental investment policies, objectives
or restrictions of the Target Fund. The Target Trust also would be required to
hold a shareholder meeting to elect new Trustees at such time as less than a
majority of the Trustees holding office have been elected by shareholders. The
Target Trust's governing instruments generally provide that a shareholder
meeting may be called by a majority of the Trustees, the Chairperson of the
Board, or the President of the Target Trust.
Shareholders of the Target Fund wishing to submit proposals for
inclusion in a proxy statement for a future shareholder meeting must send their
written proposal to the Target Fund a reasonable time before the Target Fund
Board's solicitation relating to that meeting is to be made. Shareholder
proposals must meet certain legal requirements established by the SEC, so there
is no guarantee that a shareholder's proposal will actually be included in the
next proxy statement. The persons named as proxies in future proxy materials of
the Target Fund may exercise discretionary authority with respect to any
shareholder proposal presented at any subsequent shareholder meeting if written
notice of that proposal has not been received by the Target Fund within a
reasonable period of time before the Target Fund Board's solicitation relating
to that meeting is made. Written proposals with regard to the Target Fund
should be sent to the Secretary of the Target Trust, David F. Connor, at the
address of the Target Fund given above. If the proposed Reorganization is
approved and completed, shareholders of the Target Fund will become
shareholders of the Acquiring Fund and, thereafter, will be subject to the
shareholder proposal requirements of the Acquiring Fund.
30
EXHIBIT A
OWNERSHIP OF THE TARGET FUND
SIGNIFICANT HOLDERS
The following table shows, as of [December 31, 2015], the accounts of
the Target Fund that own of record 5% or more of the Target Fund. Unless
otherwise indicated, the Target Trust has no knowledge of beneficial
ownership.
SHAREHOLDERS NAME AND ADDRESS TOTAL SHARES PERCENTAGE
----------------------------- ------------ ----------
A-1
EXHIBIT B
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") is adopted as of this [
] day of [ ], 2015 by and among (i) Delaware Pooled Trust, an open-end
registered investment company ("TARGET ENTITY"), on behalf of one of its series
portfolios, The International Equity Portfolio ("TARGET FUND"); (ii) Gallery
Trust, an open-end registered investment company ("ACQUIRING ENTITY"), on
behalf of one of its series portfolios, the Mondrian International Equity Fund
("ACQUIRING FUND"); (iii) solely for the purposes of Sections 1.1(f), 9.2 and
11.2 of this Agreement, Delaware Management Company, a series of Delaware
Management Business Trust ("DELAWARE"), investment adviser of the Target Fund;
and (iv) solely for the purposes of Sections 1.1(g), 9.2 and 11.1 of this
Agreement, Mondrian Investment Partners Limited ("MONDRIAN"), investment
adviser of the Acquiring Fund. Other than the Target Fund and the Acquiring
Fund, no other series of either the Target Entity or the Acquiring Entity are
parties to this Agreement.
WHEREAS, 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 all of the assets, property, and goodwill and
assume all of the liabilities of the Target Fund in exchange for shares of the
Acquiring Fund of equal value to the net assets of the Target Fund, and (ii)
the Target Fund will distribute such shares of the Acquiring Fund to
shareholders of the Target Fund, in connection with the liquidation of the
Target Fund, all upon the terms and conditions hereinafter set forth in this
Agreement (the "REORGANIZATION");
WHEREAS, the Acquiring Fund is, and will be immediately
prior to the Closing (defined in Section 3.1), a shell series, without assets
(other than nominal 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, investment company of the management type registered with the
Securities and Exchange Commission (the "COMMISSION"); and
WHEREAS, this Agreement is intended to be and is adopted as
a plan of reorganization with respect to the Reorganization within the meaning
of Section 368(a)(1)(F) of the United States Internal Revenue Code of 1986, as
amended (the "CODE").
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, and intending to be legally
bound, 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 (as defined in
Section 3.1), and based on the representations and warranties each
party provides to the others, the Target Entity and the Acquiring
Entity agree to take the following steps with respect to the
Reorganization:
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(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 shares of the Acquiring Fund 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 (collectively, "ASSETS").
(c) The Target Fund will endeavor to discharge all of its liabilities
and obligations prior to the Closing Date, other than those liabilities and
obligations which would otherwise be discharged at a later date in the ordinary
course of business. 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 (collectively, "LIABILITIES").
(d) As soon as reasonably practicable after the Closing, the Target
Fund will distribute to its shareholders of record ("TARGET FUND SHAREHOLDERS")
the shares of the Acquiring Fund received by the Target Fund pursuant to
Section 1.1(a) on a pro rata basis, and the Target Fund will as promptly as
practicable thereafter completely liquidate and dissolve. Such distribution and
liquidation will be accomplished, with respect to the Target Fund's shares, by
the transfer of the Acquiring Fund shares 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. At
the Closing, any outstanding certificates representing shares of the Target
Fund will be cancelled. The Acquiring Fund shall not issue certificates
representing shares in connection with such exchange, irrespective of whether
Target Fund Shareholders hold their Target Fund shares in certificated form.
(e) Ownership of Acquiring Fund shares will be shown on its books, as
such are maintained by the Acquiring Fund's transfer agent.
(f) All books and records of the Target Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 ACT"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and copies of
all such books and records maintained by Delaware or by the Target Fund's
administrator, custodian, distributor or fund accountant shall be turned over
to the Acquiring Fund or its agents as soon as practicable following the
Closing Date.
(g) To the extent applicable, Mondrian will use all commercially
reasonable efforts to ensure that the Reorganization will comply with the safe
harbor provisions of Section 15(f) of
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the 1940 Act. Mondrian will use all commercially reasonable efforts to ensure
that for a period of at least three (3) years after the Closing Date, at least
75 per cent of the members of the Board of Trustees of the Acquiring Fund are
not interested persons of Mondrian or Delaware; and for a period of at least
two (2) years after the Closing Date, no undue burden is imposed on the
Acquiring Fund or its shareholders.
2. VALUATION
2.1. With respect to the Reorganization:
(a) The net value of the Target Fund's Assets to be acquired by the
Acquiring Fund hereunder shall be computed as of the Valuation Time (defined
below) by calculating the value of the Assets, which shall reflect the
declaration of any dividends, and subtracting therefrom the amount of the
Liabilities using the valuation procedures established by the Acquiring Fund's
Board of Trustees ("ACQUIRING FUND'S VALUATION PROCEDURES").
(b) The number of shares issued by the Acquiring Fund (including
fractional shares, if any, rounded to the nearest thousandth) in exchange for
the Target Fund's Assets shall equal the number of shares of the Target Fund
outstanding as of the Valuation Time.
(c) The net asset value per share of the Acquiring Fund's shares
issued in connection with the Reorganization shall be determined to the nearest
full cent as of the Valuation Time, by dividing the net value of the Target
Fund's Assets (described in Section 2.1(a) hereof) by the number of shares
issued by the Acquiring Fund in connection with the Reorganization (described
in Section 2.1(b) hereof).
(d) All computations of value shall be made by the Acquiring Fund's
administrator using the Acquiring Fund's Valuation Procedures and shall be
subject to review by the Target Fund's administrator and, if requested by
either the Target Entity or the Acquiring Entity, by the independent registered
public accountant of the requesting party.
(e) "VALUATION TIME" shall mean immediately after the close of
regular trading on the New York Stock Exchange ("NYSE") on the Valuation Date.
(f) "VALUATION DATE" shall mean the business day next preceding the
Closing Date.
3. CLOSING AND CLOSING DATE
3.1. The Reorganization shall close on [March 14, 2016] 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 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 agree.
3.2. With respect to the Reorganization:
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(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 (the "ACQUIRING 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 Entity shall direct the
Target Fund's custodian (the "TARGET CUSTODIAN") to deliver to the Acquiring
Custodian as of the Closing Date by book entry, in accordance with customary
practices of the Target Custodian and any securities depository (as defined in
Rule 17f-4 under 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 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 the Acquiring
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 the Acquiring Custodian,
such as brokers' confirmation slips.
(b) The Target Entity shall direct the Target Custodian to deliver,
at the Closing or promptly thereafter, a certificate of an authorized officer
stating that, 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.
(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 and such other information as the
Acquiring Fund may reasonably request.
(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 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 reasonably 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.
B-4
(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 Target Fund 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. Target Entity, on behalf of itself or, where applicable, the Target
Fund, represents and warrants to the Acquiring Entity and the
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, validly existing, and in good
standing under the laws of the State of Delaware with power under its
organizational 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
Commission as an investment company under the 1940 Act, and the registration of
the issued and outstanding 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 obtained or will
be obtained at or prior to the Closing Date 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 any time during the Target Fund's six (6) most recently
completed fiscal years 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;
(f) Except as otherwise disclosed to and accepted 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,
B-5
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, if disclosed in writing to the
Acquiring Fund, 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, if any, subject to such segregation and liens that apply to such
Assets;
(g) The Target Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a violation
of the Target Entity's organizational documents or a material violation of any
material 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 material obligation, or the imposition
of any material lien, encumbrance, penalty, or additional fee under any
agreement, indenture, instrument, contract, lease, judgment or decree to which
the Target Fund or the Target Entity is a party or by which it is bound;
(h) Except as otherwise disclosed in writing to and accepted 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 Entity's or 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 Entity's
or the Target Fund's financial condition, the conduct of its business or its
ability to consummate the transactions contemplated by this Agreement. 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 or investigations, 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, tribunal, arbitrator, governmental body or FINRA that
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(i) 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 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;
(j) 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. For
B-6
purposes of this paragraph, a decline in net asset value due to declines in
market value of securities held by the Target Fund, the redemption of Target
Fund shares held by shareholders of the Target Fund or the discharge of the
Target Fund's ordinary course liabilities shall not constitute a material
adverse change;
(k) On the Closing Date, all 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 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);
(l) 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. The Target 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;
(m) 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 or exemptions therefrom;
(n) 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 Board of Trustees of the Target Entity, on behalf of
the Target Fund, 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,
B-7
to bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles;
(o) Within a timeframe mutually agreeable to the parties, the Target
Fund will provide the Acquiring Fund with such information relating to the
Target Fund as is reasonably necessary for the preparation of the N-14
Registration Statement (as defined in Section 5.1(b)) in connection with the
meeting of shareholders of the Target Fund to approve this Agreement and such
information, as of the date provided through the date of the meeting of
shareholders of the Target Fund, 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 paragraph shall not apply to statements
in or omissions from the N-14 Registration Statement made in reliance upon and
in conformity with information that was furnished by the Acquiring Entity for
use therein;
(p) 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;
(q) The Target Fund 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;
(r) The Target Fund has no unamortized or unpaid organizational fees
or expenses;
(s) Except as otherwise disclosed in writing to and accepted by or on
behalf of the Acquired Fund, the Target Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with liability
to it prior to the Closing Date; and
(t) The Target Fund is in compliance in all material respects with
applicable regulations of the Internal Revenue Service pertaining to the
reporting of dividends and other distributions on and redemptions of its shares
of beneficial interest, including but not limited to those related to
shareholder cost basis reporting pursuant to Sections 1012, 6045, 6045A and
6045B of the Code and related Treasury regulations, and has withheld in respect
of dividends and other distributions and paid to the proper taxing authorities
all taxes required to be withheld, and is not liable for any penalties which
could be imposed thereunder.
4.2. The Acquiring Entity, on behalf of the Acquiring Fund, represents and
warrants to the Target Entity and the 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
organizational 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 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 is in full force and
effect;
B-8
(c) Prior to the Closing, the registration of the shares of the
Acquiring Fund to be issued in the Reorganization under the 1933 Act will be in
full force and effect;
(d) No consent, approval, authorization, or order of any court,
governmental authority or FINRA is required for the consummation by the
Acquiring Fund and the Acquiring Entity of the transactions contemplated
herein, except such as have been or will be obtained (at or prior to the
Closing Date) under the 1933 Act, the 1934 Act, the 1940 Act and state
securities laws;
(e) The prospectuses and statements of additional information of the
Acquiring Fund, including supplements thereto, to be used in connection with
the Reorganization 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;
(f) On the Closing Date, the Acquiring Fund will have no assets other
than nominal seed capital contributed by the initial shareholder of the
Acquiring Fund in accordance with Section 14(a) of the 1940 Act;
(g) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a violation
of the Acquiring Entity's organizational documents or a material violation of
any material 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 material obligation, or
the imposition of any material 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;
(h) 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 Entity's knowledge,
threatened against the Acquiring Entity or the Acquiring Fund that, if
adversely determined, would materially and adversely affect the Acquiring
Entity's or the Acquiring Fund's financial condition, the conduct of its
business or its ability to consummate the transactions contemplated by this
Agreement. 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;
(i) The Acquiring Fund is, and will be at the time of Closing, a new
series portfolio of the Acquiring Entity, without assets (other than nominal
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 commenced
operations, prepared books of account and related records or financial
statements or issued any
B-9
shares except those issued in a private placement to the initial shareholder of
the Acquiring Fund;
(j) By the Closing, the Acquiring Entity's board of trustees and
officers shall have taken all actions as are necessary under the 1933 Act, 1934
Act, 1940 Act and any applicable state securities laws for the Acquiring Fund
to commence operations as a registered open-end management investment company,
including, without limitation, approving and executing investment advisory
contracts in the manner required by the 1940 Act and approving and executing
such other contracts as are necessary for the operation of the Acquiring Fund;
(k) On the Closing Date, all Returns of the Acquiring Fund required by
law to have been filed by such date (including any extensions), if any, 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; and adequate
provision has been made in the Acquiring Fund financial statements for all
Taxes in respect of all periods ended on or before the date of such financial
statements;
(l) The Acquiring Fund intends to elect and qualify as a regulated
investment company for federal income tax purposes under Part I of Subchapter M
of the Code, the Acquiring Fund will be a "fund" as defined in Section
851(g)(2) of the Code, and the consummation of the transactions contemplated by
the Agreement will not cause the Acquiring Fund to fail to be qualified as a
regulated investment company from and after the Closing;
(m) All issued and outstanding Acquiring Fund shares are, and on the
Closing Date will be, duly authorized and validly issued and outstanding, fully
paid and non-assessable by the Acquiring 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 or exemptions
therefrom;
(n) 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 board 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 this Agreement by the
other parties hereto, 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;
(o) 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
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accordance with the terms of this Agreement, will be fully paid and
non-assessable by the Acquiring Entity and the Acquiring Fund;
(p) The Acquiring Fund 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;
(q) The Acquiring Fund has no unamortized or unpaid organizational
fees or expenses for which it does not expect to be reimbursed; and
(r) The information provided by the Acquiring Fund for use in the N-14
Registration Statement will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, in light of the
circumstances under which such statements were made, not misleading, on the
effective date of such N-14 Registration Statement, provided, however, that the
representations and warranties in this paragraph 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 Target Fund: (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 for the Target Fund 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 Target Fund in the ordinary course in all material
respects. The Acquiring Fund shall not have commenced operations, prepared books
of account and related records or financial statements or issued any shares
except for those operations commenced, books of accounts and related records or
financial statements prepared or shares issued in connection with a private
placement to the initial shareholder of the Acquiring Fund.
(b) The parties hereto shall cooperate in preparing, and the Acquiring
Entity shall file with the Commission, a 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 (the "N-14 REGISTRATION STATEMENT").
(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.
(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.
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(e) The Target Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Target Fund's shares.
(f) The Target Entity, on behalf of the Target Fund, 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, including such information as
the Acquiring Entity may reasonably request concerning Target Fund shares or
Target Fund Shareholders in connection with Acquiring Fund's cost basis
reporting and related obligations under Sections 1012, 6045, 6045A, and 6045B
of the Code and related Treasury regulations following the Closing 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 shareholders 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, (3) the tax books and records of the Target Fund
(including but not limited to any income, excise or information returns, as
well as any transfer statements (as described in Treas. Reg. [section] 1.6045A
-1 and [section] 1.6045B -1(a))) for purposes of preparing any returns required
by law to be filed for tax periods ending after the Closing Date, and (4) all
FASB ASC 740-10-25 (formerly FIN 48) workpapers and supporting statements
pertaining to the Target Fund (the "FIN 48 WORKPAPERS"). The foregoing
information will be provided within such timeframes as is mutually agreed by
the parties.
(g) 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.
(h) Promptly after the Closing, the Target Fund will make one or more
liquidating distributions to its shareholders consisting of the shares of the
Acquiring Fund received at the Closing, as set forth in Section 1.1(d) hereof.
(i) After the Closing Date, the Target Entity, on behalf of the Target
Fund, shall deliver to the Acquiring Fund a statement of the earnings and
profits (accumulated and current) of the Target Fund for federal income tax
purposes that will be carried over to the Acquiring Fund as a result of Section
381 of the Code.
(j) It is the intention of the parties that the Reorganization will
qualify as a reorganization with the meaning of Section 368(a)(1)(F) of the
Code. None of the parties to the Reorganization 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
such Reorganization to qualify as a reorganization within the meaning of
Section 368(a)(1)(F) of the Code.
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(k) 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, except as otherwise is mutually agreed by the parties.
(l) The Target Entity, on behalf of the Target Fund, shall deliver 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 of the following that have been issued to or for the benefit
of or that otherwise affect the Target Fund and which have continuing relevance:
(a) rulings, determinations, holdings or opinions issued by any federal, state,
local or foreign tax authority and (b) legal opinions.
(m) The Target Entity, on behalf of the Target Fund, agrees that the
acquisition of all Assets and Liabilities of the Target Fund by the Acquiring
Entity, on behalf of the Acquiring Fund, includes any right of action against
current and former service providers of the Target Fund, such right to survive
for the statute of limitation of any such claim. For the avoidance of all
doubt, the Target Entity hereby assigns to the Acquiring Entity all rights,
causes of action, and other claims against third parties relating to the Target
Fund, whether known or unknown, contingent or non-contingent, inchoate or
choate, or otherwise.
(n) The Target Entity and the Acquiring Entity will coordinate with
their respective administrators to provide a valuation check to determine
whether the use of the Acquiring Fund's Valuation Procedures will result in
material differences in the prices of the portfolio securities of the Target
Fund as compared to the prices of the same portfolio securities determined using
the Target Fund's valuation procedures, such valuation check to be conducted no
later than one month prior to the Closing Date and again within one week of the
Closing Date on mutually agreeable dates. In the event that such valuation check
reveals material pricing differences, the Target Entity and the Acquiring Entity
will work together, in good faith, to eliminate or minimize such differences
prior to the Closing.
(o) The Acquiring Entity covenants that it will not make any material
changes to the Acquiring Fund's Valuation Procedures prior to the Closing Date
without providing the Target Entity with written notice of such changes at least
ten days prior to the effective date of such changes.
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
Entity and the Acquiring 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 Acquiring Fund and the
Acquiring Entity contained in this Agreement shall be true and correct in all
material respects as of the date
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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 Entity 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 the
Target Entity 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 in all material respects 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 Acquiring Entity has not made any material changes to the
Acquiring Fund's Valuation Procedures between the date of this Agreement and
the Closing Date, except as provided in Section 5.1(o) herein;
(e) The Target Entity shall have received a favorable opinion of
Morgan, Lewis & Bockius LLP, counsel to the Acquiring Entity, dated the Closing
Date and in a form satisfactory to the Target Entity, to the following effect:
(i) The Acquiring Entity is duly organized, validly existing and
in good standing under the laws of the State of Delaware and has power
to own all of its properties and assets and to carry on its business
as presently conducted and the Acquiring Fund is a separate series
thereof duly constituted in accordance with the applicable provisions
of the 1940 Act and the organizational documents of the Acquiring
Entity;
(ii) This Agreement has been duly authorized, executed and
delivered on behalf of the Acquiring Entity and, assuming the due
authorization, execution and delivery of this Agreement by all other
parties, is the valid and binding obligation of the Acquiring Entity
enforceable against the Acquiring Entity in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and other equitable principles;
(iii) The shares of the Acquiring Fund to be issued for transfer
to the Target Fund's shareholders as provided by this Agreement are
duly authorized and upon such transfer and delivery will be validly
issued and outstanding and, assuming receipt by the Acquiring Fund of
the consideration contemplated hereby, fully paid and nonassessable
shares in the Acquiring Fund, and no shareholder of the Acquiring Fund
has any preemptive right of subscription or purchase in respect
thereof;
(iv) The execution and delivery of this Agreement did not, and
the performance by the Acquiring Entity of its obligations hereunder
will not, violate the Acquiring Entity's organizational documents;
B-14
(v) The Acquiring Entity is registered with the Commission as an
open-end management investment company under the 1940 Act, and, to
such counsel's knowledge, its registration with the Commission is in
full force and effect;
(vi) Except as disclosed in writing to the Target Entity, such
counsel knows of no material legal proceedings pending against the
Acquiring Fund or the Acquiring Entity; and
(vii) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by the Acquiring Entity of the
transactions contemplated by this Agreement except such as have been
obtained; and
(f) In connection with the opinion contemplated by Section 6.1(e) of
this Agreement, it is understood that counsel may reasonably rely upon the
representations made in this Agreement as well as certificates of officers of
the Acquiring Entity.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
7.1. With respect to the Reorganization, the obligations of the Acquiring
Entity, on behalf of the Acquiring Fund, to consummate the
transactions provided for herein shall be subject, at the Acquiring
Fund's election, to the performance by the Target Entity and 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 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 reasonably satisfactory to the
Acquiring Entity 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 in all material respects at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement;
(c) The Target Entity, on behalf of the Target Fund, shall have
delivered to the Acquiring Entity (i) a statement of the Target Fund's Assets,
together with a list of portfolio securities of the Target Fund showing the
adjusted tax basis of such securities by lot and the holding periods of such
securities, as of the Closing Date, certified by the Treasurer of the Target
Entity, (ii) the Target Fund Shareholder Documentation, (iii) the FIN 48
Workpapers, 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;
(d) The Target Custodian shall have delivered the certificate
contemplated by Sections 3.2(b) of this Agreement, duly executed by an
authorized officer of the Target Custodian;
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(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 Acquiring Entity shall have received a favorable opinion of
Stradley Ronon Stevens & Young LLP, counsel to the Target Entity, dated the
Closing Date and in a form satisfactory to the Acquiring Entity, to the
following effect:
(i) The Target Entity is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has power to
own all of its properties and assets and to carry on its business as
presently conducted and the Target Fund is a separate series thereof
duly constituted in accordance with the applicable provisions of the
1940 Act and the organizational documents of the Target Entity;
(ii) This Agreement has been duly authorized, executed and
delivered on behalf of the Target Entity and, assuming the N-14
Registration Statement complies with applicable federal securities
laws and assuming the due authorization, execution and delivery of
this Agreement by all other parties, is the valid and binding
obligation of the Target Entity enforceable against the Target Entity
in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and other equitable
principles;
(iii) The execution and delivery of this Agreement did not, and
the performance by the Target Entity of its obligations hereunder,
including the transfer of the Assets, will not, violate the Target
Entity's organizational documents;
(iv) The Target Entity is registered with the Commission as an
open-end management investment company under the 1940 Act, and, to
such counsel's knowledge, its registration with the Commission is in
full force and effect;
(v) Except as disclosed in writing to the Acquiring Entity, such
counsel knows of no material legal proceedings pending against the
Target Entity; and
(vi) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by the Target Entity of the transactions
contemplated by this Agreement except such as have been obtained; and
(g) In connection with the opinion contemplated by Section 7.1(f) of
this Agreement, it is understood that counsel may reasonably rely upon the
representations made in this Agreement as well as certificates of officers of
the Target Entity.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
TARGET FUND
With respect to the Reorganization, 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
B-16
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 organizational documents,
Delaware law, and the 1940 Act. Notwithstanding anything herein to the
contrary, neither the Target Fund nor the Acquiring Fund may waive the
condition set forth in this Section 8.1;
8.2. 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 or the transactions
contemplated herein;
8.3. 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 the 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;
8.4. 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 known to be contemplated under
the 1933 Act; and
8.5. The Target Entity and the Acquiring Entity shall have received on or
before the Closing Date an opinion of Morgan Lewis & Bockius LLP in
form and substance reasonably acceptable to the Target Entity and the
Acquiring Entity, as to the matters set forth on Schedule 8.5. In
rendering such opinion, Morgan Lewis & Bockius LLP may request and
rely upon 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 a Target Fund, Acquiring Fund or any Target Fund
Shareholder with respect to any asset as to which unrealized gain or
loss is required to be recognized for federal income tax purposes at
the end of a taxable year (or on the termination or transfer thereof)
under a mark-to-market system of accounting. Notwithstanding anything
herein to the contrary, neither the Target Fund nor the Acquiring Fund
may waive the condition set forth in this Section 8.5.
9. 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. Except as may be otherwise agreed to between Mondrian and Delaware,
Mondrian or an affiliate of Mondrian will bear the expenses relating
to the Reorganization, including, but not limited to: (1) the legal
costs to Delaware, the Target Fund and the Acquiring Fund of
B-17
preparing and negotiating this Agreement; (2) the legal, printing and
mailing costs associated with providing the supplement to the
prospectus of the Target Fund notifying shareholders of board approval
of this Agreement; (3) the legal costs associated with the N-14
Registration Statement preparation, filing and negotiations with the
Commission; (4) the fees charged by the Target Fund's independent
registered public accountants for services related to the
Reorganization; (5) the fees charged by the Acquiring Fund's transfer
agent for services relating to the Reorganization, including
deconversion, printing, mailing and imaging; (6) solicitation by proxy
of approval of the Reorganization by the Target Fund Shareholders,
including printing, mailing, and solicitation and tabulation of
shareholder votes; (7) legal costs associated with an opinion of
counsel issued to both the Target Fund and the Acquiring Fund
regarding the qualification of the Reorganization as a tax-free
reorganization; and (8) all necessary taxes in connection with the
Reorganization, including all applicable Federal, state and foreign
stock transfer stamps. For the avoidance of doubt, neither the
Acquiring Fund nor the Target Fund will bear the expenses relating to
the Reorganization. The parties hereto agree to effectuate the
Reorganization in a manner designed to minimize actual costs incurred.
The terms in this Section 9.2 shall not supersede any separate
agreement by Mondrian and Delaware with respect to the fees and
expenses relating to the Reorganization.
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. Each such party or their respective agents will retain
until the applicable period for assessment under applicable law (giving effect
to any and all extensions or waivers) has expired all returns, schedules and
work papers and all material records or other documents relating to Tax matters
and financial reporting of tax positions of the Target Fund and the Acquiring
Fund for its taxable period first ending after the Closing of the
Reorganization and for all prior taxable periods for which the statute of
limitation had not run at the time of the Closing, provided that the Target
Entity shall not be required to maintain any such documents that it has
delivered to the Acquiring Fund.
If applicable, the Acquiring Fund shall receive certificates
following the Closing, promptly upon reasonable request, from the principal
executive officer and principal financial officer, or persons performing
similar functions, of the Target Entity to the effect that such principal
executive officer and principal financial officer, or persons performing
similar functions, of the Target Entity have concluded that, based on their
evaluation of the effectiveness of the Target Entity's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the 1940 Act), to the best of
their knowledge, the design and operation of such procedures were effective to
provide reasonable assurance regarding the reliability of information provided
by the Target Entity to the Acquiring Entity with respect to the Target Fund's
operations prior to the Closing that is required to be disclosed by the
Acquiring Entity on Forms N-CSR and N-Q or any forms adopted by the Commission
in replacement of Forms N-CSR or N-Q.
11. INDEMNIFICATION
11.1. Mondrian agrees to indemnify and hold harmless the Target Entity and
each of the Target Entity's officers and trustees and the Target Fund
from and against any and all losses,
B-18
claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs
of investigation) to which the Target Entity or any of its
directors/trustees or officers or the Target Fund 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. This indemnification obligation shall survive the
termination of this Agreement and the Closing.
11.2. Delaware agrees to indemnify and hold harmless the Acquiring Entity
and each of its officers and trustees and the Acquiring Fund 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 the Acquiring Entity
or any of its trustees or officers or the Acquiring Fund 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. This indemnification obligation shall survive the
termination of this Agreement and the Closing.
12. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES AND COVENANTS
12.1. Except as described in Section 9.2, and in a separate confidentiality
agreement between the Acquiring Entity and the Target Entity (the
"CONFIDENTIALITY AGREEMENT"), 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. The covenants to be performed after the
Closing shall survive the Closing.
13. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by (i) mutual agreement of the Acquiring Entity and the
Target Entity; or (ii) by either the Acquiring Entity or the Target Entity if
the Closing shall not have occurred on or before [ ], unless such date is
extended by mutual agreement of the Acquiring Entity and the Target Entity;
(iii) by either the Acquiring Entity or the Target Entity 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; (iv) by the
Acquiring Entity if any condition precedent to its obligations set forth herein
has not been fulfilled or waived by the Acquiring Entity; or (v) by the Target
Entity if any condition precedent to its obligations set forth herein has not
been fulfilled or waived by the Target Entity. 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 directors/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.
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14. AMENDMENTS
This Agreement may be amended, modified or supplemented in a writing
signed by the parties hereto to be bound by such Amendment.
15. HEADINGS; GOVERNING LAW; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY;
PUBLICITY; SEVERABILITY; EFFECT OF ELECTRONIC DOCUMENTS
15.1. 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.
15.2. 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.
15.3. 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.
15.4. This agreement may be executed in any number of counterparts, each of
which shall be considered an original.
15.5. It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of their respective directors or
trustees, shareholders, nominees, officers, agents, or employees
personally, but shall bind only the property of (a) the Target Fund or
the Acquiring Fund, as applicable, as provided in their respective
organizational documents and (b) the other parties. 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.
15.6. Any public announcements or similar publicity with respect to this
Agreement or the transactions contemplated herein will be made at such
time and in such manner as the parties mutually shall agree in
writing, provided that nothing herein shall prevent either party from
making such public announcements as may be required by applicable law,
as determined by the disclosing party on the advice of counsel, in
which case the party issuing such statement or communication shall
advise the other party prior to such issuance.
15.7. Whenever possible, each provision and term of this Agreement shall be
interpreted in a manner to be effective and valid, but if any
provision or term of this Agreement is held to be prohibited by law or
invalid, then such provision or term shall be ineffective only in the
jurisdiction or jurisdictions so holding and only to the extent of
such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provision or term or the
remaining provisions or terms of this Agreement.
15.8. A facsimile or electronic (E.G., PDF) signature of an authorized
officer of a party hereto on this Agreement and/or any transfer or
closing document shall have the same effect as if executed in the
original by such officer.
B-20
16. CONFIDENTIALITY
Each party will hold, and will cause its board members, officers,
employees, representatives, agents and affiliated persons to hold, in strict
confidence, and not disclose to any other person, and not use in any way except
in connection with the transactions herein contemplated, without the prior
written consent of the disclosing party, all confidential information obtained
from the disclosing party in connection with the transactions contemplated by
this Agreement, except such information may be disclosed: (i) to governmental
or regulatory bodies, and, where necessary, to any other person in connection
with the obtaining of consents or waivers as contemplated by this Agreement;
(ii) if required by court order or decree or applicable law; (iii) if it is
publicly available through no act or failure to act of such party; (iv) if it
was already known to such party on a non-confidential basis on the date of
receipt; (v) during the course of or in connection with any litigation,
government investigation, arbitration, or other proceedings based upon or in
connection with the subject matter of this Agreement, including, without
limitation, the failure of the transactions contemplated hereby to be
consummated; or (vi) if it is otherwise expressly provided for herein or in the
Confidentiality Agreement.
In the event of a termination of this Agreement, each party agrees
that it, along with its board members, employees, representative agents and
affiliated persons, shall, and shall cause their affiliates to, except with the
prior written consent of the other party, keep secret and retain in strict
confidence, and not use for the benefit of itself or themselves, nor disclose
to any other persons, any and all confidential or proprietary information
relating to the disclosing party and their related parties and affiliates,
whether obtained through their due diligence investigation, this Agreement or
otherwise, except such information may be disclosed: (i) if required by court
order or decree or applicable law; (ii) if it is publicly available through no
act or failure to act of such party; (iii) if it was already known to such
party on a non-confidential basis on the date of receipt; (iv) during the
course of or in connection with any litigation, government investigation,
arbitration, or other proceedings based upon or in connection with the subject
matter of this Agreement, including, without limitation, the failure of the
transactions contemplated hereby to be consummated; or (v) if it is otherwise
expressly provided for herein.
17. NOTICES
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 TARGET ENTITY:
Delaware Pooled Trust
2005 Market Street, 9(th) Floor
Philadelphia, PA 19103
Attention: Legal Department
WITH A COPY TO:
Jana L. Cresswell
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
B-21
FOR ACQUIRING ENTITY:
Gallery Trust
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Attention: Legal Department
FOR DELAWARE:
Delaware Management Company
2005 Market Street, 9th Floor
Philadelphia, PA 19103
Attention: Legal Department
FOR MONDRIAN:
Mondrian Investment Partners Limited
10 Gresham Street, 5th Floor
London, England EC2V 7JD
Attention: Jason Menegakis
[SIGNATURE PAGE FOLLOWS]
B-22
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as set forth below.
DELAWARE POOLED TRUST,
on behalf of The International Equity Portfolio
By: ______________________
Name:
Title:
GALLERY TRUST, on behalf of the Mondrian International Equity Fund
By: ______________________
Name:
Title:
DELAWARE MANAGEMENT COMPANY, a series of Delaware Management Business Trust,
solely for the purposes of Sections 1.1(f), 9.2 and 11.2 of this Agreement
By: ______________________
Name:
Title:
MONDRIAN INVESTMENT PARTNERS LIMITED solely for the purposes of Sections
1.1(g), 9.2 and 11.1 of this Agreement
By: ______________________
Name:
Title:
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
B-23
SCHEDULE 8.5
TAX OPINIONS
(i) The acquisition by the Acquiring Fund of all of the assets of the
Target Fund, as provided for in the Agreement, in exchange 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, will qualify as a reorganization within the meaning of Section
368(a)(1)(F) of the Code, and the Target Fund and the Acquiring Fund each will
be a "party to the reorganization" within the meaning of Section 368(b) of the
Code.
(ii) No gain or loss will be recognized by the 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 will 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 will be the same as the tax basis of such assets in the hands of
the Target Fund immediately prior to the transfer 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 will 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 will be recognized by the shareholders of the
Target Fund upon the exchange of all of their Target Fund shares for the
Acquiring Fund shares (including fractional shares to which they may be
entitled) pursuant to Section 354(a) of the Code.
(viii) The aggregate tax basis of the Acquiring Fund shares received
by a shareholder of the Target Fund (including fractional shares to which they
may be entitled) will be the same as the aggregate tax basis of the Target Fund
shares exchanged therefor pursuant to Section 358(a)(1) of the Code.
(ix) The holding period of the Acquiring Fund shares received by a
shareholder of the Target Fund (including fractional shares to which they may
be entitled) will include the holding period of the Target Fund shares
exchanged therefor, provided that the shareholder held the Target Fund shares
as a capital asset on the date of the exchange pursuant to Section 1223(1) of
the Code.
(x) The Acquiring Fund will succeed to and take into account the
items of the Target Fund described in Section 381(c) of the Code.
B-24
EXHIBIT C
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Target Fund's financial performance for the past 5 fiscal years. Certain
information reflects financial results for a single Target Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Target Fund (assuming reinvestment of all dividends
and distributions). The information has been audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, whose report, along with
the Target Fund's financial statements, is included in the Target Fund Annual
Report, which is available upon request by calling 800-231-8002.
YEAR ENDED
-----------------------------------------------------------------------
10/31/15 10/31/14 10/31/13 10/31/12 10/31/11
-------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.120 $15.340 $12.840 $13.120 $13.680
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net Investment Income(1) 0.375 0.629 0.337 0.441 0.471
Net Realized and Unrealized Gain (Loss) (0.577) (0.429) 2.700 (0.183) (0.596)
------------ -------- -------- ---------- --------
Total From Investment Operations (0.202) 0.200 3.037 0.258 (0.125)
------------ -------- -------- ---------- --------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net Investment Income (0.678) (0.420) (0.537) (0.538) (0.435)
------------ -------- -------- ---------- --------
Total Dividends and Distributions (0.678) (0.420) (0.537) (0.538) (0.435)
------------ -------- -------- ---------- --------
NET ASSET VALUE, END OF PERIOD $14.420 $15.120 $15.340 $12.840 $13.120
============ ======== ======== ========== ========
TOTAL RETURN(2) (1.39)% 1.46% 24.59% 2.26% (0.88)%
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) $358,381 $446,527 $491,683 $467,827 $589,109
Ratio of Expenses to Average Net Assets 0.88% 0.86% 0.88% 0.85% 0.77%
Ratio of Net Investment Income to
Average Net Assets 2.54% 4.04% 2.48% 3.56% 3.48%
Portfolio Turnover Rate 28%(3) 21% 20% 16%(3) 22%
(1) THE AVERAGE SHARES OUTSTANDING METHOD HAS BEEN APPLIED FOR PER SHARE
INFORMATION.
(2) TOTAL INVESTMENT RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE OF A
SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DIVIDENDS AND
DISTRIBUTIONS AT NET ASSET VALUE.
(3) EXCLUDES THE VALUE OF TARGET FUND SECURITIES RECEIVED OR DELIVERED AS A
RESULT OF IN-KIND PURCHASES OR REDEMPTIONS OF THE TARGET FUND'S CAPITAL
SHARES.
C-1
STATEMENT OF ADDITIONAL INFORMATION
TO THE
REGISTRATION STATEMENT ON FORM N-14 FILED BY:
Gallery Trust
on behalf of its series
Mondrian International Equity Fund
One Freedom Valley Drive
Oaks, Pennsylvania 19456
(800) 932-7781
RELATING TO THE MARCH [8], 2016 SPECIAL MEETING OF SHAREHOLDERS OF
THE INTERNATIONAL EQUITY PORTFOLIO
a series of Delaware Pooled Trust
JANUARY [ ], 2016
This Statement of Additional Information, which is not a prospectus, supplements
and should be read in conjunction with the Proxy Statement/Prospectus dated
January [ ], 2016, relating specifically to the Special Meeting of
Shareholders of The International Equity Portfolio to be held on March [8], 2016
(the "Proxy Statement/Prospectus"). Copies of the Proxy Statement/Prospectus
may be obtained at no charge by writing to Mondrian International Equity Fund,
One Freedom Valley Drive, Oaks, Pennsylvania 19456, or by calling [ ].
TABLE OF CONTENTS
PAGE
General Information 1
Incorporation by Reference 1
Pro Forma Financial Information 1
GENERAL INFORMATION
TARGET FUND ACQUIRING FUND
The International Equity Portfolio, Mondrian International Equity Fund,
a series of Delaware Pooled Trust a series of Gallery Trust
This Statement of Additional Information relates to (a) the acquisition of all
of the assets and assumption of all of the liabilities of the Target Fund by the
Acquiring Fund in exchange for shares of the Acquiring Fund; (b) the
distribution of such shares to the shareholders of the Target Fund; and (c) the
liquidation and termination of the Target Fund (the "Reorganization"). Further
information is included in the Proxy Statement/Prospectus and in the documents
listed below, which are incorporated by reference into this Statement of
Additional Information.
INCORPORATION OF DOCUMENTS BY REFERENCE INTO THE STATEMENT OF ADDITIONAL
INFORMATION
Because the Acquiring Fund was newly created for purposes of this
reorganization, the Acquiring Fund has not published an annual or semiannual
report to shareholders. This Statement of Additional Information incorporates
by reference the following documents, which have been filed with the Securities
and Exchange Commission and will be sent to any shareholder requesting this
Statement of Additional Information:
1. Statement of Additional Information dated February 27, 2015 for the
Target Fund (the "Target Fund SAI").
2. Supplement dated April 8, 2015 to the Target Fund SAI.
3. Supplement dated April 22, 2015 to the Target Fund SAI.
4. Statement of Additional Information dated January [ ], 2016 for the
Acquiring Fund.
5. The Target Fund's audited financial statements and related report of
the independent public accounting firm included in the Target Fund
Annual Report to Shareholders for the fiscal year ended October 31,
2015 (the "Target Fund Annual Report"). No other parts of the Target
Fund Annual Report are incorporated herein by reference.
PRO FORMA FINANCIAL INFORMATION
Under the Agreement and Plan of Reorganization, the Target Fund is proposed to
be reorganized into the Acquiring Fund. Pro forma financial information has not
been prepared for the Reorganization because the Acquiring Fund is a newly
organized shell series with no assets (other than seed capital) or liabilities
that will commence investment operations upon completion of the Reorganization
and continue the operations of the Target Fund. The Target Fund will be the
accounting survivor of the Reorganization.
1
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION:
A Trustee, when acting in such capacity, shall not be personally liable to any
person other than the Trust or a beneficial owner for any act, omission or
obligation of the Trust or any Trustee all as contemplated by Section 3803(b)
of the Delaware Statutory Trust Act (the "Delaware Act"). A Trustee shall not
be liable for any act or omission or any conduct whatsoever in his capacity as
Trustee, including for errors of judgment or mistakes of fact or law, provided
that nothing contained in the Agreement and Declaration of Trust or in the
Delaware Act shall protect any Trustee against any liability to the Trust or
its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee. No Trustee who has been
determined to be an "audit committee financial expert" (for purposes of Section
407 of the Sarbanes-Oxley Act of 2002 or any successor provision thereto) by
the Trustees shall be subject to any greater liability or duty of care in
discharging such Trustee's duties and responsibilities by virtue of such
determination than is any Trustee who has not been so designated.
The Trust shall indemnify each person who is, or has been, a Trustee, officer,
employee or agent of the Trust, any person who is serving or has served at the
Trust's request as a trustee, director, officer, employee or agent of another
person (including, but not limited to, a wholly-owned subsidiary) in which the
Trust or a series thereof has any interest as a shareholder, creditor or
otherwise to the fullest extent permitted by law and in the manner provided in
the By-Laws.
The officers, employees, Advisory Board (as such term is defined in the 1940
Act) members and agents of the Trust shall be entitled to the protection
against personal liability for the obligations of the Trust under Section
3803(c) of the Delaware Act. No officer, employee, Advisory Board member or
agent of the Trust shall be liable to the Trust, its shareholders, or to any
Trustee, officer, employee, or agent thereof for any action or failure to act
(including, without limitation, the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for his own bad faith,
willful misconduct, gross negligence or reckless disregard of his duties.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "1933 Act") may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
1
ITEM 16. EXHIBITS:
(1)(a) Certificate of Trust of the Registrant, dated August 25, 2015, is
incorporated herein by reference to Exhibit (a)(1) to the Registrant's
Registration Statement on Form N-1A (File No. 333-206713), filed with
the U.S. Securities and Exchange Commission (the "SEC") via EDGAR on
September 1, 2015, Accession No. 0001135428-15-000702.
(1)(b) Registrant's Amended and Restated Agreement and Declaration of Trust,
dated September 17, 2015 (the "Agreement and Declaration of Trust"),
is incorporated herein by reference to Exhibit (a)(2) to Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on Form
N-1A (File No. 333-206713), filed with the SEC via EDGAR on November
25, 2015, Accession No. 0001135428-15-000859.
(2) Registrant's By-Laws, dated September 17, 2015 (the "By-laws"), is
incorporated herein by reference to Exhibit (b) to Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement on Form
N-1A (File No. 333-206713), filed with the SEC via EDGAR on November
25, 2015, Accession No. 0001135428-15-000859.
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization is attached as Exhibit B
to the Proxy Statement/Prospectus contained in this Registration
Statement.
(5) See Article III and Article V of the Agreement and Declaration of
Trust, which has been incorporated by reference in Exhibit (1)(b) to
this Registration Statement.
(6)(a) Form of Investment Advisory Agreement between the Registrant and
Mondrian Investment Partners Limited is filed herewith.
(6)(b) Form of Expense Limitation Agreement between the Registrant and
Mondrian Investment Partners Limited is filed herewith.
(7) Form of Distribution Agreement between the Registrant and SEI
Investments Distribution Co is filed herewith.
(8) Not Applicable.
(9) Form of Custodian Agreement between the Registrant and Brown Brothers
Harriman & Co. is filed herewith.
(10) Not Applicable.
(11) Opinion and Consent of Morgan, Lewis & Bockius LLP regarding the
legality of the securities being registered is filed herewith.
(12) Form of Opinion of Morgan, Lewis & Bockius LLP regarding tax matters
is filed herewith.
(13)(a) Form of Administration Agreement between the Registrant and SEI
Investments Global Funds Services is filed herewith.
3
(13)(b) Form of Transfer Agency Agreement between the Registrant and Atlantic
Fund Services, LLC is filed herewith.
(14)(a) Consent of Independent Registered Public Accounting Firm is filed
herewith.
(14)(b) Consent of Morgan, Lewis & Bockius LLP is filed herewith.
(15) Not Applicable.
(16) Powers of Attorney, each dated December 10, 2015, for William M.
Doran, Jon C. Hunt, Thomas Lemke, Randall S. Yanker, Michael Beattie
and Stephen Connors are filed herewith.
(17)(a) Form of Proxy Card is filed herewith.
(17)(b) Prospectus and Statement of Additional Information dated February 27,
2015 for Delaware Pooled Trust (the "Target Trust"), with respect to
the International Equity Portfolio (the "Target Fund") is incorporated
herein by reference to Post-Effective Amendment No. 83 to the Target
Trust's Registration Statement on Form N-1A filed with the SEC via
EDGAR on February 27, 2015, Accession No. 0001206774-15- 000674.
(17)(c) Supplement dated December 11, 2015 to the Prospectus dated February
27, 2015 for the Target Trust, with respect to the Target Fund, is
incorporated herein by reference to the definitive materials filed
with the SEC via EDGAR on December 11, 2015 pursuant to Rule 497 under
the 1933 Act, Accession No. 0001137439-15-000260.
(17)(d) Supplement dated April 8, 2015 to the Statement of Additional
Information dated February 27, 2015 for the Target Trust, with respect
to the Target Fund (the "Target Fund SAI"), is incorporated herein by
reference to the definitive materials filed with the SEC via EDGAR on
April 8, 2015 pursuant to Rule 497 under the 1933 Act, Accession No.
0001609006-15-000056.
(17)(e) Supplement dated April 22, 2015 to the Target Fund SAI is incorporated
herein by reference to the definitive materials filed with the SEC via
EDGAR on April 22, 2015 pursuant to Rule 497 under the 1933 Act,
Accession No. 0001582816-15-000116.
(17)(f) Preliminary Prospectus and Statement of Additional Information dated
December 15, 2015 for the Registrant, with respect to the Mondrian
International Equity Fund (the "Acquiring Fund"), is incorporated
herein by reference to Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A filed with the SEC
via EDGAR on December 15, 2015, Accession No. 0001135428-15-000908.
(17)(g) The audited financial statements and related report of the independent
public accounting firm included in the Target Trust's Annual Report to
Shareholders for the
3
fiscal year ended October 31, 2015, with respect to the Target Fund,
is incorporated herein by reference to the Annual Certified
Shareholder Report on Form N-CSR filed with the SEC via EDGAR on
December 21, 2015, Accession No. 0001206774-15-003883.
ITEM 17. UNDERTAKINGS:
(1) The undersigned Registrant agrees that, prior to any public reoffering of
the securities registered through the use of a prospectus which is part of this
registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for the reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective amendment, an
opinion of counsel supporting the tax consequences of the Reorganization within
a reasonably prompt time after receipt of such opinion.
4
SIGNATURES
As required by the Securities Act of 1933, as amended, this registration
statement has been signed on behalf of the Registrant, in the City of Oaks,
Commonwealth of Pennsylvania on the 22nd day of December, 2015.
GALLERY TRUST
By: *
--------------------------
Michael Beattie, President
As required by the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
* Trustee December 22, 2015
------------------------------
William M. Doran
* Trustee December 22, 2015
------------------------------
Jon C. Hunt
* Trustee December 22, 2015
------------------------------
Thomas P. Lemke
* Trustee December 22, 2015
------------------------------
Randall S. Yanker
* President December 22, 2015
------------------------------
Michael Beattie
* Treasurer, Controller December 22, 2015
------------------------------ & Chief Financial
Stephen Connors Officer
*By: /s/ Dianne M. Descoteaux
--------------------------
Dianne M. Descoteaux
Attorney-in-Fact
5
EXHIBIT INDEX
(6)(a) Form of Investment Advisory Agreement.
(6)(b) Form of Expense Limitation Agreement.
(7) Form of Distribution Agreement.
(9) Form of Custodian Agreement.
(11) Opinion and Consent of Morgan, Lewis & Bockius LLP regarding the legality
of the securities being registered.
(12) Form of Opinion of Morgan, Lewis & Bockius LLP regarding tax matters.
(13)(a) Form of Administration Agreement.
(13)(b) Form of Transfer Agency Agreement.
(14)(a) Consent of Independent Registered Public Accounting Firm.
(14)(b) Consent of Morgan, Lewis & Bockius LLP.
(16) Powers of Attorney, each dated December 10, 2015, for William M. Doran,
Jon C. Hunt, Thomas Lemke, Randall S. Yanker, Michael Beattie and Stephen
Connors.
(17)(a) Form of Proxy Card.
6