As filed with the Securities and Exchange Commission on May 25, 2006
Securities Act Registration No. 333-[ ]
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. |_|
Touchstone Strategic Trust
(Exact Name of Registrant as Specified in Charter)
303 Broadway, Suite 1100
Columbus, Ohio 45202
(Address of Principal Executive Offices) (Zip Code)
(325) 795-2111
(Registrant's Telephone Number, including Area Code)
Jill T. McGruder, President
303 Broadway, Suite 1100
Columbus, Ohio 45202
(Name and Address of Agent for Service)
With Copy To:
Jay Fitton, Esquire Kevin Howard, Esquire Michael V. Wible, Esquire
Senior Counsel Vice President and Thompson Hine LLP
303 Broadway, Suite 1100 Associate General Counsel 10 W. Broad Street,
Cincinnati, OH 45202 303 Broadway, Suite 1100 Suite 700
Cincinnati, OH 45202 Columbus, OH 45215
- --------------------------------------------------------------------------------
TITLE OF SECURITIES BEING REGISTERED: Shares of a series of the Registrant
NO FILING FEE IS REQUIRED because the Registrant is relying on Section 24(f) of
the Investment Company Act of 1940, as amended, pursuant to which it has
previously registered an indefinite number of shares (File No. 811-3651).
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TOUCHSTONE STRATEGIC TRUST
303 BROADWAY, SUITE 1100
CINCINNATI, OH 45202
JUNE [ ], 2006
Dear Shareholder:
On behalf of the Board of Trustees of Touchstone Strategic Trust (the "Trust"),
we are pleased to invite you to a Special Meeting of Shareholders (the "Special
Meeting") of the Trust with respect to the Value Plus Fund, a series of the
Trust, to be held at 9:30 a.m. Eastern Time on August 7, 2006 at 330 Broadway,
Suite 1100, Cincinnati, OH 45202.
At the Special Meeting, you will be asked to approve a proposed Agreement and
Plan of Reorganization, between the Value Plus Fund and the Large Cap Core
Equity Fund, also a series of the Trust, (collectively, the "Funds") under which
the Value Plus Fund will merger with and into the Large Cap Core Equity Fund
(the "Reorganization").
The Board of Trustees of the Trust unanimously approved the Agreement and Plan
of Reorganization at a meeting held on May 18, 2006. . The Board of Trustees
recommends that you vote FOR the proposal.
The details of the proposed Agreement and Plan of Reorganization are set forth
in the combined Prospectus/Proxy Statement that accompanies this letter,
including details about the Large Cap Core Equity Fund's investment objective,
policies, management and costs that are important for you to know. We encourage
you to read it thoroughly. In addition, we have included a list of commonly
asked questions and answers on the next page.
Shareholders may cast their votes according to the instructions provided in the
enclosed proxy materials.
YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES YOU OWN. In
order to conduct the Special Meeting, a majority of shares must be represented
in person or by proxy. Please vote promptly.
If you have any questions on the reorganization, please call 1-800-543-0407
We thank you for your considering this carefully and for you continued
confidence in and support of the Touchstone Strategic Trust.
Sincerely,
Jill T. McGruder
President
Touchstone Strategic Trust
QUESTIONS AND ANSWERS RELATING TO THE REORGANIZATION
While we encourage you to read the full text of the enclosed Proxy
Statement/Prospectus, below is a brief overview of the proposal, which will
require your vote.
Q. WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON AT THE UPCOMING SPECIAL
MEETING ON AUGUST 17, 2006?
A. The Board of Trustees of Touchstone Strategic Trust has called the special
meeting at which you will be asked to vote on the reorganization (the
"Reorganization") of the Value Plus Fund into the Large Cap Core Equity
Fund. Both the Value Plus Fund into the Large Cap Core Equity Fund are
series of Touchstone Strategic Trust.
Q. WHY DID THE BOARD OF TRUSTEES APPROVE THE REORGANIZATION?
A. After conducting due diligence regarding the Reorganization, the
Touchstone Strategic Trust Board of Trustees unanimously approved the
Reorganization. The Board of Trustees considered the similarity in
investment objectives of the Funds and the lower total operating expenses
of the Large Cap Core Equity Fund. After careful consideration, the Board
of Trustees determined that the Reorganization is in the best interests of
the shareholders of the Value Plus Fund.
The Board of Trustees recommends that you vote FOR the Reorganization.
Q. WHAT WILL HAPPEN TO MY EXISTING SHARE?
A. Your shares will be exchanged for comparable shares of the Large Cap Core
Equity Fund. Therefore, if you currently own Class A share of the Value
Plus Fund, you will receive Class A shares of the Large Cap Core Equity
Fund. Similarly, if you own Class B or Class C shares of the Value Plus
Fund, you will receive Class B or Class shares, respectively, of the Large
Cap Core Fund. You will not pay any sales charges in connection with the
Reorganization. Although the price of the new shares may be different from
the price of your current shares, you will receive the proper amount of
new shares so that the value of your investment will remain exactly the
same.
Q. WHAT ARE THE DIFFERENCES BETWEEN THE VALUE PLUS FUND AND THE LARGE CAP
CORE EQUITY FUND?
A. The investment objectives and principal strategies of the Funds are
similar, but differ in several aspects. While both Funds seek capital
appreciation, the Large Cap Core Equity Fund seeks income as a secondary
objective. In addition, there are several differences in the amount and
types of securities that each Fund may hold. For a more complete
description of each Fund's investment objectives and strategies, please
read the section entitled "Investment Objectives" in the enclosed combined
prospectus/proxy statement.
Q. WILL I INCUR ANY TRANSACTION COSTS AS A RESULT OF THE REORGANIZATION?
A. No. Shareholders will not incur any transaction costs, e.g. sales charges
or redemption fees, as a result of the transaction.
Q. WHAT IS THE TIMETABLE FOR THE REORGANIZATION?
A. If approved by shareholders of record at the Special Meeting, the
Reorganization is expected to occur on or about August 13, 2006.
Q. WILL THE REORGANIZATION CREATE A TAXABLE EVENT FOR ME?
A. No. The Reorganization is intended to have no direct or indirect federal
income tax consequences for you.
Q. WHAT HAPPENS IF THE REORGANIZATION IS NOT APPROVED?
A. If shareholders of the Value Plus Fund do not approve the Reorganization,
the Reorganization will not take effect and the Board of Trustees will
take such action as it deems to be in the best interests of the Value Plus
Fund and its shareholders.
Q. WHO SHOULD I CALL WITH QUESTIONS ABOUT THIS PROXY?
A. If you have any questions regarding this proxy, please contact the Trust
by calling 1-800-543-0407.
PLEASE VOTE THE ENCLOSED PROXY BALLOT CARD. YOUR VOTE IS VERY IMPORTANT!
TOUCHSTONE STRATEGIC TRUST
303 BROADWAY, SUITE 1100
CINCINNATI, OH 45202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 7, 2006
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Touchstone Strategic Trust ("the Trust") with respect to
the Value Plus Fund to be held at 9:30 a.m. Eastern Time, on August 7, 2006 for
the purpose of considering the proposals set forth below:
1. Approval of the Agreement and Plan of Reorganization, which provides for:
(i) the transfer of all of the assets and liabilities of the Value Plus
Fund in exchange for shares of the Large Cap Core Equity Fund; (ii) the
distribution of shares of the Large Cap Core Equity Fund so received to
shareholders of the Value Plus Fund; and (iii) the liquidation and
termination of the Value Plus Fund.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
Shareholders of record as of the close of business on June [ ], 2006 are
entitled to notice of, and to vote at the Special Meeting, or any adjournment of
this meeting.
By Order of the Board of Trustees,
Jay S. Fitton
Secretary
July [ ], 2006
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. SHAREHOLDERS MAY ALSO
VOTE BY TELEPHONE OR VOTE THROUGH THE INTERNET. INSTRUCTIONS FOR THE PROPER
EXECUTION OF THE PROXY ARE SET FORTH IMMEDIATELY FOLLOWING THIS NOTICE OR, WITH
RESPECT TO TELEPHONE OR INTERNET VOTING, ON THE PROXY CARD. IT IS IMPORTANT THAT
YOU VOTE PROMPTLY.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense to the Trust in validating your vote if
you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration
on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp .............................. ABC Corp.
(2) ABC Corp .............................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer ..... John Doe
(4) ABC Corp. Profit Sharing Plan ......... John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust ............................. Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78 ... Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA ......... John B. Smith
(2) Estate of John B. Smith ............... John B. Smith, Jr., Executor
PROXY STATEMENT/PROSPECTUS
DATED JUNE [ ], 2006
RELATING TO THE ACQUISITION OF THE ASSETS OF
VALUE PLUS FUND
A SERIES OF
TOUCHSTONE STRATEGIC TRUST
303 BROADWAY, SUITE 1100
CINCINNATI, OH 45202
BY AND IN EXCHANGE FOR SHARES OF
LARGE CAP CORE EQUITY FUND
A SERIES OF
TOUCHSTONE STRATEGIC TRUST
303 BROADWAY, SUITE 1100
CINCINNATI, OH 45202
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Trustees of Touchstone Strategic Trust
(the "Trust") in connection with a Special Meeting of Shareholders (the "Special
Meeting") of the Value Plus Fund, a series of the Trust, to be held on August 7,
2006 at 9:30 a.m., Eastern Time ("ET"), at 303 Broadway, Suite 1100, Cincinnati,
OH 45202. At the Special Meeting, shareholders of the Value Plus Fund will be
asked to consider and approve a proposed Agreement and Plan of Reorganization
(the "Reorganization Agreement"), by and between the Value Plus Fund and the
Large Cap Core Equity Fund, also a series of the Trust (collectively, the
"Funds"). A copy of the Reorganization Agreement is attached as Exhibit A.
Proposals
1. Approval of the Agreement and Plan of Reorganization, which provides for:
(i) the transfer of all of the assets and liabilities of the Value Plus
Fund in exchange for shares of the Large Cap Core Fund; (ii) the
distribution of shares of the Large Cap Core Fund so received to
shareholders of the Value Plus Fund; and (iii) the liquidation and
termination of the Value Plus Fund.
2. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
The Reorganization Agreement provides that the Value Plus Fund will
transfer all of its assets and liabilities to the Lage Cap Core Equity Fund. In
exchange for the transfer of these assets and liabilities, the Large Cap Core
Equity Fund will simultaneously issue shares to the Value Plus Fund in an amount
equal in value to the net asset value of the Value Plus Fund's shares (the
"Reorganization"). These transfers are expected to occur on or about August 13,
2006 (the "Effective Time").
Immediately after the transfer of the Value Plus Fund's assets and
liabilities, the Value Plus Fund will make a liquidating distribution to its
shareholders of the Large Cap Core Equity Fund shares received, so that a holder
of shares in the Value Plus Fund at the Effective Time of the Reorganization
will receive a number of shares of the Large Cap Core Equity Fund with the same
aggregate value as the shareholder had in the Value Plus Fund immediately before
the Reorganization. At the Effective Time of the Reorganization, shareholders of
the Value Plus Fund will become shareholders of the Large Cap Core Equity Fund,
and thereafter the Value Plus Fund will be liquidated and terminated.
The Trust is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"). Touchstone
Advisors, Inc., (the "Advisor") an investment advisor registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), is the
investment advisor to the Funds. Fort Washington Investment Advisors, Inc.
("Fort Washington"), an investment adviser registered under the Advisers Act, is
the sub-advisor to the Value Plus Fund. Todd Investment Advisors, Inc. ("Todd"),
an investment adviser registered under the Advisers Act, is the sub-advisor to
the Large Cap Core Equity Fund. Both Fort Washington and Todd are affiliated
with the Advisor. Integrated Fund Services, Inc. serves as the transfer,
administrative and fund accounting agent for both Funds, while Touchstone
Securities, Inc. (the "Distributor") is the principal distributor of each Fund.
The Distributor and Integrated Fund Services, Inc. are affiliated with the
Advisor, Fort Washington and Todd.
This Proxy Statement/Prospectus sets forth concisely the information that
a shareholder of the Value Plus Fund should know before voting on the
Reorganization and should be retained for future reference. Certain additional
relevant documents listed below, which have been filed with the U.S. Securities
and Exchange Commission (the "SEC"), are incorporated in whole or in part by
reference. (That means that those documents are considered legally to be part of
this Proxy Statement/Prospectus). A Statement of Additional Information dated
June [ ], 2006 relating to this Proxy Statement/Prospectus and including certain
financial information about the Value Plus Fund and the Large Cap Core Equity
Fund, has been filed with the SEC and is incorporated in its entirety into this
Proxy Statement/Prospectus. A copy of such Statement of Additional Information
is available upon request and without charge by calling toll-free
1-800-543-0407.
For a more detailed discussion of the investment objectives, policies,
risks and restrictions of the Value Plus Fund, see the prospectuses for the Fund
dated August 1, 2006, which has been filed with the SEC and is incorporated by
reference into this Proxy Statement/Prospectus. A Statement of Additional
Information for the Value Plus Fund dated August 1 2006, has been filed with the
SEC, and is incorporated by reference into this Proxy Statement/Prospectus.
Copies of the prospectus and Statement of Additional Information for the Value
Plus Fund are available upon request and without charge by calling toll-free
1-800-543-0407.
For a more detailed discussion of the investment objectives, policies,
risks and restrictions of the Large Cap Core Equity Fund, see the prospectuses
for the Fund dated August 1, 2006, which has been filed with the SEC and is
incorporated by reference into this Proxy Statement/Prospectus. A Statement of
Additional Information for the Large Cap Core Equity Fund dated August 1, 2006
has been filed with the SEC, and is incorporated by reference into this Proxy
Statement/Prospectus. Copies of the Prospectus and Statement of Additional
Information for the Large Cap Value Fund are available upon request and without
charge by calling toll-free 1-800-543-0407.
The Annual Report for the Trust relating to the Funds for the fiscal year
ended March 31, 2005 can be obtained without charge by call toll-free
1-800-543-0407. The Annual Reports for the Funds also are available on the SEC's
website at www.sec.gov.
This Proxy Statement/Prospectus constitutes the proxy statement of Value
Plus Fund for the Special Meeting and is expected to be sent to shareholders on
or about July 7, 2006.
ii
THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
iii
TABLE OF CONTENTS
PAGE
SYNOPSIS .................................................................. 1
The Reorganization ............................................. 1
The Funds ...................................................... 1
Fees and Expenses .............................................. 2
Fund Management ................................................ 5
Investment Objectives .......................................... 7
Investment Limitations ......................................... 9
The Funds' Purchase, Exchange and
Redemption Procedures ........................................ 12
PRINCIPAL RISKS ........................................................... 16
INFORMATION RELATING TO THE REORGANIZATION ................................ 17
Description of the Reorganization .............................. 17
Costs of Reorganization ........................................ 18
Federal Income Taxes ........................................... 18
Capitalization ................................................. 18
REASONS FOR THE REORGANIZATION ............................................ 19
SHAREHOLDER RIGHTS ........................................................ 19
General Shareholder Rights ..................................... 19
Taxes .......................................................... 21
INFORMATION ABOUT THE VALUE PLUS FUND AND
THE LARGE CAP CORE EQUITY FUNDS ................................ 22
VOTING MATTERS ............................................................ 22
General Information ............................................ 22
Voting Rights and Required Vote ................................ 23
Expenses ....................................................... 24
Record Date and Outstanding Shares ............................. 25
Security Ownership of Certain Beneficial Owners
and Management ............................................... 25
OTHER BUSINESS ............................................................ 27
SHAREHOLDER INQUIRIES ..................................................... 27
EXHIBIT A - FORM OF AGREEMENT AND PLAN OF REORGANIZATION .................. A-1
EXHIBIT B - MANAGEMENT DISCUSSION OF FUND PERFORMANCE ..................... B-1
SYNOPSIS
This Synopsis is designed to allow you to compare the current fees,
investment objectives, policies and restrictions, and distribution, purchase,
exchange and redemption procedures of Value Plus Fund with those of the Large
Cap Core Equity Fund. This Synopsis is a summary of certain information
contained elsewhere in this Proxy Statement/Prospectus or incorporated by
reference into this Proxy Statement/Prospectus. Shareholders should read this
entire Proxy Statement/Prospectus carefully. The Synopsis is qualified in its
entirety by reference to the prospectuses for the Value Plus Fund and the Large
Cap Core Equity Fund. For more complete information, please read the prospectus
for each of the Funds.
THE REORGANIZATION
BACKGROUND. Pursuant to the Reorganization Agreement, the Value Plus will
transfer all of its assets and liabilities to the Large Cap Core Equity Fund in
exchange solely for shares of that Fund. The Value Plus Fund will then
distribute the Large Cap Core Equity Fund shares that it receives to its
shareholders in complete liquidation. The Value Plus Fund will thereafter be
terminated. The result of the Reorganization is that shareholders of the Value
Plus Fund will become shareholders of the Large Cap Core Equity Fund. No
front-end sales charges or contingent deferred sales charges will be imposed in
connection with these transactions.
The Board of Trustees of the Trust, including the Trustees who are not
"interested persons" within the meaning of Section 2(a)(19) of the 1940 Act, has
concluded that the Reorganization would be in the best interests of the Value
Plus Fund and its shareholders, and that the interests of existing shareholders
in the Value Plus Fund would not be diluted as a result of the transactions
contemplated by the Reorganization. The Board of Trustees of the Trust
recommends that you vote FOR approval of the Reorganization.
TAX CONSEQUENCES. The Reorganization is intended to qualify for federal
income tax purposes as a tax-free reorganization. If the Reorganization so
qualifies, shareholders of the Value Plus Fund will not recognize gain or loss
in the transaction. Nevertheless, the sale of securities by the Value Plus Fund
prior to the Reorganization, whether in the ordinary course of business or in
anticipation of the Reorganization, could result in a taxable capital gains
distribution prior to the Reorganization.
SPECIAL CONSIDERATIONS AND RISK FACTORS. The investment objectives of the
Value Plus Fund and the Large Cap Core Equity Fund are similar. The primary
objective of both Funds is long-term capital appreciation, although the Large
Cap Core Equity Fund has a secondary goal of generating income. In addition, the
principal investment strategies of the Funds differ slightly. Finally, an
investment in the Large Cap Core Equity Fund will involve investment risks that
are, in most respects, similar to those of the Value Plus Fund. For a more
complete discussion of the risks associated with the respective Funds, see
"Principal Risks" below.
THE FUNDS
BUSINESS OF THE FUNDS. Both the Value Plus Fund and the Large Cap Core
Equity Fund are series of the Trust. The Trust is an open-end, diversified
management investment company organized as a Massachusetts business trust on
November 18, 1982. The Trust currently offers seven series of shares to
investors.
FEES AND EXPENSES
Under the Reorganization Agreement, the Value Plus Fund will transfer all
of its assets and liabilities to the Large Cap Core Equity Fund. If the
Reorganization is approved, you will pay the fees assessed by Large Cap Core
Equity Fund. The following tables compare the current fees and expenses of the
Value Plus Fund and with those of the Large Cap Core Equity Fund. The Net
Expenses of the Large Cap Core Equity Fund are lower than those of the Value
Plus Fund due to the investment advisor's contractual commitment to voluntarily
waive a portion of its advisory fee and/or reimburse certain Fund expenses.
There is no guarantee that these voluntary waivers or reimbursements will
continue in the future.
VALUE PLUS FUND AND LARGE CAP CORE EQUITY FUND
COMPARISON OF SHAREHOLDER FEES
- --------------------------------------- -------------------------------- ------------------------------ ----------------------
MAXIMUM SALES CHARGE (LOAD) MAXIMUM DEFERRED SALES
IMPOSED ON PURCHASE (AS A CHARGE (LOAD)
PERCENTAGE OF OFFERING PRICE) (AS A PERCENTAGE OF NET
FUND AND SHARE CLASS ASSET VALUE) WIRE REDEMPTION FEE
- --------------------------------------- ------------------------------- ------------------------------ ----------------------
VALUE PLUS FUND -CLASS A 5.75%(1) * Up to $15
LARGE CAP CORE EQUITY FUND - CLASS A 5.75%(1) * Up to $15
VALUE PLUS FUND -CLASS B None 5.00%(2) Up to $15
LARGE CAP CORE EQUITY FUND - CLASS B None 5.00%(2) Up to $15
VALUE PLUS FUND -CLASS C None 1.00%(3) Up to $15
LARGE CAP CORE EQUITY FUND - CLASS C None 1.00%(3) Up to $15
- --------------------------------------- ------------------------------- ------------------------------ ----------------------
COMPARISON OF ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
FEE WAIVER/
TOTAL FUND AND OR
MANAGEMENT DISTRIBUTION OTHER OPERATING EXPENSE NET
FUND AND SHARE CLASS FEES (12B-1) FEES EXPENSES EXPENSES REIMBURSEMENT EXPENSES
- ----------------------------- ------------ ------------ ------------ ------------ ------------- ------------
VALUE PLUS FUND - CLASS A 0.75% 0.25% 0.47% 1.47% 0.17%(4) 1.30%
LARGE CAP CORE EQUITY FUND
- CLASS A 0.65% 0.25% 1.27% 2.17% 1.17%(5) 1.00%
VALUE PLUS FUND - CLASS B 0.75% 1.00% 2.90% 4.65% 2.60%(4) 2.05%
LARGE CAP CORE EQUITY FUND
- CLASS B 0.65% 1.00% 2.31% 3.96% 2.21%(5) 1.75%
VALUE PLUS FUND - CLASS C 0.75% 1.00% 1.46% 3.21% 1.16%(4) 2.05%
LARGE CAP CORE EQUITY FUND
- CLASS C 0.65% 1.00% 2.06% 3.71% 1.96%(5) 1.75%
- ----------------------------- ------------ ------------ ------------ ------------ ------------- ------------
* Investors investing $1 million or more do not pay a front-end sales
charge, but may pay a contingent deferred sales charge ("CDSC") of 1.00%
if shares are redeemed within 1 year of their purchase and compensation
was paid to an unaffiliated broker-dealer.
2
(1) You may pay a reduced sales charge on very large purchases.
(2) You will pay a 5.00% CDSC if shares are redeemed within 1 year of their
purchase. The CDSC will be incrementally reduced over time. After the 6th
year, there is no CDSC. The CDSC may be waived under certain circumstances
described in the prospectus.
(3) The 1.00% CDSC is waived if shares are held for 1 year or longer or under
other circumstances described in the Prospectus.
(4) The Advisor has contractually agreed to waive a portion of its advisory
fee and/or reimburse certain Fund expenses in order to limit Net Expenses
to 1.30% for Class A shares and 2.05% for Class B and Class C shares (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least [March 31, 2007.]
(5) The Advisor has contractually agreed to waive a portion of its advisory
fee and/or reimburse certain Fund expenses in order to limit Net Expenses
to 1.00% for Class A shares and 1.75% for Class B and Class C shares (the
"Sponsor Agreement"). The Sponsor Agreement will remain in place until at
least [March 31, 2007.]
EXAMPLES
These Examples is intended to help you compare the cost of investing in the
Large Cap Core Equity Fund assuming the Reorganization is approved. The Examples
assume that you invest $10,000 in each Fund for the time periods indicated, that
your investment has a 5% return each year, and that each Fund's operating
expenses remain the same (except for the 10 year amounts for Class B shares,
which reflect the conversion of Class B shares to Class A shares after 8 years).
Although your actual costs may be higher or lower, based on these assumptions
you would pay the following expenses if you redeem all of your shares at the end
of the time periods indicated:
ASSUMING REDEMPTION AT THE END OF PERIOD
FUND 1 YEAR 3 YEARS(1) 5 YEARS(1) 10 YEARS(1)
- ------------------------------------- ---------- ---------- ---------- -----------
VALUE PLUS FUND CLASS A $ 700 $ 997 $ 1,316 $ 2,218
LARGE CAP CORE EQUITY FUND CLASS A(1) $ 671 $ 1,109 $ 1,571 $ 2,847
VALUE PLUS FUND CLASS B $ 608 $ 1,369 $ 2,236 $ 3.922(2)
LARGE CAP CORE EQUITY FUND CLASS B(1) $ 578 $ 1,204 $ 1,948 $ 3,642(2)
VALUE PLUS FUND CLASS C $ 208 $ 881 $ 1,578 $ 3,433
LARGE CAP CORE EQUITY FUND CLASS C(1) $ 178 $ 954 $ 1,750 $ 3,832
ASSUMING NO REDEMPTION AT THE END OF PERIOD
FUND 1 YEAR 3 YEARS(1) 5 YEARS(1) 10 YEARS(1)
- ------------------------------------- ---------- ---------- ---------- -----------
VALUE PLUS FUND CLASS B $ 208 $ 1,169 $ 2,136 $ 3,922(2)
LARGE CAP CORE EQUITY FUND CLASS B(1) $ 178 $ 1,004 $ 1,848 $ 3,642(2)
(1) The example for the 3, 5 and 10 year periods are calculated using the
Total Annual Fund Operating Expenses before the limits agreed to under the
Sponsor Agreement with the Advisor for periods after year 1.
(2) Based on conversion to Class A shares after 8 years.
The Example above should not be considered a representation of future expenses.
Actual expenses may be greater or less than those shown.
THE FUNDS' PERFORMANCE. The following charts show the past performance of
each class of the Value Plus Fund and the Large Cap Core Equity Fund. The charts
give some indication of the risks involved in investing in the Funds. PAST
PERFORMANCE BEFORE AND AFTER TAXES IS NOT AN INDICATION OF FUTURE RESULTS.
3
Year-to-Year Total Return
This chart shows the performance of Class A shares of each Fund since the
inception of the Fund. The chart should give you a general idea of the
comparative risks of investing in the Value Plus Fund and Large Cap Core Equity
Fund by showing how each Fund's Class A returns have varied from year-to-year.
The chart does not reflect any sales charges, which would reduce your return.
Each Fund also can experience short-term performance swings as indicated in the
high and low quarter information at the bottom of the chart.
- --------------- -------------------------------- ------------------------------
CLASS A SHARES VALUE PLUS FUND LARGE CAP CORE EQUITY FUND(1)
- --------------- -------------------------------- ------------------------------
1999 15.51% --
- --------------- -------------------------------- ------------------------------
2000 1.91% --
- --------------- -------------------------------- ------------------------------
2001 -1.77% -8.95%
- --------------- -------------------------------- ------------------------------
2002 -26.02% -22.66%
- --------------- -------------------------------- ------------------------------
2003 29.43% 30.86%
- --------------- -------------------------------- ------------------------------
2004 9.99% 8.36%
- --------------- -------------------------------- ------------------------------
Best Quarter 2nd Quarter 2003 17.59% 2nd Quarter 2003 18.81%
- --------------- -------------------------------- ------------------------------
Worst Quarter 3rd Quarter 2002 -18.72% 3 rd Quarter 2002 -20.19%
- --------------- -------------------------------- ------------------------------
(1) Class A shares began operations on May 1, 2000.
YEAR-TO-DATE RETURNS FOR CLASS A SHARES AS OF MARCH 31, 2006
- --------------------------------------------------------------------------------
Value Plus Fund %
Large Cap Core Equity Fund %
Average Annual Total Returns (for the periods ended 12/31/2005)
This table shows each Fund's average annual total returns and after-tax
returns over the past one, five and ten years or since inception. The table
includes the effects of Fund expenses and is intended to provide you with some
indication of the risks of investing in each Fund by comparing each Fund's
performance with an appropriate widely recognized securities index that is
described in a footnote to the table. An index does not reflect fees or
expenses. It is not possible to invest directly in an index. Past performance,
before and after taxes, is not an indication of future results.
- --------------------------------------------------------------- ------------ ------------- -----------------------------
SINCE CLASS STARTED ON
MAY 1, 1998
VALUE PLUS FUND CLASS A 1 YEAR 5 YEARS
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Return Before Taxes 3.64% -0.13% 2.73%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Return After Taxes on Distributions(1) 3.57% -0.74% 2.17%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Return After Taxes on Distributions and Sale of Fund Shares 2.45% -0.36% 2.11%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Russell 1000 Value Index(2) 16.49% 5.27% 5.47%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
SINCE CLASS STARTED ON
LARGE CAP CORE EQUITY FUND CLASS A 1 YEAR 5 YEARS MAY 1, 2000
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Return Before Taxes 2.15% -- -1.40%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Return After Taxes on Distributions(1) 1.98% -- -1.63%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Return After Taxes on Distributions and Sale of Fund Shares(3) 1.62% -- -1.30%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
Russell 1000 Index(4) 11.40% -- -2.26%
- --------------------------------------------------------------- ------------ ------------- -----------------------------
4
- ------------------------------------- ------------- ------------ -----------------------------
VALUE PLUS FUND CLASS B 1 YEAR 5 YEARS SINCE CLASS STARTED ON
MAY 1, 2001
- ------------------------------------- ------------- ------------ -----------------------------
Return Before Taxes 5.10% -- -1.01%
- ------------------------------------- ------------- ------------ -----------------------------
Russell 1000 Value Index(2) 16.49% -- 5.64%
- ------------------------------------- ------------- ------------ -----------------------------
LARGE CAP CORE EQUITY FUND CLASS B 1 YEAR 5-YEARS SINCE CLASS STARTED ON
MAY 1, 2001
- ------------------------------------- ------------- ------------ -----------------------------
Return Before Taxes 3.45% -- 0.15%
- ------------------------------------- ------------- ------------ -----------------------------
Russell 1000 Index(4) 11.40% -- 0.98%
- ------------------------------------- ------------- ------------ -----------------------------
- ------------------------------------- ------------- ------------ -----------------------------
VALUE PLUS FUND CLASS C 1 YEAR 5 YEARS SINCE CLASS STARTED ON
JANUARY 1, 1999(5)
- ------------------------------------- ------------- ------------ -----------------------------
Return Before Taxes 9.16% 0.42% 2.73%
- ------------------------------------- ------------- ------------ -----------------------------
Russell 1000 Value Index(2) 16.49% 5.27% 5.47%
- ------------------------------------- ------------- ------------ -----------------------------
LARGE CAP CORE EQUITY FUND CLASS C 1 YEAR 5-YEARS SINCE CLASS STARTED ON MAY
16, 2000
- ------------------------------------- ------------- ------------ -----------------------------
Return Before Taxes 7.41% -- -0.76%
- ------------------------------------- ------------- ------------ -----------------------------
Russell 1000 Index(4) 11.40% -- -2.19%
- ------------------------------------- ------------- ------------ -----------------------------
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates, and do not reflect the impact of state
and local taxes. Actual after-tax returns depend on the investor's tax
situation and may differ from those shown above. After tax returns do not
apply to investors who hold shares in a tax-deferred account, such as an
individual retirement account or a 401(k) plan.
(2) The Russell 1000 Value Index measures the performance of those Russell
1000 Index companies with lower price-to-book ratios and lower forecasted
growth values. (The Russell 1000 Index measures the performance of the
1,000 largest companies in the Russell 3000 Index. The Russell 3000 Index
measures the performance of the 3,000 largest U.S. companies based on
total market capitalizations). The Index reflects no deductions for fees,
expenses or taxes.
(3) When the "Return After Taxes on Distributions and Sale of Fund Shares" is
higher, it is because of realized losses. If a capital loss occurs upon
the redemption of the Fund's shares, the capital loss is recorded as a tax
benefit, which increases the return and translates into an assumed tax
deduction that benefits the shareholder.
(4) The Russell 1000 Index measures the performance of the 1,000 largest
companies in the Russell 3000 Index. The Russell 3000 Index measures the
performance of the 3,000 largest U.S. companies based on total market
capitalizations). The Index reflects no deductions for fees, expenses or
taxes.
(5) The Class C performance was calculated using the historical performance
for the Class C predecessor, which was another mutual fund that began
operations on May 1, 1998.
FUND MANAGEMENT
THE INVESTMENT ADVISOR. The Advisor serves as investment advisor to both
the Value Plus Fund and the Large Cap Core Equity Fund. The Advisor, located at
303 Broadway, Suite 1100, Cincinnati, OH 45202, is registered as an investment
adviser under the Investment Advisers Act of 1940 (the "Advisers Act"). As of
December 31, 2005, the Advisor had approximately $3.0 billion in assets under
management.
The Advisor is responsible for selecting each Fund's Sub-Advisor, subject
to approval by the Trust's Board of Trustees. The Advisor also continually
monitors each Sub-Advisor's performance through various analyses and through
in-person, telephone and written consultations with the Sub-Advisor. The Advisor
provides evaluations and recommendations to the Board of Trustees, including
whether or not a Sub-Advisor's contract should be renewed, modified or
terminated.
5
The Advisor also is responsible for running all of the operations of each
Fund, except those that are subcontracted to the Sub-Advisor, custodian,
transfer, accounting and administrative agent, or other parties.
Each Fund pays the Advisor a management fee for its services. Out of this
fee the Advisor pays each Sub-Advisor a fee for its services. The fee paid to
the Advisor by each Fund during its most recent fiscal year is shown in the
table below:
FUND FEE AS PERCENTAGE OF FUND'S AVERAGE
DAILY NET ASSETS
- ----------------------------------------------------------------------
Value Plus Fund 0.75%
Large Cap Core Equity Fund 0.65%
A discussion of the basis for the Board of Trustees approval of the Funds'
advisory and sub-advisory agreements appears in the Trust's Annual Report dated
March 31, 2006.
THE SUB-ADVISORS. The Sub-Advisors make the daily decisions regarding
buying and selling specific securities for the Value Plus Fund and the Large Cap
Core Equity Fund. Each Sub-Adviser manages the investments held by the Fund it
serves according to the each Fund's applicable investment goals and strategies.
VALUE PLUS FUND
Fort Washington Investment Advisors, Inc. ("Fort Washington") is the
sub-advisor for the Value Plus Fund. Fort Washington, located at 420 East Fourth
Street, Cincinnati, OH 45202, has been registered as an investment advisor since
1990 and has managed the Value Plus Fund since its inception in 1998. Fort
Washington is an affiliate of the Advisor and as of December 31, 2005, had
approximately [$26] billion in assets under management.
PORTFOLIO MANAGEMENT
John C. Holden, CFA, and Bradley A. Reed, CFA, are jointly and primarily
responsible for managing the Value Plus Fund. Mr. Holden joined Fort Washington
in 1997 and is currently a Managing Director and Senior Portfolio Manager. He
was previously a Vice President and Senior Portfolio Manager at Fort Washington.
Mr. Reed is an Assistant Portfolio Manager and a Senior Research Manager at Fort
Washington. Mr. Reed joined Fort Washington in 1999 as a Research Manager and
was a Management Associate with the Western & Southern Financial Group prior to
joining Fort Washington. Mr. Holden has managed the Fund since 1998 and Mr. Reed
has managed the Fund since 2004.
LARGE CAP CORE EQUITY FUND
Todd Investment Advisors, Inc. ("Todd") is the sub-advisor for the Large
Cap Core Equity Fund. Todd, located at 101 South Fifth Street, Suite 3160,
Louisville, KY 40202, has been registered as an investment advisor since 1967
and has managed the Fund since its inception in 2000. Todd is an affiliate of
the Advisor and as of December 31, 2005, had [$3.5] billion in assets under
management.
6
PORTFOLIO MANAGEMENT
Curtiss M. Scott, Jr., CFA, has primary responsibility for the daily
management of the Large Cap Core Equity Fund. Mr. Scott joined Todd in 1996 and
is the Senior Equity Portfolio Manager. Mr. Scott is supported by Robert P.
Bordogna, Bosworth M. Todd and John J. White, CFA. Mr. Bordogna has been
President and Chief Executive Officer of Todd since 1980. Mr. Todd founded Todd
in 1967 and is its Chairman and a Director. Mr. White is a Portfolio Manager and
joined Todd in 2002. Mr. White worked as a Director of Equity Research and
Investment Strategy at Wachovia Securities from 1994 until 2002. Messrs. Scott,
Bordogna and Todd have managed the Fund since its inception. Mr. White has
managed the Fund since 2002.
The Trust's Statement of Additional Information provides additional
information about the portfolio managers compensation structure, other managed
accounts and ownership of securities in the Funds.
SUB-ADVISORY FEES
The Advisor pays each Sub-Advisor a fee for its services out of its
management fees. The fee paid to each Sub-Advisor during the most recent fiscal
year is shown in the table below:
FEE AS PERCENTAGE OF FUND'S AVERAGE
FUND DAILY NET ASSETS
- -------------------------------------------------------------------------
Value Plus Fund 0.45%
Large Cap Core Equity Fund(1) 0.25%
(1) The Sub-Advisor voluntarily has agreed to waive a portion of its fee. If
the Reorganization is approved and assets in the Large Cap Core Equity
Fund exceed $100 million, the waiver will be discontinued and the Advisor
will pay the Sub-Advisor a fee of 0.30% of the Fund's average daily net
assets. The fee paid by the Fund to the Advisor will remain unchanged.
INVESTMENT OBJECTIVES
This section will help you compare the investment objectives and principal
investment strategies of the Value Plus Fund with those of the Large Cap Core
Equity Fund. This section also describes the key differences, if any, between
the Funds. Please be aware that this is only a brief discussion. More complete
information may be found in each Fund's prospectus.
VALUE PLUS FUND
INVESTMENT OBJECTIVE:
The Value Plus Fund seeks to increase the value of Fund shares over the
long-term.
PRINCIPAL INVESTMENT STRATEGIES:
The Value Plus Fund invests primarily (at least 65% of its assets) in
common stocks of larger companies that the Sub-Advisor believes are undervalued.
In choosing undervalued stocks, the Sub-Advisor looks for companies that have
proven management and unique features or advantages, but are believed to be
priced lower than their true value. These companies may not pay dividends. These
may include companies in the technology sector.
7
At least 75% of the Value Plus Fund's assets will be invested in large cap
companies and the remainder generally will be invested in mid cap companies.
The Fund's securities will be considered for sale when the Sub-Advisor
believes they are overvalued relative to their growth potential, when there is a
deterioration in fundamental criteria, or when their price decreases by at least
10% relative to the market.
The Value Plus Fund may depart from its investment strategies by taking
temporary defensive positions in response to adverse market, economic, political
or other conditions, including conditions when the Sub-Advisor is unable to
identify attractive investment opportunities. The Fund's temporary investments
may include debt securities or cash equivalents. During these times, the Fund
may not achieve its investment goals.
The Fund may change its investment goals by a vote of the Board of
Trustees without shareholder approval. Shareholders will be notified at least 30
days before any change takes effect.
OTHER INVESTMENT STRATEGIES:
Although not a principal strategy, the Value Plus Fund also may invest in
preferred stocks, investment grade debt securities, convertible securities, and
American depositary receipts ("ADRs") and other depositary receipts. In
addition, the Fund may invest up to 10% of its total assets in cash equivalents
and short-term debt securities.
LARGE CAP CORE EQUITY FUND
INVESTMENT OBJECTIVE:
The Large Cap Core Equity Fund seeks long-term capital appreciation as its
primary goal and income as its secondary goal.
PRINCIPAL INVESTMENT STRATEGIES:
The Large Cap Core Equity Fund invests primarily (at least 80% of its
total assets) in common stocks of large cap companies. Shareholders will be
provided with at least 60 days' prior notice of any change in this policy. A
large cap company has a market capitalization of more than $10 billion. The
Fund's portfolio will at all times consist of 30 stocks. The Fund's investments
may include companies in the technology sector.
The Sub-Advisor selects stocks that it believes are attractively valued
with active catalysts in place. The Sub-Advisor uses a database of 4,000 stocks
from which to choose the companies that will be selected for the Fund's
portfolio. A specific process is followed to assist the Sub-Advisor in its
selections:
o The 4,000 stocks are reduced to 1,000 by screening for the stocks in
the Russell 1000 Index.
o The 1,000 stocks are reduced to 200 by screening for the largest
market capitalizations.
o A model is applied to select stocks that the Sub-Advisor believes
are priced at a discount to their true value.
8
o The Sub-Advisor then searches for those companies that have
unrecognized earnings potential versus their competitors.
Restructuring announcements, changes in regulations and spot news
can be indicators of improved earnings potential.
Stocks are considered for sale if the Sub-Advisor believes they are
overpriced, or if a significant industry or company development forces a
re-evaluation of expected earnings. Stocks will be sold if the relative price to
intrinsic value reaches 50% or more above the Russell 1000 Index, if a
structural event permanently lowers the company's expected earnings, or if the
integrity of accounting is in doubt. The portfolio is rebalanced periodically,
or as needed, due to changes in the Russell 1000 Index or the Fund's other
portfolio securities.
The Sub-Advisor's selection process is expected to cause the Fund's
portfolio to have some of the following characteristics:
o Attractive relative value
o Unrecognized earnings potential
o Above-average market capitalization
o Seasoned management
o Dominant industry position
The Large Cap Core Equity Fund may depart from its investment strategies
by taking temporary defensive positions in response to adverse market, economic,
political or other conditions, including conditions when the Sub-Advisor is
unable to identify attractive investment opportunities. The Fund's temporary
investments may include debt securities or cash equivalents. During these times,
the Fund may not achieve its investment goals.
The Fund may change its investment goals by a vote of the Board of
Trustees without shareholder approval. Shareholders will be notified at least 30
days before any change takes effect.
HOW THE FUNDS COMPARE
The investment objectives of the Value Plus Fund and the Large Cap Core
Equity Fund are similar. The primary objective of both Funds is long-term
capital appreciation. However, unlike the Value Plus Fund, the Large Cap Core
Equity Fund has a secondary objective of generating income. The principal
investment strategies of the Fund, while similar, do differ in some respects.
The Large Cap Core Equity Fund invests at least 80% of its total assets in the
common stock of large capitalization companies. Large cap companies are defined
as companies with market capitalizations of more than $10 billion. The Value
Plus Fund, by contrast, invests at least 75% of its total assets in common
stocks of large capitalization companies. In addition, the Value Plus Fund may
invest up to 25% of its assets in mid capitalization companies, which are
defined as companies with market capitalizations of between $1.5 billion and $10
billion. While not a principal investment strategy, the Value Plus Fund also may
invest in preferred stock, investment grade debt securities, convertible
securities, and ADRs and other depositary receipts. Finally, the Value Plus Fund
may invest up to 10% of its assets in cash equivalents and short-term debt
securities. As a result, only the Value Plus Fund currently is subject to the
risks associated with investments in these types of securities. For a discussion
of the risks of investing in either fund, please see PRINCIPAL RISKS in this
Proxy/Prospectus.
INVESTMENT LIMITATIONS
This section will help you contrast the fundamental and non-fundamental
investment policies and restrictions of the Value Plus Fund to those of the
Large Cap Core Equity Fund.
9
FUNDAMENTAL INVESTMENT LIMITATIONS
Listed below are the fundamental investment limitations adopted by each of
the Funds. These limitations cannot be changed without the consent of the
holders of a majority of each Fund's outstanding shares. The term "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.
The Value Plus Fund and the Large Cap Core Equity Fund have adopted the
following identical fundamental investment limitations.
1. BORROWING MONEY. The Funds may not engage in borrowing except as permitted
by the Investment Company Act of 1940, any rule, regulation or order under
the Act or any SEC staff interpretation of the 1940 Act.
2. UNDERWRITING. The Funds may not underwrite securities issued by other
persons, except to the extent that, in connection with the sale or
disposition of portfolio securities, a Fund may be deemed to be an
underwriter under certain federal securities laws or in connection with
investments in other investment companies.
3. LOANS. The Funds may not make loans to other persons except that a Fund
may (1) engage in repurchase agreements, (2) lend portfolio securities,
(3) purchase debt securities, (4) purchase commercial paper, and (5) enter
into any other lending arrangement permitted by the Investment Company Act
of 1940, any rule, regulation or order under the Act or any SEC staff
interpretation of the 1940 Act.
4. REAL ESTATE. The Funds may not purchase or sell real estate except that a
Fund may (1) hold and sell real estate acquired as a result of the Fund's
ownership of securities or other instruments (2) purchase or sell
securities or other instruments backed by real estate or interests in real
estate and (3) purchase or sell securities of entities or investment
vehicles, including real estate investment trusts that invest, deal or
otherwise engage in transactions in real estate or interests in real
estate.
5. COMMODITIES. The Funds may not purchase or sell physical commodities
except that a Fund may (1) hold and sell physical commodities acquired as
a result of the Fund's ownership of securities or other instruments, (2)
purchase or sell securities or other instruments backed by physical
commodities, (3) purchase or sell options, and (4) purchase or sell
futures contracts.
6. CONCENTRATION OF INVESTMENTS. The Funds may not purchase the securities of
an issuer (other than securities issued or guaranteed by the United States
Government, its agencies or its instrumentalities) if, as a result, more
than 25% of the Fund's total assets would be invested in the securities of
companies whose principal business activities are in the same industry.
7. SENIOR SECURITIES. The Funds may not issue senior securities except as
permitted by the Investment Company Act of 1940, any rule, regulation or
order under the Act or any SEC staff interpretation of the 1940 Act.
NON-FUNDAMENTAL INVESTMENT LIMITATION
The following investment limitations are non-fundamental investment
limitations of the Funds. Non-fundamental limitations may be changed at any time
by the Fund's Board of Trustees. Shareholders are notified before any material
change in these limitations becomes effective.
10
The Value Plus Fund and the Large Cap Core Equity Fund have adopted the
following identical non-fundamental investment limitations.
1. BORROWING MONEY. The Funds will not borrow money (including through
reverse repurchase agreements or forward roll transactions involving
mortgage-backed securities or similar investment techniques entered into
for leveraging purposes), except that a Fund may borrow for temporary or
emergency purposes up to 10% of its total assets; provided, however, that
no Fund may purchase any security while outstanding borrowings exceed 5%;
2. PLEDGING. The Funds will not pledge, mortgage or hypothecate for any
purpose in excess of 10% of each Fund's total assets (taken at market
value), provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation margin, and
reverse repurchase agreements are not considered a pledge of assets for
purposes of this restriction;
3. MARGIN PURCHASES. The Funds will not purchase any security or evidence of
interest therein on margin, except that such short-term credit as may be
necessary for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and variation margin
may be made in connection with the purchase, ownership, holding or sale of
futures;
4. SELLING SECURITIES. The Funds will not sell any security which it does not
own unless by virtue of its ownership of other securities it has at the
time of sale a right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities sold and
provided that if such right is conditional the sale is made upon the same
conditions;
5. INVESTING FOR CONTROL. The Funds will not invest for the purpose of
exercising control or management;
6. ILLIQUID SECURITIES. The Funds will not invest more than 15% of their net
assets (taken at the greater of cost or market value) in securities that
are illiquid or not readily marketable (defined as a security that cannot
be sold in the ordinary course of business within seven days at
approximately the value at which a Fund has valued the security) not
including (a) Rule 144A securities that have been determined to be liquid
by the Board of Trustees; and (b) commercial paper that is sold under
Section 4(2) of the 1933 Act, which is not traded flat or in default as to
interest or principal and either (i) is rated in one of the two highest
categories by at least two nationally recognized statistical rating
organizations and the Fund's Board of Trustees has determined the
commercial paper to be liquid; or (ii) is rated in one of the two highest
categories by one nationally recognized statistical rating agency and the
Fund's Board of Trustees has determined that the commercial paper is
equivalent quality and is liquid;
7. RESTRICTED SECURITIES. The Funds will not invest more than 10% of its
total assets in securities that are restricted from being sold to the
public without registration under the 1933 Act (other than Rule 144A
Securities deemed liquid by the Fund's Board of Trustees);
8. SECURITIES OF ONE ISSUER. The Funds will not purchase securities of any
issuer if such purchase at the time thereof would cause a Fund to hold
more than 10% of any class of securities of such issuer, for which
purposes all indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single class, except
that futures or option contracts shall not be subject to this restriction;
9. SHORT SALES. The Funds will not make short sales of securities or maintain
a short position, unless at all times when a short position is open it
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue and equal in amount to, the securities sold short, and
unless not more than 10% of a Fund's net assets (taken at market value) is
represented by such securities, or securities convertible into or
exchangeable for such securities, at any one time (the Funds have no
current intention to engage in short selling);
11
10. PURCHASE OF PUTS AND CALLS. The Funds will not purchase puts, calls,
straddles, spreads and any combination thereof if by reason thereof the
value of a Fund's aggregate investment in such classes of securities will
exceed 5% of its total assets;
11. WRITING OF PUTS AND CALLS. The Funds will not write puts and calls on
securities unless each of the following conditions are met: (a) the
security underlying the put or call is within the investment policies of a
Fund and the option is issued by the OCC, except for put and call options
issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate value of the obligations
underlying the puts determined as of the date the options are sold shall
not exceed 50% of a Fund's net assets; (c) the securities subject to the
exercise of the call written by a Fund must be owned by a Fund at the time
the call is sold and must continue to be owned by a Fund until the call
has been exercised, has lapsed, or a Fund has purchased a closing call,
and such purchase has been confirmed, thereby extinguishing a Fund's
obligation to deliver securities pursuant to the call it has sold; and (d)
at the time a put is written, a Fund establishes a segregated account with
its custodian consisting of cash or liquid securities equal in value to
the amount a Fund will be obligated to pay upon exercise of the put (this
account must be maintained until the put is exercised, has expired, or the
Fund has purchased a closing put, which is a put of the same series as the
one previously written).
12. PUTS AND CALLS ON FUTURES. The Funds will not buy and sell puts and calls
on securities, stock index futures or options on stock index futures, or
financial futures or options on financial futures unless such options are
written by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or are listed
on a national securities or commodities exchange, except for put and call
options issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all such options
which are held at any time do not exceed 20% of a Fund's total net assets;
and (c) the aggregate margin deposits required on all such futures or
options thereon held at any time do not exceed 5% of a Fund's total
assets.
The Large Cap Core Equity Fund has adopted the following non-fundamental
80% investment policy that may be changed by the Board of Trustees without
shareholder approval. Shareholders will be provided with at least 60 days' prior
notice of any change in a Fund's non-fundamental 80% investment policy.
1. LARGE CAP CORE EQUITY FUND 80% INVESTMENT POLICY. Under normal
circumstances, the Fund will invest at least 80% of its assets (defined as
net assets plus the amount of any borrowing for investment purposes) in
common stocks of large cap companies. A large cap company has a market
capitalization of more than $10 billion.
THE FUNDS' PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
Because the Value Plus Fund and the Large Cap Core Equity Fund are each
series of the Trust, they have identical purchase, exchange and redemption
procedures. These common procedures, as well as other features related to
investing in the Funds, are summarized below. A more complete description can be
found in the Funds' prospectus.
12
SHARE CLASSES.
Each Fund offers Class A, Class B and Class C shares. As discussed above
under FEES AND EXPENSES, each class of shares has different sales charges and
distribution fees. The amount of sales charge and distribution fees you pay will
depend on which class of shares you decide to purchase. Shares may be purchased
directly from the Distributor, through your financial advisor, through various
retirement plans, by exchange of shares (see below) or through a "processing
organization, such as a mutual fund supermarket. The minimum initial investment
for each Fund is $1,000 ($250 for Retirement Plan Accounts or Custodial Accounts
under a Uniform Gift/Transfer to Minors Act and $50 for investments through the
Automatic Investment Plan). Subsequent investments must be in amounts of at
least $50.
PRICING FUND SHARES
Each Fund's share price (also called "NAV") and offering price (NAV plus a
sales charge, if applicable) is determined as of the close of trading (normally
4:00 p.m. ET) every day the New York Stock Exchange ("NYSE") is open. Each Fund
calculates its NAV per share, generally using market prices, by dividing the
total value of its net assets by the number of shares outstanding. Shares are
purchased or sold at the next offering price determined after your purchase or
sale order is received in proper form by the Distributor or its authorized
agent.
The Funds' equity investments are valued based on market value or, if no
market value is available, based on fair value as determined by the Board of
Trustees (or under their direction). Securities held by Funds that do not have
readily available market quotations, or securities for which the available
market quotation is not reliable, are priced at their fair value using
procedures approved by the Board of Trustees. The Funds may use fair value
pricing if the value of a security has been materially affected by events
occurring before the Fund's pricing time but after the close of the primary
markets on which the security is traded. The Funds may use fair value pricing if
reliable market quotations are unavailable due to infrequent trading. The Funds
may also use fair value pricing if the exchange on which a portfolio security is
principally traded closes early or if trading in a particular portfolio security
was halted during the day and did not resume prior to the Funds' NAV
calculation. The use of fair value pricing has the effect of valuing a security
based upon the price the Fund's might reasonably expect to receive if it sold
that security but does not guarantee that the security can be sold at the fair
value price. With respect to any portion of the Funds' assets that is invested
in other mutual funds, that portion of the Funds' NAV is calculated based on the
NAV of that mutual fund. The prospectus for the other mutual fund explains the
circumstances and effects of fair value pricing for that fund.
PURCHASE PROCEDURES.
Each Fund prices direct purchases based upon the next determined offering
price after your order is received. Direct purchase orders received by the
Distributor, or its authorized agent, by the close of the regular session of
trading on the NYSE, are processed at that day's public offering price. Direct
purchase orders received by the Distributor, or its authorized agent, after the
close of the regular session of trading on the NYSE, are processed at the public
offering price next determined on the following business day. It is the
responsibility of the Distributor's authorized agents to transmit orders that
will be received by the Distributor in proper form and in a timely manner.
SALES CHARGES AND DISTRIBUTION FEES.
Class A shares are sold subject to a front-end sales charge of up to 5.75%
of the offering price and annual 12b-1 fees of up to 0.25% of average daily net
assets attributable to Class A shares. The front-end sales charge is reduced for
purchases of $50,000 or more and is not applicable to purchases of $1 million or
more. In addition, the front-end sales charge may be waived in certain
circumstances, and may be reduced through participation in the Rights of
Accumulation Program and through the use of Letters of Intent.
13
Class B shares are sold at NAV, are subject to annual 12b-1 fees of up to
1.00% of average daily net assets attributable to Class B shares and a
contingent deferred sales charge ("CDSC") of up to 5.00% for shares redeemed
within one year of their purchase. The Class B CDSC is incrementally reduced
over time and is eliminated following the sixth year in which the purchase was
made. Class B shares convert to Class A shares after eight years.
Class C shares are sold at NAV and are subject to annual 12b-1 fees of up
to 1.00% of average daily net assets attributable to Class C shares and a CDSC
of 1.00% for shares redeemed within one year of their purchase.
EXCHANGE PRIVILEGES.
You may exchange shares of either Fund for shares of the same class of
series of the Trust or of another fund advised by the Advisor ("Touchstone
Funds"), other than for shares of Touchstone Variable Series Trust. You also may
exchange Class A or Class C shares of the Funds for Class A shares of any
Touchstone money market fund, except the Institutional Money Market Fund. You do
not have to pay an exchange fee for your exchange. Shares otherwise subject to a
contingent deferred sales charge ("CDSC") will not be charged a CDSC in an
exchange. However, when you redeem the shares acquired through the exchange, the
shares you redeem may be subject to a CDSC, depending on when you originally
purchased the exchanged shares. For purposes of computing the CDSC, the length
of time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange. If you exchange Class C
shares for Class A shares of any Touchstone money market fund, the amount of
time you hold shares of the money market fund will not be added to the holding
period of your original shares for the purpose of calculating the CDSC, if you
later redeem the exchanged shares. However, if you exchange back into your
original Class C shares, the prior holding period of your Class C shares will be
added to your current holding period of Class C shares in calculating the CDSC.
REDEMPTION PROCEDURES.
You may sell some or all of your shares on any day that the Funds
calculate their NAV. If your request is received by the Distributor, or its
authorized agent, in proper form by the close of regular trading on the NYSE,
you will receive a price based on that day's NAV for the shares you sell, minus
any applicable CDSC. Orders received after the close of trading on the NYSE will
be based on the next calculated NAV. Each Fund permits redemptions by phone,
mail, wire or through a systematic investment plan.
Under unusual circumstances, when the Board of Trustees deems it
appropriate, each Fund may make payment for shares redeemed in portfolio
securities of the Fund taken at current value.
DISTRIBUTION ARRANGEMENTS
Each Fund has adopted distribution plans under Rule 12b-1 of the 1940 Act
for its Class A, Class B and Class C shares. The plans allow each Fund to pay
distribution and other fees for the sale and distribution of its shares and for
services provided to shareholders. Under the Class A plan, the Funds pay an
annual fee of up to 0.25% of average daily net assets that are attributable to
Class A shares. Under the Class B and Class C plans, the Funds pay an annual fee
of up to 1.00% of average daily net assets that attributable to Class B or Class
C shares (of which up to 0.75% is a distribution fee and up to 0.25% is an
account maintenance fee). Because these fees are paid out of a Fund's assets on
an ongoing basis, they will increase the cost of your investment and over time
may cost you more than paying other types of sales charges. The Distributor is
the principal underwriter of the Trust, and as such, the exclusive agent for the
distribution of shares of both Funds.
14
MARKET TIMING POLICY.
Market timing or excessive trading in accounts that you own or control may
disrupt portfolio investment strategies, may increase brokerage and
administrative costs, and may negatively impact investment returns for all
shareholders, including long-term shareholders who do not generate these costs.
Both the Value Plus Fund and the Large Cap Core Equity Fund take reasonable
steps to discourage excessive short-term trading and will not knowingly
accommodate frequent purchases and redemptions of Fund shares by shareholders.
The Board of Trustees of the Trust has adopted the following policies and
procedures with respect to market timing of the Funds by shareholders. The Funds
will monitor selected trades on a daily basis in an effort to deter excessive
short-term trading. If a Fund has reason to believe that a shareholder has
engaged in excessive short-term trading, the Fund may ask the shareholder to
stop such activities or restrict or refuse to process purchases or exchanges in
the shareholder's accounts. While a Fund cannot assure the prevention of all
excessive trading and market timing, by making these judgments the Fund believes
it is acting in a manner that is in the best interests of its shareholders.
However, because the Funds cannot prevent all market timing, shareholders may be
subject to the risks described above.
Generally, a shareholder may be considered a market timer if he or she has
(i) requested an exchange or redemption out of any of the Touchstone Funds
within 2 weeks of an earlier purchase or exchange request out of any Touchstone
Fund, or (ii) made more than 2 "round-trip" exchanges within a rolling 90 day
period. A "round-trip" exchange occurs when a shareholder exchanges from one
Touchstone Fund to another Touchstone Fund and back to the original Touchstone
Fund. If a shareholder exceeds these limits, the Funds may restrict or suspend
that shareholder's exchange privileges and subsequent exchange requests during
the suspension will not be processed. The Funds may also restrict or refuse to
process purchases by the shareholder. These policies and procedures generally do
not apply to purchases and redemptions of money market funds (except in the case
of an exchange request into a Touchstone non-money market fund), exchanges
between money market funds and systematic purchases and redemptions.
Financial intermediaries (such as investment advisers and broker-dealers)
often establish omnibus accounts in the Funds for their customers in which
transactions are placed. If a Fund identifies excessive trading in such an
account, the Fund may instruct the intermediary to restrict the investor
responsible for the excessive trading from further trading in the Fund. However,
some omnibus accounts submit daily aggregate purchase and redemption orders
reflecting the trade orders of multiple unidentified investors. In these
situations, the Fund cannot monitor trading activity by individual shareholders
who may be engaged in market timing.
The Value Plus Fund and the Large Cap Core Equity Fund apply these
policies and procedures uniformly to all shareholders believed to be engaged in
market timing or excessive trading. The Funds have no arrangements to permit any
investor to trade frequently in shares of the Funds, nor will they enter into
any such arrangements in the future.
15
DIVIDEND POLICIES.
Each Fund intends to distribute to its shareholders substantially all of
its income and capital gains. Each Fund's dividends are distributed and paid
annually. Distributions of any capital gains earned by a Fund will be made at
least annually. Dividends and capital gains will be reinvested in the Fund that
pays them, unless you indicate on your investment application that dividends and
capital gains are to be automatically reinvested in another Touchstone Fund
within the same class of shares. Dividends and capital gains automatically
reinvested in another Touchstone Fund are not subject to a fee or sales charge.
You also may choose to have your dividends or capital gains paid to you in cash.
PRINCIPAL RISKS
The Value Plus Fund and the Large Cap Core Equity Fund are subject to many
of the same risks, but to different degrees due to the different investment
strategies of the Funds. Other risks, such as the risk of investing in debt
securities, apply only to the Value Plus Fund. The primary risks of an
investment in each Fund are discussed below.
RISKS COMMON TO INVESTMENTS IN BOTH FUNDS
MARKET RISK. Each Fund invests in common stocks. Investments in common stocks
are subject to stock market risk. Stock prices in general may decline over short
or even extended periods, regardless of the success or failure of a particular
company's operations. Stock markets tend to run in cycles, with periods when
stock prices generally go up and periods when they generally go down. In
addition, stocks fall into three broad market capitalization categories - large
cap, mid cap and small cap. Investing primarily in one category carries the risk
that due to market conditions, that category may be out of favor. For example,
if valuations of large cap companies appear to be greatly out of proportion to
the valuations of small or mid cap companies, investors may migrate to the
stocks of small and mid-sized companies, causing a fund that invests in these
companies to increase in value more rapidly than a fund that invests in larger,
fully-valued companies. The price of stocks tends to go up and down more than
the price of bonds.
LARGE CAP STOCK RISK. The Value Plus Fund and the Large Cap Core Equity Fund
invest at least 75% and 80%, respectively, of their total assets in common
stocks of large cap companies. Large cap stock risk is the risk that stocks of
larger companies may underperform relative to those of small and mid-sized
companies. Larger, more established companies may be unable to respond quickly
to new competitive challenges, such as changes in technology and consumer
tastes. Many larger companies may not be able to attain the high growth rate of
successful smaller companies, especially during extended periods of economic
expansion.
TECHNOLOGY SECURITIES RISK. Both Funds may invest in companies in the technology
sector. The value of technology securities may fluctuate dramatically and
technology securities may be subject to greater than average financial and
market risk. Investments in the high technology sector include the risk that
certain products may be subject to competitive pressures and aggressive pricing
and may become obsolete and the risk that new products will not meet
expectations or even reach the market.
INVESTMENT STYLE RISK. Different investment styles tend to shift in and out of
favor depending upon market and economic conditions as well as investor
sentiment. A Fund may outperform or underperform other funds that employ a
different investment style. The Value Plus Fund and the Large Cap Core Equity
Fund both employ a value investing style. Value stocks are those that are
undervalued in comparison to their peers due to adverse business developments or
other factors. Value investing carries the risk that the market will not
recognize a security's inherent value for a long time, or that a stock judged to
be undervalued may actually be appropriately priced or overvalued. Value
oriented funds may underperform when growth investing is in favor. In addition,
the market may continually value the stocks held by the Large Cap Core Equity
Fund lower than the Fund's Sub-Advisor believes them to be valued.
16
ADDITIONAL RISKS OF INVESTING IN THE VALUE PLUS FUND
Up to 25% of the Value Plus Fund's assets will be invested mid cap
companies. In addition, the Fund may invest in investment graded debt
securities, convertible securities and preferred stocks. Finally, the Value Plus
Fund may invest up to 10% of its total assets in cash equivalent investments and
short-term debt securities. As a result, the Value Plus Fund alone currently is
subject to the following risks.
MID CAP COMPANY RISK. Mid cap stock risk is the risk that stocks of mid-sized
companies may be subject to more abrupt or erratic market movements than stocks
of larger, more established companies. Mid-sized companies may have limited
product lines or financial resources, and may be dependent upon a particular
niche of the market.
DEBT SECURITY RISK. Investments in debt securities are subject to the risk that
the market value of the debt securities will decline because of rising interest
rates. The price of debt securities is generally linked to the prevailing market
interest rates. In general, when interest rates rise, the price of debt
securities falls, and when interest rates fall, the price of debt securities
rises. The price volatility of a debt security also depends on its maturity.
Generally, the longer the maturity of a debt security, the greater its
sensitivity to changes in interest rates. To compensate investors for this
higher risk, debt securities with longer maturities generally offer higher
yields than debt securities with shorter maturities. Debt securities also are
subject to credit risk. Credit risk is the possibility that an issuer will fail
to make timely payments of interest or principal, when due. Securities rated in
the lowest investment grade category have some risky characteristics and changes
in economic conditions are more likely to cause issuers of these securities to
be unable to make payments.
INFORMATION RELATING TO THE REORGANIZATION
DESCRIPTION OF THE REORGANIZATION
The following summary is qualified in its entirety by reference to the
Reorganization Agreement found in Exhibit A.
The Reorganization Agreement provides that all of the assets and
liabilities of the Value Plus Fund will be transferred to the Large Cap Core
Equity Fund at the Effective Time of the Reorganization (i.e., 9:00 a.m. ET on
or about August 13, 2006). In exchange for this transfer of these assets and
liabilities, the Large Cap Core Equity Fund will simultaneously issue shares to
the Value Plus Fund in an amount equal in value to the net asset value of the
Value Plus Fund's shares.
Following the transfer of assets and liabilities in exchange for Large Cap
Core Equity Fund shares, the Value Plus Fund will distribute, in complete
liquidation pro rata to its shareholders of record, all the shares of the Large
Cap Core Equity Fund so received. Shareholders of the Value Plus Fund owning
shares at the Effective Time of the Reorganization will receive a number of
shares of the Large Cap Core Equity Fund with the same aggregate value as the
shareholder had in the Value Plus Fund immediately before the Reorganization.
Such distribution will be accomplished by the establishment of accounts in the
names of the shareholders of the Value Plus Fund on the share records of the
Large Cap Core Equity Fund's transfer agent. Each account will represent the
respective pro rata number of full and fractional shares of the Large Cap Core
Equity Fund due to the shareholders of the Value Plus Fund. The Large Cap Core
Equity Fund does not issue share certificates to shareholders. Shares of the
Large Cap Core Equity Fund to be issued will have no preemptive or conversion
rights. No front-end sales loads or contingent deferred sales charges will be
imposed in connection with the receipt of such shares by the Value Plus Fund's
shareholders. The Value Plus Fund will then be liquidated and terminated.
17
The Reorganization Agreement contains customary representations,
warranties and conditions designed to ensure that the Reorganization is fair to
both parties. The Reorganization Agreement provides that the consummation of the
Reorganization is contingent upon, among other things: (i) approval of the
Reorganization Agreement by the Value Plus Fund shareholders; and (ii) the
receipt by the Value Plus Fund and the Large Cap Core Fund of a tax opinion to
the effect that the Reorganization will be tax-free to the Value Plus Fund and
the Large Cap Core Equity Fund. and their shareholders. The Reorganization
Agreement may be terminated if, on the Closing Date, any of the required
conditions have not been met or if the representations and warranties are not
true or, if at any time prior to the Effective Time of the Reorganization, the
Board of Trustees of the Trust determines that the consummation of the
transactions contemplated by the Reorganization Agreement is not in the best
interest of shareholders.
COSTS OF REORGANIZATION
Reorganization expenses include, without limitation: (a) expenses
associated with the preparation and filing of this Prospectus/Proxy Statement;
(b) postage; (c) printing; (d) accounting fees; (e) legal and audit fees; (f)
solicitation costs of the transaction, (g) accounting fees, and (h) the cost of
winding up and liquidating the business and affairs of the Value Plus Fund. The
Advisor or an affiliate thereof will bear and pay all expenses of the
Reorganization.
FEDERAL INCOME TAXES
The combination of the Value Plus Fund into the Large Cap Core Equity Fund
in the Reorganization is intended to qualify for federal income tax purposes as
a separate tax-free reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). If so, neither the Value Plus Fund nor
its shareholders will recognize gain or loss as a result of the Reorganization.
The tax basis of the Large Cap Core Equity Fund received will be the same as the
basis of the Value Plus Fund shares exchanged and the holding period of the
Large Cap Core Equity Fund shares received will include the holding period of
the Value Plus Fund shares exchanged, provided that the shares exchanged were
held as capital assets at the time of the Reorganization. As a condition to the
closing of the Reorganization, the Trust will receive an opinion from counsel to
that effect. No tax ruling from the Internal Revenue Service regarding the
Reorganization has been requested. The opinion of counsel is not binding on the
Internal Revenue Service and does not preclude the Internal Revenue Service from
adopting a contrary position. Nevertheless, the sale of securities by the Value
Plus Fund prior to the Reorganization, whether in the ordinary course of
business or in anticipation of the Reorganization, could result in a taxable
capital gains distribution prior to the Reorganization. Shareholders should
consult their own tax advisors concerning the potential tax consequences of the
Reorganization to them, including foreign, state and local tax consequences.
CAPITALIZATION
The following table sets forth as of [March 31, 2006]: (i) the unaudited
capitalization of each of the Value Plus Fund and (ii) the unaudited pro forma
combined capitalization of the Funds assuming the Reorganization has been
approved. If the Reorganization is consummated, the capitalizations are likely
to be different on the Effective Time as a result of daily share purchase and
redemption activity in the Funds and changes in NAV.
18
- ----------------------------- ---------- -------------------- ------------------
NET ASSET VALUE
FUND NET ASSETS PER SHARE SHARES OUTSTANDING
- ----------------------------- ---------- -------------------- ------------------
Value Plus Fund $ $
- ----------------------------- ---------- -------------------- ------------------
Large Cap Core Equity Fund $ $
- ----------------------------- ---------- -------------------- ------------------
Combined Funds $ $
- ----------------------------- ---------- -------------------- ------------------
REASONS FOR THE REORGANIZATION
At a meeting held on May 18, 2006, the Board of Trustees of the Trust
unanimously voted that the proposed Reorganization would be in the best
interests of the Value Plus Fund and its shareholders and that the interests of
the shareholders would not be diluted. At these meetings, representatives of the
Advisor provided, and the Board of Trustees reviewed, detailed information about
the proposed Reorganization. The representatives provided information to the
Board of Trustees concerning: (a) the specific terms of the Reorganization,
including information regarding comparative expense ratios; (b) the proposed
plans for ongoing management, distribution and operation of the Value Plus Fund;
and (c) the impact of the Reorganization on the Value Plus Fund and its
shareholders.
Before approving the Reorganization, the Board of Trustees examined all
factors that it considered relevant, including information regarding comparative
expense ratios. In connection with its deliberations, the Board of Trustees
inquired into a number of matters and evaluated the above-referenced information
and considered, among other things,:
o The similarity of the investment objectives of Value Plus Fund
and the Large Cap Core Equity Fund;
o The composition of each Fund's portfolio;
o The difference in risks of each Fund;
o The lower expense ratio, fees and expenses of the Large Cap
Core Equity Fund after waivers and reimbursements by the
Advisor
o The anticipated tax free nature of the Reorganization;
o The fact that the Trust will not bear the costs of the
Reorganization; and
o The alternatives available to the shareholders of the Value
Plus Fund, including the ability to redeem their shares.
The Board of Trustees determined that the Reorganization is in the best
interests of the Value Plus Fund's shareholders. On the basis of the information
provided to the Board of Trustees and its evaluation of that information, the
Board recommends that the shareholders of the Value Plus Fund approve the
Reorganization.
SHAREHOLDER RIGHTS
GENERAL SHAREHOLDER RIGHTS
General. The Trust is an open-end, diversified management investment
company registered with the SEC under the 1940 Act. The Trust was organized as a
Massachusetts business trust on November 18, 1982 and is governed by its
Declaration of Trust, Bylaws, a Board of Trustees and by applicable
Massachusetts and federal law. The Trust currently consists of seven series,
including Value Plus Fund and the Large Cap Core Equity Fund.
19
Shares. The Trust is authorized to issue an unlimited number of shares of
beneficial interest, without par value, of one or more series. The Trust's
Declaration of Trust permits the Trustees to allocate shares into one or more
series, and classes thereof, with rights determined by the Trustees, all without
shareholder approval. Fractional shares may be issued by each Fund. Shares of
each Fund are currently offered in three classes and each class of shares
represents an equal proportionate interest in the applicable Fund. Shareholders
of each Fund are entitled to receive dividends and other amounts as determined
by the Trustees. The shares of each Fund have no preference as to conversion and
have no preemptive rights.
Voting Requirements. Under the Trust's Declaration of Trust, each whole
share of beneficial interest of a Fund is entitled to one vote, and each
fractional share is entitled to a proportionate vote. Shareholders of each Fund
vote separately, by Fund, as to matters that affect only their particular Fund,
such as changes in fundamental investment restrictions, approval of or
amendments to investment advisory agreements or proposed mergers, except in
matters where a vote of all series of the Trust in the aggregate is required by
the 1940 Act. Except when a larger quorum is required by applicable law or the
applicable governing documents, a majority of the shares issued and outstanding
and entitled to vote constitutes a quorum for consideration of a matter at a
shareholders' meeting but any lesser number is sufficient for adjourned
sessions.
Shareholder Meetings. The Trust on behalf of the Funds is not required to
hold annual meetings of shareholders. However, a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee must be called when
requested in writing by the holders of at least 10% of the outstanding shares of
the Trust. In addition, the Trust is required to call a meeting of shareholders
for the purpose of electing Trustees if, at any time, less than a majority of
the Trustees then holding office were elected by shareholders. The Trust does
not currently intend to hold regular shareholder meetings.
Election and Term of Trustees. The affairs of the Trust are supervised by
the Trustees under the laws governing business trusts in the State of
Massachusetts. When a quorum is present at a meeting, a majority of the shares
present in person or by proxy is sufficient to act on a matter and is required
to elect a Trustee (unless otherwise specifically required by the applicable
governing documents or other law, including the 1940 Act). A Trustee of the
Trust may be removed at a meeting of shareholders by a vote of two-thirds of the
outstanding shares of the Trust, or by the vote of two-thirds of the remaining
number of Trustees. Trustees hold office until their successors are duly elected
and qualified or until their death, removal or resignation.
Shareholder Liability. Under Massachusetts law, shareholders of a business
trust could, under certain circumstances, be held personally liable for the
obligations of the business trust. However, the Declaration of Trust under which
the Funds were established disclaims shareholder liability for acts or
obligations of the series and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Funds or the Trustees. The Declaration of Trust provides for indemnification out
of the series' property for all losses and expenses of any shareholder held
personally liable for the obligations of the series. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
considered remote since it is limited to circumstances in which a disclaimer is
inoperative and the series or the Trust itself would be unable to meet its
obligations. A substantial number of mutual funds in the United States are
organized as Massachusetts business trusts.
Liability of Trustees. The Declaration of Trust of the Trust provides that
no Trustee or officer shall be liable to the Trust or to any shareholder,
Trustee, officer, employee or agent of the Trust for any action or failure to
act except for his or her own willful misfeasance, bad faith, gross negligence
or reckless disregard of his or her duties involved in the conduct of his or her
office. The Declaration of Trust provides that present and former Trustees or
officers are generally entitled to indemnification against liabilities and
expenses with respect to claims related to their position with the Funds unless,
in the case of any liability to the Funds or their shareholders, such Trustee or
officer is liable by reason of his or her willful misfeasance, bad faith, gross
negligence or reckless disregard of his or her duties involved in the conduct of
his or her office.
20
The foregoing is only a summary of certain characteristics of the
operations of the Declaration of Trust of the Trust, its Bylaws and
Massachusetts law and is not a complete description of those documents or law.
Shareholders should refer to the provisions of such Declaration of Trust, Bylaws
and Massachusetts law directly for more complete information.
TAXES
Please consult your tax advisor regarding your specific questions about
federal, state and local income taxes. Below is a summary of some important tax
issues that affect the Funds and their shareholders. This summary is based on
current tax laws, which may change. This summary is not applicable to the tax
consequences of the Reorganization. The tax-free nature of the Reorganization is
discussed above under INFORMATION RELATING TO THE REORGANIZATION - FEDERAL
INCOME TAXES.
Each Fund has qualified to be treated as a regulated investment company
under the Code. To remain qualified as a regulated investment company, a Fund
must distribute 90% of its taxable and tax-exempt income and diversify its
holdings as required by the 1940 Act and the Code. While so qualified, so long
as each Fund distributes all of its net investment company taxable and
tax-exempt income and any net realized gains to the shareholders, it is expected
that the Funds will not be required to pay any federal income taxes on the
amounts distributed to shareholders.
Each Fund will distribute substantially all of its net investment income
and its net realized capital gains, if any, at least annually. The dividends and
distributions that shareholders receive may be subject to federal, state and
local taxation, depending upon your tax situation. Distributions received from a
Fund may be taxable whether or not shareholders reinvest them.
Income and short-term capital gains that are distributed to you are
taxable as ordinary income for federal income tax purposes regardless of how
long you have held your Fund shares. To the extent that underlying income of a
Fund consists of qualified dividend income, income distributions by the Fund may
be subject to a maximum federal income tax rate of 15% for individuals and may
qualify for the dividends received deduction for corporations. Long-term capital
gains distributed to you are taxable as long-term capital gains for federal
income tax purposes regardless of how long you have held your Fund shares. The
maximum individual tax rate on net long-term capital gains is 15%.
Income distributions are generally taxable as ordinary income. Long-term
capital gains are currently taxed at a maximum rate of 15%. Each sale or
exchange of Fund shares may be a taxable event. For tax purposes, an exchange of
shares of one Fund for shares of another Fund is treated the same as a sale. You
will receive an annual statement outlining the tax status of your distributions.
You will also receive written notices of certain foreign taxes and distributions
paid by the Funds during the prior taxable year.
Shareholders with tax-advantaged or other retirement accounts generally
will not be subject to federal taxation on income and capital gain distributions
until distributions from the retirement account are received. Shareholders
should consult their tax advisor regarding the rules governing their own
retirement plan.
21
The Trust are each subject to the information requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith,
each files reports and other information, including proxy materials and charter
documents, with the SEC. Reports, proxy statements, registration statements and
other information filed by the Trust may be inspected without charge and copied
at the public reference facilities maintained by the SEC at 100 F Street, N.E.,
Washington, DC 20549, and at the following regional offices of the SEC:
Northeast Regional Office, 3 World Financial Center, Room 4-300, New York, New
York 10281; Southeast Regional Office, 801 Brickell Avenue, Suite 1800, Miami,
Florida 33131; Midwest Regional Office, 175 West Jackson Boulevard, Suite 900,
Chicago, Illinois 60604; Central Regional Office, 1801 California Street, Suite
1500, Denver, Colorado 80202; and Pacific Regional Office, 5670 Wilshire
Boulevard, Suite 1100, Los Angeles, California 90036. Copies of such materials
may also be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission,
Washington, DC 20549 at prescribed rates. Information included in the
Proxy/Prospectus concerning the Trusts was provided by Integrated Fund Services,
Inc.
INFORMATION ABOUT VALUE PLUS FUND
AND THE LARGE CAP CORE EQUITY FUND
Information concerning the operation and management of the Value Plus Fund
and the Large Cap Core Equity Fund is incorporated herein by reference from the
Trust's prospectuses. Additional information about the Value Plus Fund and the
Large Cap Core Equity Fund is included in the Trust's Statement of Additional
Information dated August 1, 2005, which is available upon request and without
charge by calling 1-800-543-0407.
INTEREST OF CERTAIN PERSONS IN THE TRANSACTIONS. The Advisor may be deemed to
have an interest in the Reorganization. If the Reorganization is approved, the
Advisor will pay Todd a fee of 0.30% for sub-advising the Large Cap Core Equity
Fund and will no longer pay Fort Washington a fee of 0.45% for sub-advising the
Value Plus Fund. However, as discussed above, the Large Cap Core Equity Fund
also pays a lower management fee to the Advisor.
FINANCIAL STATEMENTS. The financial statements of the Trust relating to the
Value Plus Fund and the Large Cap Core Equity Fund contained in the Annual
Report to shareholders for the fiscal year ended March 31, 2006 have been
audited by [ ], their independent registered public accountant and are
incorporated herein by reference. The Trust will furnish, without charge, a copy
of the Annual Report on request. Requests should be made by calling toll-free
1-800-543-0407. The Annual Reports for the Funds also are available on the SEC's
website at www.sec.gov.
The Financial Highlights relating to the Funds contained in the Annual
Report for the fiscal year ended March 31, 2006 are attached as Exhibit C.
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF THE REORGANIZATION AGREEMENT.
VOTING MATTERS
GENERAL INFORMATION
22
This Proxy Statement/Prospectus is being furnished in connection with the
solicitation of proxies by the Board of Trustees of the Trust in connection with
the Special Meeting to be held August 7, 2006 at 9:30 a.m., ET, at 303 Broadway,
Suite 1100, Cincinnati, OH 45202, and at any adjournments thereof. This
Prospectus/Proxy Statement, along with a Notice of the Special Meeting and a
proxy card, is first being mailed to shareholders of the Value Plus Fund on or
about July 7, 2004. It is expected that the solicitation of proxies will be
primarily by mail, but beginning on or about July [__], 2006, proxy
solicitations may also be made by telephone, or personal solicitations may be
conducted by officers and employees of the Advisor, its affiliates or other
representatives of the Trust (who will not be paid for their soliciting
activities). In addition, proxy solicitations may be made by [Alamo Direct,
Inc.], the Value Plus Fund's proxy solicitor.
The Board of Trustees of the Trust has fixed the close of business on June
[__], 2006 as the record date (the "Record Date") for determining the
shareholders of the Value Plus Fund entitled to receive notice of the Special
Meeting and to vote, and for determining the number of shares that may be voted,
with respect to the Meeting or any adjournment thereof.
VOTING RIGHTS AND REQUIRED VOTE
Each shareholder of the Value Plus Fund is entitled to one vote for each
full share held and fractional votes for fractional shares. The holders of 50%
of the outstanding shares of the Value Plus Fund entitled to vote at the Special
Meeting, present in person or by proxy, constitute a quorum. Approval of the
Reorganization requires the affirmative vote of a majority of the aggregate
number of votes entitled to be cast.
If you wish to participate in the Special Meeting, you may submit the
proxy card included with this Prospectus/Proxy Statement, vote by telephone,
vote through the Internet, or attend in person. (Guidelines on voting by proxy
card are immediately after the Notice of Special Meeting. Instructions for
telephone and Internet voting are set forth on the proxy card.)
If the enclosed proxy is properly executed and returned in time to be
voted at the Special Meeting, the proxies named therein will vote the shares of
beneficial interest represented by the proxy in accordance with the instructions
marked on the returned proxy. PROXIES THAT ARE PROPERLY EXECUTED AND RETURNED
BUT ARE NOT MARKED WITH VOTING INSTRUCTIONS WILL BE VOTED FOR THE PROPOSED
REORGANIZATION AND FOR ANY OTHER MATTERS DEEMED APPROPRIATE. It is not
anticipated that any matters other than the approval of the Reorganization will
be brought before the Special Meeting. Should other business properly be brought
before the Special Meeting, it is intended that the accompanying proxies will be
voted in accordance with the judgment of the persons named as such proxies.
Proxies may be revoked by executing and delivering a later-dated signed
proxy to the Secretary of the Trust at the address set forth on the cover page
of this Prospectus/Proxy Statement, or by attending the Special Meeting in
person and voting your shares. Unless revoked, all valid proxies will be voted
in accordance with the specifications thereon.
Abstentions and "broker non-votes" (i.e. shares held by brokers or
nominees, typically in "street name," as to which (i) instructions have not been
received from the beneficial owners or persons entitled to vote and (ii) the
broker or nominee does not have discretionary voting power on a particular
matter) will be treated as present for purposes of determining a quorum. In
addition, under the rules of the New York Stock Exchange, if a broker has not
received instructions from beneficial owners or persons entitled to vote and the
proposal to be voted upon may "affect substantially" a shareholder's rights or
privileges, the broker may not vote the shares as to that proposal even if it
has discretionary voting power As a result, these shares also will be treated as
broker non-votes for purposes of proposals that may "affect substantially" a
shareholder's rights or privileges (but will not be treated as broker non-votes
for other proposals, including adjournment of the Special Meeting).
23
Abstentions and broker non-votes will be treated as shares voted against a
proposal. Treating broker non-votes as votes against a proposal can have the
effect of causing shareholders who choose not to participate in the proxy vote
to prevail over shareholders who cast votes or provide voting instructions to
their brokers or nominees. In order to prevent this result, the Trust may
request that selected brokers or nominees refrain from returning proxies on
behalf of shares for which voting instructions have not been received from
beneficial owners or persons entitled to vote. The Trust also may request that
selected brokers or nominees return proxies on behalf of shares for which voting
instructions have not been received if doing so is necessary to obtain a quorum.
If shareholders of the Value Plus Fund do not vote to approve the
Reorganization, the Trustees of the Trust will consider other possible courses
of action in the best interests of shareholders. If sufficient votes in favor of
the Reorganization are not received by the time scheduled for the Special
Meeting, the persons named as proxies or any officer present entitled to preside
or act as Secretary of such meeting, may propose one or more adjournments of the
Special Meeting to permit further solicitation of proxies. In determining
whether to adjourn the Special Meeting, the following factors may be considered:
the percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to shareholders with respect to the reasons for the solicitation. Any
adjournment will require an affirmative vote of a majority of those shares
represented at the Special Meeting, whether or nor a quorum is present, in
person or by proxy. The persons named as proxies will vote upon such adjournment
after consideration of all circumstances that may bear upon a decision to
adjourn the Meeting. Any business that might have been transacted at the Special
Meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present. The costs of any additional solicitation and of any
adjourned session will be borne by the Advisor
A shareholder of the Value Plus Fund who objects to the proposed
Reorganization will not be entitled under either Massachusetts law or the
Declaration of Trust of the Trust to demand payment for, or an appraisal of, his
or her shares. However, shareholders should be aware that the Reorganization as
proposed is not expected to result in recognition of gain or loss to
shareholders for federal income tax purposes. If the Reorganization is
consummated, shareholders will be free to redeem the shares of Large Cap Core
Equity Fund that they receive in the transaction at their then-current net asset
value. Shares of Value Plus Fund may be redeemed at any time prior to the
consummation of the Reorganization. Shareholders of the Value Plus Fund may wish
to consult their tax advisors as to any different consequences of redeeming
their shares prior to the Reorganization or exchanging such shares in the
Reorganization.
The Trust does not hold annual shareholder meetings. If the Reorganization
is not approved, shareholders wishing to submit proposals to be considered for
inclusion in a proxy statement for a subsequent shareholder meeting should send
their written proposals to the Secretary of the Trust at the address set forth
on the cover of this Prospectus/Proxy Statement so that they will be received by
the Trust in a reasonable period of time prior to that meeting.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise the Value Plus Fund whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
this Prospectus/Proxy Statement needed to supply copies to the beneficial owners
of the respective shares.
EXPENSES
The costs of solicitation and the expenses incurred in connection with
preparing this Prospectus/Proxy Statement and its enclosures (totaling
approximately [$ 30,000]) will be paid by the Advisor whether or not
shareholders approve the Reorganization. The estimated cost of the additional
proxy solicitation by [Alamo Direct, Inc.] is approximately [$1,300]. Persons
holding shares as nominees will, upon request, be reimbursed for their
reasonable expenses in sending soliciting material to their principals.
24
RECORD DATE AND OUTSTANDING SHARES
Only shareholders of record of the Value Plus Fund at the close of
business on June [__], 2006 (the "Record Date") are entitled to notice of and to
vote at the Meeting and any postponement or adjournment thereof. At the close of
business on the Record Date there were outstanding and entitled to vote
[_______] shares of the Value Plus Fund.
The votes of the shareholders of the Large Cap Core Equity Fund are not
being solicited, because their approval or consent is not necessary for the
approval of the Reorganization. However, the vote required for approval of the
proposal, including the treatment of abstentions and broker non-votes would be
the same as for Value Plus Fund. At the close of business on the Record Date
there were outstanding and entitled to vote [_________] shares of the Large Cap
Core Equity Fund.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, the officers and Trustees of the Trust, as a group,
beneficially owned less than 1% of the outstanding shares of the Value Plus Fund
and the Large Cap Core Equity Fund.
As of the Record Date, to the knowledge of the Trustees and management of
the Trust, other than as set forth below, no person owned beneficially or of
record more than 5% of the outstanding shares of either the Value Plus Fund and
the Large Cap Core Equity.
VALUE PLUS FUND - CLASS A
- ------------------------ ------------------ ------------------- ----------------
PERCENTAGE
NAME AND ADDRESS FUND NUMBER OF SHARES OWNERSHIP
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
VALUE PLUS FUND - CLASS B
- ------------------------ ------------------ ------------------- ----------------
PERCENTAGE
NAME AND ADDRESS FUND NUMBER OF SHARES OWNERSHIP
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
25
VALUE PLUS FUND - CLASS C
- ------------------------ ------------------ ------------------- ----------------
PERCENTAGE
NAME AND ADDRESS FUND NUMBER OF SHARES OWNERSHIP
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
LARGE CAP CORE EQUITY FUND - CLASS A
- ------------------------ ------------------ ------------------- ----------------
PERCENTAGE
NAME AND ADDRESS FUND NUMBER OF SHARES OWNERSHIP
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
LARGE CAP CORE EQUITY FUND - CLASS B
- ------------------------ ------------------ ------------------- ----------------
PERCENTAGE
NAME AND ADDRESS FUND NUMBER OF SHARES OWNERSHIP
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
LARGE CAP CORE EQUITY FUND - CLASS C
- ------------------------ ------------------ ------------------- ----------------
PERCENTAGE
NAME AND ADDRESS FUND NUMBER OF SHARES OWNERSHIP
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
- ------------------------ ------------------ ------------------- ----------------
26
OTHER BUSINESS
The Board of Trustees of the Trust knows of no other business to be
brought before the Special Meeting. However, if any other matters come before
the Special Meeting, it is the intention that proxies that do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust by calling 1-800-543-0407.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
VOTE BY MAIL, PHONE, FAX, OR INTERNET. INFORMATION ON THE VARIOUS MANNERS OF
VOTING ARE SET FORTH IN THE ENCLOSED PROXY.
By Order of the Board of Trustees,
Jay S. Fitton
Secretary
27
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [ th] day of May, 2006, by and between the Large Cap Core Equity Fund (the
"Acquiring Fund") and the Value Plus Fund (the "Selling Fund"), each a series of
Touchstone Strategic Trust (the "Trust"). The Trust is a Massachusetts business
trust, with its principal place of business at 303 Broadway, Suite 1100,
Cincinnati, Ohio 45202.
The reorganization (the "Reorganization") will consist of (i) the transfer
of all of the assets of the Selling Fund in exchange solely for shares of
beneficial interest, without par value per share, of the Acquiring Fund (the
"Acquiring Fund Shares"); (ii) the assumption by the Acquiring Fund of all of
the liabilities of the Selling Fund; and (iii) the distribution, after the
Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Selling Fund in liquidation of the Selling Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Selling Fund and the Acquiring Fund are authorized to issue
their shares of beneficial interest;
WHEREAS, the Trustees of the Trust have determined that the transactions
contemplated herein will be in the best interests of the Acquiring Fund and its
shareholders;
WHEREAS, the Trustees of the Trust have determined that the Selling Fund
should exchange all of its assets and liabilities for Acquiring Fund Shares and
that the interests of the existing shareholders of the Selling Fund will not be
diluted as a result of the transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND ASSUMPTION OF SELLING FUND LIABILITIES AND LIQUIDATION OF THE
SELLING FUND
1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange for
the Selling Fund's assets (i) to deliver to the Selling Fund the number of
Acquiring Fund Shares, including fractional Acquiring Fund Shares, computed in
the manner and as of the time and date set forth in paragraphs 2.2 and 2.3; and
(ii) to assume all of the liabilities of the Selling Fund, as set forth in
paragraph 1.3. Such transactions shall take place on the Closing Date provided
for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be acquired
by the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling Fund
on the Closing Date.
The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of the Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of the
date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the purchase
and sale of securities and the payment of its normal operating expenses and the
payment of dividends, capital gains distributions and redemption proceeds to
shareholders. The Selling Fund reserves the right to sell any of such
securities, but will not, without the prior written approval of the Acquiring
Fund, acquire any additional securities other than securities of the type in
which the Acquiring Fund is permitted to invest.
The Acquiring Fund will, within a reasonable time prior to the Closing
Date, furnish the Selling Fund with a list of the securities, if any, on the
Selling Fund's list referred to in the second sentence of this paragraph that do
not conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time (not
less than 30 days) prior to the Closing Date, furnish the Acquiring Fund with a
list of its portfolio securities and other investments. In the event that the
Selling Fund holds any investments that the Acquiring Fund may not hold, the
Selling Fund, if requested by the Acquiring Fund, will dispose of such
securities prior to the Closing Date. In addition, if it is determined that the
Selling Fund and the Acquiring Fund portfolios, when aggregated, would contain
investments exceeding certain percentage limitations imposed upon the Acquiring
Fund with respect to such investments, the Selling Fund if requested by the
Acquiring Fund will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
Notwithstanding the foregoing, nothing herein will require the Selling Fund to
dispose of any investments or securities if, in the reasonable judgment of the
Selling Fund, such disposition would violate the Selling Fund's fiduciary duty
to its shareholders.
1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to discharge
all of its known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume all of the Selling Fund's liabilities and
obligations of any kind whatsoever, whether absolute, accrued, contingent or
otherwise in existence on the Closing Date.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date as
is conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Valuation Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1; and (b) the Selling Fund will thereupon proceed to terminate
as set forth in paragraph 1.8 below. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Selling Fund on the books of the Acquiring Fund to open accounts
on the share records of the Acquiring Fund in the names of the Selling Fund
Shareholders and representing the respective pro rata number of the Acquiring
Fund Shares due such shareholders. All issued and outstanding shares of the
Selling Fund will simultaneously be canceled on the books of the Selling Fund.
The Acquiring Fund shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown
on the books of the Acquiring Fund's transfer agent. Shares of the Acquiring
Fund will be issued in the manner described in the Prospectus/Proxy Statement on
Form N-14 which has been distributed to shareholders of the Selling Fund as
described in paragraph 4.1(o).
1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the Selling
Fund is and shall remain the responsibility of the Selling Fund up to and
including the Closing Date and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. The Trust shall take all necessary and appropriate steps
under applicable law to terminate the Selling Fund promptly following the
Closing Date and the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Selling Fund's then current
prospectus and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring
Fund Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectus and statement of additional
information.
2.3 SHARES TO BE ISSUED. The number of full and fractional Acquiring Fund
Shares to be issued in exchange for the Selling Fund's assets shall be
determined by multiplying the outstanding shares of the Selling Fund by the
ratio computed by dividing the net asset value per share of the Selling Fund by
the net asset value per share of the Acquiring Fund on the Valuation Date,
determined in accordance with in paragraph 2.2. Class A, Class B and Class C
shares of the Acquiring Fund will be issued for Class A, Class B and Class C
shares of the Acquired Fund, respectively.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
Integrated Fund Services, Inc., the Acquiring Fund and Selling Fund's accounting
agent, in accordance with its regular practice in pricing the shares and assets
of the Acquiring Fund and Selling Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing of the Reorganization (the "Closing") shall
take place on or about August 13, 2006 or such other date as the parties may
agree to in writing (the "Closing Date"). All acts taking place at the Closing
shall be deemed to take place simultaneously immediately prior to the opening of
business on the Closing Date unless otherwise provided. The Closing shall be
held as of 8:00 a.m. Eastern Time ("ET") at the offices of the Trust, or at such
other time and/or place as the parties may agree.
3.2 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date (a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date (and 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.
3.3 TRANSFER AGENT'S CERTIFICATE. The Selling Fund shall cause its
transfer agent to deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the Selling Fund
Shareholders and the number and percentage ownership of outstanding shares owned
by each such shareholder immediately prior to the Closing. The Acquiring Fund
shall issue and deliver, or cause its transfer agent, to issue and deliver, to
the Secretary of the Trust a confirmation evidencing the Acquiring Fund Shares
to be credited on the Closing Date or provide evidence satisfactory to the
Selling Fund that such Acquiring Fund Shares have been credited to the Selling
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts and other documents as such other party or its
counsel may reasonably request.
3.4 CUSTODIAN'S CERTIFICATE. Brown Brothers Harriman & Co., as custodian
for the Selling Fund, shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to its
respective Acquiring Fund on the Closing Date; and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities by the Selling Fund.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents and
warrants to the Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of the Trust, a
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(b) The Selling Fund is a separate investment series of the Trust,
which is registered as an investment company classified as a management company
of the open-end type, and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), is in full force and effect.
(c) The current prospectus and statement of additional information
of the Selling Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act and the rules and regulations of the Commission thereunder and do 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 misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of the Trust's Declaration of Trust or By-Laws or
of any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling 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, except for liabilities, if any, to be discharged as
provided in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or to its knowledge
threatened against the Selling Fund or any of its properties or assets, which,
if adversely determined, would materially and adversely affect its financial
condition, the conduct of its business, or the ability of the Selling Fund to
carry out the transactions contemplated by this Agreement. The Selling Fund
knows of no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any order,
decree, or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
(g) The audited financial statements of the Selling Fund at March
31, 2006 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(h) Since March 31, 2006, there has not been any material adverse
change in the Selling Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Selling Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the net asset value of the Selling Fund shall not constitute a
material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to have been filed by such date
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Selling Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has distributed in each such year all net
investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are, and
at the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Selling Fund. All of the issued and outstanding shares
of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the transfer agent as
provided in paragraph 3.3. The Selling Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any of the
Selling Fund shares, nor is there outstanding any security convertible into any
of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act, other than as
disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary action on the part of the Selling Fund
and, subject to approval by the Selling Fund's shareholders, this Agreement
constitutes a valid and binding obligation of the Selling 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.
(n) The information furnished by the Selling Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations thereunder applicable thereto.
(o) The Selling Fund has provided the Acquiring Fund with
information reasonably necessary for the preparation of a prospectus, which
included the proxy statement of the Selling Fund (the "Prospectus/Proxy
Statement"), all of which was included in a Registration Statement on Form N-14
of the Acquiring Fund (the "Registration Statement"), in compliance with the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and
the 1940 Act in connection with the meeting of the shareholders of the Selling
Fund to approve this Agreement and the transactions contemplated hereby. The
Prospectus/Proxy Statement included in the Registration Statement (other than
information therein that relates to the Acquiring Fund and any other fund
described therein other than the Selling Fund) does 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.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund represents
and warrants to the Selling Fund as follows:
(a) The Acquiring Fund is a separate investment series of the Trust,
a business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of the Trust,
which is registered as an investment company classified as a management company
of the open-end type, and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), is in full force and effect.
(c) The prospectus and statement of additional information, as of
the date of the Prospectus/Proxy Statement, of the Acquiring Fund will conform
in all material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission thereunder and 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 misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling Fund and
accepted by the Selling Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(f) The audited financial statements of the Selling Fund at March
31, 2006 are in accordance with generally accepted accounting principles
consistently applied, and such statements (copies of which have been furnished
to the Acquiring Fund) fairly reflect the financial condition of the Selling
Fund as of such date, and there are no known contingent liabilities of the
Selling Fund as of such date not disclosed therein.
(g) Since March 31, 2006, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute a
material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law then to be filed by such date
shall have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such return
is currently under audit, and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company and has distributed in each such year all net
investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Acquiring Fund
Shares, nor is there outstanding any security convertible into any Acquiring
Fund Shares.
(k) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary action on the part of the Acquiring Fund,
and this Agreement constitutes 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.
(l) The Acquiring Fund Shares to be issued and delivered to the
Selling Fund, for the account of the Selling Fund Shareholders, pursuant to the
terms of this Agreement will, at the Closing Date, have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable.
(m) The information furnished by the Acquiring Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations applicable thereto.
(n) The Prospectus/Proxy Statement included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) does 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.
(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940 Act,
and such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling Fund
each will operate its business in the ordinary course between the date hereof
and the Closing Date, it being understood that such ordinary course of business
will include customary dividends and distributions.
5.2 APPROVAL BY SHAREHOLDERS. The Trust will call a meeting of the
shareholders of the Selling Fund to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Selling Fund covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling 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, including any actions required to be taken after the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND
The obligations of the Selling Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and as of the Closing Date with the same force and effect as if made on
and as of the Closing Date, and the Acquiring Fund shall have delivered to the
Selling Fund a certificate executed in its name by the Trust's President or Vice
President, in form and substance reasonably satisfactory to the Selling Fund and
dated as of the Closing Date, to such effect and as to such other matters as the
Selling Fund shall reasonably request.
6.2 With respect to the Selling Fund, the Trust shall have received on the
Closing Date an opinion from [_______] LLP, special counsel to the Trust and the
Acquiring Fund, dated as of the Closing Date, in a form reasonably satisfactory
to the Selling Fund, covering the following points:
(a) The Acquiring Fund is a separate investment series of a business
trust duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts and, to such counsel's knowledge, has the
trust power to own all of its properties and assets and, to carry on its
business as presently conducted.
(b) The Acquiring Fund is a separate series of a Massachusetts
business trust registered as an investment company under the 1940 Act, and, to
such counsel's knowledge, such registration with the Commission as an investment
company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed, and delivered
by the Trust on behalf of the Acquiring Fund and, assuming due authorization,
execution and delivery of this Agreement by the Selling Fund, is a valid and
binding obligation of the Acquiring Fund enforceable against the Acquiring Fund
in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium, and other laws
relating to or affecting creditors' rights generally and to general equity
principles.
(d) Assuming that a consideration therefore not less than the net
asset value thereof has been paid, the Acquiring Fund Shares to be issued and
delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any statutory preemptive rights in respect
thereof.
(e) The Registration Statement, to the knowledge of such counsel,
has been declared effective by the Commission and no stop order under the 1933
Act pertaining thereto has been issued; and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts is required for
consummation by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act and the 1940 Act, and as
may be required under state securities laws.
(f) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or a material provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Acquiring Fund is
a party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty under any agreement, judgment, or decree to which the
Acquiring Fund is a party or by which it is bound.
(g) Only insofar as they relate to the Acquiring Fund, the
descriptions in the Prospectus/Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
present the information required to be shown.
(h) In the ordinary course of such counsel's representation of the
Acquiring Fund, and without having made any investigation, such counsel does not
know of any legal or governmental proceedings, only insofar as they relate to
the Acquiring Fund, existing on or before the effective date of the Registration
Statement or the Closing Date required to be described in the Registration
Statement or to be filed as exhibits to the Registration Statement which are not
described or filed as required.
(i) In the ordinary course of such counsel's representation of the
Acquiring Fund, and without having made any investigation, and except as
otherwise disclosed, to the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquiring Fund or
any of its properties or assets and the Acquiring Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
(j) To the knowledge of such counsel no consent, approval,
authorization or order of any court or governmental authority of the United
States or the Commonwealth of Massachusetts is required for consummation by the
Acquiring Fund of the transaction contemplated herein, except as has and as may
be obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
Such opinion shall contain such assumptions and limitations as shall be in
the opinion of [___________] LLP appropriate to render the opinions expressed
therein.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by the
Selling Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Selling Fund contained in
this Agreement shall be true and correct as of the date hereof and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date, and the Selling Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by the Trust's President or Vice
President, in form and substance satisfactory to the Acquiring Fund and dated as
of the Closing Date, to such effect and as to such other matters as the
Acquiring Fund shall reasonably request.
7.2 The Selling Fund shall have delivered to the Acquiring Fund a
statement of the Selling Fund's assets and liabilities, together with a list of
the Selling Fund's portfolio securities showing the tax costs of such securities
by lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer or Assistant Treasurer of the Trust.
7.3 With respect to the Acquiring Fund, the Trust shall have received on
the Closing Date an opinion of [_______________] LLP, special counsel to the
Trust and the Selling Fund, in a form reasonably satisfactory to the Acquiring
Fund, covering the following points:
(a) The Selling Fund is a separate investment series of the Trust, a
business trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has the trust power to own all of
its properties and assets and, to the knowledge of such counsel, to carry on its
business as presently conducted.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act, and, to such counsel's knowledge, such registration with the Commission as
an investment company under the 1940 Act is in full force and effect.
(c) This Agreement has been duly authorized, executed and delivered
by the Trust on behalf of the Selling Fund and, assuming due authorization,
execution, and delivery of this Agreement by the Acquiring Fund, is a valid and
binding obligation of the Selling Fund enforceable against the Selling Fund in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles.
(d) Assuming that a consideration therefore of not less than the net
asset value thereof has been paid, and assuming that such shares were issued in
accordance with the terms of the Selling Fund's registration statement, or any
amendment thereto, in effect at the time of such issuance, all issued and
outstanding shares of the Selling Fund are legally issued and fully paid and
non-assessable.
(e) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-laws, or a material
provision of any material agreement, indenture, instrument, contract, lease or
other undertaking (in each case known to such counsel) to which the Selling Fund
is a party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which the
Selling Fund is a party or by which it is bound.
(f) Only insofar as they relate to the Selling Fund, the
descriptions in the Prospectus/Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and fairly
represent the information required to be shown.
(g) In the ordinary course of such counsel's representation of the
Selling Fund and without having made any investigation, such counsel does not
know of any legal or governmental proceedings, only insofar as they relate to
the Selling Fund existing on or before the effective date of the Registration
Statement or the Closing Date, required to be described in the Registration
Statement or to be filed as exhibits to the Registration Statement which are not
described or filed as required.
(h) In the ordinary course of such counsel's representation of the
Selling Fund and without having made any investigation, and except as otherwise
disclosed, to the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to the Selling Fund or any of its respective
properties or assets and the Selling Fund is not a party to nor subject to the
provisions of any order, decree or judgment of any court or governmental body,
which materially and adversely affects its business other than as previously
disclosed in the Prospectus/Proxy Statement.
(i) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the Commonwealth of Massachusetts is required for consummation by the
Selling Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, 1934 Act and the 1940 Act, and as may be required
under state securities laws.
Such opinion shall contain such other assumptions and limitations as shall
be in the opinion of [_______________] LLP appropriate to render the opinions
expressed therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE ACQUIRING FUND AND THE SELLING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Selling Fund in accordance with the provisions of the Trust's Agreement and
Declaration of Trust and By-Laws and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund or
the Selling Fund may waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, nor instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act and no action, suit or
other proceeding shall be threatened or pending 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 required consents of other parties and all other consents, orders,
and permits of federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky securities authorities, including any
necessary "no-action" positions of and exemptive orders from such federal and
state authorities) to permit consummation 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 Selling Fund, provided
that either party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the 1933
Act, and no stop orders suspending the effectiveness of the Registration
Statement shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933 Act.
8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends shall have the effect of distributing
to the Selling Fund Shareholders all of the Selling Fund's investment company
taxable income for all taxable periods ending on the Closing Date (computed
without regard to any deduction for dividends paid) and all of the net capital
gains realized in all taxable periods ending on the Closing Date (after
reduction for any capital loss carryforward).
8.6 The Trust shall have received a favorable opinion of [_______________]
LLP addressed to the Acquiring Fund and the Selling Fund substantially to the
effect that, for federal income tax purposes:
(a) The transfer of all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Selling Fund followed by the distribution of the Acquiring
Fund Shares to the Selling Fund Shareholders in dissolution and liquidation of
the Selling Fund will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Acquiring Fund and the Selling Fund will
each be a "party to a reorganization" within the meaning of Section 368(b) of
the Code.
(b) No gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund upon the
transfer of the Selling Fund's assets to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Selling Fund or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Selling Fund Shareholders in
exchange for their shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for the Acquiring
Fund Shares in liquidation of the Selling Fund.
(e) The aggregate tax basis for the Acquiring Fund Shares received
by each Selling Fund Shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Selling Fund shares held by such Shareholder
immediately prior to the Closing. The holding period of the Acquiring Fund
Shares received by each Selling Fund Shareholder will include the period during
which the Selling Fund shares exchanged therefore were held by such Shareholder
(provided the Selling Fund shares were held as capital assets on the date of the
Closing).
(f) The tax basis of the Selling Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Closing, and the holding period of the assets of
the Selling Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Selling Fund.
(g) The Acquiring Fund will succeed to and take into account the
items of the Selling Fund described in Section 381(c) of the Code, subject to
the conditions and limitations specified in Sections 381, 382, 383 and 384 of
the Code and applicable regulations thereunder.
Such opinion shall contain such assumptions and limitations as shall be in
the opinion of [______________] appropriate to render the opinions expressed
therein. Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Selling Fund may waive the conditions set forth in this paragraph
8.6.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by the Selling Fund and the
Acquiring Fund, whether incurred before or after the date of this Agreement,
will be borne by Touchstone Advisors, Inc., the investment advisor to the Trust.
Such expenses include, without limitation, (a) expenses incurred in connection
with the entering into and the carrying out of the provisions of this Agreement;
(b) expenses associated with the preparation and filing of the Registration
Statement under the 1933 Act covering the Acquiring Fund Shares to be issued
pursuant to the provisions of this Agreement; (c) registration or qualification
fees and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which the Selling Fund
Shareholders are residents as of the date of the mailing of the Prospectus/Proxy
Statement to such shareholders; (d) postage; (e) printing; (f) accounting fees;
(g) legal fees; and (h) solicitation costs of the transaction.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Selling Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2 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.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:
(a) of a breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date, if
not cured within 30 days;
(b) a condition herein expressed to be precedent to the obligations
of the terminating party has not been met and it reasonably appears that it will
not or cannot be met; or
(c) a determination by the Trust's Board of Trustees that the
consummation of the Transaction contemplated herein is not in the best interest
of the Selling Fund or the Acquiring Fund.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of the Acquiring
Fund, the Selling Fund, the Trust, or its Trustees or officers, to the other
party, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Trust; provided, however, that following the meeting of shareholders of the
Selling Fund pursuant to paragraph 5.2 of this Agreement, no such amendment may
have the effect of changing the provisions for determining the number of the
Acquiring Fund Shares to be issued to the Selling Fund Shareholders under this
Agreement to the detriment of such Selling Fund Shareholders without their
further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect to the
conflicts of laws provisions thereof.
13.4 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 party. 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 permitted assigns, any rights or remedies under or by reason of
this Agreement.
13.5 With respect to the Trust, the name used herein refers respectively
to the trust created and, as the case may be, the Trustees, as trustees but not
individually or personally, acting from time to time under organizational
documents filed in Massachusetts, which are hereby referred to and are also on
file at the principal offices of the Trust. The obligations of the Trust entered
into in the name or on behalf thereof by any of the Trustees, representatives or
agents of the Trust, are made not individually, but in such capacities, and are
not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the trust property, and all persons dealing with
the Selling Fund and the Acquiring Fund must look solely to the trust property
belonging to the Selling Fund and the Acquiring Fund for the enforcement of any
claims against the Selling Fund and the Acquiring Fund, respectively.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
TOUCHSTONE STRATEGIC TRUST
ON BEHALF OF THE LARGE CAP
CORE EQUITY FUND
By:
-----------------------
Name: Jill T. McGruder
Title: President
TOUCHSTONE STRATEGIC TRUST
ON BEHALF OF THE VALUE
PLUS FUND
By:
-----------------------
Name: Jill T. McGruder
Title: President
EXHIBIT B
- ------------------------------------------------
VALUE PLUS FUND
PERFORMANCE AND MARKET OVERVIEW
March 31, 2006
- ------------------------------------------------
[To be filed]
- ------------------------------------------------
LARGE CAP CORE EQUITY FUND
PERFORMANCE AND MARKET OVERVIEW
March 31, 2006
- ------------------------------------------------
[To be filed]
EXHIBIT C
FINANCIAL HIGHLIGHTS
[To be filed]
STATEMENT OF ADDITIONAL INFORMATION
JUNE [ ], 2006
TOUCHSTONE STRATEGIC TRUST
300 BROADWAY, SUITE 1100
CINCINNATI, OH 45202
1-800-543-0407
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the Combined Proxy Statement/Prospectus dated June [ ] ,
2006 for the Special Meeting of Shareholders of Touchstone Strategic Trust (the
"Trust") with respect to the Value Plus Fund to be held on August 7, 2006.
Copies of the Combined Proxy Statement/Prospectus may be obtained at no charge
by calling 1-800-543-0407. Unless otherwise indicated, capitalized terms used
herein and not otherwise defined have the same meanings as are given to them in
the Combined Proxy Statement/Prospectus.
Further information about the Value Growth Fund and the Large Cap Core Equity
Fund, each a series of the Trust is contained in and incorporated by reference
to the Statement of Additional Information for the Trust dated August 1, 2005.
The audited financial statements and related independent auditor's report for
the Trust relating the Value Growth Fund and the Large Cap Core Equity Fund
contained in the Annual Report to Shareholders for the fiscal year ending March
31, 2006, are incorporated herein by reference.
TABLE OF CONTENTS
- ---------------------------------------------------------------------- ---
Financial Statements of the combined Value Plus Fund and the Large 1
Cap Core Equity Fund on a pro forma basis for the period ended March
31, 2006
- ---------------------------------------------------------------------- ---
PART C
ITEM 15. Indemnification:
Article VII of the Restated Agreement and Declaration of Trust filed as an
Exhibit to the Registrant's Post-Effective Amendment No. 36 is incorporated
herein by reference. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to trustees, directors,
officers and controlling persons of the Registrant by the Registrant pursuant to
the Restated Agreement and Declaration of Trust or otherwise, the Registrant is
aware that in the opinion of the U.S. Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and, therefore,
is 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 trustees, directors, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or proceeding) is
asserted by such trustees, directors, officers or controlling persons in
connection with the shares 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 Act and will
be governed by the final adjudication of such issues.
ITEM 16. EXHIBITS
(1) (i) Restated Agreement and Declaration of Trust and Amendment No. 1 dated
May 24, 1994, Amendment No. 2 dated February 28, 1997 and Amendment No. 3
dated August 11, 1997, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 36, is incorporated by reference.
(ii) Amendment No. 4 to Restated Agreement and Declaration of Trust dated
February 12, 1998, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 42, is incorporated by reference.
(iii) Amendments to Restated Agreement and Declaration of Trust dated
March 16, 2000, which were filed as Exhibits to Registrant's
Post-Effective Amendment No. 42 is incorporated by reference.
(iv) Amendment to Restated Agreement and Declaration of Trust dated April
6, 2000, which was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 42 is incorporated by reference.
(v) Amendment to Restated Agreement and Declaration of Trust, which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 45 is
incorporated by reference.
(vi) Amendment to Restated Agreement and Declaration of Trust, which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 45 is
incorporated by reference.
(vii) Amendment to Restated Agreement and Declaration of Trust, which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 48 is
incorporated by reference.
(viii) Amendment dated November 7, 2002 to Restated Agreement and
Declaration of Trust, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 49 is incorporated by reference.
C-1
(ix) Amendment dated April 14, 2004 to Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 54 is incorporated by reference.
(x) Amendment dated January 3, 2006 to Restated Agreement and Declaration
of Trust, which was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 60 is incorporated by reference.
(2) Bylaws with Amendments adopted July 17, 1984 and April 5, 1989, which were
filed as Exhibits to Registrant's Post-Effective Amendment No. 36, are
hereby incorporated by reference.
(3) None
(4) Form of Agreement and Plan of Reorganization dated as of ___________, 2006
is filed herewith.
(5) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Article IV of Registrant's Restated Agreement and Declaration of
Trust provides the following rights for security holders:
LIQUIDATION. In event of the liquidation or dissolution of the
Trust, the Shareholders of each Series that has been established and
designated shall be entitled to receive, as a Series, when and as declared
by the Trustees, the excess of the assets belonging to that Series over
the liabilities belonging to that Series. The assets so distributable to
the Shareholders of any particular Series shall be distributed among such
Shareholders in proportion to the number of Shares of that Series held by
them and recorded on the books of the Trust.
VOTING. All shares of all Series shall have "equal voting rights" as
such term is defined in the Investment Company Act of 1940 and except as
otherwise provided by that Act or rules, regulations or orders promulgated
thereunder. On each matter submitted to a vote of the Shareholders, all
shares of each Series shall vote as a single class except as to any matter
with respect to which a vote of all Series voting as a single series is
required by the 1940 Act or rules and regulations promulgated thereunder,
or would be required under the Massachusetts Business Corporation Law if
the Trust were a Massachusetts business corporation. As to any matter
which does not affect the interest of a particular Series, only the
holders of Shares of the one or more affected Series shall be entitled to
vote.
REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Series shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the Trust to
redeem all or any part of his Shares of that Series at a redemption price
equal to the net asset value per Share of that Series next determined in
accordance with subsection (h) of this Section 4.2 after the Shares are
properly tendered for redemption.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Series to require the Trust to redeem Shares of that Series during any
period or at any time when and to the extent permissible under the 1940
Act, and such redemption is conditioned upon the Trust having funds or
property legally available therefore.
C-2
TRANSFER. All Shares of each particular Series shall be
transferable, but transfers of Shares of a particular Series will be
recorded on the Share transfer records of the Trust applicable to that
Series only at such times as Shareholders shall have the right to require
the Trust to redeem Shares of that Series and at such other times as may
be permitted by the Trustees.
Article V of Registrant's Restated Agreement and Declaration of
Trust provides the following rights for security holders:
VOTING POWERS. The Shareholders shall have power to vote only (i)
for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust or
any Series to the extent and as provided in Sections 7.1 and 7.2, (iv)
with respect to any amendment of this Declaration of Trust to the extent
and as provided in Section 7.3, (v) to the same extent as the stockholders
of a Massachusetts business corporation as to whether or not-a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vi) with respect to such additional matters relating to
the Trust as may be required by the 1940 Act, this Declaration of Trust,
the Bylaws or any registration of the Trust with the Commission (or any
successor agency) in any state, or as the Trustees may consider necessary
or desirable. There shall be, no cumulative voting in the election of any
Trustee or Trustees. Shares may be voted in person or by proxy.
(6) (i) Advisory Agreement with Touchstone Advisors, Inc., which was filed as
an Exhibit to Registrant's Post-Effective Amendment No. 57 is incorporated
by reference.
(ii) Subadvisory Agreement between Touchstone Advisors, Inc. and
Mastrapasqua Asset Management, Inc. for the Growth Opportunities Fund
which was filed as an Exhibit to Registrant's Post-Effective Amendment No.
42 is incorporated by reference.
(iii) Subadvisory Agreement between Touchstone Advisors, Inc. and TCW
Investment Management Company for the Mid Cap Growth Fund (formerly the
Emerging Growth Fund), which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 45 is incorporated by reference.
(iv) Subadvisory Agreement between Touchstone Advisors, Inc. and Westfield
Capital Management, Inc. for the Mid Cap Growth Fund (formerly the
Emerging Growth Fund), which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 57 is incorporated by reference.
(v) Subadvisory Agreement between Touchstone Advisors, Inc. and Fort
Washington Investment Advisors, Inc. for the Value Plus Fund, which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 49 is
incorporated by reference.
(vi) (a) Form of Subadvisory Agreement between Touchstone Advisors, Inc.
and Navellier & Associates, Inc. for the Large Cap Growth Fund, which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 54 is
incorporated by reference.
(b) Amendment to Sub-Advisory Agreement with Navellier E. Associates,
Inc., which was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 57 is incorporated by reference.
C-3
(vii) Subadvisory Agreement between Touchstone Advisors, Inc. and Todd
Investment Advisors, Inc. for the Large Cap Core Equity Fund, which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 49 is
incorporated by reference.
(viii) Subadvisory Agreement between Touchstone Advisors, Inc. and
Bjurman, Barry & Associates for the Small Cap Growth Fund, which was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 48 is hereby
incorporated by reference.
(ix) Subadvisory Agreement between Touchstone Advisors, Inc. and Longwood
Investment Advisors, Inc. for the Small Cap Growth Fund, which was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 48 is hereby
incorporated by reference.
(x) Subadvisory Agreement between Touchstone Advisors, Inc. and Bjurman,
Barry & Associates for the Micro Cap Growth Fund, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 54 is, incorporated
by reference.
(xi) Form of Subadvisory Agreement between Touchstone Advisors, Inc. and
JS Asset Management LLC which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 60 is incorporated by reference.
(7) (i) Distribution Agreement with Touchstone Securities, Inc., which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 45, is
incorporated by reference.
(i) Form of Underwriter's Dealer Agreement, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 56, is incorporated by
reference.
(8) The Touchstone Trustee Deferred Compensation Plan, which was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 43, is incorporated
by reference.
(9) (i) Custodian Agreement with Brown Brothers Harriman & Co., which was
filed as an Exhibit to Registrant's Post-Effective Amendment No. 49 is
incorporated by reference.
(ii) Securities Lending Agreement, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 49 is incorporated by reference.
(iii) Custody Fee Offset Agreement with Brown Brothers Harriman & Co.,
which was filed as an Exhibit to Registrant's Post-Effective Amendment No.
58 is incorporated by reference.
(10) (i) Registrant's Plans of Distribution Pursuant to Rule 12b-1 for Class A
Shares and Class C Shares, which were filed as an Exhibit to Registrant's
Post-Effective Amendment No. 42, are incorporated by reference.
(ii) Registrant's Plan of Distribution Pursuant to Rule 12b-1 for Class B
Shares, which was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 45, is incorporated by reference.
(iii) Amended Rule 18f-3 Plan Adopted with Respect to the Multiple Class
Distribution System [to be filed].
(11) (i) Opinion and Consent of Counsel, which was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1, is hereby incorporated by
reference.
C-4
(12) Form of Opinion of counsel regarding tax matters [to be filed].
(13) (i) Accounting Services Agreement dated December 31, 2002 with Integrated
Fund Services, Inc., which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 49 is incorporated by reference.
(ii) (a) Transfer Agency Agreement dated December 31, 2002 with Integrated
Fund Services, Inc., which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 49 is incorporated by reference.
(b) Recordkeeping Agreement which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 51 is incorporated by reference.
(c) Integrated Fund Services Anti-Money Laundering Compliance Program
Service Agreement Addendum which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 51 is incorporated by reference.
(d) Addendum to Transfer Agency Agreements, which was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 60 is incorporated by
reference.
(iii) Administration Agreement dated December 31, 2002 with Integrated
Fund Services, Inc., which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 49 is incorporated by reference.
(iv) Allocation Agreement for Allocation of Fidelity Bond Proceeds, which
was filed as an Exhibit to Registrant's Post-Effective Amendment No. 50 is
incorporated by reference.
(v) Amended Expense Limitation Agreement with Touchstone Advisors, Inc.,
which was filed as an Exhibit to Registrant's Post-Effective Amendment No.
57 is incorporated by reference.
(vi) (a) Sponsor Agreement with Touchstone Advisors, Inc., which was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 43 is
incorporated by reference.
(b) Amendment No. 1 to Sponsor Agreement, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 45 is incorporated by reference.
(c) Amendment No. 2 to Sponsor Agreement, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 49 is incorporated by reference.
(d) Amendments 3 and 4 to Sponsor Agreement with Touchstone Advisors,
Inc., which were filed as Exhibits to Registrant's Post-Effective
Amendment No.50 are incorporated by reference.
(e) Amendments 5, 6, and 7 to Sponsor Agreement with Touchstone Advisors,
Inc., which were, filed as an Exhibit to Registrant's Post-Effective
Amendment No. 54 is incorporated by reference.
(f) Amendments 8 and 9 to Sponsor Agreement with Touchstone Advisors,
which were filed as Exhibits to Registrant's Post-Effective Amendment No.
57 are incorporated by reference.
(g) Amendment 10 to Sponsor Agreement, which was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 60 is incorporated by reference.
C-5
(vii) Compliance Services Agreement with Integrated Fund Services, Inc.
which was filed as an Exhibit to Touchstone Investment Trust's
Post-Effective Amendment No. 89 (File Number 2-52242) is incorporated by
reference.
(14) Consent of Auditors [to be filed].
(15) None.
(16) Powers of Attorney for John F. Barrett, Richard L. Brenan, Philip R. Cox,
H. Jerome Lerner, Jill T. McGruder, Donald C. Siekmann, Robert E.
Stautberg and John P. Zanotti are filed herewith.
(17) (i) Prospectus and Statement of Additional Information for Touchstone
Strategic Trust dated August 1, 2005 filed in Post-Effective Amendment No.
60 is incorporated by reference.
(ii) Audited Annual Financial Report for Touchstone Strategic Trust for
the fiscal year ended March 31, 2006 filed on Form N-CSR is incorporated
by reference.
(iii) Form of Proxy Card is filed herewith.
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, as amended, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by 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 a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment shall be deemed to be a
new registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial
bona fide offering of them.
C-6
SIGNATURES
As required by the Securities Act of 1933 this registration statement has been
signed on behalf of the Registrant, in the City of Cincinnati and the State of
Ohio, on the 25th day of May, 2006.
TOUCHSTONE STRATEGIC TRUST
By: /s/ Jill T. McGruder
----------------------------------
Jill T. McGruder, President
As required of the Securities Act of 1933, this registration statement has been
signed below by the following persons in the capacity and on the dates
indicated.
/s/* Trustee May 25, 2006
- ---------------------------
John F. Barrett
/s/ * Trustee May 25, 2006
- ---------------------------
Phillip R. Cox
/s/ * Trustee May 25, 2006
- ---------------------------
H. Jerome Lerner
/s/ * Trustee May 25, 2006
- ---------------------------
Robert E. Stautberg
/s/ * Trustee May 25, 2006
- ---------------------------
John P. Zanotti
/s/ * Trustee May 25, 2006
- ---------------------------
Donald C. Siekmann
/s/ * Trustee May 25, 2006
- ---------------------------
Richard L. Brenan
/s/ Jill T. McGruder President and Trustee May 25, 2006
- ---------------------------
Jill T. McGruder
/s/ Terrie A. Wiedenheft Treasurer and Controller May 25, 2006
- ---------------------------
Terrie A. Wiedenheft
/s/ Jay S. Fitton
- ---------------------------
Jay S. Fitton
*Attorney in Fact
C-7
EXHIBIT INDEX
(4) Agreement and Plan of Reorganization
(17)(v) Form of Proxy Card.