UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
|_| Pre-Effective Amendment No. |_| Post-Effective Amendment No.
(Check appropriate box or boxes)
Touchstone Funds Group Trust
(Exact Name of Registrant as Specified in Charter)
303 Broadway, Suite 1100
Cincinnati, Ohio 45202
(Address of Principal Executive Offices: Number, Street, City, State, Zip Code)
(800) 543-0407
(Area Code and Telephone Number)
[INSERT]
(Name and Address of Agent for Service)
Copies to:
John Ford, Esq. and to Jay S. Fitton, Esq.
Morgan, Lewis & Bockius LLP Integrated Investment Services
1701 Market Street 303 Broad Way, Suite 1100
Philadelphia, PA 19103 Cincinnati, OH 45202
215-963-5110 513-362-8314
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement is declared effective.
It is proposed that this filing will become effective on May 4, 2007 pursuant to
Rule 488.
An indefinite number of Registrant's shares of beneficial interest, par value
$0.001 per share, has been registered pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Accordingly, no filing fee is being paid at this
time.
May 4, 2007
TOUCHSTONE FUNDS GROUP TRUST
TOUCHSTONE PITCAIRN SELECT VALUE FUND
Dear Shareholder:
On behalf of the Board of Trustees of the Touchstone Funds Group Trust (the
"Trust"), we are pleased to invite you to a Special Meeting of Shareholders (the
"Meeting") of the Trust with respect to the Touchstone Pitcairn Select Value
Fund ("Select Value"), a series of the Trust, to be held at 10:00 a.m. Eastern
Time on June 22, 2007 at 303 Broadway, Suite 1100, Cincinnati, Ohio 45202.
At the Meeting you will be asked to approve an Agreement and Plan of
Reorganization, between Select Value and Touchstone Diversified Value Fund
("Diversified Value"), each a series of the Trust, under which Select Value will
merge into Diversified Value (the "Reorganization").
The Board of Trustees of the Trust unanimously approved the Agreement and Plan
of Reorganization at a meeting held on February 22, 2007. The Board of Trustees
recommends that you vote FOR the Reorganization.
The details of the proposed Agreement and Plan of Reorganization are set forth
in the Prospectus/Proxy Statement that accompanies this letter, including
details about Diversified Value's investment objective and policies, portfolio
management and fees and expenses 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 following this letter.
Shareholders may cast their votes by mail, by telephone, through the Internet or
in person, 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 Meeting, forty percent of shares must be represented in
person or by proxy. Please vote promptly.
If you have any questions regarding the Reorganization, please call
1-800-543-0407.
We thank you for considering this proposal carefully and for your continued
confidence in and support of the Trust.
Sincerely,
Jill T. McGruder
President
Touchstone Funds Group Trust
QUESTIONS AND ANSWERS RELATING TO THE REORGANIZATION
While we encourage you to read the full text of the enclosed
Prospectus/Proxy Statement, 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 JUNE 22, 2007?
A. The Board of Trustees of the Touchstone Funds Group Trust (the "Trust")
has called a Special Meeting at which you will be asked to vote on the
reorganization (the "Reorganization") of Touchstone Pitcairn Select Value
Fund ("Select Value"), into Touchstone Diversified Value Fund
("Diversified Value"), each a series of the Trust.
Q. WHY DID THE BOARD OF TRUSTEES APPROVE THE REORGANIZATION?
A. The Board of Trustees of the Trust unanimously approved the Reorganization
after reviewing detailed information about the Reorganization provided by
the management of the Trust and reviewed various factors about Diversified
Value and Select Value and the proposed Reorganization. The Trustees noted
that Diversified Value has an identical investment objective and
substantially similar strategies to Select Value. In addition, on a pro
forma basis after the Reorganization, total net operating expenses of
Diversified Value are anticipated to be less than those of Select Value.
After consideration of these factors, together with other factors and
information considered to be relevant, the Board of Trustees determined
that the proposed Reorganization was in the best interests of Select Value
and its shareholders.
The Board of Trustees recommends that you vote FOR the Reorganization.
Q. WHAT WILL HAPPEN TO MY EXISTING SHARES?
A. Your shares of Select Value will be exchanged for shares of Diversified
Value. Therefore, if you currently own Class II shares of Select Value,
you will receive Class A shares of Diversified Value. You will not pay any
sales charges in connection with the Reorganization. The shares of
Diversified Value that you receive following the Reorganization will have
an aggregate net asset value equal to the aggregate net asset value of
your shares of Select Value immediately prior to the Reorganization so
that the value of your investment will remain exactly the same.
Q. WHAT ARE THE DIFFERENCES BETWEEN THE INVESTMENT OBJECTIVES AND INVESTMENT
STRATEGIES OF SELECT VALUE AND DIVERSIFIED VALUE?
A. The investment objective of Select Value is identical to that of
Diversified Value. The investment strategies of Select Value are
substantially similar to those of Diversified Value. However, Select Value
is a non-diversified fund while Diversified Value is a diversified fund.
Non-diversified funds have fewer investments than diversified funds of
comparable size. Because non-diversified funds generally invest in a small
number of issuers, they are more susceptible to any single economic,
political or regulatory event affecting those issuers than diversified
funds.
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 Reorganization.
Q. WHAT IS THE TIMETABLE FOR THE REORGANIZATION?
A. If approved by shareholders of record at the Meeting, the Reorganization
is expected to occur on or about June 22, 2007.
Q. WILL THE REORGANIZATION CREATE A TAXABLE EVENT FOR ME?
A. No. The Reorganization is expected to be a tax free transaction for
federal income tax purposes.
Q. WHAT HAPPENS IF THE REORGANIZATION IS NOT APPROVED?
A. If shareholders of Select Value do not approve the Reorganization, the
Reorganization will not take effect and the Board of Trustees will
consider other possible courses of action in the best interests of
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 CARD.
YOUR VOTE IS VERY IMPORTANT!
ACQUISITION OF ASSETS AND LIABILITIES OF
TOUCHSTONE PITCAIRN SELECT VALUE FUND
a series of
TOUCHSTONE FUNDS GROUP TRUST
303 Broadway, Suite 1100
Cincinnati, Ohio 45202
(800) 543-0407
BY AND IN EXCHANGE FOR SHARES OF
TOUCHSTONE DIVERSIFIED VALUE FUND
a series of
TOUCHSTONE FUNDS GROUP TRUST
303 Broadway, Suite 1100
Cincinnati, Ohio 45202
(800) 543-0407
PROSPECTUS/PROXY STATEMENT
MAY 4, 2007
This Prospectus/Proxy Statement is being furnished in connection with the
proposed Agreement and Plan of Reorganization which will be submitted to
shareholders of Touchstone Pitcairn Select Value Fund ("Select Value"), a series
of Touchstone Funds Group Trust (the "Trust"), for consideration at a Special
Meeting of Shareholders to be held on June 22, 2007 at 10:00 a.m. Eastern Time
at the offices of the Trust, 303 Broadway, Suite 1100, Cincinnati, Ohio 45202,
and any adjournments thereof (the "Meeting").
GENERAL
Subject to the approval of Select Value's shareholders, the Board of Trustees of
the Trust has approved the proposed reorganization of Select Value into
Touchstone Diversified Value Fund ("Diversified Value"), also a series of the
Trust. Select Value and Diversified Value are sometimes referred to in this
Prospectus/Proxy Statement individually as a "Fund" and collectively as the
"Funds."
In the Reorganization, all of the assets of Select Value will be acquired by
Diversified Value in exchange for Class A shares of Diversified Value and the
assumption by Diversified Value of the liabilities of Select Value (the
"Reorganization"). If the Reorganization is approved, Class A shares of
Diversified Value will be distributed to each shareholder in liquidation of
Select Value and Select Value will be terminated as a series of the Trust.
Shareholders of Select Value will then hold that number of full and fractional
shares of Diversified Value which have an aggregate net asset value equal to the
aggregate net asset value of their shares of Select Value as of the close of
business on the day immediately prior to the Reorganization.
Select Value and Diversified Value are each separate series of the Trust, a
Delaware statutory trust, which is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"). The investment objective of Select Value is identical to that of
Diversified Value, as follows:
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Fund Investment Objective
- --------------------------------------------------------------------------------
Select Value Long-term capital appreciation
- --------------------------------------------------------------------------------
Diversified Value Long-term capital appreciation
- --------------------------------------------------------------------------------
The investment strategies for Select Value are substantially similar to those of
Diversified Value. However, Select Value is a non-diversified fund. Diversified
Value is a diversified fund. Non-diversified funds have fewer investments than
diversified funds of comparable size. Because non-diversified funds generally
invest in a small number of issuers, they are more susceptible to any single
economic, political or regulatory event affecting those issuers than diversified
funds.
This Prospectus/Proxy Statement explains concisely the information about
Diversified Value that you should know before voting on the Reorganization.
Please read it carefully and keep it for future reference. Additional
information concerning each Fund and the Reorganization is contained in the
documents described below, all of which have been filed with the Securities and
Exchange Commission ("SEC"):
- -------------------------------------------------------------------------------------------------------------------------
Information about Select Value: How to Obtain this Information:
- -------------------------------------------------------------------------------------------------------------------------
Prospectus of the Trust relating to Select Value, dated February 1, Copies are available upon request and without 2007
charge if you:
Statement of Additional Information of the Trust relating to Select o Write to the Trust at the address listed on the
of Value, dated February 1, 2007 Annual Report of the Trust relating cover page this Prospectus/Proxy Statement; or
to Select Value for the fiscal year ended September 30, 2006
o Call (800) 543-0407 toll-free.
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Information about Diversified Value: How to Obtain this Information:
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Prospectus of the Trust relating to Diversified Value, dated Copies are available upon request and without
February 1, 2007 (which accompanies this Prospectus/Proxy charge if you:
Statement)
o Write to the Trust at the address listed on the
Statement of Additional Information of the Trust relating to cover page of this Prospectus/Proxy Statement; or
Diversified Value, dated February 1, 2007
o Call (800) 543-0407 toll-free.
Annual Report of the Trust relating to Diversified Value for the
fiscal year ended September 30, 2006
- -------------------------------------------------------------------------------------------------------------------------
Information about the Reorganization: How to Obtain this Information:
- -------------------------------------------------------------------------------------------------------------------------
Statement of Additional Information dated May 4, 2007, which A copy is available upon request and without
relates to this Prospectus/Proxy Statement and the Reorganization charge if you:
o Write to the Trust at the address listed on the
cover page of this Prospectus/Proxy Statement; or
o Call (800) 543-0407 toll-free.
- -------------------------------------------------------------------------------------------------------------------------
You can also obtain copies of any of these documents without charge on the EDGAR
database on the SEC's Internet site at http://www.sec.gov. Copies are available
for a fee by electronic request at the following E-mail address:
publicinfo@sec.gov. These documents can also be inspected and copied at public
reference facilities maintained by the Commission in Washington, D.C. and at the
SEC's Regional Offices located at Northeast Regional Office, 3 World Financial
Center, Room 4300, New York, New York 10281; Southeast Regional Office, 801
Brickell Avenue, Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175
W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional
Office, 1801 California Street, Suite 1500, Denver, Colorado 80202-2656; and
Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036-3648. Copies of such materials can also be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, 100 F Street,
N.E., Washington, D.C. 20549.
Information relating to Select Value and Diversified Value contained in the
Prospectus of the Trust dated February 1, 2007 (SEC File No. 811-08104) and the
Statement of Additional Information dated February 1, 2007 which includes the
financial statements of the Trust relating to Select Value and Diversified Value
for the fiscal year ended September 30, 2006 are incorporated by reference in
this document. This means that such information is legally considered to be part
of this Prospectus/Proxy Statement. The Statement of Additional Information
dated May 4, 2007 relating to this Prospectus/Proxy Statement and the
Reorganization is also incorporated by reference in its entirety in this
document.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT DETERMINED THAT THE INFORMATION
IN THIS PROSPECTUS/PROXY STATEMENT IS ACCURATE OR ADEQUATE, NOR HAS IT APPROVED
OR DISAPPROVED THESE SECURITIES. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
An investment in Diversified Value:
o is not a deposit of, or guaranteed by, any bank
o is not insured by the FDIC, the Federal Reserve Board or any other
government agency
o is not endorsed by any bank or government agency
o involves investment risk, including possible loss of the purchase payment
of your original investment
TABLE OF CONTENTS
Page
SUMMARY.......................................................................XX
Why is the Reorganization being proposed?.................................XX
What are the key features of the Reorganization?..........................XX
After the Reorganization, what shares of Diversified Value will I own?....XX
How will the Reorganization affect me?....................................XX
Will I be able to purchase and redeem shares, change my investment
options and receive distributions the same way?...........................XX
How do the Trustees recommend that I vote?................................XX
How do the Funds' investment objectives, principal investment
strategies and risks compare?.............................................XX
How do the Funds' fees and expenses compare?..............................XX
How do the Funds' performance records compare?............................XX
Who will be the investment advisor of my Fund after the Reorganization?
What will the advisory and sub-advisory fees be after the Reorganization?.XX
What will be the primary federal tax consequences of the Reorganization?..XX
RISKS.........................................................................XX
Are the risk factors for the Funds similar?...............................XX
What are the primary risks of investing in each Fund?.....................XX
Are there any other risks of investing in each Fund?......................XX
INFORMATION ABOUT THE REORGANIZATION..........................................XX
Reasons for the Reorganization............................................XX
Agreement and Plan of Reorganization......................................XX
Federal Income Tax Consequences...........................................XX
Pro Forma Capitalization..................................................XX
Distribution of Shares....................................................XX
Purchase and Redemption Procedures........................................XX
Exchange Privileges.......................................................XX
Dividend Policy...........................................................XX
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS...............................XX
Form of Organization......................................................XX
Capitalization............................................................XX
Shareholder Liability.....................................................XX
Shareholder Meetings and Voting Rights....................................XX
Liquidation...............................................................XX
Liability and Indemnification of Trustees.................................XX
VOTING INFORMATION CONCERNING THE MEETING.....................................XX
Shareholder Information...................................................XX
Control Persons and Principal Holders of Securities.......................XX
FINANCIAL STATEMENTS AND EXPERTS..............................................XX
LEGAL MATTERS.................................................................XX
ADDITIONAL INFORMATION........................................................XX
OTHER BUSINESS................................................................XX
PROXY CARD....................................................................XX
EXHIBIT A Form of Agreement and Plan of Reorganization .....................A-1
SUMMARY
THIS SECTION SUMMARIZES THE PRIMARY FEATURES AND CONSEQUENCES OF THE
REORGANIZATION. IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. TO UNDERSTAND THE REORGANIZATION, YOU SHOULD READ THIS ENTIRE
PROSPECTUS/PROXY STATEMENT AND THE EXHIBITS.
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectus and Statement of Additional Information relating to the Funds and the
copy of the Agreement and Plan of Reorganization (the "Plan"), which is attached
to this Prospectus/Proxy Statement as Exhibit A.
WHY IS THE REORGANIZATION BEING PROPOSED?
The Reorganization is part of a restructuring designed to eliminate the offering
of overlapping funds with similar investment objectives and similar investment
strategies that are managed by Touchstone Advisors, Inc., the advisor to the
Trust. The net total operating expenses (total annual fund operating expenses
less fee waivers and expense reimbursements) of Diversified Value, assuming the
Reorganization is consummated, will be less than those of Select Value. In
addition, the average annual total return for Diversified Value was higher than
that of Select Value for the one- and five-year periods ended December 31, 2006.
Therefore, the Trustees believe that the Reorganization is in the best interests
of Select Value's shareholders.
WHAT ARE THE KEY FEATURES OF THE REORGANIZATION?
The Plan sets forth the key features of the Reorganization. For a complete
description of the Reorganization, see Exhibit A. The Plan generally provides
for the following:
o the transfer in-kind of all of the assets of Select Value to
Diversified Value in exchange for Class A shares of Diversified
Value;
o the assumption by Diversified Value of all of the liabilities of
Select Value;
o the liquidation of Select Value by distribution of Class A shares of
Diversified Value to Select Value's shareholders; and
o the structuring of the Reorganization as a tax-free Reorganization
for federal income tax purposes.
The Reorganization is expected to be completed on or about June 22, 2007.
AFTER THE REORGANIZATION, WHAT SHARES OF DIVERSIFIED VALUE WILL I OWN?
Shareholders owning Class II shares of Select Value will own Class A shares of
Diversified Value.
The new shares you receive will have the same total value as your shares of
Select Value as of the close of business on the day immediately prior to the
Reorganization.
HOW WILL THE REORGANIZATION AFFECT ME?
It is anticipated that the Reorganization will benefit you as follows, although
no assurance can be given that the Reorganization will result in any such
benefits:
o POTENTIAL COST SAVINGS: After the Reorganization, Select Value's
shareholders may benefit from lower fund operating expenses. Select
Value's and Diversified Value's net total operating expenses (total
annual fund operating expenses less fee waivers and expense
reimbursements) at current asset levels as of the Trust's most
recent fiscal year ended are 1.15% and 1.10%, respectively. It is
anticipated that Diversified Value's net total operating expenses
will be ____% for Class A shares based upon its anticipated level of
assets immediately following the Reorganization.
o OPERATING EFFICIENCIES: After the Reorganization, operating
efficiencies may be achieved by Diversified Value because it will
have a greater level of combined assets than Select Value. As of
September 30, 2006, Select Value's and Diversified Value's total net
assets were approximately $60.0 million and $167.6 million,
respectively, which will be combined to give Diversified Value total
net assets of approximately $227.6 million after the Reorganization.
After the Reorganization, Select Value will cease to exist and the value of your
shares will depend on the performance of Diversified Value. Touchstone Advisors,
Inc. will bear the expenses incurred in connection with the Reorganization,
except Diversified Value will pay its own federal and state registration fees
and any portfolio transaction costs.
Like Select Value, Diversified Value will declare and pay dividends from net
investment income quarterly and will distribute net realized capital gains at
least annually. These dividends and distributions will continue to be reinvested
in the same class of shares of Diversified Value you receive in the
Reorganization or, if you have so elected, distributed in cash or invested in
other funds of the Trust.
WILL I BE ABLE TO PURCHASE AND REDEEM SHARES, CHANGE MY INVESTMENT OPTIONS AND
RECEIVE DISTRIBUTIONS THE SAME WAY?
The Reorganization will not affect your right to purchase and redeem shares, to
exchange shares, and to receive distributions. After the Reorganization, you
will be able to purchase additional shares, redeem shares, exchange shares and
receive distributions of Diversified Value in the same way you did for your
shares of Select Value before the Reorganization. For more information, see
"Purchase and Redemption Procedures," "Exchange Privileges" and "Dividend
Policy" below.
HOW DO THE TRUSTEES RECOMMEND THAT I VOTE?
The Trustees of the Trust, including those Trustees who are not "interested
persons" of the Trust, as such term is defined in the 1940 Act (the
"Disinterested Trustees"), have concluded that the Reorganization would be in
the best interest of Select Value and Diversified Value, and that shareholders'
interests will not be diluted as a result of the Reorganization. Accordingly,
the Trustees have submitted the Plan for the approval of the shareholders of
Select Value.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR THE PROPOSED REORGANIZATION.
HOW DO THE FUNDS' INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND
RISKS COMPARE?
The investment objectives of Select Value and Diversified Value are identical.
The investment strategies for Select Value are substantially similar to those of
Diversified Value. However, Diversified Value is a diversified fund and
currently holds approximately 45 stocks. Select Value is a non-diversified fund
and will typically own between 25 and 40 stocks.
The investment objective of each Fund is non-fundamental, which means that it
may be changed by vote of the Trustees without shareholder approval.
The following tables summarize the investment objectives and principal
investment strategies of Select Value and Diversified Value as set forth in each
Fund's Prospectus and Statement of Additional Information.
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Select Value Diversified Value
- --------------------------------------------------------------------------------------------------------
Investment Long-term capital appreciation. Long-term capital appreciation.
Objective
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Principal Invests, under normal market conditions, Invests, under normal market conditions
Investment at least 80% of its assets in common at least 80% of its assets in common
Strategies stocks of U.S. companies that the stocks of U.S. companies that the
sub-adviser believes to be priced below sub-adviser believes to be priced below
their true worth. their true worth.
Sub-adviser emphasizes investments in Sub-adviser emphasizes investments in
companies that have a market companies that have a market capitalization
capitalization in excess of $1.5 in excess of $1.5 billion, although the
billion, although the Fund may Fund may invest in companies of any size
invest in companies of any size in in order to achieve its investment objective.
order to achieve its investment
objective.
The Fund is a non-diversified fund The Fund is a diversified fund holding
holding approximately 25 and 40 stocks. approximately 45 stocks .
Sub-adviser analyzes true worth of Sub-adviser analyzes true worth of stocks by
stocks by measuring earnings, book measuring earnings, book value and dividend
value and dividend paying ability. paying ability.
Dividend income is a consideration Dividend income is a consideration
incidental to the Fund's investment incidental to the Fund's investment
objective. objective.
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Because the Funds have identical investment objectives and substantially similar
investment strategies, they are subject to similar risks. The principal risks of
investing in Select Value and Diversified Value include:
o Market risk - A Fund's share price can fall because of weakness in the
broad market, a particular industry, or specific holdings. A Fund's
investment performance may also be harmed by potentially rapid changes in
the prices of equity securities.
o Market capitalization risk - Investments primarily in issuers in one
market capitalization category (large, medium or small) carry the risk
that due to current market conditions that category may be out of favor.
To the extent that a Fund invests in small and medium capitalization
companies, the Fund may be more vulnerable to adverse business events than
a fund that invests in larger, more established companies.
o Investment style risk - Different investment styles such as growth or
value investing tend to shift in or out of favor, depending on market and
economic conditions as well as investor sentiment. 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.
Select Value is also subject to non-diversification risk. The Fund may have
fewer investments than diversified mutual funds of comparable size. Because the
Fund may invest in a small number of issuers, the Fund is more susceptible to
any single economic, political or regulatory event affecting those issuers than
is a diversified fund.
Each Fund may invest some or all of its assets in money market instruments or
utilize other investment strategies as a temporary defensive measure during, or
in anticipation of, adverse market conditions. This strategy may be inconsistent
with the Fund's principal investment objective and strategies, and could result
in lower returns and loss of market opportunities.
For a detailed discussion of the Funds' risks, see the section entitled "Risks"
below.
The Funds have other investment policies, practices and restrictions which,
together with their related risks, are also set forth in the Prospectus and
Statement of Additional Information relating to Select Value and Diversified
Value.
Because Select Value and Diversified Value have identical investment objectives
and substantially similar investment strategies, it is not expected that the
securities held by Select Value will be sold in significant amounts in order to
comply with the investment policies and practices of Diversified Value in
connection with the Reorganization. If such sales occur, the transaction costs
will be borne by Diversified Value. Such costs are ultimately borne by
Diversified Value's shareholders.
HOW DO THE FUNDS' FEES AND EXPENSES COMPARE?
Select Value currently offers one class of shares, Class II shares. Diversified
Value currently offers two classes of shares, Class A and Class C shares. Select
Value shareholders will receive Class A shares of Diversified Value as part of
the Reorganization. You will not pay any initial sales charges in connection
with the Reorganization.
The following tables allow you to compare the various fees and expenses that you
may pay for buying and holding shares of each of the Funds. The table entitled
"Annual Fund Operating Expenses" shows you what fees and expenses are estimated
to be assuming the Reorganization takes place. Class II shares of Select Value
are sold at net asset value. Class A shares of Diversified Value will be sold
with a front-end sales charge.
The fees and expenses for the shares of Select Value and Diversified Value set
forth in the following tables and in the examples are based on the expenses for
Select Value and Diversified Value for the fiscal year ended September 30, 2006.
The shares of the Funds are charged the following sales charges. You will not
pay any sales charge in connection with the shares of Diversified Value received
in the Reorganization. Class A shares of Diversified Value have a front-end
sales charge although existing shareholders of Select Value will be able to make
additional investments or exchange into other Trust funds without paying a
front-end sales charge.
In addition, you will not pay a charge for those shares purchased in connection
with the reinvestment of your dividends.
Shareholder Fees (fees paid directly from your investment)
- -------------------------------------------------------------------------------------------------------------------
Select Value Diversified Value Diversified Value Pro
Class II Class A Forma After
Reorganization
- -------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None 5.75%(1) 5.75%
(as a percentage of offering price)
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Maximum Deferred Sales Charge (as a None None(2) None
percentage of original purchase price or
the amount redeemed, whichever is less)
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Wire Redemption Fee Up to $15 Up to $15 Up to $15
- -------------------------------------------------------------------------------------------------------------------
(1) You may pay a reduced sales charge on very large purchases. (See "Reduced
Class A Sales Charge" in the Prospectus.)
(2) Purchases of $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.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------------------------------------------
Select Value Diversified Value Diversified Value
Class II Class A Class A Pro Forma
After Reorganization
- --------------------------------------------------------------------------------------------------------------------
Management Fees 0.70%(1) 0.70% 0.70%
- --------------------------------------------------------------------------------------------------------------------
Distribution and/or Shareholder Services 0.25% 0.25% 0.25%
Fees
- --------------------------------------------------------------------------------------------------------------------
Other Expenses 0.30%(2) 0.50%(3) XX%
- --------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses Before 1.25% 1.45% XX%
Contractual Fee Waiver/Expense
Reimbursement
- --------------------------------------------------------------------------------------------------------------------
Contractual Fee Waiver/Expense Reimbursement 0.10% 0.35% XX%
- --------------------------------------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses After 1.15% 1.10% XX%
Contractual Fee Waiver/Expense Reimbursement
- --------------------------------------------------------------------------------------------------------------------
(1) Investment Advisory Fees paid by the Fund in the most recently completed
fiscal year were 0.69%. The Investment Advisory Fees in the table have
been restated to reflect the current contractual rate. As a result, the
actual Net Total Operating Expenses for the most recently completed fiscal
year ended were 1.14%.
(2) Touchstone Advisors has contractually agreed to waive fees and reimburse
expenses in order to keep "Other Expenses" and "Distribution and/or
Shareholder Services Fees" from collectively exceeding 0.45% through March
1, 2008. The contractual waiver may not be modified or eliminated except
with the approval of the Board of Trustees of the Fund.
(3) Touchstone Advisors has contractually agreed to waive fees and reimburse
expenses in order to keep "Other Expenses" and "Distribution and/or
Shareholder Services Fees" from collectively exceeding 0.40% through March
1, 2008. The contractual waiver may not be modified or eliminated except
with the approval of the Board of Trustees of the Fund.
The tables below show examples of the total expenses you would pay on a $10,000
investment over one-, three-, five- and ten-year periods. The examples are
intended to help you compare the cost of investing in Select Value versus
Diversified Value and Diversified Value (Pro Forma), assuming the Reorganization
takes place. The examples assume a 5% average annual return, that you redeem all
of your shares at the end of each time period and that you reinvest all of your
dividends. The following tables also assume that total annual operating expenses
remain the same and that all expense limitations remain in effect only through
March 1, 2008. The examples are for illustration only, and your actual costs may
be higher or lower.
Examples of Fund Expenses
- ---------------------------------------------------------------------------------------------------
SELECT VALUE
One Year Three Years Five Years Ten Years
Class II $117 $387 $677 $1,502
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
DIVERSIFIED VALUE
One Year Three Years Five Years Ten Years
Class A $681 $975 $1,290 $2,182
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
DIVERSIFIED VALUE PRO FORMA AFTER REORGANIZATION
One Year Three Years Five Years Ten Years
Class A $XX $XX $XX $XX
- ---------------------------------------------------------------------------------------------------
HOW DO THE FUNDS' PERFORMANCE RECORDS COMPARE?
The following charts show how Select Value and Diversified Value have performed
in the past. Past performance before and after taxes is not an indication of
future results.
Year-by-Year Total Return (%)
The charts below show the percentage gain or loss for the shares of Select Value
in each calendar year since the inception of the Fund on August 11, 2000, and
for the shares of Diversified Value in each full calendar year since the
inception of the Fund on August 4, 2000.
These charts should give you a general idea of the risks of investing in Select
Value and Diversified Value by showing how each Fund's return has varied from
year-to-year. These charts include the effects of each Fund's expenses. The bar
chart for Diversified Value however, does not reflect any sales charges. Each
Fund can also experience short-term performance swings as indicated in the high
and low quarter information at the bottom of each chart.
SELECT VALUE
-------------------------------------------------------------------------
-2.19% -22.18% 30.23% 11.95% 1.46% 16.37%
01 02 03 04 05 06
-------------------------------------------------------------------------
High Quarter: 2nd - 2003 + 17.46%
Low Quarter: 3rd - 2002 -21.21%
DIVERSIFIED VALUE
-------------------------------------------------------------------------
-4.91% -13.28% 29.04% 14.13% 4.88% 17.67%
01 02 03 04 05 06
-------------------------------------------------------------------------
High Quarter: 2nd - 2003 + 17.45%
Low Quarter: 3rd - 2002 -17.57%
The next set of tables lists the average annual total return (before and after
taxes) of the Class II shares of Select Value and Class A shares of Diversified
Value for the past one, five years and since inception (through December 31,
2006). These tables include the effects of Fund expenses and are intended to
provide you with some indication of the risks of investing in each Fund by
comparing its performance with an appropriate widely recognized index of
securities, a description of which can be found following the table. An index
does not reflect fees or expenses. It is not possible to invest directly in an
index.
Average Annual Total Return (for the period ended 12/31/2006)
- --------------------------------------------------------------------------------
From Inception
1 Year Ended 5 Years Ended (8/11/2000) to
12/31/06 12/31/06 12/31/06
- --------------------------------------------------------------------------------
Select Value -
Class II
- --------------------------------------------------------------------------------
Before taxes on distributions 16.37% 6.02% 6.09%
- --------------------------------------------------------------------------------
After taxes on distributions 14.61% 4.92% 5.14%
- --------------------------------------------------------------------------------
After taxes on distributions 12.96% 4.84% 4.95%
and sales of shares
- --------------------------------------------------------------------------------
Russell 1000 Value Index(1) 22.25% 10.86% 8.50%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 Year Ended 5 Years Ended From Inception
12/31/06 12/31/06 (8/04/2000)
to 12/31/06
- --------------------------------------------------------------------------------
Diversified Value - Class A
- --------------------------------------------------------------------------------
Before taxes on distributions 10.90% 8.25% 6.42%
- --------------------------------------------------------------------------------
After taxes on distributions 10.09% 7.37% 5.66%
- --------------------------------------------------------------------------------
After taxes on distributions 8.12% 6.78% 5.23%
and sale of shares
- --------------------------------------------------------------------------------
Russell 1000 Value Index1 22.25% 10.86% 8.64%
- --------------------------------------------------------------------------------
(1) The Russell 1000 Value Index is an unmanaged index that measures the
performance of those Russell 1000 companies with lower price-to-book ratios and
lower forecasted growth values.
For a detailed discussion of the manner of calculating total return, please see
the Funds' Statement of Additional Information. Generally, the calculations of
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment date and the deduction of all recurring
expenses that were charged to shareholders' accounts. Important information
about Diversified Value is also contained in management's discussion of
Diversified Value's performance which appears in the most recent Annual Report
of the Trust relating to Diversified Value.
WHO WILL BE THE INVESTMENT ADVISER OF MY FUND AFTER THE REORGANIZATION? WHAT
WILL THE ADVISORY AND SUB-ADVISORY FEES BE AFTER THE REORGANIZATION?
Management of the Funds
The overall management of Select Value and Diversified Value is the
responsibility of, and is supervised by, the Board of Trustees of the Trust.
Adviser
Touchstone Advisors, Inc. (the "Adviser") is the investment adviser for each
Fund. The Adviser has contracted with sub-advisers including the Sub-Adviser (as
defined below) to make the day-to-day investment decisions for each of the
Funds. The Adviser is responsible for overseeing the Trust's sub-advisers,
including the Sub-Adviser, and for making recommendations to the Board of
Trustees relating to hiring and replacing the sub-advisers.
Facts about the Adviser:
-----------------------------------------------------------------------
As of December 31, 2006, the Adviser had assets under management of
approximately $7.8 billion. The Adviser is located at 303 Broadway,
Suite 1100, Cincinnati, Ohio 45202.
-----------------------------------------------------------------------
Sub-Adviser
Pitcairn Investment Management (the "Sub-Adviser") is the sub-adviser to each
Fund. Pursuant to a Sub-Advisory Agreement with the Adviser, the Sub-Adviser
continuously furnishes an investment program for each Fund, makes day-to-day
investment decisions on behalf of each Fund, and arranges for the execution of
Fund transactions.
Facts about the Sub-Adviser:
-----------------------------------------------------------------------
The Sub-Adviser is a division of Pitcairn Trust Company ("PTC").
As of December 31, 2006, the Sub-Adviser had assets under management of
approximately $669.5 million. The Sub-Adviser is located at One
Pitcairn Place, Suite 3000, 165 Township Line Road, Jenkintown,
Pennsylvania 19046.
-----------------------------------------------------------------------
Eric Feder and David Larrabee, CFA, are the portfolio managers for Diversified
Value. Mr. Feder, who is a Vice President and Chief Investment Officer of the
Sub-Adviser and PTC, joined PTC in 1994. Mr. Feder has investment experience
dating back to 1995. Mr. Larrabee, who is Vice President of the Sub-Adviser and
PTC, joined PTC in 1997. Mr. Larrabee has investment experience dating back to
1994.
Eric Feder and David Larrabee are also the portfolio managers for Select Value.
Advisory Fees
Diversified Value will pay the Adviser a monthly investment advisory fee at the
annual rate of 0.70% of the Fund's average daily net assets.
The Adviser may, at its discretion, reduce or waive its fee or reimburse the
Fund for certain of its other expenses in order to reduce the expense ratios.
Unless otherwise agreed upon, the Adviser may also reduce or cease these
voluntary waivers and reimbursements at any time.
Sub-Advisory Fees
Under the terms of the Sub-Advisory Agreement, the Sub-Adviser is paid by the
Adviser for providing sub-advisory services to Diversified Value at the annual
rate of 0.55% on the value of the first [$150 million] of the Fund's average
daily net assets, and 0.40% on the value of assets above that amount. The Fund
does not pay a fee to the Sub-Adviser.
WHAT WILL BE THE PRIMARY FEDERAL TAX CONSEQUENCES OF THE REORGANIZATION?
It is anticipated that the Reorganization will constitute a tax-free
reorganization for federal income tax purposes.
RISKS
ARE THE RISK FACTORS FOR THE FUNDS SIMILAR?
Yes. The risk factors are similar due to the identical investment objectives and
substantially similar investment strategies of Select Value and Diversified
Value.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN EACH FUND?
An investment in each Fund is subject to certain risks. There is no assurance
that the investment performance of any Fund will be positive or that the Funds
will meet their investment objectives. Loss of money is a risk of investing in
either of these Funds. The following tables and discussions highlight the
primary risks associated with an investment in each Fund.
- --------------------------------------------------------------------------------
Each of the Funds is subject to Market
Risk.
- --------------------------------------------------------------------------------
Diversified Value Normally invests the Fund's assets
primarily in common stocks.
- --------------------------------------------------------------------------------
Select Value Normally invests the Fund's assets
primarily in common stocks.
- --------------------------------------------------------------------------------
A Fund's share price can fall because of weakness in the broad market, a
particular industry, or specific holdings. The market as a whole can decline for
many reasons, including disappointing corporate earnings, adverse political or
economic developments here or abroad, changes in investor psychology, or heavy
institutional selling. The prospects for an industry or a company may
deteriorate. In addition, an assessment by a Fund's sub-adviser of particular
companies may prove incorrect, resulting in losses or poor performance by those
holdings, even in a rising market. A Fund could also miss attractive investment
opportunities if its sub-adviser underweights fixed income markets or industries
where there are significant returns, and could lose value if the sub-adviser
overweights fixed income markets or industries where there are significant
declines. The investment performance of a Fund that invests in equity securities
could also be harmed by the potentially rapid changes in the prices of equity
securities (volatility).
- --------------------------------------------------------------------------------
Each of the Funds is subject to Market
Capitalization Risk.
- --------------------------------------------------------------------------------
Diversified Value Normally invests at least 80% of the
Fund's assets in the securities of
companies with market capitalizations in
excess of $1.5 billion.
- --------------------------------------------------------------------------------
Select Value Normally invests at least 80% of the
Fund's assets in the securities of
companies with market capitalizations in
excess of $1.5 billion.
- --------------------------------------------------------------------------------
Stocks fall into three broad market capitalization categories--large, medium and
small. Investing primarily in one category carries the risk that due to current
market conditions that category may be out of favor. If valuations of any of the
Funds' capitalization companies appear to be greatly out of proportion to the
valuations of small or medium capitalization 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. Larger, more established companies may also be unable to
respond quickly to new competitive challenges such as changes in technology and
consumer tastes. Many larger companies also may not be able to attain the high
growth rate of successful smaller companies, especially during extended periods
of economic expansion.
- --------------------------------------------------------------------------------
Each of the Funds is subject to
Investment Style Risk.
- --------------------------------------------------------------------------------
Diversified Value Invests in "value" stocks.
- --------------------------------------------------------------------------------
Select Value Invests in "value" stocks.
- --------------------------------------------------------------------------------
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.
A Fund may also employ a combination of styles that impact its risk
characteristics. Examples of different investment styles include growth and
value investing. Growth stocks may be more volatile than other stocks because
they are more sensitive to investor perceptions of the issuing company's growth
of earnings potential. Also, since growth companies usually invest a high
portion of earnings in their business, growth stocks may lack the dividends of
value stocks that can cushion stock prices in a falling market. Growth oriented
funds will typically underperform when value investing is in favor. Value stocks
are those which 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 will typically underperform when growth
investing is in favor.
- --------------------------------------------------------------------------------
Non-Diversification Risk
- --------------------------------------------------------------------------------
Diversified Value Invests in a diversified portfolio of
stocks.
- --------------------------------------------------------------------------------
Select Value Invests in a non-diversified portfolio of
stocks.
- --------------------------------------------------------------------------------
Select Value is also subject to non-diversification risk. The Fund may have
fewer investments than diversified mutual funds of comparable size. Because the
Fund may invest in a small number of issuers, the Fund is more susceptible to
any single economic, political or regulatory event affecting those issuers than
is a diversified fund. Diversified Value is not subject to non-diversification
risk.
ARE THERE ANY OTHER RISKS OF INVESTING IN EACH FUND?
FOREIGN SECURITIES: Each of the Funds may invest in foreign securities and
foreign currency denominated securities. Investments in foreign securities and
in foreign currency denominated securities involve risks relating to political,
social and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject. These risks may include the seizure by the government of
company assets, excessive taxation, withholding taxes on dividends and interest,
limitations on the use or transfer of portfolio assets, and political or social
instability. Enforcing legal rights may be difficult, costly and slow in foreign
countries, and there may be special problems enforcing claims against foreign
governments. Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. Foreign markets may be less liquid
and more volatile than U.S. markets. Foreign securities often trade in
currencies other than the U.S. dollar, and a Fund may directly hold foreign
currencies and purchase and sell foreign currencies. Changes in currency
exchange rates will affect a Fund's net asset value, the value of dividends and
interest earned, and gains and losses realized on the sale of foreign
securities. An increase in the strength of the U.S. dollar relative to these
other currencies may cause the value of a Fund to decline. Certain foreign
currencies may be particularly volatile, and foreign governments may intervene
in the currency markets, causing a decline in value or liquidity of a Fund's
foreign currency or securities holdings. Costs of buying, selling and holding
foreign securities, including brokerage, tax and custody costs, may be higher
than those involved in domestic transactions.
In addition, investments in emerging markets include all of the risks of
investments in foreign securities and are subject to severe price declines. The
economic and political structures of developing nations, in most cases, do not
compare favorably with the U.S. or other developed countries in terms of wealth
and stability, and their financial markets often lack liquidity. Such countries
may have relatively unstable governments, immature economic structures, national
policies restricting investments by foreigners and economies based on only a few
industries. For these reasons, all of the risks of investing in foreign
securities are heightened by investing in emerging market countries. The markets
of developing countries have been more volatile than the markets of developed
countries with more mature economies. These markets often have provided
significantly higher or lower rates of return than developed markets, and
significantly greater risks, to investors.
ACTIVE TRADING RISK: The Funds may engage in active and frequent trading of Fund
securities to achieve their principal investment objective. Frequent trading
also increases brokerage and transaction costs, which could detract from a
Fund's performance.
OTHER RISKS: Each Fund may invest some or all of its assets in money market
instruments or utilize other investment strategies as a temporary defensive
measure during, or in anticipation of, adverse market conditions. This strategy
may be inconsistent with the Fund's principal investment objective and
strategies, and could result in lower returns and loss of market opportunities.
INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
The Reorganization is designed to eliminate the offering of overlapping funds
with similar investment objectives and similar investment strategies that are
managed by Touchstone Advisors, Inc., the investment adviser to the Trust. The
Reorganization may lead to potential efficiencies and economies of scale for
shareholders. Also, the Reorganization could result in lower operating expenses
by reducing certain fund expenses associated with operating multiple funds.
At a regular meeting held on February 22, 2007, all of the Trustees of the
Trust, including the Disinterested Trustees, considered and approved the
Reorganization, determined that the Reorganization was in the best interests of
shareholders of Select Value, and that the interests of existing shareholders of
Select Value will not be diluted as a result of the transaction contemplated by
the Reorganization.
In evaluating the Reorganization, the Board requested and reviewed, with
assistance of independent counsel, materials furnished by the Adviser. These
materials included written information regarding operations and financial
conditions of the Funds, principal terms and conditions of the Reorganization,
including the intention that the Reorganization be consummated on a tax-free
basis for Select Value and its respective shareholders. The Trustees noted that
Diversified Value will have an identical investment objective and substantially
similar investment strategies to those of Select Value. In addition, on a pro
forma basis after the Reorganization, total net operating expenses of
Diversified Value are anticipated to be lower than those of Select Value. The
Trustees also noted that Diversified Value's overall performance has been better
than that of Select Value since their inceptions in August, 2000.
The Trustees considered the relative sizes and operating efficiencies of Select
Value joining with Diversified Value into a larger combined entity, as well as
their investment styles. As of September 30, 2006, the Funds' combined assets
would have been approximately $227.6 million, which could lead to operating
efficiencies and lower operating costs for the Funds' shareholders.
In addition, the Trustees considered, among other things:
o the terms and conditions of the Reorganization;
o the investment advisory and other fees paid by the Funds and the
projected expense ratios of Diversified Value as compared with those
of Select Value;
o the advice and recommendation of the Adviser, including its opinion
that in light of the foregoing, the Reorganization would be in the
best interests of Select Value and its shareholders;
o the expenses of the Reorganization would not be borne by Select
Value's shareholders;
o the historical investment performance record of Diversified Value
and expected continuity of day-to-day Fund management through the
Sub-Adviser;
o the identical investment objectives and substantially similar
investment strategies of the Funds and their compatibility of each
other;
o the fact that Diversified Value will assume all of the liabilities
of Select Value;
o the benefits to shareholders, including operating efficiencies,
which may be achieved from the Reorganization;
o the anticipated tax-free nature of the Reorganization for Select
Value and its shareholders; and
o alternatives available to shareholders of Select Value, including
the ability to redeem their shares.
During their consideration of the Reorganization, the Trustees of the Trust met
with counsel to the Disinterested Trustees regarding the legal issues involved.
After consideration of the factors noted above, together with other factors and
information considered to be relevant, and recognizing that there can be no
assurance that any operating efficiencies or other benefits will in fact be
realized, the Trustees of the Trust concluded that the Reorganization would be
in the best interests of Select Value and their shareholders. Consequently, they
approved the Plan and directed that the Plan be submitted to shareholders of
Select Value for approval.
The Trustees of the Trust, including the Disinterested Trustees, have also
approved the Plan on behalf of Diversified Value.
AGREEMENT AND PLAN OF REORGANIZATION
The following summary is qualified in its entirety by reference to the Plan (the
copy of which is attached as Exhibit A to this Prospectus/Proxy Statement).
The Plan provides that all of the assets of Select Value will be acquired by
Diversified Value in exchange for Class A shares of Diversified Value, and the
assumption by Diversified Value of all of the liabilities of Select Value on or
about June 22, 2007 or such other date as may be agreed upon by the parties (the
"Closing Date"). Prior to the Closing Date, Select Value will endeavor to
discharge all of its known liabilities and obligations. Select Value will
prepare an unaudited statement of its assets and liabilities as of the close of
business on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern
Time, on the business day immediately preceding the Closing Date (the "Valuation
Date").
At or prior to the Closing Date, Select Value will declare a dividend or
dividends and distribution or distributions which, together with all previous
dividends and distributions, shall have the effect of distributing to the Fund's
shareholders all of the Fund's investment company taxable income for the taxable
period ending on the Closing Date (computed without regard to any deduction for
dividends paid), all of the Fund's net tax exempt income and all of its net
capital gains realized in all taxable periods ending on the Closing Date (after
reductions for any capital loss carryforward).
The number of full and fractional Class A shares of Diversified Value to be
received by the shareholders of Select Value will be determined by multiplying
the number of outstanding Class II shares of Select Value by a ratio which shall
be computed by dividing the net asset value per share of the Class II shares of
Select Value by the net asset value per share of the Class A shares of
Diversified Value. These computations will take place as of the Valuation Date.
Integrated Investment Services, Inc., the accounting agent of the Funds, will
compute the value of each Fund's respective portfolio of securities. The method
of valuation employed will be consistent with the procedures set forth in the
Prospectus and Statement of Additional Information of Diversified Value, Rule
22c-1 under the 1940 Act, and with the interpretations of that Rule by the SEC's
Division of Investment Management.
As soon after the Closing Date as conveniently practicable, Select Value will
liquidate and distribute pro rata to the shareholders as of the close of
business on the Closing Date the full and fractional shares of Diversified Value
received by Select Value. The liquidation and distribution will be accomplished
by the establishment of accounts in the names of Select Value's shareholders on
Diversified Value's share records of its transfer agent. Each account will
represent the respective pro rata number of full and fractional shares of
Diversified Value due to Select Value's shareholders. All issued and outstanding
shares of Select Value will be canceled. The shares of Diversified Value to be
issued will have no preemptive or conversion rights and no share certificates
will be issued. After these distributions and the winding up of their affairs,
Select Value will be terminated as series of the Trust.
The consummation of the Reorganization is subject to the conditions set forth in
the Plan, including approval, as applicable, by Select Value's shareholders,
accuracy of various representations and warranties and receipt of opinions of
counsel. Notwithstanding approval of Select Value's shareholders, a Plan may be
terminated: (a) by the mutual agreement of Select Value and Diversified Value;
or (b) at or prior to the Closing Date by either party (1) because of a breach
by the other party of any representation, warranty, or agreement contained in
the Plan to be performed at or prior to the Closing Date, if not cured within 30
days; or (2) because a condition to the obligation of the terminating party has
not been met and it reasonably appears that it will not or cannot be met.
Whether or not the Reorganization is consummated, the Adviser will bear the
expenses incurred in connection with the Reorganization.
If Select Value's shareholders do not approve the Reorganization, the Trustees
will consider other possible courses of action in the best interests of
shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify for federal income tax purposes as a
tax free reorganization under section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"). As a condition to the closing of the
Reorganization, Diversified Value and Select Value, as applicable, will receive
an opinion from the law firm of Morgan, Lewis & Bockius LLP substantially to the
effect that, on the basis of the existing provisions of the Code, U.S. Treasury
regulations issued thereunder, current administrative rules, pronouncements and
court decisions, and certain representations made by the Funds, for federal
income tax purposes, upon consummation of the Reorganization:
(1) The transfer of all of the assets of Select Value solely in exchange
for shares of Diversified Value and the assumption by Diversified
Value of the liabilities of Select Value followed by the
distribution of Diversified Value's shares to the shareholders of
Select Value in dissolution and liquidation of Select Value, will
constitute a "reorganization" within the meaning of section 368(a)
of the Code, and Diversified Value and Select Value will each be a
"party to a reorganization" within the meaning of section 368(b) of
the Code;
(2) No gain or loss will be recognized by Diversified Value upon the
receipt of the assets of Select Value solely in exchange for the
shares of Diversified Value and the assumption by Diversified Value
of the liabilities of Select Value;
(3) No gain or loss will be recognized by Select Value upon the transfer
of all of its assets to Diversified Value solely in exchange for
Diversified Value's shares and the assumption by Diversified Value
of the liabilities of Select Value or upon the distribution (whether
actual or constructive) of Diversified Value's shares to Select
Value's shareholders in exchange for their shares of Select Value;
(4) No gain or loss will be recognized by Select Value's shareholders
upon the exchange of their shares of Select Value for shares of
Diversified Value in liquidation of Select Value;
(5) The aggregate tax basis of the shares of Diversified Value received
by each shareholder of Select Value pursuant to the Reorganization
will be the same as the aggregate tax basis of the shares of Select
Value held by such shareholder immediately prior to the
Reorganization, and the holding period of the shares of Diversified
Value received by each shareholder of Select Value will include the
period during which the shares of Select Value exchanged therefor
were held by such shareholder (provided that the shares of Select
Value were held as a capital asset on the date of the
Reorganization);
(6) The tax basis of the assets of Select Value acquired by Diversified
Value will be the same as the tax basis of such assets to Select
Value immediately prior to the Reorganization, and the holding
period of such assets in the hands of Diversified Value will include
the period during which the assets were held by Select Value; and
(7) Diversified Value will succeed to and take into account capital loss
carryovers, if any, of Select Value described in Section 381(c) of
the Code, subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code and the
regulations thereunder.
No opinion, however, will be expressed as to the effect of the Reorganization on
(i) Select Value or Diversified Value with respect to any asset as to which any
unrealized gain or loss is required to be recognized for U.S. federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting and (ii) any shareholder of
Select Value that is required to recognize unrealized gains and losses for U.S.
federal income tax purposes under a mark-to-market system of accounting.
Such opinion shall be based on customary assumptions and such representations as
Morgan, Lewis & Bockius LLP may reasonably request.
Opinions of counsel are not binding upon the Internal Revenue Service or the
courts. If the Reorganization is consummated but does not qualify as a tax free
reorganization under the Code, a shareholder of Select Value would recognize a
taxable gain or loss equal to the difference between its tax basis in its Select
Value shares and the fair market value of the shares of Diversified Value it
received.
Diversified Value's utilization after the Reorganization of any
pre-Reorganization losses realized by Select Value to offset gains realized by
Diversified Value could be subject to limitation in future years.
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of Select Value and
Diversified Value, and the capitalization of Diversified Value on a pro forma
basis as of March 31, 2007, giving effect to the proposed acquisition of assets
at net asset value. The pro forma data reflects an exchange ratio of
approximately ____ Class A share of Diversified Value for each Class II share of
Select Value.
CAPITALIZATION OF SELECT VALUE, DIVERSIFIED VALUE AND
DIVERSIFIED VALUE (PRO FORMA)
- ----------------------------------------------------------------------------------------------------------------------
Select Value Diversified Value Adjustments Diversified Value Pro
Forma (After
Reorganization)(a)
- ----------------------------------------------------------------------------------------------------------------------
Net Assets
Class II $ $ ---
Class A --- --- $
Total Net Assets $ $ $
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value Per
Share
Class II $ $ ---
Class A --- --- $
- ----------------------------------------------------------------------------------------------------------------------
Shares Outstanding
Class II ---
Class A --- ---
Total Shares
Outstanding
- ----------------------------------------------------------------------------------------------------------------------
(a) Reflects change in shares outstanding due to the issuance of Class A
shares of Diversified Value in exchange for Class II shares of Select
Value.
The table set forth above should not be relied upon to reflect the number of
shares to be received in the Reorganization; the actual number of shares to be
received will depend upon the net asset value and number of shares outstanding
of each Fund at the time of the Reorganization.
DISTRIBUTION OF SHARES
Touchstone Securities, Inc. is the principal underwriter of the Trust and, as
such, the exclusive agent for distribution of the Trust's shares. Shares of the
Funds are sold in a continuous offering directly through Touchstone Securities,
Inc., through financial advisors and financial intermediaries or through
processing organizations. Touchstone Securities, Inc. allows concessions to
dealers who sell shares of the Funds. Touchstone Securities, Inc. receives that
portion of the sales charge that is not reallowed to dealers and retains the
entire sales charge on all direct investments and accounts with no designated
dealer of record. Touchstone Securities, Inc. is an affiliate of the Adviser by
reason of common ownership.
Diversified Value offers Class A and Class C shares. Class A shares are subject
to a maximum front-end sales charge of 5.75% while Class C shares are subject to
1.00% of CDSC if shares are held less than 1 year. Class C shares of the Fund
are sold at NAV without an initial sales charge so that the full amount of
investor's purchase payment would be invested in the Fund. Class C shares are
not involved in the Reorganization.
Diversified Value has adopted a distribution plan under Rule 12b-1 of the 1940
Act with respect to its Class A shares. The plan allows Diversified Value to pay
Touchstone Securities, Inc. distribution and other fees for the sale and
distribution of its shares and for services provided to shareholders. Under the
Class A plan, Diversified Value pays an annual fee of up to 0.25% of average
daily net assets that are attributable to Class A shares. With respect to Class
II shares, Select Value has adopted a plan of distribution and shareholder
service under which Touchstone Securities, Inc. is paid up to, but not exceeding
1.00% in the aggregate, with 0.25% for shareholder service fees and 0.75% for
distribution payments. However, Class II shares currently only assess
shareholder service fees.
In the proposed Reorganization, Class II shareholders of Select Value will
receive Class A shares of Diversified Value. Class A shares of Diversified Value
to be issued upon consummation of the Reorganization will be issued at net asset
value and no sales charges will be imposed. Shareholders who receive Class A
shares in the Reorganization will be able to buy additional Class A shares
without a sales charge. Select Value does not impose sales charges for Class II
shares.
More detailed descriptions of the Diversified Value Class A shares and the
distribution arrangements applicable to each class of shares is contained in the
Prospectus and Statement of Additional Information relating to Diversified
Value.
PURCHASE AND REDEMPTION PROCEDURES
The Funds have the same purchase and redemption procedures. Class II shares of
Select Value and Class A shares of Diversified Value each have a minimum initial
purchase requirement of $2,500. The minimum subsequent purchase requirement for
each is $50 ($25 if the subsequent investment is made through a systematic
investment plan). For more information, see "Purchasing Your Shares" in the
Trust Prospectus. Select Value's and Diversified Value's shares may each be
redeemed by telephone, by Internet, by mail, by wire or through accounts with
certain brokers and other financial institutions. Payments for redemptions of
each Fund are sent within seven days (normally within 3 business days) after
receipt of a proper redemption request. Each Fund reserves the right to redeem
in kind, under certain circumstances, by paying you the proceeds in securities
rather than in cash. Additional information concerning purchases and redemptions
of shares, including how each Fund's net asset value is determined, is contained
in the Trust's Prospectus. All investments in the Funds are invested in full and
fractional shares.
The Funds reserve the right to reject any purchase order.
EXCHANGE PRIVILEGES
The Funds have similar exchange privileges. You may exchange Class II shares of
Select Value and Class A of Diversified Value for the corresponding class of
shares of another Touchstone Fund at net asset value, subject to any applicable
limitations resulting from the closing of Touchstone Funds to new investors. You
do not have to pay any fee for your exchange of shares of the Funds. Additional
information concerning the Funds' exchange privileges is contained in the
Trust's Prospectus.
DIVIDEND POLICY
Each Fund has the same dividend distribution policy. Each Fund distributes its
income quarterly as a dividend to shareholders and distributes its capital gains
at least annually. Dividends and distributions are reinvested in additional
shares of the Fund, or paid in cash, if you have elected this option. See the
Trust's Prospectus for further information concerning dividends and
distributions.
After the Reorganization, shareholders of Select Value who have elected to have
their dividends and/or distributions reinvested will have dividends and/or
distributions received from Diversified Value reinvested in the same class of
shares of Diversified Value. Shareholders of Select Value who have elected to
receive dividends and/or distributions in cash will receive dividends and/or
distributions from Diversified Value in cash after the Reorganization, although
they may, after the Reorganization, elect to have such dividends and/or
distributions reinvested in additional shares of Diversified Value.
Select Value and Diversified Value have each qualified to be treated as a
regulated investment company under the Code. To remain qualified as a regulated
investment company, a Fund must, among other things, 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 its shareholders of record, it is expected that a Fund will not be
required to pay any federal income taxes on the amounts distributed to its
shareholders of record.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
The operations of the Trust are governed by its Amended and Restated Agreement
and Declaration of Trust, as amended, and Amended and Restated By-Laws, and
applicable Delaware law. The organizational documents of the Trust are referred
to generically in this section of the Prospectus/Proxy Statement as the
Declaration of Trust and By-Laws. Shareholders entitled to vote at the Meeting
may obtain a copy of the Trust's Declaration of Trust and By-Laws, without
charge, upon written or oral request to the Trust at the address and telephone
number set forth on the cover of this Prospectus/Proxy Statement. The following
information summarizes shareholders' rights under the Amended and Restated
Declaration of Trust and Amended and Restated By-Laws. The rights of Select
Value shareholders and Diversified Value shareholders are the same under these
documents.
FORM OF ORGANIZATION
As noted above, the Trust is organized as a Delaware statutory trust. The Trust
is an open-end management investment company registered with the SEC under the
1940 Act, and is organized as a "series company" as that term is used in Rule
18f-2 under the 1940 Act. The series of the Trust consist of Select Value,
Diversified Value and other mutual funds of various asset classes. The Trust is
governed by its Declaration of Trust, By-Laws, and a Board of Trustees, and by
applicable Delaware and federal law.
CAPITALIZATION
The beneficial interests in the Trust are represented by an unlimited number of
transferable shares of beneficial interest, $.01 par value per share, of one or
more series. The Declaration of Trust of the 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.
Select Value offers Class II shares. Diversified Value offers Class A and Class
C shares. Class C shares are not involved in the Reorganization. Shares of the
classes of each Fund represent an equal pro rata interest in the Fund and
generally have identical voting, dividend, liquidation and other rights, other
than the payment of distribution fees. Shareholders of each Fund are entitled to
receive dividends and other amounts as determined by the Trustees, as
applicable.
Shareholders of each Fund vote separately, by Fund, as to matters, such as
changes in fundamental investment restrictions, that affect only their
particular Fund. Shareholders of each Fund vote by class as to matters, such as
approval of or amendments to Rule 12b-1 distribution plans, that affect only
their particular class.
SHAREHOLDER LIABILITY
Under Delaware law, shareholders of a Delaware statutory trust are entitled to
the same limitation of personal liability extended to stockholders of Delaware
corporations. To the extent that the Trust or a shareholder is subject to the
jurisdiction of courts in other states, it is possible that a court may not
apply Delaware law and may thereby subject shareholders of the Trust to
liability. To guard against this risk, the Trust's Declaration of Trust (a)
contains an express disclaimer of shareholder liability for obligations of the
Trust; (b) requires that notice of this disclaimer be given in each agreement,
obligation or instrument entered into or executed by or on behalf of the Trust
or its Trustees; and (c) provides for indemnification out of the Trust's
property of any shareholder held personally liable for the obligations of the
Trust. Accordingly, the risk of a shareholder of the Trust incurring financial
loss beyond that shareholder's investment because of shareholder liability is
limited to circumstances in which: (1) the court refuses to apply Delaware law;
(2) no contractual limitation of liability was in effect; and (3) the Trust
itself is unable to meet its obligations. In light of Delaware law, the nature
of the Trust's business, and the nature of its assets, the risk of personal
liability to a shareholder of the Trust is remote.
Under Delaware law, shareholders of a Delaware statutory trust are entitled to
the same limitation of personal liability extended to stockholders of Delaware
corporations. As a result, Delaware law is generally considered to afford
additional protection against potential shareholder liability.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
The Trust on behalf of Select Value or Diversified Value 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. Special meetings of the Trust shall be called upon the written
request of shareholders owning at least 25% of the shares then outstanding. 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. Cumulative voting is not
permitted in the election of Trustees of the Trust.
Except when a larger quorum is required by applicable law or the applicable
governing documents, forty percent (40%) of the shares entitled to vote
constitutes a quorum for consideration of a matter at a shareholders' meeting,
but any lesser number is sufficient for adjourned sessions. Approval of a matter
by the shareholders of the Trust requires, when a quorum is present at a
meeting, the affirmative vote of a majority (greater than 50%) of the shares
voted, and a plurality of the shares voted is required to elect a Trustee
(unless a larger vote is 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 with or without cause by vote of a majority of the then Trustees.
Under the Declaration of Trust of the 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. The Declaration of Trust of the Trust provides
that the Board of Trustees may, to the extent consistent with applicable law,
cause the Trust or a Fund to be merged or consolidated with another trust or
company, provided such merger or consolidation is authorized by vote of a
majority of the outstanding shares of the Trust or the Fund, as applicable.
LIQUIDATION
In the event of the liquidation of the Trust or a Fund, the shareholders are
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to the Trust or the Fund over the liabilities belonging to the
Trust or the Fund. The assets so distributable to shareholders of the Fund will
be distributed among the shareholders in proportion to the number of shares of a
class of the Fund held by them on the date of distribution.
LIABILITY AND INDEMNIFICATION OF TRUSTEES
The Declaration of Trust of the Trust provides that: (1) the Trustees shall not
be responsible or liable for any neglect or wrongdoing of any officer, agent,
employee, investment advisor or principal underwriter of the Trust, or any act
or omission of any other Trustee; and (2) the Trust out of its assets shall
indemnify and hold harmless each and every Trustee from and against any and all
claims and demands whatsoever arising out of or related to such Trustee's
performance of his or her duties as a Trustee of the Trust. Under the
Declaration of Trust of the Trust, a Trustee may be liable to the Trust or any
shareholder of the Trust by reason of such Trustee's own willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office.
The foregoing is only a summary of certain characteristics of the operations of
the Declaration of Trust of the Trust, its By-Laws and Delaware law and is not a
complete description of those documents or law. Shareholders should refer to the
provisions of such Declaration of Trust, By-Laws and Delaware law directly for
more complete information.
VOTING INFORMATION CONCERNING THE MEETING
This Prospectus/Proxy Statement is being sent to shareholders of Select Value in
connection with a solicitation of proxies by the Trustees of the Trust, to be
used at the Meeting to be held at 10:00 a.m. Eastern Time, June 22, 2007, at the
offices of the Trust, 303 Broadway, Suite 1100, Cincinnati, Ohio 45202, and at
any adjournments thereof. This Prospectus/Proxy Statement, along with a Notice
of the Meeting and a proxy card, is first being mailed to shareholders of Select
Value on or about May 14, 2007.
The Board of Trustees of the Trust has fixed the close of business on April 23,
2007 as the record date (the "Record Date") for determining the shareholders of
Select Value entitled to receive notice of the Meeting and to vote, and for
determining the number of shares for which such instructions may be given, with
respect to the Meeting or any adjournment thereof.
In voting for the Reorganization, each full share of Select Value is entitled to
one vote and any fractional share is entitled to a fractional vote.
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 Meeting in person and voting
your shares. Unless revoked, all valid proxies will be voted in accordance with
the specifications thereon or, in the absence of such specifications, FOR
approval of the Plan.
If you wish to participate in the Meeting, you may submit the proxy card
included with this Prospectus/Proxy Statement, vote by telephone or through the
Internet or attend in person. Guidelines on voting by proxy card are immediately
after the Notice of Special Meeting and telephonic and Internet voting
instructions are included on the proxy card.
If the enclosed proxy card is properly executed and returned in time to be voted
at the Meeting, the proxies named therein will vote the interest represented by
the proxy card in accordance with the instructions marked on the returned proxy
card. Proxy cards 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.
Approval of the Reorganization will require the affirmative vote of a majority
of the total number of shares of Select Value present at a shareholders' meeting
duly called and at which a quorum is present (the presence in person or by proxy
of holders entitled to cast at least forty percent (40%) of the votes at any
shareholders' meeting).
Proxy solicitations will be made primarily by mail, but beginning on or about
May 14, 2007 proxy solicitations may also be made by telephone, through the
Internet or personal solicitations conducted by officers and employees of the
Adviser, its affiliates or other representatives of Select Value (who will not
be paid for their soliciting activities). In addition, proxy solicitations may
be made by ___, the Trust's proxy solicitor. The costs of solicitation and the
expenses incurred in connection with preparing this Prospectus/Proxy Statement
and its enclosures will be paid by the Adviser whether or not shareholders
approve the Reorganization. Persons holding shares as nominees will, upon
request, be reimbursed for their reasonable expenses in sending soliciting
material to their principals.
Proxies that reflect abstentions and "broker non-votes" (i.e., shares held by
brokers or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter) will be counted
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but will have the effect of being counted as votes against
the Plan, which must be approved by a majority of the shares present.
If shareholders of Select Value 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 to approve the Reorganization are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit further solicitation of voting instructions. In
determining whether to adjourn the 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 Meeting in person or by proxy. The persons named as proxies
will vote upon such adjournment after consideration of all circumstances which
may bear upon a decision to adjourn the Meeting.
A shareholder of Select Value who objects to the proposed Reorganization will
not be entitled under either Delaware 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. In addition, if the Reorganization is consummated, shareholders will
be free to redeem the shares of Diversified Value that they receive in the
transaction at their then-current net asset value. Shares of Select Value may be
redeemed at any time prior to the Reorganization. Shareholders of Select Value
may wish to consult their tax advisors as to any different consequences of
redeeming or exchanging their shares prior to 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 Select Value 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.
The votes of the shareholders of Diversified Value are not being solicited by
this Prospectus/Proxy Statement and are not required to carry out the
Reorganization.
SHAREHOLDER INFORMATION
The shareholders of Select Value at the close of business on April 23, 2007 (the
Record Date) will be entitled to be present and vote at the Meeting with respect
to shares of Select Value owned as of the Record Date. As of the Record Date,
the total number of shares of Select Value outstanding and entitled to vote was:
______________
As of April 23, 2007, the officers and Trustees of the Trust beneficially owned
as a group less than 1% of the outstanding shares of Select Value.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On April 23, 2007, 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 Select Value or Diversified Value's outstanding shares.
[List any owners who owned more than 5% of any Funds' shares as of the Record
Date.]
FINANCIAL STATEMENTS AND EXPERTS
The Annual Report of the Trust, for the year ended as of September 30, 2006, and
the financial statements and financial highlights for the periods indicated
therein, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of Ernst & Young LLP, independent
registered public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Diversified Value
will be passed upon by Morgan, Lewis & Bockius LLP.
ADDITIONAL INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and in accordance therewith file reports
and other information including proxy material and charter documents with the
SEC. These items can be inspected and copied at the Public Reference Facilities
maintained by the SEC at Washington, D.C. 20549-0102, and at the SEC's Regional
Offices located at Northeast Regional Office, 3 World Financial Center, Room
4300, New York, New York 10281; Southeast Regional Office, 801 Brickell Avenue,
Suite 1800, Miami, Florida 33131; Midwest Regional Office, 175 W. Jackson
Boulevard, Suite 900, Chicago, Illinois 60604; Central Regional Office, 1801
California Street, Suite 1500, Denver, Colorado 80202-2656; and Pacific Regional
Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648.
Copies of such materials can also be obtained at prescribed rates from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549.
OTHER BUSINESS
The Trustees of the Trust do not intend to present any other business at the
Meeting. If, however, any other matters are properly brought before the Meeting,
the persons named in the accompanying form of proxy will vote thereon in
accordance with their judgment.
THE TRUSTEES OF THE TRUST RECOMMEND APPROVAL OF THE PLAN AND ANY UNMARKED PROXY
CARDS WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN.
April 23, 2007
PROXY CARD
TOUCHSTONE PITCAIRN SELECT VALUE FUND
The undersigned shareholder of the Touchstone Pitcairn Select Value Fund
("Select Value"), a series of Touchstone Funds Group Trust (the "Trust"), hereby
appoints [ ] the attorneys and proxies of the undersigned, with full power of
substitution, to vote, as indicated herein, all of the shares of beneficial
interest of Select Value standing in the name of the undersigned at the close of
business on April 23, 2007, at a Special Meeting of Shareholders to be held at
the offices of the Trust at 303 Broadway, Suite 1100, Cincinnati, Ohio 45202, at
10:00 a.m. Eastern Time, on June 22, 2007, and at any and all adjournments
thereof, with all of the powers the undersigned would possess if then and there
personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated on the proposal, as
more fully described in the Prospectus/Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
To approve an Agreement and Plan of Reorganization providing for the
transfer of all of assets of Select Value to Touchstone Diversified Value
Fund ("Diversified Value"), a series of the Trust, in exchange for
Diversified Value's Class A shares having an aggregate net asset value
equal to the value of Select Value's net assets and the assumption by
Diversified Value of all of the liabilities of Select Value. Class A
shares of Diversified Value received in the Reorganization will be
distributed by Select Value to its shareholders in liquidation of Select
Value, after which Select Value will cease operations.
|_| FOR |_| AGAINST |_| ABSTAIN
THIS PROXY IS SOLICITED BY THE TRUST'S BOARD OF TRUSTEES AND WILL BE VOTED FOR
THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or names appearing on this proxy. If
shares are held jointly, each holder should sign. If signing is by attorney,
executor, administrator, trustee or guardian, please give full title. By signing
this proxy card, receipt of the Prospectus/Proxy Statement is acknowledged.
Dated:
-----------------------
- ------------------------------
Title
- ------------------------------
Signature
- ------------------------------
Signature
Please sign, date and return the proxy card promptly using the enclosed
envelope.
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [22nd day of February], 2007, by and between Touchstone Funds Group Trust,
a Delaware statutory trust, with its principal place of business at 303
Broadway, Suite 1100, Cincinnati, Ohio 45202 (the "Trust"), with respect to its
Touchstone Diversified Value Fund series (the "Acquiring Fund"), and the Fund,
with respect to its Touchstone Pitcairn Select Value Fund series (the "Selling
Fund," and when used collectively with the "Acquiring Fund," the "Funds").
The reorganization (the "Reorganization") will consist of (i) the transfer
of all of the assets of the Selling Fund in exchange solely for Class A shares
of beneficial interest, $.01 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 the Trust 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, including a majority of Trustees that
are not "interested persons," as such term is defined in section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "1940 Act"), of the Trust have
determined that the transactions contemplated herein are in the best interests
of the Funds and that the interests of the Funds' respective existing
shareholders will not be diluted as a result;
NOW, THEREFORE, in consideration of the promises 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
unaudited 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. 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 either violate the Selling Fund's fiduciary
duty to its shareholders or adversely affect the tax-free nature of the
Reorganization.
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 reflected on a
Statement of Assets and Liabilities prepared on behalf of the Selling Fund, as
of the Valuation Date (as defined in paragraph 2.1), in accordance with
generally accepted accounting principles consistently applied from the prior
audited period, and other 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 Fund 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 immediately 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 Acquiring 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 Class A shares
of the 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 Class A shares of the
Acquiring Fund on the Valuation Date, determined in accordance with paragraph
2.2. Holders of Class II shares of the Selling Fund will receive Class A shares
of the Acquiring Fund.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
Integrated Investment Services, Inc., the Funds' accounting agent, in accordance
with its regular practice in pricing the shares and assets of the Funds.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing of the Reorganization (the "Closing") shall
take place on or about June 22, 2007 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 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 Fund 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. PFPC Trust Company, 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 provisions 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
statutory trust duly organized, validly existing, and in good standing under the
laws of the State of Delaware.
(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 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 or
reflected in the Statement of Assets and Liabilities 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 as of
September 30, 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 September 30, 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 by the Internal Revenue Service or any state or local tax
authority, and no assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Selling Fund has met,
and will continue to meet through the Closing Date, the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification and treatment as a regulated investment company and has
distributed in each such year all net investment company taxable income
(computed without regard to any deduction for dividends paid) and net realized
capital gains (after reduction for any capital loss carryforward).
(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 statutory trust duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
(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 Commission as an investment
company under the 1940 Act is in full force and effect.
(c) The current prospectus and statement of additional information
of the Acquiring Fund 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 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 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 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 Acquiring Fund as of
September 30, 2006 are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have been
furnished to the Selling Fund) fairly reflect the financial condition of the
Acquiring Fund as of such date, and there are no known contingent liabilities of
the Acquiring Fund as of such date not disclosed therein.
(g) Since September 30, 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 by the Internal Revenue Service or any state or local
tax authority, and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring Fund has
met, and will continue to meet through the Closing Date, 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
company taxable income (computed without regard to any deduction for dividends
paid) and net realized capital gains (after reduction for any capital loss
carryforward).
(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.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in
any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund for
federal income tax purposes that will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be reviewed by Ernst & Young
LLP and certified by the Fund's President, Vice President or Treasurer.
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 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 Fund'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 Fund shall have received on the
Closing Date an opinion from Morgan, Lewis & Bockius LLP 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 the Trust,
which is duly organized, validly existing and in good standing under the laws of
the State of Delaware 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 Trust is 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 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,
moratorium, and other laws relating to or affecting creditors' rights generally
and to general equity principles.
(d) Assuming that a consideration therefor 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 State of Delaware 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) 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.
Such opinion may contain such assumptions and limitations as shall be in
the opinion of such counsel appropriate to render the opinions expressed
therein. In addition, such counsel shall be entitled to state that they have
relied upon officers' certificates and certificates of public officials in
rendering their opinion.
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 Fund'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 Fund.
7.3 With respect to the Acquiring Fund, the Fund shall have received on
the Closing Date an opinion of Morgan, Lewis & Bockius LLP, 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
statutory trust duly organized, validly existing and in good standing under the
laws of the State of Delaware 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 Trust is 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 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, moratorium
and other laws relating to or affecting creditors' rights generally and to
general equity principles.
(d) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Delaware is required for consummation by the Selling 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.
(e) 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.
(f) Assuming that a consideration therefor 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.
Such opinion may contain such assumptions and limitations as shall be in
the opinion of such counsel appropriate to render the opinions expressed
therein. In addition, such counsel shall be entitled to state that they have
relied upon officers' certificates and certificates of public officials in
rendering their opinion.
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 Funds, 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 nor
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 Fund shall have received a favorable opinion of Morgan, Lewis &
Bockius 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
solely 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 all of
the liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund upon the
transfer of all of its assets to the Acquiring Fund solely in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of all
of the liabilities of the Selling Fund or upon the distribution of the
Acquiring Fund Shares to shareholders of the Selling Fund.
(d) No gain or loss will be recognized by the shareholders of the
Selling Fund upon the exchange of their shares of the Selling Fund for the
Acquiring Fund Shares (including fractional shares to which they may be
entitled).
(e) The aggregate tax basis of the Acquiring Fund Shares received by
each shareholder of the Selling Fund (including fractional shares to which
they may be entitled) will be the same as the aggregate tax basis of the
Selling Fund shares exchanged therefor.
(f) The holding period of the Acquiring Fund Shares received by the
shareholders of the Selling Fund (including fractional shares to which
they may be entitled) will include the holding period of the Selling Fund
shares surrendered in exchange therefor, provided that the Selling Fund
shares were held as a capital asset as of the Closing Date of the
Reorganization.
(g) The tax basis of the assets of the Selling Fund received by the
Acquiring Fund will be the same as the tax basis of such assets to the
Selling Fund immediately prior to the exchange.
(h) The holding period of the assets of the Selling Fund received by
the Acquiring Fund will include the period during which such assets were
held by the Selling Fund.
(i) The Acquiring Fund will succeed to and take into account as of
the date of the transfer (as defined in Section 1.381(b)-1(b) of the
Treasury Regulations) the items of the Selling Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381(b) and (c), 382, 383 and 384 of the Code.
No opinion will be expressed as to the effect of the Reorganization on (i)
the Selling Fund or the Acquiring Fund with respect to any asset as to
which any unrealized gain or loss is required to be recognized for U.S.
federal income tax purposes at the end of a taxable year (or on the
termination or transfer thereof) under a mark-to-market system of
accounting and (ii) any shareholder of the Selling Fund that is required
to recognize unrealized gains and losses for U.S. federal income tax
purposes under a mark-to-market system of accounting.
Such opinion shall be based on customary assumptions, limitations and such
representations as Morgan, Lewis & Bockius LLP may reasonably request, and the
Selling Fund and Acquiring Fund will cooperate to make and certify the accuracy
of such representations. Such opinion may contain such assumptions and
limitations as shall be in the opinion of such counsel 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 and paid by Touchstone Advisors, Inc., the investment advisor to
the Fund. 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.
All such fees and expenses so borne and paid by Touchstone Advisors, Inc. shall
be solely and directly related to the transactions contemplated by this
Agreement and shall be paid directly by Touchstone Advisors, Inc. to the
relevant providers of services or other payees in accordance with the principles
set forth in the Internal Revenue Service Rev. Ruling 73-54, 1973-1 C.B. 187.
Notwithstanding the foregoing, the Acquiring Fund shall pay its own
federal and state registration fees and any portfolio transaction costs.
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 not 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; or
(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.
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 their Trustees or officers, to the other
party. In such event, Touchstone Advisors, Inc. shall bear the expenses incurred
by the Selling Fund and the Acquiring Fund 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 Fund; 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 State of Delaware, 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 Fund, 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 Delaware, which are hereby referred to and are also on file
at the principal offices of the Fund. The obligations of the Fund entered into
in the name or on behalf thereof by any of the Trustees, representatives or
agents of the Fund, are made not individually, but in such capacities, and are
not binding upon any of the Trustees, shareholders or representatives of the
Fund 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 FUNDS GROUP TRUST ON BEHALF OF
TOUCHSTONE PITCAIRN SELECT VALUE FUND
By:
-----------------------------------------
Name: Jill T. McGruder
Title: President
TOUCHSTONE FUNDS GROUP TRUST ON BEHALF OF
TOUCHSTONE DIVERSIFIED VALUE FUND
By:
-----------------------------------------
Name: Jill T. McGruder
Title: President
STATEMENT OF ADDITIONAL INFORMATION
MAY 4, 2007
ACQUISITION OF ASSETS OF
TOUCHSTONE PITCAIRN SELECT VALUE FUND
a series of
TOUCHSTONE FUNDS GROUP TRUST
303 BROADWAY, SUITE 1100
CINCINNATI, OHIO 45202
(800) 543-0407
BY AND IN EXCHANGE FOR SHARES OF
TOUCHSTONE DIVERSIFIED VALUE FUND
a series of
TOUCHSTONE FUNDS GROUP TRUST
303 BROADWAY, SUITE 1100
CINCINNATI, OHIO 45202
(800) 543-0407
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus/Proxy
Statement dated May 4, 2007, relating specifically to the proposed transfer of
all of the assets and liabilities of Touchstone Pitcairn Select Value Fund
("Select Value"), a series of Touchstone Funds Group Trust (the "Trust"), in
exchange for Class A shares of Touchstone Diversified Value Fund ("Diversified
Value "), a series of the Trust, and the assumption by the Diversified Value of
all of the liabilities of Select Value. The transfer is to occur pursuant to an
Agreement and Plan of Reorganization. This Statement of Additional Information
consists of this cover page and the following documents attached hereto and
incorporated by reference herein:
(1) The Statement of Additional Information of the Trust relating to Select
Value and Diversified Value dated February 1, 2007; and
(2) Semi-Annual Report of the Trust relating to Select Value and Diversified
Value for the six month period ended March 31, 2006.
A copy of the Prospectus/Proxy Statement may be obtained without charge by
calling or writing to the Trust at the telephone number or address set forth
above.