UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the registrant: /x/
Filed by a party other than the registrant: / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMMONWEALTH INTERNATIONAL SERIES TRUST
---------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Page 1
COMMONWEALTH INTERNATIONAL SERIES TRUST
ON BEHALF OF ITS FUNDS
COMMONWEALTH AUSTRALIA/NEW ZEALAND FUND
COMMONWEALTH JAPAN FUND
COMMONWEALTH GLOBAL FUND
COMMONWEALTH REAL ESTATE SECURITIES FUND
April 24, 2006
To the Shareholders of the Commonwealth International Trust Family of Funds:
The Commonwealth International Series Trust (the "Trust") is holding a
special meeting of its shareholders on Wednesday, May 31, 2006, at 10:00 a.m.
(cdt) at 5847 San Felipe, Suite 850, Houston, Texas 77057. If a quorum is not
present or represented by proxy on that date, the meeting will be adjourned to
another date and time without further notice.
The Trust is a Massachusetts Business Trust, operating as an open end
registered management Investment Company. The Trust has previously authorized
the division of its shares into four (4) separate series (each a "Fund" and
together the "Funds") and currently offers shares of the following Funds to the
public: Commonwealth Australia/New Zealand Fund, Commonwealth Japan Fund,
Commonwealth Global Fund and Commonwealth Real Estate Securities Fund. Each Fund
has only one (1) class of stock.
Enclosed is a proxy statement that has been prepared in anticipation of
the May 31, 2006, special meeting of shareholders of all the Commonwealth Funds.
Shareholders of each Commonwealth Fund are asked to consider two (2) matters.
I(a) - (g) Shareholders of each Fund are asked to approve the revision of
the Fund's fundamental investment restrictions in the Fund's
Statement of Additional Formation.
II. Shareholders of each Fund are asked to approve such other
business as may properly come before the meeting, or any
adjournments thereof.
This proxy represents an effort to simplify your Fund's investment
restrictions. It is a result of many meetings by your Fund's Board of Trustees
to consider these proposals. Therefore, to enhance governance and the Board's
overseeing of the Funds, which have many operational issues in common, the Board
of Trustees, including all the Independent Trustees, believe that each of these
proposals set forth herein would be in the best interests of each Fund and
recommend that each Fund's shareholders vote FOR them. Please read the enclosed
materials, complete and execute the enclosed "Proxy Card" and return it promptly
in the enclosed envelope that requires no postage if mailed in the United
States.
Shareholders of record as of the close of business on March 17, 2006 are
entitled to vote at the meeting and any related follow-up meetings.
YOU ARE URGED TO VOTE PROMPTLY TO MINIMIZE EXPENSES OF ADDITIONAL SOLICITATIONS.
As always, we thank you for your confidence and support.
Sincerely,
Jack Ewing, Chairman of the Board
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE AND RETURN THE ENCLOSED "PROXY CARD".
Page 2
COMMONWEALTH INTERNATIONAL SERIES TRUST
ON BEHALF OF ITS FUNDS
COMMONWEALTH AUSTRALIA/NEW ZEALAND FUND
COMMONWEALTH JAPAN FUND
COMMONWEALTH GLOBAL FUND
COMMONWEALTH REAL ESTATE SECURITIES FUND
5847 San Felipe, Suite 850, Houston, Texas 77057
Toll Free: 1-888-345-1898
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held May 31, 2006
NOTICE IS HEREBY GIVEN that a special meeting of shareholders ("Meeting")
of the Commonwealth International Series Trust ("Trust"), which include
shareholders of its four (4) series ("Funds"), Commonwealth Australia/New
Zealand Fund ("Australia/New Zealand Fund"), Commonwealth Japan Fund ("Japan
Fund"), Commonwealth Global Fund ("Global Fund") and the Commonwealth Real
Estate Securities Fund ("Real Estate Securities Fund"), will be held at 10:00
a.m. (cdt) on Wednesday, May 31, 2006, at 5847 San Felipe, Suite 850, Houston,
Texas 77057 for the following purposes:
I(a) - (g) Shareholders of each Fund are asked to approve the revision of
the Funds' fundamental investment restrictions in the Funds'
proxy statement.
II. Shareholders of each Fund are asked to approve such other
business as may properly come before the meeting, or any
adjournments thereof.
The Board of Trustees has fixed the close of business on March 17, 2006 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the meeting or at any adjournment(s) thereof.
Shareholders are requested to complete, date and sign the enclosed form of
proxy (whether or not they intend to attend the meeting in person) and to return
the proxy promptly in the enclosed envelope that requires no postage if mailed
in the United States. The enclosed proxy is solicited on behalf of the Board of
Trustees of the Trust who recommends that you vote FOR the proposals.
By Order of the Board of Trustees,
Dave Ganley
Assistant Secretary
Houston, Texas
April 24, 2006
Page 3
COMMONWEALTH INTERNATIONAL SERIES TRUST
ON BEHALF OF ITS FUNDS
COMMONWEALTH AUSTRALIA/NEW ZEALAND FUND
COMMONWEALTH JAPAN FUND
COMMONWEALTH GLOBAL FUND
COMMONWEALTH REAL ESTATE SECURITIES FUND
5847 San Felipe, Suite 850, Houston Texas 77057
Toll Free: 1-888-345-1898
----------
PROXY STATEMENT
Dated: April 24, 2006
----------
SPECIAL MEETING OF SHAREHOLDERS
To Be Held: May 31, 2006
This proxy statement contains the information you should know before
voting on the proposals summarized below.
In addition, current financial and other information is available in the
Funds Annual Report. The Fund will furnish without charge a copy of its most
recent annual report and any more recent semi-annual report to any shareholder
upon request. Shareholders who want to obtain a copy of the Funds' reports
should direct all written requests to the attention of the Fund, at the address
listed above, or may call InCap Fund Administration Services at 1-888-345-1898
or visit the Fund's website at www.commonwealthfunds.com.
WHEN IS THE SPECIAL MEETING?
The Board of Trustees (the "Board") of the Commonwealth International
Series Trust (the "Trust") has voted to call a special meeting of all
shareholders of each of its four (4) separate series listed above (each a "Fund"
and together the "Funds"), in order to seek shareholder approval of the
proposals set forth below relating to the Trust. The meeting will be held at the
Trust's offices, located at 5847 San Felipe, Suite 850, Houston, Texas 77057 at
10:00 a.m., Central Time, on Wednesday, May 31, 2006, and at any adjournments of
the meeting held on a later date, for the purposes as set forth in the
accompanying notice of special meeting of shareholders. If you expect to attend
the meeting in person, please call the Trust at 1-888-345-1898 to inform them of
your intentions.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record of each Fund as of the close of business on March
17, 2006 (the "Record Date") are entitled to vote on all of the business
relating to each Fund for which they are a shareholder at the special
shareholder meeting and any adjournments thereof. Each share is entitled to one
vote. Shares represented by properly executed proxies, unless revoked before or
at the meeting, will be voted according to the shareholder's instructions. If
you sign a proxy but do not fill in a vote, your shares will be voted in favor
of Proposal No. I. If any other business comes before the shareholder meeting,
your shares will be voted at the discretion of the persons named as proxies if
you vote FOR Proposal II.
Page 4
WHAT ITEMS OF TRUST BUSINESS AM I BEING ASKED TO VOTE ON?
The Board is asking you to approve two (2) proposals: (1) the modification
or restatement of the Funds' fundamental investment restriction, as described in
the Funds' proxy statement; and (2) such other business as may properly come
before the meeting or any adjournments thereof.
WHY AM I BEING ASKED TO VOTE ON THE AMENDMENT AND RESTATEMENT OF THE FUNDS'
FUNDAMENTAL RESTRICTIONS?
The Investment Company Act of 1940, as amended, (the "Act") requires an
investment company to adopt certain specified investment restrictions which can
be changed only by a shareholder vote. Those restrictions are often referred to
as "fundamental" investment restrictions. In the past, fundamental investment
restrictions were adopted by the Funds, and in some cases amended by vote of the
shareholders of the affected Fund, in order to reflect regulatory, business or
industry conditions which were in effect at the time the particular action was
taken. The Funds' Advisor, FCA Corp, and the Board have reviewed each Fund's
fundamental investment restrictions with the goal of simplifying and conforming
the fundamental investment restrictions of the Commonwealth Funds to the terms
of the Act as interpreted or modified from time to time, which will simplify the
process of monitoring compliance with fundamental investment restrictions. These
Proposals seek shareholder approval of changes that are intended to further this
goal and to provide each Fund, consistent with its investment objectives and
strategies, with the flexibility to respond to changing markets, new investment
opportunities and future changes in applicable law.
The proposed revision to the fundamental investment restrictions are
discussed in detail below. Upon shareholder approval of these new fundamental
investment restrictions each would become effective as soon as practicable after
your Fund's prospectus and/or statement of additional information has been
supplemented to describe the revised restriction.
The reference below to modification and restatement is intended to include
no-action letters or interpretive positions or releases issued by the staff of
the Securities and Exchange Commission or another regulatory agency with
jurisdiction over the Funds. The Funds will provide appropriate notification to
its shareholders of any material interpretations and/or modifications.
The Act requires a vote of the shareholders of a fund whenever there is a
change in any fundamental investment restriction of the Fund. Accordingly, the
proposed change in the Funds' fundamental investment restrictions require your
approval under the Act as a shareholder of one or more of the Funds.
HOW WILL THESE CHANGES AFFECT ME AS A FUND SHAREHOLDER?
The Proposals seek to modify or restate existing fundamental restrictions
to conform them to the language of the Act as it may be modified or amended from
time to time.
WHICH PROPOSALS APPLY TO ME?
The table below summarizes each proposal to be presented at the meeting
and shows the Funds whose shareholders may vote for each proposal.
Page 5
PROPOSAL WHICH SHAREHOLDERS MAY VOTE
-------- ---------------------------
I. Approve the modification or restatement of:
(a). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's borrowing as described
herein.
(b). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's portfolio diversification as
described herein.
(c). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's portfolio concentration of
assets as described herein.
(d). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's underwriting of securities
as described herein.
(e). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's real estate investments as
described herein.
(f). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's investments in commodities
as described herein.
(g). The Fund's fundamental investment restriction All shareholders of each Fund
relating to the Fund's lending of portfolio securities
as described herein.
II. Approve such other business as shall be properly pre- All shareholders of each Fund
sented at the meeting or any adjournment thereof.
HOW DO I VOTE?
Voting By Proxy
To vote, complete, sign and date the enclosed proxy card and mail it back
to the Trust in the envelope provided. The Board urges you to fill out and
return your proxy card even if you plan to attend the meeting. Returning your
proxy card will not affect your right to attend the meeting and vote.
The Board has named Dave Ganley and Bonnie Scott, as proxies, and their
names appear on your proxy card(s). By signing your proxy card and returning it,
you are appointing these persons to vote for you at the meeting. If you properly
fill in your proxy card and return it to the Trust in time to vote, one of the
appointed proxies will vote your shares as you have directed. If you sign and
return your proxy card, but do not cast your votes on the proxy card, one of the
appointed proxies will vote your shares on each proposal as recommended by the
Board. Your vote(s) will be applied only to the Fund(s) for which you are a
shareholder and no other Fund. IF YOU OWN SHARES IN MORE THAN ONE FUND, YOU MUST
CAST YOUR VOTE FOR EACH FUND.
If an additional matter is presented for vote at the meeting, one of the
appointed proxies will vote in accordance with his or her best judgment if you
vote FOR Proposal II. At the time this proxy statement was printed, the Board
was not aware of any other matter that needed to be acted upon at the meeting
other than Proposals I(a)-(g) discussed in this proxy statement.
If you appoint a proxy by signing and returning your proxy card, you can
revoke that appointment at any time BEFORE it is exercised. You can revoke your
proxy by sending in another proxy with a later date, or by notifying the Trust's
Secretary in writing, BEFORE the meeting, that you have revoked your proxy, at
the following address: Bonnie Scott, Inspector of Election, 5847 San Felipe,
Suite 850, Houston Texas 77057
Page 6
Voting In Person
If you attend the meeting and wish to vote in person, you will be given a
ballot when you arrive. If you have already voted by proxy and wish to vote in
person instead, you will be given an opportunity to do so during the meeting. If
you attend the meeting, but your shares are held in the name of your broker,
bank or other nominee, you must bring with you a letter from that nominee
stating that you are the beneficial owner of the shares on the Record Date and
authorizing you to vote.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE PROPOSALS
DESCRIBED IN THIS PROXY STATEMENT.
WHAT IS A QUORUM AND WHY IS IT IMPORTANT?
A quorum is the number of outstanding shares of each Fund, as of the
Record Date, which must be present, in person or by proxy, in order for each
Fund to hold a valid shareholder meeting. The Fund cannot hold a valid
shareholder meeting unless there is a quorum of shareholders for each Fund
present in person or by proxy. The Trust's Declaration of Trust requires that
the presence, in person or by proxy, of a majority of the outstanding shares of
each Fund entitled to vote on a matter shall constitute a quorum, unless a
larger number of shares is required pursuant to law. In the absence of a quorum,
the meeting will be adjourned to a later date without further notice. The quorum
required for each Fund to hold a valid meeting as to each proposal:
PROPOSAL NUMBER OF SHARES REQUIRED FOR QUORUM
-------- ------------------------------------
I. Approve the modification or restatement of:
(a). The Fund's fundamental investment A majority of the outstanding shares of each Fund
restriction relating to the Fund's (as of March 17, 2006)
borrowing as described herein.
(b). The Fund's fundamental investment A majority of the outstanding shares of each Fund
restriction relating to the Fund's portfolio (as of March 17, 2006)
diversification as described herein.
(c). The Fund's fundamental investment A majority of the outstanding shares of each Fund
restriction relating to the Fund's portfolio (as of March 17, 2006)
concentration of assets as described herein.
(d). The Fund's fundamental investment A majority of the outstanding shares of each Fund
restriction relating to the Fund's under- (as of March 17, 2006)
writing of securities as described herein.
(e). The Fund's fundamental investment to the A majority of the outstanding shares of each Fund
Fund's real estate investments as described (as of March 17, 2006)
herein.
(f). The Fund's fundamental investment A majority of the outstanding shares of each Fund
restriction relating to the Fund's investments (as of March 17, 2006)
in commodities as described herein.
(g). The Fund's fundamental investment A majority of the outstanding shares of each Fund
restriction relating to the Fund's lending (as of March 17, 2006)
of portfolio securities as described herein.
II. Approve such other business as shall be properly A majority of the outstanding shares of each Fund
presented at the meeting or any adjournment thereof. (as of March 17, 2006)
Page 7
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, the broker is not allowed to vote your shares on proposals herein
stated unless it has received voting instructions from you. If your broker does
not vote your shares on one or more proposals because it has not received
instructions from you, those shares will be considered broker non-votes.
Broker non-votes and abstentions with respect to a proposal count as
present for purposes of establishing a quorum.
WHAT IS THE VOTE NECESSARY TO APPROVE EACH PROPOSAL?
The votes needed to approve each proposal:
PROPOSAL NUMBER OF SHARES REQUIRED TO APPROVE;
-------- -------------------------------------
I. Approve the modification or restatement of
(a). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating to the Fund's entitled to vote of each Fund are required to
borrowing as described herein. approve this Proposal.
(b). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating the Fund's portfolio entitled to vote of each Fund are required to
diversification as described herein approve this Proposal.
(c). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating to the Fund's portfolio entitled to vote of each Fund are required to
Concentration of Assets as described herein. approve this Proposal.
(d). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating to the Fund's underwriting entitled to vote of each Fund are required to
of securities as described herein. approve this Proposal.
(e). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating to the Fund's real estate entitled to vote of each Fund are required to
nvestments as described herein approve this Proposal.
(f). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating to the Fund's investments entitled to vote of each Fund are required to
in commodities as described herein. approve this Proposal.
(g). The Fund's fundamental investment The affirmative vote of a majority of the shares
restriction relating to the Fund's lending entitled to vote of each Fund are required to
of portfolio securities as described herein. approve this Proposal.
II. Approve such other business as shall be The affirmative vote of a majority of the shares
properly presented at the meeting or any entitled to vote of each Fund are required to
adjournment thereof. approve this Proposal.
Page 8
The Act defines a "majority" of the outstanding voting securities of each
Fund as the lesser of (a) the vote of holders of at least 67% of the voting
securities of each Fund present in person or by proxy, if more than 50% of such
shares are present in person or by proxy; or (b) the vote of holders of more
than 50% of the outstanding voting securities of the Fund.
Broker non-votes will not count as votes cast and will have the effect of
votes against each proposal herein set forth.
CAN THE MEETING BE ADJOURNED?
The appointed proxies may propose to adjourn the meeting, either in order
to solicit additional proxies or for other purposes. If there is a proposal to
adjourn the meeting, the affirmative vote of a majority of the outstanding
shares present at the meeting, in person or by proxy, is required to approve
such proposal.
WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY SOLICITATION?
Each Fund will pay its own allocable share of the cost of preparing,
printing and mailing the enclosed Proxy Card and Proxy Statement and all other
costs incurred in connection with the solicitation of proxies, including any
additional solicitation made by letter, telephone or telegraph (all such costs
are referred to as the "Proxy Costs"). The amount borne by each Fund amounts to
approximately the percentage of the net asset value of each Fund in relation to
the entire value of the Trust as of March 17, 2006.
WHO DO I CALL IF I HAVE QUESTIONS?
PLEASE CALL THE TRUST AT 1-888-345-1898 WITH ANY QUESTIONS YOU MAY HAVE
RELATING TO THIS PROXY STATEMENT. ALSO, AT YOUR REQUEST, THE FUND WILL FURNISH,
WITHOUT CHARGE, A COPY OF THE MOST RECENT ANNUAL REPORT AND/OR SEMI-ANNUAL
REPORT , BY FIRST CLASS MAIL, OR OTHER MEANS DESIGNED TO ASSURE PROMPT DELIVERY,
WITHIN THREE BUSINESS DAYS OF YOUR REQUEST.
WHICH SHAREHOLDERS MAY VOTE FOR THESE PROPOSALS?
All shareholders of record as of March 17, 2006 of each Fund may vote
their shares of that particular Fund for these proposals.
WHAT IS HAPPENING?
The Act requires mutual funds to adopt "fundamental investment
restrictions" covering certain types of investment practices. The Board of
Trustees has determined that it is in the best interest of the Funds that these
restrictions be described in conformity with the terms of the Act as interpreted
or modified from time to time.
In Proposal I(a) the Advisor to the Funds and the Board of Trustees
recommend that each Fund's fundamental investment restriction relating to the
permitted borrowing limits be conformed to the Act as interpreted or modified
from time to time. The Funds' current borrowing restriction is more restrictive
than the Act and unnecessarily complicates management of the Funds. As disclosed
in the SAI and the Prospectus, each dated February 27, 2006, as amended, the
Trust has received from the SEC a formal notice of investigation relating to
Page 9
certain activities of the Funds including alleged use of the Funds' line of
credit in violation of current restrictions. Specifically, each Fund's current
restriction is limited to borrowing as a temporary measure for extraordinary or
emergency purposes with a further limit to the lesser of 1/3 of the value of its
net assets taken at market value, at the time of borrowing, including the amount
borrowed or 10% of its total assets, valued at cost, excluding the amount
borrowed. Proposal I(a) is asking the shareholders of each Fund to amend the
Fund's borrowing limit by increasing it to 33 1/3 of its total assets valued at
the time of the borrowing. It is proposed that the ten percent (10%) of total
assets valued at cost, excluding the amount borrowed limit, be deleted.
Moreover, the requirement that borrowings be a temporary measure for
extraordinary or emergency purposes is proposed to be deleted. The revised
borrowing limit permits the Fund to borrow to the full extent permitted by the
Act.
In Proposals I(b)-(g) the Advisor and the Funds' Board of Trustees seek
shareholder approval to modify or restate the remaining fundamental investment
restrictions to conform each to the language of the Act as interpreted or
modified from time to time.
The Advisor expects the shareholders of the Funds will benefit from the
proposed modifications or restatements. The Funds would have borrowing authority
to the full extent authorized by the Act comparable to other similar mutual
funds enabling the Advisor to maximize the portfolio holdings. The proposed
modifications or restatements of the Funds' remaining investment restrictions
are also designed to produce a clearer and more concise set of restrictions
tailored to conform to the language of the Act as interpreted or modified from
time to time.
It is also anticipated that these modified or restated restrictions will
simplify compliance by the Advisor and the Funds as interpreted or modified from
time to time by the Act. Due to these factors, the Board of Trustees is
recommending that each Fund's shareholders approve the proposals.
Each current investment restriction, the corresponding proposed
restriction or amendment, and the Funds' rationale for the change are set forth
below.
The Board of Trustees believes that it is in the best interest of the
Funds that such fundamental restrictions apply to all the Funds under the Trust
and seeks approval thereof by all Funds. These proposed amendments are intended
to provide the Advisor with greater flexibility in managing the Funds'
portfolio. Should shareholders of each Fund approve the proposals, the Funds
will continue to be managed subject to the limitations imposed by the Act and
the rules and interpretive guidance provided there under, as well as the
investment objective, strategies, and policies expressed in the Funds'
prospectus and statement of additional information, as amended from time to
time.
Should a particular Fund's shareholders not approve a proposal to modify
or clarify, a particular fundamental investment restriction, the Fund's current
fundamental investment restriction, as set forth below, would continue to apply
unchanged.
PROPOSAL I
Proposal I(a) - Borrowing Money / Issuing Senior Securities.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
"The Fund may not borrow money, except that as a
temporary measure for extraordinary or emergency
purposes it may borrow from banks in an amount not to
exceed the lesser of 1/3 of the value of its net assets
taken at market value, at the time of the borrowing,
including the amount borrowed, or 10% of its total
assets, valued at cost, excluding the amount borrowed."
Page 10
"The Fund may not issue any senior securities, except as
appropriate to evidence indebtedness which it is
permitted to incur, and provided that collateral
arrangements with respect to forward contracts, futures
contracts or options, including deposits of initial and
variation margin, are not considered to be the issuance
of a senior security for purposes of this restriction."
If shareholders of a Fund approve Proposal I(a), the Fund's current
fundamental investment restrictions on borrowing and issuing senior securities
would be modified to read as follows:
"The Fund may not issue senior securities or borrow
money except as permitted under the Act and as
interpreted or modified from time to time."
Discussion of Proposed Modifications. Each Fund is permitted, consistent
with the Act, to borrow, and pledge its shares to secure such borrowing,
provided, that immediately thereafter there is asset coverage of at least 300%
for all borrowings by the Fund from a bank. If at any point the Funds assets
coverage falls below 300%, the Fund has three (3) calendar days (excluding
Sundays and holidays) to make the appropriate adjustments to bring the coverage
into compliance. The Act also permits a Fund to borrow for temporary purposes
only in an amount not exceeding 5% of the value of its total assets at the time
when the loan is made. A loan shall be presumed to be for temporary purposes if
it is repaid within sixty (60) days and is not extended or renewed.
The SEC has indicated, however, that certain types of transactions, which
could be deemed "borrowings" (such as firm commitment agreements and reverse
repurchase agreements), are permissible if a Fund "covers" the agreements by
establishing and maintaining segregated accounts. (Reverse repurchase agreements
involve the sale of securities held by a Fund pursuant to the Fund's agreement
to repurchase the securities at an agreed upon date and price, which typically
reflects the original purchase price plus the current market rate of interest.)
To the extent a Fund borrows money, positive or negative performance by
the Fund's investments may be magnified. Any gain in the value of securities
purchased with borrowed money that exceeds the interest paid on the amount
borrowed would cause the net asset value of the Fund's shares to increase more
rapidly than otherwise would be the case. Conversely, any decline in the value
of securities purchased would cause the net asset value of the Fund's shares to
decrease more rapidly than otherwise would be the case. Borrowed money thus
creates an opportunity for greater capital gain but at the same time increases
exposure to capital risk. The net cost of any borrowed money would be an expense
that otherwise would not be incurred, and this expense could offset or eliminate
a Fund's net investment income in any given period.
With respect to senior securities, the Act and regulatory interpretations
of relevant provisions of the Act establish the following general limits:
Open-end registered investment companies such as the Funds are not permitted to
issue any class of senior security or to sell any senior security of which they
are the issuers. The Trust is, however, permitted to issue separate series of
shares (each Fund is a series of the Trust) and to divide those series into
separate classes. Individual class and institutional class are separate classes.
The Funds have no intention of issuing senior securities, except that the Trust
has issued its shares in separate series and may divide those series into
classes of shares. Collateral arrangements with respect to forward contracts,
futures contracts or options, including deposits of initial and variation
margin, are not considered to be the issuance of a senior security for purposes
of this restriction.
Proposal I(b) - Portfolio Diversification.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
Page 11
"The Fund may not with respect to 75% of its total assets,
taken at market value at the time of investment, purchase more
than 10% of the voting securities of any one issuer or invest
more than 5% of the value of such assets in the securities or
instruments of any one issuer, except securities or
instruments issued or guaranteed by the U.S. Government or its
agencies or instrumentalities."
If shareholders of a Fund approve Proposal I(b), the Fund's current
fundamental investment restriction relating to portfolio diversification would
be modified to read as follows:
"The Fund may not make any investment that is
inconsistent with its classification as a "diversified"
investment company under the Act as interpreted or
modified from time to time."
Discussion of Proposed Modifications. Each Fund is a "diversified" fund
under the Act and, accordingly, must have fundamental restrictions or policies
establishing the percentage limitations with respect to investments in
individual issuers that it will follow in order to qualify as "diversified." The
proposed restriction would modify the Funds' fundamental investment restrictions
regarding the Fund's classification as a "diversified" fund under the Act to
rely on the definition of the term "diversified" in the Act and as interpreted
or modified from time to time rather than stating the relevant limitations
expressed under current law. Currently, to remain classified as a "diversified"
investment company under the Act, each Fund must conform with the following:
With respect to 75% of its total assets, a fund may not invest more than 5% of
the fund's total assets, determined at market or other fair value at the time of
purchase, in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to (1) a Fund's assets represented by
cash or cash equivalents, (2) investments in securities issued or guaranteed by
the United States (U.S.) government or its agencies or instrumentalities, and
(3) shares of other investment companies.
Proposal I(c) - Concentration of Assets.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
"The Fund may not purchase securities or instruments
which would cause 25% or more of the market value of the
Fund's total assets at the time of such purchase to be
invested in securities or instruments of one or more
issuers having their principal business activities in
the same industry or in securities or instruments issued
or guaranteed by a single government or its agencies or
instrumentalities, or with respect to repurchase
agreements secured by such securities or instruments,
provided that there is no limit with respect to
investments in the U.S. Government, its agencies and
instrumentalities."
If shareholders of a Fund approve Proposal I(c), the Fund's current
fundamental investment restriction relating to the concentration of assets would
be modified to read as follows:
"The Fund may not concentrate its investments in a
particular industry, as that term is used in the Act, as
interpreted or modified from time to time."
Discussion of Proposed Modifications. Each Fund may not invest 25% or more
of its total assets, taken at market value as of the date of the investment, in
the securities of issuers primarily engaged in any particular industry (other
than securities issued or guaranteed by the US). This restriction shall not
prevent the Fund from purchasing the securities of an issuer pursuant to the
exercise of rights distributed to the Fund by the issuer, except that no such
purchase may be made if, as a result, the Fund would no longer be a diversified
investment company as defined in the Act and as interpreted or modified from
time to time.
Page 12
Proposal I(d) - Underwriting of Securities.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
"The Fund may not underwrite securities issued by other
persons except to the extent that in connection with the
purchase of portfolio securities and their later
disposition it may be deemed to be an underwriter under
the Federal securities laws."
If shareholders of a Fund approve Proposal I(d), the Fund's current
fundamental investment restriction relating to the underwriting of securities
would be modified to read as follows:
"The Fund may not engage in the business of underwriting
securities issued by others, except to the extent that a
Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities and as
permitted under the Act as interpreted or modified from
time to time."
Discussion of Proposed Modifications. The proposed new restriction would
restate the current restriction without making any material changes except to
incorporate interpretations or modifications of the Act from time to time.
Proposal I(e) - Real Estate Investments.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
"The Fund may not purchase or sell real estate including
limited partnership interests, except the Fund may
invest in securities of companies which deal in real
estate and securities secured by real estate or
interests therein and the Fund reserves the freedom of
action to hold and sell real estate acquired as a result
of the Fund's ownership of securities."
If shareholders of a Fund approve Proposal I(e), the Fund's current
fundamental investment restriction relating to investments in real estate would
be modified to read as follows:
"The Fund may not purchase or sell real estate including
limited partnership interests (except that the Fund may
invest in securities of companies which deal in real
estate and securities secured by real estate or
interests therein and the Fund reserves the right to
hold and sell real estate acquired as a result of the
Fund's ownership of securities and except as otherwise
permitted by the Act as modified or interpreted from
time to time)."
Discussion of Proposed Modifications. The proposed new restriction would
restate the current restriction without any material changes except to
incorporate interpretations or modifications of the Act from time to time. The
Act requires every mutual fund to set forth a fundamental investment restriction
indicating the extent to which the fund may engage in the purchase and sale of
real estate. Most funds' current fundamental investment restrictions generally
prohibit the purchasing or selling of real estate, but except securities secured
by real estate or interests therein. Most of the funds also explicitly prohibit
the holding or selling of real estate except for real estate acquired as a
result of the fund's ownership of securities.
Page 13
The proposed restriction would preserve the ability to invest in all real
estate-related securities and companies whose business consists in whole or in
part of investing in real estate. As a result of exercising its rights attached
to real estate-related securities, a Fund could eventually own an interest in
real property. If this occurs, the Fund would consider the appropriate action to
take with respect to the property, including disposing of the property,
consistent with the Fund's best interests.
Proposal I(f) - Commodities.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
"The Fund may not, purchase or sell commodities or
commodity contracts [for purposes of this restriction,
interest-rate, index and currency futures contracts,
options on such contracts and on stock indices and
currencies, and forward foreign currency exchange
contracts are not deemed to be commodities or commodity
contracts.]"
If shareholders of a Fund approve Proposal I(f), the Fund's current
fundamental investment restriction relating to investing in commodities would be
modified to read as follows:
"The Fund may not purchase or sell commodities, except
as permitted by the Act, as interpreted or modified from
time to time."
Discussion of Proposed Modifications. Under the proposed policy, each Fund
would be permitted to purchase or sell commodities since, currently; the Act
does not prohibit investments in physical commodities or contracts related to
physical commodities. The investment policy of each Fund is to invest in
securities (including futures contracts on securities indices, interest rates or
currencies and warrants, swaps, foreign currency spot and forward contracts, and
securities seeking to correspond to the day to day movement of a commodity price
and other derivative instruments) and not in physical commodities. This policy
is not expected to change. Therefore, this amendment is not expected to have any
material effect and the Funds will, in the future as in the past, invest in
commodities only as a result of the ownership of securities and instruments as
permitted by its investment policy.
Proposal I(g) - Lending.
Funds to which this Proposal applies: Each Fund
Each Fund's current restriction reads as follows:
"The Fund may not make loans to other persons except (a)
through the lending of securities held by it and (b) by
the purchase of debt securities in accordance with its
policies."
If shareholders of a Fund approve Proposal I(g), the Fund's current
fundamental investment restriction relating to the lending of portfolio
securities would be modified to read as follows:
Page 14
"The Fund may not make loans to other persons, except
(i) loans of portfolio securities; (ii) to the extent
that entry into repurchase agreements and the purchase
of debt investment instruments or interests in
indebtedness in accordance with a Fund's investment
objective and policies may be deemed to be loans; and,
(iii) as otherwise permitted by the Act as interpreted
and modified from time to time."
Discussion of Proposed Modifications. To generate income and offset
expenses, a Fund may lend portfolio securities to broker-dealers and other
financial institutions in an amount up to 33 1/3% of its total assets, taken at
market value. While securities are on loan, the borrower will pay the Fund any
income accruing on the security. The Fund may invest any collateral it receives
in additional portfolio securities, such as U.S. Treasury notes, certificates of
deposit, other high-grade, short-term obligations or interest bearing cash
equivalents. Increases or decreases in the market value of a security lent will
affect the Fund and its shareholders. All of the Funds have and will continue to
specifically exclude repurchase agreements from their lending restrictions. (A
repurchase agreement is an agreement to purchase a security, coupled with an
agreement to sell that security back to the original seller at an agreed upon
date, at a price that generally depends on current interest rates. The SEC
frequently treats these agreements as loans.)
The proposed restatement will continue, to the full extent permitted under
the 1940 Act, to: (1) permit securities lending and the use of repurchase
agreements by all the Funds; and (2) allow the Funds to lend money and other
assets--thus becoming a creditor--to the full extent permitted under the 1940
Act. The proposed restatement would also conform each Fund's lending policy more
closely to the exact statutory and regulatory requirements, as they are modified
from time to time, without incurring the time and expense of obtaining
shareholder approval to change the policy.
Page 15
PROXY TABULATOR
P.O. BOX 9112
FARMINGDALE, NY 11735
- --------------------------------------------------------------------------------
IMPORTANT: ELECTRONIC VOTING OPTIONS AVAILABLE
Fast, convenient, easy and available 24 hours a day!
Vote by Phone: Call toll-free 1-888-221-0697. Follow the recorded instructions.
Vote on the Internet: Log on to www.proxyweb.com. Follow the on-screen
instructions.
Vote by Mail: Check the appropriate box on the reverse side of this card, sign
and date this card and return in the envelope provided.
- --------------------------------------------------------------------------------
IF YOU VOTE BY TELEPHONE OR INTERNET, DO NOT MAIL YOUR CARD.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
COMMONWEALTH INTERNATIONAL SERIES TRUST
ON BEHALF OF ITS FUNDS
COMMONWEALTH AUSTRALIA/NEW ZEALAND FUND
COMMONWEALTH JAPAN FUND
COMMONWEALTH GLOBAL FUND
COMMONWEALTH REAL ESTATE SECURITIES FUND
999 999 999 999 99 <--
SPECIAL MEETING OF SHAREHOLDERS
FUND NAME PRINTS HERE May 19, 2006 - 10:00 A.M. CENTRAL TIME
The undersigned hereby revokes all previous proxies for his or her shares and
appoints David Ganley and Bonnie Scott and each of them, with full power of
substitution, as proxies, and hereby authorizes them to vote as designated on
the reverse side, as effectively as the undersigned could do if personally
present, all the shares of Commonwealth International Series Trust ("Trust")
held of record by the undersigned on March 17, 2006, at the Special Meeting of
Shareholders, or any adjournment thereof, to be held at 10:00 a.m. Central Time
on May 19, 2006 at 5847 San Felipe, Suite 850, Houston, Texas 77057.
This Proxy is solicited on behalf of the Board of Trustees, and when properly
executed, will be voted as specified. If no specification is made, the
undersigned's vote will be cast FOR the revision of the Fund's fundamental
investment restriction relating to the Fund's as described in the Funds proxy
statement attached and noted thereunder as Proposals I(a)-(g) (all shareholders
of the Fund only). The undersigned acknowledges receipt of the Notice of Meeting
and Proxy Statement dated March 31, 2006.
|
| Dated: __________________, 2006
v
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY
IMMEDIATELY IN THE POSTAGE-PAID ENVELOPE PROVIDED.
--------------------------------------------------
--------------------------------------------------
Signature(s) (Please Sign in Box)
Please sign exactly as your name or names appear
below. When shares are held by joint tenants, both
should sign. If signing as Attorney, Executor,
Trustee or in any other representative capacity,
or as a corporate officer, please give full title.
Please date the proxy.
| |
| |
v v
| Please fill in box(es) as shown using black or blue ink or |
| number 2 pencil. |X| |
v PLEASE DO NOT USE FINE POINT PENS. v
I. As to the modification or restatement of each
Fundamental Restriction as follows: FOR AGAINST ABSTAIN
(Shareholders of each Fund vote on these items.)
I(a). Borrowing |_| |_| |_|
I(b). Diversification |_| |_| |_|
I(c). Concentration assets |_| |_| |_|
I(d). Underwriting of Securites |_| |_| |_|
I(e). Real Estate investments |_| |_| |_|
I(f). Investments in Commodities |_| |_| |_|
I(g). Lending |_| |_| |_|
II. Approve such other business as shall be properly
presented at the meeting or any adjournment
thereof.
Check here if you plan to attend the Meeting. |_|
_______ persons will attend.
| PLEASE SIGN AND DATE ON THE REVERSE SIDE. |
| |
v v