SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
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BARR ROSENBERG SERIES TRUST
(Name of Registrant as Specified in its Charter)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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PROXY STATEMENT
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NOTICE OF SPECIAL MEETING
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Notice is hereby given that a special meeting of shareholders of each series of
the Barr Rosenberg Series Trust will be held at the offices of Charles Schwab &
Co., 101 Montgomery Street, San Francisco, California on January 30, 2004, at
11 a.m. Pacific Time for the following purposes:
1. To elect Trustees for the Trust (ALL FUNDS).
2. To approve Charles Schwab Investment Management, Inc. ("CSIM") as
investment adviser for each Fund by approving a new Management Agreement
between CSIM and the Trust (ALL FUNDS EXCEPT THE AXA ROSENBERG ENHANCED 500
FUND).
3. To approve AXA Rosenberg Investment Management LLC ("AXA Rosenberg") as
investment subadviser for each Fund by approving a Subadviser Agreement
among the Trust, CSIM and AXA Rosenberg (ALL FUNDS EXCEPT THE AXA ROSENBERG
ENHANCED 500 FUND).
4. To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
The close of business on December 5, 2003 has been fixed as the record date for
determining shareholders who are entitled to notice of and are entitled to vote
at the meeting and any adjournments thereof (the "Record Date").
By order of the Board of Trustees
Sara Donaldson, Clerk
Barr Rosenberg Series Trust
December 12, 2003
Barr Rosenberg Series Trust
3435 Stelzer Road
Columbus, Ohio 43219
AXA ROSENBERG MUTUAL FUNDS
AXA ROSENBERG U.S. SMALL CAPITALIZATION FUND
AXA ROSENBERG U.S. DISCOVERY FUND
AXA ROSENBERG U.S. LARGE CAPITALIZATION FUND
AXA ROSENBERG ENHANCED 500 FUND
AXA ROSENBERG INTERNATIONAL EQUITY FUND
AXA ROSENBERG INTERNATIONAL SMALL CAPITALIZATION FUND
AXA ROSENBERG EUROPEAN FUND
AXA ROSENBERG U.S. LONG/SHORT EQUITY FUND
AXA ROSENBERG U.S. LARGE/MID CAPITALIZATION
LONG/SHORT EQUITY FUND
AXA ROSENBERG VALUE LONG/SHORT EQUITY FUND
AXA ROSENBERG GLOBAL LONG/SHORT EQUITY FUND
EACH OF THE AXA ROSENBERG MUTUAL FUNDS IS A SERIES OF BARR ROSENBERG SERIES
TRUST, WHICH IS AN OPEN-END MANAGEMENT INVESTMENT COMPANY.
This proxy statement is first being mailed to shareholders on or about December
12, 2003.
SHAREHOLDER PROXY
December 12, 2003
Your vote is important!
Please read and respond today.
1
AXA ROSENBERG MUTUAL FUNDS -- BARR ROSENBERG SERIES
TRUST (THE "TRUST") SHAREHOLDER PROXY
December 12, 2003
TABLE OF CONTENTS
PAGE
4 ABOUT THE PROPOSALS
An overview of the three proposals that shareholders are voting on and
how they would affect the series of the Trust (the "Funds").
11 PROPOSAL 1
To elect trustees for the Trust (each a "Trustee" and collectively, the
"Trustees").
19 PROPOSAL 2
To approve a new Management Agreement between Charles Schwab
Investment Management, Inc. ("CSIM") and the Trust on behalf of each
Voting Fund (as defined herein).
28 PROPOSAL 3
To approve a Subadviser Agreement among CSIM, AXA Rosenberg
Investment Management LLC ("AXA Rosenberg") and the Trust on
behalf of each Voting Fund (as defined herein).
38 ADDITIONAL INFORMATION
Information concerning independent public accountants and additional
information about the Trust.
53 EXHIBITS
Forms of Proposed Management Agreement and Subadviser Agreement;
Fund Benchmarks and Assets under Management Targets.
2
SHAREHOLDER REPORTS
On request, the Trust will furnish, without charge, a copy of its most recent
Annual Report and Semi-Annual Report, to any shareholder.
Shareholders may direct all written requests for such reports to the Trust at
3435 Stelzer Road, Columbus, Ohio 43219-8021, or you may call the Trust at
1-800-555-5737 (FOR INVESTMENT PROFESSIONALS) OR 1-800-447-3332 (FOR INDIVIDUAL
INVESTORS).
3
ABOUT THE PROPOSALS
The purpose of this proxy is to seek shareholder approval of the following
proposals:
o TO ELECT TRUSTEES -- Shareholders of all the Funds are being asked to elect
three new Trustees.
o TO CONSIDER CHANGES TO THE CURRENT ADVISORY ARRANGEMENTS FOR EACH FUND --
Shareholders of each Fund other than the AXA Rosenberg Enhanced 500 Fund
(the "AXA 500 Fund") are being asked to approve a Management Agreement with
Charles Schwab Investment Management, Inc. ("CSIM"), pursuant to which CSIM
would provide overall investment management for such Fund. Shareholders of
each of those Funds are also being asked to approve a Subadviser Agreement
among the Trust, CSIM and AXA Rosenberg Investment Management LLC ("AXA
Rosenberg"), which currently serves as investment adviser to each Fund. As
subadviser, AXA Rosenberg would continue to provide day-to-day portfolio
management services to the Funds. Shareholders of the AXA 500 Fund will
receive an Information Statement describing revisions to that Fund's
objective, investment strategy and investment advisory arrangements
generally. For the Funds being asked to vote on Proposals 2 and 3 (the
"Voting Funds"), the amount that shareholders pay for investment advisory
services will not increase, and may be reduced.
The Trustees believe that the proposals are in the best interests of
shareholders, but shareholder approval is required to make them happen. This
document tells you more about the proposals and explains the main reasons that
the Trustees believe the proposals are in the best interests of shareholders.
Please take a moment to understand the proposed changes and vote your shares.
HOW TO VOTE YOUR SHARES
Voting your shares is easy and doesn't take long. Use any of the following
options.
o By Mail. Please complete, date and sign your proxy card before mailing it
in the enclosed postage paid envelope.
o By Internet. Have your proxy card available. Go to the Web site listed on
the proxy card. Enter your control number from your proxy card. Follow the
simple instructions found on the Web site.
o By Telephone. Have your proxy card available. Call the toll-free number on
the proxy card. Enter your control number from your proxy card. Follow the
simple instructions.
o Shareholders can also vote in person at the meeting.
Remember: if you vote by internet or phone, do not mail your proxy card(s).
Please make sure you vote all of the enclosed proxy cards. Questions on any
part of this document?
Call our proxy solicitor, King Mutual Fund Services, at 888-414-5566.
4
INTRODUCTION
PURPOSE OF THIS DOCUMENT
This proxy statement is being furnished to shareholders of each Fund in
connection with the solicitation of proxies by and on behalf of the Board of
Trustees of the Trust (the "Board" or "Board of Trustees") for use at the
Trust's Special Meeting of shareholders to be held at the offices of Charles
Schwab & Co., 101 Montgomery Street, San Francisco, California on January 30,
2004, at 11 a.m. Pacific Time, and at any adjournment thereof (the "Meeting").
WHO MAY VOTE
The Board of Trustees has fixed the Record Date as the close of business on
December 5, 2003. Only holders of shares of the Funds at the close of business
on the Record Date are entitled to notice of, and to vote at, the Meeting. The
chart on page 8 shows the number of issued and outstanding shares of each Fund
entitled to vote.
The holder of each full share of a Fund outstanding as of the close of business
on the Record Date is entitled to one vote upon each matter properly submitted
to the Meeting that relates to that Fund, and a proportionate fractional vote
for any fractional shares held.
HOW TO VOTE
Shareholders may vote by Internet, phone or by returning the enclosed proxy
card. Depending on the number of Funds of which you are a shareholder and the
number of accounts you have, you may receive more than one proxy card.
If you vote by mail, complete, date, sign and promptly return the enclosed
proxy card(s) in the accompanying envelope. If you properly execute and return
your proxy card(s) prior to the Meeting, your shares will be voted in
accordance with the instructions marked on the proxy card(s). If no
instructions are marked on the proxy card(s), then your shares will be voted
FOR the proposals described in this proxy statement and in the discretion of
the persons named as proxies in connection with any other matter that may
properly come before the Meeting.
You may revoke your proxy at any time prior to its exercise by voting in person
at the Meeting or by submitting, before the Meeting, written notice of
revocation or a later-dated proxy.
QUORUM AND VOTING REQUIREMENTS
In order to take action on any proposal, a "quorum" of forty percent (40%) of
shares entitled to vote on that proposal must be present in person or by proxy.
5
To be elected as a Trustee, each individual nominated for election to the Board
of Trustees (each a "Nominee") must receive the affirmative vote of the holders
of a plurality of the outstanding shares of all of the Funds voting together as
a single class. This means that the three Nominees for election receiving the
highest number of affirmative votes cast at a meeting will be elected, as long
as the votes FOR such Nominee exceed the votes AGAINST such Nominee. As
required by the Investment Company Act of 1940, as amended (the "1940 Act"),
approval of Proposals 2 and 3 requires the affirmative vote of a majority of
the outstanding voting securities of the Fund entitled to vote on such
Proposal. As defined by the 1940 Act, a "majority of the outstanding voting
securities" means the vote of (i) 67% or more of the Fund's outstanding shares
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares, whichever is less.
OTHER VOTING-RELATED MATTERS
If a quorum is not present at the Meeting, or if sufficient votes to approve a
proposal are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
adjournment(s) of the Meeting will require the affirmative vote of a majority
of those shares of the relevant Funds present at the Meeting in person or by
proxy and entitled to vote on the proposal. If the Meeting is adjourned with
respect to a proposal, any other proposal may still be acted on by shareholders
so long as there is a quorum.
The Board of Trustees does not presently know of any matter to be considered at
the Meeting other than the matters described in the Notice of Special Meeting
accompanying this proxy statement. If any other matter should arise, however,
the persons named in properly authorized proxies have discretionary authority
to vote such proxies as they decide.
Abstentions and broker "non-votes" (i.e., proxies received from brokers or
nominees indicating that they have not received instructions from the
beneficial owner or other person entitled to vote shares) will be counted as
shares that are present for purposes of determining the presence of a quorum,
but will not be counted as votes FOR a proposal. Accordingly, abstentions and
broker non-votes will have the effect of a vote AGAINST Proposals 2 and 3.
SOLICITATION OF PROXIES
The Trust has retained King Mutual Fund Services, a proxy solicitation firm, at
an estimated cost of $150,000. CSIM and AXA Rosenberg will bear the expenses
incurred in connection with preparing this proxy statement, including certain
legal costs. CSIM will bear the cost of retaining the proxy solicitation firm
and all other costs associated with the solicitation of proxies, including the
reimbursement of
6
certain parties for their expenses in forwarding proxy materials to beneficial
owners of Fund shares.
In addition to the solicitation of proxies by mail, officers of the Trust and
officers and employees of CSIM and AXA Rosenberg also may solicit proxies
electronically, by telephone, fax, in person or by other means.
LIST OF PROPOSALS AND AFFECTED FUNDS
PROPOSAL FUNDS
-------- -----
1 To elect three new Trustees for the Trust to hold All Funds, voting together
office until their successors are duly elected and
qualified.
2 To approve CSIM as investment adviser for each Each Voting Fund,
Voting Fund by approving a Management voting separately
Agreement between CSIM and the Trust on
behalf of each Voting Fund.
3 To approve AXA Rosenberg as investment Each Voting Fund,
subadviser for each Voting Fund by approving voting separately
a Subadviser Agreement among CSIM, AXA
Rosenberg and the Trust on behalf of each
Voting Fund.
Proposals 2 and 3 are contingent on each other with respect to each Fund, so if
shareholders of a Fund do not approve both proposals, the Board of Trustees
does not intend to implement either proposal with respect to that Fund.
Proposal 1 regarding the election of new Trustees will not be implemented
unless Proposals 2 and 3 are approved and implemented by a majority of the
outstanding voting securities of at least one of the Voting Funds. If
shareholders approve Proposals 2 and 3 with respect to some but not all of the
Voting Funds, the current Trustees may determine to maintain the STATUS QUO by
not implementing any of the proposals with respect to any of the Funds.
If the shareholders do not approve all of the proposals with respect to each
Fund, the Trustees will consider other possible courses of action that may be
in the best interest of shareholders, which may include not proceeding with any
proposal.
7
NET ASSETS AND NUMBER OF SHARES OUTSTANDING AS OF THE
RECORD DATE
NET SHARES
FUND ASSETS OUTSTANDING
- ---- -------------- -------------
AXA Rosenberg U.S. Small
Capitalization Fund ......................... $1,097,721,081 86,378,644.068
AXA Rosenberg U.S. Discovery Fund ............. $ 76,265,408 5,679,513.775
AXA Rosenberg U.S. Large
Capitalization Fund ......................... $ 42,837,357 4,168,749.046
AXA Rosenberg Enhanced 500 Fund ............... $ 6,372,453 855,278.210
AXA Rosenberg International Equity Fund ....... $ 11,353,269 1,460,703.943
AXA Rosenberg International Small
Capitalization Fund ......................... $ 112,053,879 9,141,713.385
AXA Rosenberg European Fund ................... $ 8,136,493 770,108.172
AXA Rosenberg U.S. Long/Short Equity Fund ..... $ 0 0
AXA Rosenberg U.S. Large/Mid Cap
Long/Short Equity Fund ...................... $ 31,725,349 2,980,359.095
AXA Rosenberg Value Long/Short
Equity Fund ................................. $ 117,371,869 11,949,104.077
AXA Rosenberg Global Long/Short
Equity Fund ................................. $ 21,923,367 1,959,970.547
ABOUT THE PROPOSALS
The Board of Trustees has proposed changes to the management structure of the
Voting Funds. These changes are intended to enhance the management and
distribution services provided to these Funds.
ELECTION OF TRUSTEES -- The Board of Trustees is responsible for overseeing the
activities of the Funds and their service providers. Currently, the Board
consists of four trustees, one of whom is an interested person (as defined in
Section 2(a)(19) of the 1940 Act) of the Trust (an "Interested Trustee") and
three of whom are not interested persons of the Trust (each an "Independent
Trustee"). It is proposed that shareholders elect three new trustees to the
Board. Two of the Nominees would be Independent Trustees (even after
implementation of the proposals) and the other is an officer of Charles Schwab
& Co., Inc. ("Schwab"), an affiliate of CSIM. The new Nominees for Independent
Trustee have had wide ranges of experience, including serving as trustees of
other mutual funds advised by CSIM, and will apply this experience in
overseeing the Funds. It is anticipated that if shareholders approve the
proposed changes to the investment advisory arrangements for the Funds, the
current Interested Trustee and two of the three current Independent Trustees
will resign from the Board of Trustees, leaving the Board with one current
Independent Trustee and three new Trustees (two Independent Trustees
8
and one Interested Trustee), thus maintaining the current composition of three
Independent Trustees and one Interested Trustee.
APPROVAL OF MANAGEMENT AGREEMENT AND SUBADVISER AGREEMENT -- AXA Rosenberg
currently serves as investment adviser to each Fund. As investment adviser, AXA
Rosenberg directs the investments of the Funds and is responsible for
overseeing regulatory compliance, overseeing the Trust's other service
providers and generally monitoring the affairs of and providing an investment
program for the Funds, subject to the supervision of the Trustees. If
shareholders of the Voting Funds approve the proposed changes to the advisory
arrangements, AXA Rosenberg, subject to the supervision of CSIM, would continue
to provide day-to-day portfolio management services to the Funds as investment
subadviser. However, CSIM would be the investment adviser to the Funds. As
investment adviser, CSIM would take over AXA Rosenberg's non-portfolio
management related functions, such as monitoring Fund compliance and
supervising services provided to the Funds and shareholders. If CSIM is
approved as investment adviser, it is anticipated that the Board may in the
future appoint CSIM's affiliate, Schwab, as principal underwriter or
distributor of the Funds. It is also expected that, upon approval of the new
advisory arrangements described above, the business of the Funds would be
conducted under the name "Laudus Rosenberg Funds."
The Trustees believe that engaging CSIM to serve as investment adviser and
Schwab as distributor will allow AXA Rosenberg to focus exclusively on the area
of its greatest expertise -- making investment decisions for the Funds. It will
also allow the Funds to benefit from CSIM's experience providing mutual fund
management. CSIM currently oversees the investment programs for 49 mutual funds
with approximately $138.6 billion in assets. In managing these funds, CSIM has
developed significant regulatory compliance resources and systems for providing
services to fund shareholders. CSIM also manages other funds for which
investment subadvisers provide day-to-day portfolio management.
Moreover, it is expected that approving this proposal may result in operational
efficiencies and a larger, long-term shareholder base. This may result in
expenses being spread over a larger pool of assets and potentially lower
operating expenses and/or transaction costs to the Funds (as a percentage of
assets).
In connection with the proposals, AXA Rosenberg and CSIM have entered into an
agreement regarding AXA Rosenberg's and CSIM's cooperation in realigning
responsibilities for the Funds' assets. The agreement commits CSIM to using
commercially reasonable efforts (including, in some instances, reduction of
CSIM's management fee) to maintain the proposed subadvisory fees for AXA
Rosenberg and, subject to certain conditions, provides that CSIM will pay
compensation to AXA Rosenberg in the event that AXA Rosenberg is terminated as
investment subadviser for a Fund. Consequently, CSIM will have a material
economic interest in avoiding the termination of AXA Rosenberg or reducing AXA
Rosenberg's
9
subadvisory fee. The amount of compensation owed to AXA Rosenberg upon its
termination, if any, is based on a formula that takes into account when AXA
Rosenberg is terminated, the circumstances surrounding the termination, the
performance of the Fund(s) at the time of termination, the assets under
management at the time of termination and the amount of compensation under the
Subadvisory Agreement that AXA Rosenberg received in the 12-month period prior
to the termination. The agreement also contains a limited non-compete provision
that provides that, for an eight year period (or a shorter period in certain
events), AXA Rosenberg cannot advise other mutual funds, subject to certain
exceptions, and that CSIM, subject to certain exceptions, cannot offer other
"quantitatively managed" mutual funds except under its existing Schwab
MarketMasters, Schwab and Excelsior brands. Consummation of the agreement is
conditioned upon, among other things, approval of the proposals by shareholders
of each Fund. Each of Dr. Kenneth Reid, a current Trustee, and Jeffrey Lyons, a
Nominee, may be deemed to have a material interest in all of the proposals
because of the agreement described in this paragraph by virtue of his
employment with and direct or indirect ownership interest in AXA Rosenberg and
CSIM's corporate parent, respectively.
If the shareholders do not approve the proposals, the Trustees will consider
other possible courses of action which may be in the best interest of
shareholders.
10
PROPOSAL 1
TO ELECT TRUSTEES.
ELECTION OF TRUSTEES
It is proposed that shareholders of the Trust elect three Nominees to serve as
Trustees, each to hold office until a successor is elected and qualified. The
three Nominees (who have not previously served on the Board of Trustees)
include two Independent Nominees and one officer of Schwab, all of whom serve
on the boards of trustees of other mutual funds advised by CSIM.
The persons named in the accompanying proxies intend to vote for the election
of the persons listed below unless shareholders indicate on their proxy cards
their desire to withhold authority to vote for election to office.
Each Nominee has consented to being named in this proxy statement and has
agreed to serve as a Trustee if elected, provided that the other proposals are
also approved and implemented (or the current Trustees proceed to effect the
new advisory arrangement with respect to some, but not all, of the Funds). If
the new Trustees are elected and the other proposals are implemented, it is
anticipated that Dr. Reid, the current Interested Trustee, and two of the three
current Independent Trustees (William F. Sharpe and Dwight M. Jaffee) will
resign from the Board.
The two Nominees to serve as Independent Trustees have been nominated by
Messrs. Sharpe and Jaffee and Nils H. Hakansson, the current Independent
Trustees. Messrs. Sharpe, Jaffee and Hakansson are familiar with the background
and relevant experience of those two Nominees and have met with them in person
to discuss the nomination and their service as Independent Trustees.
The Board of Trustees does not know of any reason why any Nominee would be
unable or unwilling to serve as a Trustee, but if any Nominee should become
unable to serve prior to the Meeting, the proxy holders reserve the right to
vote for another person of their choice as Nominee or Nominees.
11
INFORMATION ABOUT CURRENT TRUSTEES AND NOMINEES FOR ELECTION AS TRUSTEES
The table below provides basic information about each Nominee and the current
Trustees. The mailing address for each Nominee is 101 Montgomery Street, San
Francisco, California 94104. The mailing address for each current Trustee is
c/o Barr Rosenberg Series Trust, 3435 Stelzer Road, Columbus, OH 43219. There
is no stated term of office for the Trustees.
POSITION WITH NUMBER OF
THE FUNDS FUNDS IN
AND THE BUSINESS EXPERIENCE AND THE FUND
LENGTH OF OTHER DIRECTORSHIPS HELD COMPLEX TO
NAME AND AGE TIME SERVED DURING THE PAST FIVE YEARS BE OVERSEEN
- ------------ ------------- --------------------------------------- ------------
NOMINEES FOR INDEPENDENT TRUSTEE
Mariann Byerwalter Nominee Chairman of JDN Corporate Advisory 61***
43 LLC. From 1996 to 2001,
Ms. Byerwalter was the Vice President
for Business Affairs and Chief
Financial Officer of Stanford University
and, in 2001, Special Adviser to the
President of Stanford University.
Trustee of each portfolio of The
Charles Schwab Family of Funds,
Schwab Investments, Schwab Annuity
Portfolios and Schwab Capital Trust
(consisting of 49 portfolios).
Ms. Byerwalter also is on the Board of
Trustees of Stanford University,
America First Companies, Omaha, NE
(venture capital/fund management),
Redwood Trust, Inc. (mortgage
finance), Stanford Hospitals and
Clinics, SRI International (research),
PMI Group, Inc. (mortgage insurance)
and Lucile Packard Children's Hospital;
Director until 2002, LookSmart, Ltd.
(an Internet infrastructure company).
12
POSITION WITH NUMBER OF
THE FUNDS FUNDS IN
AND THE BUSINESS EXPERIENCE AND THE FUND
LENGTH OF OTHER DIRECTORSHIPS HELD COMPLEX TO
NAME AND AGE TIME SERVED DURING THE PAST FIVE YEARS BE OVERSEEN
- ------------ ------------- -------------------------------------------- -----------
William A. Hasler Nominee Co-Chief Executive Officer, Aphton 61***
62 Corporation (bio-pharmaceuticals).
Prior to August 1998, Mr. Hasler was
Dean of the Haas School of Business at
the University of California, Berkeley
(higher education). Trustee of each
portfolio of The Charles Schwab
Family of Funds, Schwab Investments,
Schwab Annuity Portfolios and Schwab
Capital Trust (consisting of 49
portfolios). Mr. Hasler is on the Board
of Directors of Solectron Corporation
and is the Non-Executive Chairman
(manufacturing). He is also on the
Board of Directors of Airlease Ltd.
(aircraft leasing), Mission West
Properties (commercial real estate) and
Digital Microwave Corporation (a
network equipment corporation).
NOMINEE FOR INTERESTED TRUSTEE
Jeffrey M. Lyons* Nominee Executive Vice President, Asset 61***
48 Management Products & Services since
September 2001, Charles Schwab &
Co., Inc. Prior to September 2001,
Mr. Lyons was Executive Vice
President, Mutual Funds, Charles
Schwab & Co., Inc. Trustee of each
portfolio of The Charles Schwab
Family of Funds, Schwab Investments,
Schwab Annuity Portfolios and Schwab
Capital Trust (consisting of 49 portfolios).
CURRENT INDEPENDENT TRUSTEES
William F. Sharpe Trustee STANCO 25 Professor of Finance 12+/-
68 13 Years Emeritus, Stanford University;
STANCO 25 Professor of Finance,
Stanford University, September
1995-September 1999; Chairman,
Financial Engines Incorporated (online
investment advice) March 1995-2003.
Nils H. Hakansson Trustee Sylvan C. Coleman Professor of 12+/-
65 12 Years Finance and Accounting, Haas School
of Business, University of California,
Berkeley, July 1969 to June 2003.
13
POSITION WITH NUMBER OF
THE FUNDS FUNDS IN
AND THE BUSINESS EXPERIENCE AND THE FUND
LENGTH OF OTHER DIRECTORSHIPS HELD COMPLEX TO
NAME AND AGE TIME SERVED DURING THE PAST FIVE YEARS BE OVERSEEN
- ------------ ------------- -------------------------------------------- -----------
Dwight M. Jaffee Trustee Professor of Finance and Real Estate, 12+/-
59 4 Years Haas School of Business, University of
California, Berkeley, July 1991 to
present.
CURRENT INTERESTED TRUSTEE
Kenneth Reid** Trustee Global Chief Investment Officer, AXA 12+/-
52 13 Years Rosenberg Investment Management
LLC, January 1999-present; General
Partner and Director of Research;
Rosenberg Institutional Equity
Management, June 1986-December
1998.
- ----------------
* Mr. Lyons is a Nominee for Interested Trustee because he is an employee of
Schwab.
** Mr. Reid is an Interested Trustee because he is an employee of, and holds
an ownership interest in the parent company of, AXA Rosenberg.
*** This includes 49 Schwab funds, 11 series of the Barr Rosenberg Series Trust
and the sole series of the Barr Rosenberg Variable Insurance Trust.
+/- This includes 11 series of the Barr Rosenberg Series Trust and the sole
series of the Barr Rosenberg Variable Insurance Trust.
TRUSTEE ACTIVITIES AND COMPENSATION
MEETINGS AND COMMITTEES -- During the Trust's most recent fiscal year, the
Board of Trustees met four times. Each Trustee attended all of those meetings.
The Trust has a standing Audit Committee, which is composed of all of the
current Independent Trustees. The Audit Committee assists the Trustees in their
oversight of the Trust's financial reporting process and met once during the
Trust's most recently completed fiscal year. Each member of the Audit Committee
attended that meeting.
The Trust does not have a standing nominating committee or a standing
compensation committee or any committee performing similar functions.
Consistent with the requirements of certain exemptive rules under the 1940 Act,
the selection and nomination of Independent Trustees is committed to the other
Independent Trustees.
14
COMPENSATION OF THE TRUSTEES, OFFICERS AND OTHERS -- Interested Trustees and
officers of the Trust do not receive compensation from the Trust. Each
Independent Trustee currently receives an annual fee of $45,540 plus an
additional fee for each meeting attended. The total compensation accrued and
payable to the Independent Trustees by the Trust and by the fund complex for
the fiscal year ended March 31, 2003, is shown in the table below.
PENSION OR
RETIREMENT ESTIMATED
BENEFITS ANNUAL TOTAL
TOTAL ACCRUED AS BENEFITS COMPENSATION
NAME OF COMPENSATION PART OF FUND UPON FROM THE
INDEPENDENT TRUSTEE FROM TRUST** EXPENSES RETIREMENT FUND COMPLEX*
- ------------------- ------------ ------------ ---------- -------------
Nils H. Hakansson ........ $85,965 N/A N/A $85,965
Dwight M. Jaffee ......... $85,965 N/A N/A $85,965
William F. Sharpe ........ $85,965 N/A N/A $85,965
- ----------------
* The fund complex includes the Funds as well as the AXA Rosenberg VIT Value
Long/Short Equity Fund, the sole series of the Barr Rosenberg Variable
Insurance Trust. The Barr Rosenberg Variable Insurance Trust was not
operational in the fiscal year ended March 31, 2003.
** Reflects fees accrued for the fiscal year regardless of payment date.
If elected, Ms. Byerwalter and Mr. Hasler would receive compensation from the
Trust for serving as Independent Trustees.
The Trust does not currently have a bonus, pension, profit sharing or
retirement plan, but may adopt such a plan in the future.
15
OWNERSHIP OF FUND SECURITIES
The table below shows the dollar range of equity securities beneficially owned
by each Trustee or Nominee as of October 15, 2003.
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN ALL
FUNDS OVERSEEN OR
TO BE OVERSEEN
BY TRUSTEE OR
NOMINEE IN THE
FAMILY OF
INVESTMENT
COMPANIES*
NAME OF TRUSTEE DOLLAR RANGE OF EQUITY AS OF
OR NOMINEE SECURITIES IN THE FUNDS OCTOBER 15, 2003
- ---------- ----------------------- -----------------
INDEPENDENT TRUSTEES
Nils H. Hakansson AXA Rosenberg U.S. Small Capitalization $50,001-$100,000
Fund: $10,001-$50,000
AXA Rosenberg U.S. Discovery Fund: none
AXA Rosenberg U.S. Large Capitalization
Fund: none
AXA Rosenberg Enhanced 500 Fund: none
AXA Rosenberg International Equity Fund:
none
AXA Rosenberg International Small
Capitalization Fund: $1-$10,000
AXA Rosenberg European Fund: none
AXA Rosenberg U.S. Long/Short Equity Fund:
none
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund: none
AXA Rosenberg Value Long/Short Equity Fund:
$10,001-$50,000
AXA Rosenberg Global Long/Short Equity
Fund: none
Dwight M. Jaffee AXA Rosenberg U.S. Small Capitalization Over $100,000
Fund: $10,001-$50,000
AXA Rosenberg U.S. Discovery Fund: none
AXA Rosenberg U.S. Large Capitalization
Fund: none
AXA Rosenberg Enhanced 500 Fund: none
16
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN ALL
FUNDS OVERSEEN OR
TO BE OVERSEEN
BY TRUSTEE OR
NOMINEE IN THE
FAMILY OF
INVESTMENT
COMPANIES*
NAME OF TRUSTEE DOLLAR RANGE OF EQUITY AS OF
OR NOMINEE SECURITIES IN THE FUNDS OCTOBER 15, 2003
- ---------- ----------------------- -----------------
AXA Rosenberg International Equity Fund:
none
AXA Rosenberg International Small
Capitalization Fund: $1-$10,000
AXA Rosenberg European Fund: none
AXA Rosenberg U.S. Long/Short Equity Fund:
none
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund: $1-$10,000
AXA Rosenberg Value Long/Short Equity Fund:
over $100,000
AXA Rosenberg Global Long/Short Equity
Fund: none
William F. Sharpe AXA Rosenberg U.S. Small Capitalization $50,001-$100,000
Fund: $10,001-$50,000
AXA Rosenberg U.S. Discovery Fund: none
AXA Rosenberg U.S. Large Capitalization
Fund: none
AXA Rosenberg Enhanced 500 Fund:
$ 1-$10,000
AXA Rosenberg International Equity Fund:
$ 1-$10,000
AXA Rosenberg International Small
Capitalization Fund: $10,001-$50,000
AXA Rosenberg European Fund: none
AXA Rosenberg U.S. Long/Short Equity Fund:
none
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund: none
AXA Rosenberg Value Long/Short Equity Fund:
$10,001-$50,000
17
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN ALL
FUNDS OVERSEEN OR
TO BE OVERSEEN
BY TRUSTEE OR
NOMINEE IN THE
FAMILY OF
INVESTMENT
COMPANIES*
NAME OF TRUSTEE DOLLAR RANGE OF EQUITY AS OF
OR NOMINEE SECURITIES IN THE FUNDS OCTOBER 15, 2003
- ---------- ----------------------- -----------------
AXA Rosenberg Global Long/Short Equity
Fund: none
INTERESTED TRUSTEE
Kenneth Reid AXA Rosenberg U.S. Small Capitalization Over $100,000
Fund: over $100,000
AXA Rosenberg U.S. Discovery Fund: none
AXA Rosenberg U.S. Large Capitalization
Fund: none
AXA Rosenberg Enhanced 500 Fund: none
AXA Rosenberg International Equity Fund:
none
AXA Rosenberg International Small
Capitalization Fund: none
AXA Rosenberg European Fund: none
AXA Rosenberg U.S. Long/Short Equity Fund:
none
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund: none
AXA Rosenberg Value Long/Short Equity Fund:
none
AXA Rosenberg Global Long/Short Equity
Fund: over $100,000
NOMINEES FOR INDEPENDENT TRUSTEE
Mariann Byerwalter
William A. Hasler
NOMINEE FOR INTERESTED TRUSTEE
Jeffrey M. Lyons
- ----------------
* The Family of Investment Companies includes the Funds as well as the AXA
Rosenberg VIT Value Long/Short Equity Fund, the sole series of Barr
Rosenberg Variable Insurance Trust.
18
PROPOSAL 2
TO APPROVE CSIM AS INVESTMENT ADVISER FOR EACH VOTING
FUND BY APPROVING A MANAGEMENT AGREEMENT BETWEEN
CSIM AND THE TRUST ON BEHALF OF EACH VOTING FUND.
BACKGROUND
AXA Rosenberg currently serves as investment adviser to each Fund pursuant to a
separate advisory agreement with the Trust on behalf of each Fund. At a meeting
of the Board of Trustees held on November 3, 2003, the Board, and the
Independent Trustees voting separately, unanimously approved the appointment of
CSIM as investment adviser to each Fund and approved a Management Agreement
(each a "Proposed Management Agreement") between the Trust, on behalf of each
Fund, and CSIM. The Board also recommended that each Proposed Management
Agreement be submitted to shareholders of each respective Fund for approval.
There is no intention to change the investment mandate of any of the Voting
Funds upon approval of CSIM as investment manager.
As described more fully under "Proposal 3," below, the Board is also proposing
that AXA Rosenberg, subject to CSIM's supervision, continue to provide
day-to-day portfolio management of each Fund.
SUMMARY OF THE PROPOSED MANAGEMENT AGREEMENTS
A summary of the Proposed Management Agreements and information about CSIM are
provided below. A form of the Proposed Management Agreements is attached as
Exhibit A to this proxy statement, and the following description of the
Proposed Management Agreements is qualified in its entirety by reference to
such Exhibit.
The Proposed Management Agreements contain certain provisions that are
different from the provisions of the current advisory agreements with AXA
Rosenberg such as: (i) the Proposed Management Agreements provide for the
delegation of duties to a subadviser while the current management agreements do
not, and (ii) the fees payable to CSIM under the Proposed Management Agreements
may be less than the fees payable to AXA Rosenberg under the current management
agreements. A number of the provisions, however, including provisions relating
to the standards of care and limitation of liability, the selection of
portfolio securities and duration and termination, will not be materially
different under the Proposed Management Agreements.
DUTIES UNDER THE PROPOSED MANAGEMENT AGREEMENTS -- The provisions regarding the
duties of the adviser under each Proposed Management Agreement are similar to
those of the the current agreements except that the current
19
investment advisory agreements do not provide for the delegation of
responsibilities to an investment subadviser. Under each Proposed Management
Agreement, CSIM will, subject to the direction and control of the Board of
Trustees and at its expense, have responsibility (either directly or in a
supervisory capacity) for (i) furnishing continuously an investment program for
the particular Fund, making investment decisions on behalf of such Fund and
placing all orders for the purchase and sale of its portfolio securities, and
(ii) furnishing all necessary office space and equipment, providing bookkeeping
and clerical services required to perform its duties thereunder and paying all
salaries, fees and expenses of the Trustees and officers of the Trust who are
affiliated persons of CSIM. The Agreement also provides that CSIM may, subject
to the provisions of the Trust's Second Amended and Restated Agreement and
Declaration of Trust, as amended, and the 1940 Act, delegate its responsibility
for day-to-day portfolio management and trade execution to an investment
subadviser. Each Proposed Management Agreement provides that CSIM is
responsible for payment of all compensation to any such investment subadviser.
STANDARD OF CARE -- The limitation of liability provisions of each Proposed
Management Agreement are substantially similar to those of the current
agreements. Each Proposed Management Agreement provides that in the absence of
willful malfeasance, bad faith or gross negligence on the part of CSIM, or
reckless disregard of its obligations and duties thereunder, CSIM shall not be
subject to any liability to the Trust, to any Fund or to any shareholder,
officer, director or Trustee thereof, for any act or omission in the course of,
or connected with, rendering services under each Proposed Management Agreement.
PORTFOLIO TRANSACTIONS -- The portfolio transactions provisions of each
Proposed Management Agreement are substantially similar to those of the current
agreements. The provisions relating to the execution of portfolio transactions
in each Proposed Management Agreement authorize CSIM to select brokers and
dealers to execute portfolio transactions, subject to its overall obligation to
seek the most favorable price and execution available for the Funds. However,
under each Proposed Subadviser Agreement, CSIM and the Trust have agreed that
CSIM shall have no authority for the selection of brokers and/or the day-to-day
placing of orders in connection with the particular Fund for so long as AXA
Rosenberg is subadviser, subject only to CSIM's general supervisory
obligations. In the event that AXA Rosenberg is terminated as subadviser to a
particular Fund, CSIM may retain responsibility with regard to the selection of
brokers and dealers and may execute portfolio transactions for such Fund or
delegate such responsibility to a successor subadviser.
In selecting a broker or dealer, CSIM shall consider all factors it deems
relevant, including, by way of illustration, the price, the size of the
transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience
20
and financial stability of the broker involved, and the quality of service
rendered by the broker in other transactions. Subject to such policies as the
Trustees may determine, CSIM shall not be deemed to have acted unlawfully or to
have breached any duty created by each Proposed Management Agreement or
otherwise solely by reason of its having caused the Trust to pay, on behalf of
a particular Fund, a broker that provides brokerage and research services to
CSIM or any affiliated person of CSIM an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting that transaction, if CSIM determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker, viewed in
terms of either that particular transaction or CSIM's overall responsibilities
with respect to such Fund and to other clients of CSIM and any affiliated
person of CSIM as to which CSIM or any affiliated person of CSIM exercises
investment discretion. It is expected that AXA Rosenberg's policy with respect
to the selection of brokers and the use of "soft dollars" will continue under
the Proposed Management and Subadviser Agreements.
DURATION AND TERMINATION -- The duration and termination provisions of each
Proposed Management Agreement are substantially similar to those of the current
agreements. Each Proposed Management Agreement shall be in effect until two
years from its execution date and thereafter shall be continued for successive
annual periods, provided that such continuance is specifically approved at
least annually (a) by the affirmative vote of a majority of the outstanding
shares of a particular Fund or by the Board of Trustees, and (b) by the vote of
a majority of the Trustees who are not parties to such Proposed Management
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. If the continuance of a Proposed Management Agreement is submitted to
the shareholders of a particular Fund for their approval and such shareholders
fail to approve the continuance of such Proposed Management Agreement as
provided therein, CSIM may continue to serve thereunder in a manner consistent
with the 1940 Act and the rules and regulations thereunder. Each Proposed
Management Agreement may be terminated at any time by the vote of a majority of
the Fund's outstanding voting securities or by a vote of the entire Board of
Trustees on sixty days' written notice to CSIM or by CSIM on sixty days'
written notice to the Trust. Each Proposed Management Agreement shall terminate
automatically in the event of its "assignment" (as defined in Section 2(a)(4)
of the 1940 Act). Each Proposed Management Agreement may not be materially
amended unless such amendment is approved by the affirmative vote of a majority
of the outstanding shares of the particular Fund, and by the vote of a majority
of the Trustees who are not interested persons (as defined in the 1940 Act) of
the Trust or of CSIM, cast in person at a meeting called for the purpose of
voting on such amendment.
21
COMPENSATION -- Each Voting Fund's advisory fee under its Proposed Management
Agreement will be the same or lower than the advisory fees paid by such Fund
under its current agreement.
The following table compares the fees payable to AXA Rosenberg under the
current advisory agreements with the fees payable to CSIM under the Proposed
Management Agreements. It also shows how much AXA Rosenberg earned under each
advisory agreement, and how much would have been payable to CSIM under the
corresponding Proposed Management Agreement if it had been in effect, for the
fiscal year ended March 31, 2003.
CURRENT AGGREGATE PROPOSED DIFFERENCE
AGREEMENT AMOUNT AGREEMENT AGGREGATE (% HIGHER/
FUND RATE (%) ($)+ RATE (%) AMOUNT ($) LOWER)
- ---- --------- --------- --------- ---------- ----------
AXA Rosenberg 0.90% $5,509,497 0.90% $5,509,497 0%
U.S. Small
Capitalization Fund
AXA Rosenberg U.S. 0.90% $ 87,552 1st $1 billion $ 87,552 0%
Discovery Fund -- 0.90%
Over $1 billion
-- 0.85%
AXA Rosenberg U.S. 0.75% $ 67,141* 1st $1 billion $ 67,141* 0%
Large Capitalization -- 0.75%
Fund Over $1 billion
-- 0.70%
Over $2 billion
-- 0.675%
AXA Rosenberg 0.85% $ 61,051 1st $1 billion $ 61,051 0%
International -- 0.85%
Equity Fund Over $1 billion
-- 0.80%
Over $2 billion
-- 0.775%
AXA Rosenberg 1.00% $ 338,099 1st $500 million $ 338,099 0%
International -- 1.00%
Small Capitalization Over $500 million
Fund -- 0.95%
AXA Rosenberg 0.75% $ 47,644 1st $500 million $ 47,644 0%
European Fund -- 0.75%
Over $500 million
-- 0.70%
Over $2 billion
-- 0.675%
AXA Rosenberg U.S. 1.25% $ 0** 1st $500 million $ 0** 0%
Long/Short Equity -- 1.25%
Fund Over $500 million
-- 1.20%
22
CURRENT AGGREGATE PROPOSED DIFFERENCE
AGREEMENT AMOUNT AGREEMENT AGGREGATE (% HIGHER/
FUND RATE (%) ($)+ RATE (%) AMOUNT ($) LOWER)
- ---- --------- --------- --------- ---------- ----------
AXA Rosenberg U.S. 1.00% $ 195,277 1st $500 million $ 195,277 0%
Large/Mid -- 1.00%
Capitalization Long/ Over $500 million
Short Equity Fund -- 0.95%
AXA Rosenberg Value 1.50% $2,016,922 1st $500 million $2,016,922 0%
Long/Short Equity -- 1.50%
Fund Over $500 million
-- 1.45%
AXA Rosenberg Global 1.50% $ 250,834 1st $500 million $ 250,834 0%
Long/Short Equity -- 1.50%
Fund Over $500 million
-- 1.45%
- ----------------
+ Before waivers.
* This fee is for the period June 20, 2002 (the Fund's inception date) to
March 31, 2003.
** The AXA Rosenberg U.S. Long/Short Equity Fund was not operational as of
March 31, 2003.
EXPENSE LIMITATIONS
The fees in the table above reflect the fees payable by each Fund to AXA
Rosenberg and CSIM under the current advisory agreement and the Proposed
Management Agreement, respectively. Currently, AXA Rosenberg waives fees and/or
reimburses the Funds as necessary to keep ordinary operating expenses incurred
by a Fund in any fiscal year, including but not limited to investment advisory
fees (but subject to certain exclusions as described below), from exceeding the
limits set forth in the table below through March 31, 2004. CSIM has agreed to
extend the limitations through March 31, 2007. Both the current and proposed
expense limitation agreements exclude non-recurring account fees, extraordinary
expenses, dividends on securities sold short, service fees, subtransfer agency
and subaccounting fees and distribution and shareholder service fees, so total
Fund operating expenses will be higher than the amounts shown below. The table
below also reflects the total annual operating expenses of each Fund, net of
expense limitations under the current AXA Rosenberg expense limit and the
proposed CSIM expense limit, based on asset levels and other expenses for the
Funds' last fiscal year.
23
TOTAL TOTAL
EXPENSES EXPENSES
CURRENT UNDER UNDER
AXA PROPOSED CURRENT PROPOSED
ROSENBERG CSIM AXA CSIM
EXPENSE EXPENSE EXPENSE EXPENSE
FUND LIMIT LIMIT LIMIT LIMIT
- ---- --------- -------- -------- --------
AXA Rosenberg U.S. Small
Capitalization Fund ...................... 1.15% 1.14% 1.15% 1.14%
AXA Rosenberg U.S. Discovery Fund .......... 1.15% 1.14% 1.15% 1.14%
AXA Rosenberg U.S. Large
Capitalization Fund ...................... 1.00% 0.99% 1.00% 0.99%
AXA Rosenberg International
Equity Fund .............................. 1.35% 1.34% 1.35% 1.34%
AXA Rosenberg International Small
Capitalization Fund ...................... 1.50% 1.49% 1.50% 1.49%
AXA Rosenberg European Fund ................ 1.25% 1.24% 1.25% 1.24%
AXA Rosenberg U.S. Long/Short
Equity Fund .............................. 1.50% 1.49% 1.50%* 1.49%*
AXA Rosenberg U.S. Large/Mid
Capitalization Long/Short Equity Fund 1.25% 1.24% 2.67% 2.66%
AXA Rosenberg Value Long/Short
Equity Fund .............................. 1.75% 1.74% 2.42% 2.41%
AXA Rosenberg Global Long/Short
Equity Fund .............................. 2.00% 1.99% 3.00% 2.99%
- ----------------
* Because the AXA Rosenberg U.S. Long/Short Equity Fund is a new fund (as
defined under Form N-1A of the 1940 Act), total expenses are based on
estimated amounts.
A note on redemption fees: In addition to on-going operating expenses as set
forth above, the Trust expects to continue its policy of imposing redemption
fees on share exchanges or redemptions that occur within one month of purchase.
The Trustees believe that redemption fees have the equitable result of
requiring redeeming shareholders to bear brokerage and other transaction costs
associated with their redemptions, rather than having those costs borne by
non-redeeming shareholders. In particular, this policy also has the beneficial
effect of discouraging market timers and other short-term investors whose
activities might otherwise adversely affect the Funds and their other
shareholders.
24
DATES OF APPROVAL OF CURRENT MANAGEMENT AGREEMENTS
The following table shows the date that the current management agreement
between each Fund and AXA Rosenberg was executed and was last submitted to
shareholders for approval.
DATE OF DATE SUBMITTED
FUND EXECUTION TO SHAREHOLDERS
- ---- --------- ---------------
AXA Rosenberg U.S. Small Capitalization Fund ......... 12/30/98 12/28/98
AXA Rosenberg U.S. Discovery Fund .................... 12/1/00 12/4/00
AXA Rosenberg U.S. Large Capitalization Fund ......... 3/27/02 3/26/02
AXA Rosenberg International Equity Fund .............. 2/28/00 5/31/00
AXA Rosenberg International Small
Capitalization Fund ................................ 12/30/98 12/28/98
AXA Rosenberg European Fund .......................... 7/9/01 7/6/01
AXA Rosenberg U.S. Long/Short Equity Fund ............ 3/27/02 3/26/02
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund ............................. 12/30/98 12/20/98
AXA Rosenberg Value Long/Short Equity Fund ........... 2/28/00 12/28/98
AXA Rosenberg Global Long/Short Equity Fund .......... 6/1/00 5/31/00
TRUSTEES' CONSIDERATIONS
The Trustees, including the Independent Trustees voting separately, approved
each Proposed Management Agreement at a meeting held on November 3, 2003,
subject to approval by each Fund's shareholders and, if the new advisory and
subadvisory arrangements are approved by some, but not all, of the Voting
Funds, a determination by the Trustees that implementation is appropriate. The
Trustees also held meetings on September 10 and October 15, 2003, to consider
each Proposed Management Agreement and ask questions of representatives of
CSIM. The Independent Trustees also held separate meetings in person or by
telephone on August 6, August 29, September 10, September 16, September 24 and
October 15, 2003 to discuss each Proposed Management Agreement and other
information provided by AXA Rosenberg or CSIM pursuant to their requests. The
Trustees received written and oral information from CSIM regarding CSIM's key
personnel and its experience in managing mutual funds. The Trustees reviewed
CSIM's qualifications to act as investment adviser to the Funds. In response to
public filings and private conversations with representatives of CSIM regarding
investigations and allegations of market timing and late day trading at U.S.
Trust Corporation, a subsidiary of the Charles Schwab Corporation, the Trustees
considered CSIM's confirmation to the Trustees that, to date, it has found no
improper or illegal trading by CSIM personnel for their own accounts, or any
special arrangements between CSIM and third parties to permit market timing or
illegal late day trading of the SchwabFunds. In recommending that shareholders
approve each Proposed Management Agreement, the Trustees carefully evaluated
the experience of CSIM's key personnel in institutional investing and the
quality of services CSIM is expected to
25
provide to each Fund, including, but not limited to: (1) the fee and expense
ratios of comparable mutual funds; (2) the nature and quality of services
expected to be rendered to each Fund by CSIM; (3) the benefits that might
accrue to the Funds, including increased efficiencies and economies of scale,
as a result of the size and depth of CSIM's and its affiliates' mutual fund
organizations; (4) the distinct investment objectives and policies of each
Fund; (5) the history, reputation, qualification and background of CSIM, as
well as the qualifications of its personnel and its financial condition; (6)
its performance record; (7) CSIM's compliance infrastructure, including systems
and procedures designed to comply with recent federal regulations affecting
mutual funds; (8) CSIM and its affiliates' ability to support the growth of
assets invested in the Funds; (9) CSIM's experience overseeing, monitoring and
supervising the services of subadvisers to certain funds for which it currently
serves as investment adviser; and (10) other factors deemed relevant. The
Trustees also reviewed the fees to be paid to CSIM by each Fund under each
Proposed Management Agreement in comparison to those being charged generally in
the relevant segment of the mutual fund business. The Trustees also took into
account that the potential benefits that might accrue to the Funds in the areas
of increased efficiency and economies of scale are less likely to be achieved
in the event that some, but not all, Funds approve the Proposals. Furthermore,
the Trustees considered that the Funds are part of a fund family and therefore
they believed it was in the best interests of each Fund and its shareholders to
preserve the diversity of offerings of such fund family by implementing the
Proposals with respect to all of the Funds together.
Based on this evaluation, the Trustees considered whether each Proposed
Management Agreement is in the best interests of each Fund and the Fund's
shareholders. One of the issues influencing the Trustees' decision was the fact
that despite the change in investment adviser, the investment objective of each
Voting Fund will remain the same, and the investment strategies, policies,
restrictions, and current policy with respect to redemption fees of each Voting
Fund will remain substantially the same. The Trustees considered that it is
expected that the Voting Funds' shares will be subject to the same or a lower
operating expense ratio as a result of the change in advisory arrangements.
They also considered the potential for a larger long-term shareholder base as a
result of CSIM's involvement, which would result in certain expenses being
spread over a larger pool of assets and potentially lower transaction costs to
the Funds. They discussed the various challenges to maintaining or increasing
the Funds' assets over the long term and how the proposed relationship with
CSIM could address those challenges. Furthermore, after adoption of each
Proposed Management Agreement, AXA Rosenberg will continue to manage the assets
of each Fund as subadviser to the Funds. Accordingly, for the reasons noted
above, together with other factors and information considered relevant, and
recognizing that there can be no assurance that any of the potential benefits
described above will be realized, the Trustees concluded that each Proposed
Management Agreement would be in the best interest of each Fund and its
shareholders.
26
ABOUT CHARLES SCHWAB INVESTMENT MANAGEMENT, INC. (CSIM)
CSIM is a wholly-owned subsidiary of The Charles Schwab Corporation. Both CSIM
and The Charles Schwab Corporation are located at 101 Montgomery Street, San
Francisco, CA 94104.
As of December 4, 2003, CSIM managed 49 mutual funds and approximately $138.6
billion in assets. Information about those funds managed by CSIM with
investment objectives and policies similar to those of the Funds is set forth
below.
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS -- Listed below are the directors
and principal executive officer of CSIM. The principal business address of each
director and the principal executive officer, as it relates to their duties at
CSIM, is the same as above.
NAME POSITION
- ---- --------
Randall W. Merk ........... Director, President and Chief Executive Officer
Charles R. Schwab ......... Chairman and Director
Stephen B. Ward ........... Director, Senior Vice President and Chief Investment
Officer
SIMILAR FUNDS MANAGED BY CSIM
CSIM is the investment adviser for the following funds that have investment
objectives and policies similar to those of the Funds in that each invests
primarily in equity securities using "quantitative" investment methodologies.
NET ASSETS
AS OF CONTRACTUAL EFFECTIVE
SEPTEMBER 30, RATE OF RATE OF
FUND 2003 COMPENSATION %* COMPENSATION %**
- ---- ------------- --------------- ----------------
Schwab Core Equity Fund ......... $224,883,714 0.54% on first $500,000, 0.41%+
0.49% on all other assets
Schwab Dividend
Equity Fund ................... $163,859,723 0.85% on all assets ***
Schwab Hedged
Equity Fund ................... $ 34,507,182 1.75% on all assets 1.35%+
Schwab Small-Cap
Equity Fund ................... $ 40,060,175 1.05% on all assets ***
- ----------------
* These fees are paid to CSIM for the services it provides as investment
adviser and administrator to each fund.
** Net of fee waivers and expense reimbursements.
*** These Funds have not been in operation for a complete fiscal year.
Therefore, information on CSIM's effective rates of compensation is not yet
available.
+ These figures are provided for each Fund's fiscal year ending October 31,
2003.
27
PROPOSAL 3
TO APPROVE AXA ROSENBERG AS AN INVESTMENT SUBADVISER FOR EACH VOTING FUND BY
APPROVING A SUBADVISER AGREEMENT AMONG CSIM, AXA ROSENBERG AND THE TRUST
ON BEHALF OF EACH VOTING FUND.
BACKGROUND
At a meeting of the Board of Trustees held on November 3, 2003, the Board,
including the Independent Trustees voting separately, unanimously approved a
Subadviser Agreement among CSIM, AXA Rosenberg and the Trust on behalf of each
Fund (each a "Proposed Subadviser Agreement"). The Board also recommended that
each Proposed Subadviser Agreement be submitted to shareholders of each Fund
for approval.
SUMMARY OF THE PROPOSED SUBADVISER AGREEMENT
A summary of the Proposed Subadviser Agreements and information about AXA
Rosenberg are provided below. A form of the Proposed Subadviser Agreement is
attached as Exhibit B to this proxy statement, and the following description of
the Proposed Subadviser Agreement is qualified in its entirety by reference to
such Exhibit.
DUTIES UNDER THE PROPOSED SUBADVISER AGREEMENT -- Under each Proposed
Subadviser Agreement, AXA Rosenberg, at its expense, will furnish continuously
an investment program for the particular Fund and will make investment
decisions on behalf of such Fund and place all orders for the purchase and sale
of portfolio securities and all other investments, subject to the supervision
of CSIM and the Trustees. Under each Proposed Subadviser Agreement, CSIM and
the Trust have agreed that CSIM shall have no authority for the selection of
brokers and/or the day-to-day placing of orders in connection with the
particular Fund so long as AXA Rosenberg is subadviser, subject only to CSIM's
general supervisory obligations.
STANDARD OF CARE -- Each Proposed Subadviser Agreement provides that, in the
absence of willful misfeasance, bad faith or gross negligence on the part of
AXA Rosenberg, or reckless disregard of its obligations and duties thereunder,
AXA Rosenberg shall not be subject to any liability to CSIM, to the Trust, to
any Fund, or to any shareholder, officer, director or Trustee thereof, for any
act or omission in the course of, or connected with, rendering services under
each Proposed Subadviser Agreement. This standard of care is substantially
similar to the standard of care to which AXA Rosenberg is currently held under
the current management agreements.
PORTFOLIO TRANSACTIONS -- The portfolio transaction-related provisions of each
Proposed Subadviser Agreement are substantially similar to those of the current
management agreements. Each Proposed Subadviser Agreement authorizes
28
AXA Rosenberg to select brokers and dealers to execute portfolio transactions,
subject to the brokerage policies established by the Trustees and AXA
Rosenberg's overall obligation to seek the most favorable price and execution
for the particular Fund. In selecting a broker or dealer, AXA Rosenberg shall
consider all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market security, the
amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial ability of
the broker involved, and the quality of service rendered by the broker in other
transactions. Subject to such policies as the Trustees may determine and
communicate to AXA Rosenberg in writing, AXA Rosenberg shall not be deemed to
have acted unlawfully or to have breached any duty created by any Proposed
Subadviser Agreement or otherwise solely by reason of its having caused a Fund
to pay a broker that provides brokerage and research services to AXA Rosenberg
or any affiliated person of AXA Rosenberg an amount of commission for effecting
a portfolio investment transaction in excess of the amount of commission
another broker would have charged for effecting that transaction, if AXA
Rosenberg determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker, viewed in terms of either that particular transaction
or AXA Rosenberg's overall responsibilities with respect to the particular Fund
and to other clients of AXA Rosenberg and any affiliated person of AXA
Rosenberg as to which AXA Rosenberg or any affiliated person of AXA Rosenberg
exercises investment discretion. It is expected that AXA Rosenberg's policy
with respect to the selection of brokers and the use of "soft dollars" will
continue under the Proposed Management and Subadviser Agreements.
DURATION AND TERMINATION -- Each Proposed Subadviser Agreement shall be in
effect until two years from its execution date and thereafter shall be
continued for successive annual periods, provided that such continuance is
specifically approved at least annually (a) by the affirmative vote of a
majority of the outstanding shares of the particular Fund or by the Board of
Trustees, and (b) by the vote of a majority of the Trustees who are not parties
to such Proposed Subadviser Agreement or "interested persons" (as defined in
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval. Each Proposed Subadviser Agreement may be
terminated at any time by the vote of a majority of the particular Fund's
outstanding voting securities or by a vote of the entire Board of Trustees on
sixty days' written notice to AXA Rosenberg or by AXA Rosenberg on sixty days'
written notice to the Trust. Each Proposed Subadviser Agreement shall terminate
automatically in the event of its "assignment" (as defined in Section 2(a)(4)
of the 1940 Act). Each Proposed Subadviser Agreement shall not be amended
except by a writing executed by each of the parties thereto. In certain
circumstances, AXA Rosenberg shall be entitled to payment by CSIM (not the
Fund) in the event of AXA Rosenberg's termination with respect to a particular
Fund.
29
COMPENSATION
The Funds do not pay AXA Rosenberg's compensation under the Proposed Subadviser
Agreements: CSIM pays it, and for any given year it will never be payable at a
rate that exceeds 55% (90% in the case of the AXA Rosenberg U.S. Small
Capitalization Fund) of the gross rate of compensation payable to CSIM by each
Fund under the Proposed Management Agreements described above. The compensation
payable by CSIM to AXA Rosenberg in respect of each Fund under the respective
Proposed Subadviser Agreement is payable quarterly (at the end of each quarter)
as a portion of such Fund's average daily net assets, and, beginning one year
after AXA Rosenberg becomes subadviser, will be adjusted (up or down) if such
Fund outperforms or underperforms its benchmark by 1.0%, 2% and 2.5% for Group
A, B and C Funds, respectively, or more. This way, AXA Rosenberg has monetary
incentive to achieve good performance and avoid poor performance for each Fund.
Starting in 2008 and in each year thereafter, AXA Rosenberg may be entitled to
an additional rate of compensation from CSIM if the assets under management for
all Funds (other than the AXA Rosenberg U.S. Small Capitalization Fund, but
including the AXA Rosenberg VIT Value Long/Short Equity Fund) have not reached
certain levels, but, as noted above, it will never be entitled to a rate of
compensation that is more than 55% (90% in the case of the AXA Rosenberg U.S.
Small Capitalization Fund) of the gross rate of compensation payable to CSIM by
each Fund under the Proposed Management Agreements. AXA Rosenberg's
compensation is described in detail on Schedule A to the Form of Proposed
Subadviser Agreement, which is attached as Exhibit B to this Proxy Statement,
and the following summary is qualified in its entirety by the Form of Proposed
Subadviser Agreement and Schedule A thereto.
Base Subadvisory Fee
This section describes the base subadvisory fee payable by CSIM to AXA
Rosenberg. As described more fully below, CSIM will pay a flat fee to AXA
Rosenberg in respect of each Fund's average daily net assets up to the amount
of assets in such Fund at the time AXA Rosenberg becomes subadviser (the Fund's
"Existing Assets"). The following paragraph describes this component of AXA
Rosenberg's compensation. With respect to assets in excess of a Fund's Existing
Assets, the fee arrangements are proposed to be different for the AXA Rosenberg
U.S. Small Capitalization Fund than for the other Funds. The following
subsections describe the arrangements for the other Funds and the AXA Rosenberg
U.S. Small Capitalization Fund, respectively, with respect to those assets.
Please remember, however, that all the fees described on this and the following
three pages are paid by CSIM to AXA Rosenberg; they do not affect how much you
pay or your Fund pays.
Unless the fee payable to CSIM under the Proposed Management Agreements is
increased by a Fund's shareholders (in which case the base subadvisory fee
would
30
also be increased), the base subadvisory fee payable by CSIM to AXA Rosenberg
will never exceed the percentage listed in the table below in the "Existing
Assets" row of any Fund's average daily net assets on an annual basis, and it
will be lower than that for Fund assets above certain thresholds, as described
below. As shown in the table below, CSIM will pay AXA Rosenberg a percentage
(on an annual basis) of each Fund's Existing Assets.
All Funds other than the AXA Rosenberg U.S. Small Capitalization Fund. For any
quarter during which a Fund's average daily net assets exceed its Existing
Assets, CSIM will pay AXA Rosenberg a lower percentage (on an annual basis) of
such Fund's portion, if any, of the average daily net assets of all Funds
(excluding the assets of the AXA Rosenberg U.S. Small Capitalization Fund, but
including the assets of the AXA Rosenberg VIT Value Long/Short Equity Fund)
that exceed the aggregate Existing Assets of all such Funds, but fall short of
$2.5 billion (the Fund's "Second Tier Assets"). For any quarter during which a
Fund's average daily net assets exceed its Existing Assets AND the average
daily net assets of all Funds (excluding the assets of the AXA Rosenberg U.S.
Small Capitalization Fund, but including the assets of the AXA Rosenberg VIT
Value Long/Short Equity Fund) exceed $2.5 billion, CSIM will pay AXA Rosenberg
a still lower percentage (on an annual basis) of such Fund's portion of such
excess (the Fund's "Third Tier Assets").
AXA Rosenberg U.S. Small Capitalization Fund. The base annual subadvisory fee
payable to AXA Rosenberg by CSIM with respect to the AXA Rosenberg U.S. Small
Capitalization Fund may also be adjusted if the gross advisory fee payable to
CSIM by the Fund is adjusted by the Trustees or the Fund's shareholders, and
will also be subject to "break points," currently as follows (on an annualized
basis): 0.72% of the Fund's average daily net assets up to its Existing Assets;
and 0.405% of the Fund's average daily net assets in excess of the Existing
Assets.
FUND BASE SUBADVISORY FEE*
- ---- ---------------------
AXA Rosenberg U.S. Discovery Fund .................... 0.405% of Existing Assets
0.36% of Second Tier Assets
0.27% of Third Tier Assets
AXA Rosenberg U.S. Large Capitalization Fund ......... 0.338% of Existing Assets
0.30% of Second Tier Assets
0.225% of Third Tier Assets
AXA Rosenberg International Equity Fund .............. 0.383% of Existing Assets
0.34% of Second Tier Assets
0.255% of Third Tier Assets
AXA Rosenberg International Small
Capitalization Fund ................................. 0.45% of Existing Assets
0.40% of Second Tier Assets
0.30% of Third Tier Assets
31
FUND BASE SUBADVISORY FEE*
- ---- ---------------------
AXA Rosenberg European Fund .......................... 0.338% of Existing Assets
0.30% of Second Tier Assets
0.225% of Third Tier Assets
AXA Rosenberg U.S. Long/Short Equity Fund ............ 0.5625% of Existing Assets
0.50% of Second Tier Assets
0.375% of Third Tier Assets
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund .............................. 0.45% of Existing Assets
0.40% of Second Tier Assets
0.30% of Third Tier Assets
AXA Rosenberg Value Long/Short Equity Fund ........... 0.675% of Existing Assets
0.60% of Second Tier Assets
0.45% of Third Tier Assets
AXA Rosenberg Global Long/Short Equity Fund .......... 0.675% of Existing Assets
0.60% of Second Tier Assets
0.45% of Third Tier Assets
AXA Rosenberg U.S. Small Capitalization Fund ......... 0.72% of Existing Assets
0.405% of All other Assets
- ----------------
* As noted above, the rates for any Fund set forth in the table are expected
to be adjusted if the gross advisory fee rates payable to CSIM by such Fund
are adjusted by the Trustees or the shareholders of such Fund.
Performance Adjustment.
As noted above, the compensation payable to AXA Rosenberg by CSIM under the
Proposed Subadviser Agreements is structured to provide monetary incentive to
AXA Rosenberg to achieve good performance and avoid poor performance. In
particular, AXA Rosenberg's compensation in respect of a Fund will be increased
for any quarter in which such Fund's performance exceeds that of its benchmark
by more than 1.0%, 2.0% or 2.5% for Group A, B or C Funds (as listed in the
table below), respectively.
GROUP A GROUP B GROUP C
------- ------- -------
U.S. Large U.S. Small U.S. Long/Short Equity Fund
Capitalization Fund Capitalization Fund U.S. Large/Mid Capitalization
International Equity U.S. Discovery Fund Long/Short Equity Fund
Fund International Small Value Long/Short Equity Fund
European Fund Capitalization Fund Global Long/Short Equity Fund
Conversely, AXA Rosenberg's compensation will be decreased for any quarter in
which a Fund's performance falls short of its benchmark's performance by more
32
than 1.0%, 2.0% or 2.5% for Group A, B or C Funds, respectively. More
specifically, the fee payable to AXA Rosenberg will be increased or decreased
by a performance component (the "Performance Adjustment") that will vary
proportionately with the difference between (a) the investment performance of
the relevant Fund over a rolling three-year period* minus the investment record
of the respective benchmark set forth in Exhibit C over the same period,
expressed as a percentage, whether the result is positive or negative, and (b)
(i) 1.0% for Group A Funds, (ii) 2.0% for Groups B Funds, or 2.5% for Group C
Funds. The Performance Adjustment (whether positive or negative) for a Fund
will never be charged at a rate that exceeds 5% of the gross advisory fee rate
payable to CSIM with respect to such Fund (the "Maximum Performance
Adjustment"). The Maximum Performance Adjustment will be made when the Fund's
performance reaches plus or minus 2.0%, 4.0% and 5.0% in relation to the
relevant benchmark for funds falling within Groups A, B and C, respectively
(the "Maximum Adjustment Performance Point"). There will be no Performance
Adjustment when the performance difference (between the Fund and the relevant
benchmark) is between 1% and -1% for Group A Funds, 2% and -2% for Group B
Funds, or 2.5% and -2.5% for Group C Funds and, starting at 1% or -1% (as the
case may be) for Group A Funds, 2% or -2% (as the case may be) for Group B
Funds, or 2.5% or -2.5% (as the case may be) for Group C Funds, it shall
increase (or decrease in the case of a negative Performance Adjustment) based
on a constant ratio until the Maximum Adjustment Performance Point is reached.
The following table provides examples of how different levels of Fund
performance will generate different adjustments to the compensation payable by
CSIM to AXA Rosenberg under the proposed arrangements.
PERCENTAGE BY WHICH PERFORMANCE ADJUSTMENT
FUND PERFORMANCE (AS A PERCENTAGE OF THE GROSS RATE OF
EXCEEDS OR FALLS SHORT COMPENSATION PAYABLE BY EACH FUND TO CSIM)
OF ITS BENCHMARK'S FUND FUND FUND
PERFORMANCE GROUP A GROUP B GROUP C
5.0% (and all higher 0/0s) 5% 5% 5%
4.5% 5% 5% 4%
4.0% 5% 5% 3%
3.5% 5% 3.75% 2%
3.0% 5% 2.5% 1%
2.5% 5% 1.25% 0
2.0% 5% 0 0
1.5% 2.5% 0 0
1.0% 0 0 0
* Until AXA Rosenberg has been subadviser for twelve calendar quarters
(including the quarter in which it becomes subadviser), the rolling period
will be the period that has elapsed since AXA Rosenberg has been
subadviser. No Performance Adjustment will be made until AXA Rosenberg has
been subadviser for at least four calendar quarters (including such
quarter).
33
PERCENTAGE BY WHICH PERFORMANCE ADJUSTMENT
FUND PERFORMANCE (AS A PERCENTAGE OF THE GROSS RATE OF
EXCEEDS OR FALLS SHORT COMPENSATION PAYABLE BY EACH FUND TO CSIM)
OF ITS BENCHMARK'S FUND FUND FUND
PERFORMANCE GROUP A GROUP B GROUP C
0.5% 0 0 0
- -0.5% 0 0 0
- -1.0% 0 0 0
- -1.5% -2.5% 0 0
- -2.0% -5% 0 0
- -2.5% -5% -1.25% 0
- -3.0% -5% -2.5% -1%
- -3.5% -5% -3.75% -2%
- -4.0% -5% -5% -3%
- -4.5% -5% -5% -4%
- -5.0% (and all lower 0/0s) -5% -5% -5%
Assets Under Management Adjustment (Applicable to all Funds except the AXA
Rosenberg U.S. Small Capitalization Fund).
Finally, to protect AXA Rosenberg, its compensation from CSIM for each Fund
will be adjusted upward if the Funds do not grow as planned over the first few
years after the proposed new management and subadvisory arrangements are in
place; bear in mind, however, that for any given year it will never exceed 55%
(90% in the case of the AXA Rosenberg U.S. Small Capitalization Fund) of the
gross rate of compensation payable to CSIM by any Fund under the Proposed
Management Agreements. As noted above, beginning in 2008, CSIM will pay AXA
Rosenberg a higher percentage of a Fund's average daily net assets if the
average daily net assets of all Funds (excluding the AXA Rosenberg U.S. Small
Capitalization Fund, but including the AXA Rosenberg VIT Value Long/Short
Equity Fund) have not reached certain thresholds. Specifically, if the Funds
collectively (excluding the AXA Rosenberg U.S. Small Capitalization Fund, but
including the AXA Rosenberg VIT Value Long/Short Equity Fund) have not achieved
assets under management of at least $2.025 billion and the S&P 500 Index[RegTM]
is above 1,000 by calendar year-end 2007, the base subadvisory fee for 2008
will be increased by an amount equal to 5% of the gross base investment
advisory fee payable to CSIM with respect to each Fund.
In the event that the Funds collectively (excluding the AXA Rosenberg U.S.
Small Capitalization Fund, but including the AXA Rosenberg VIT Value Long/Short
Equity Fund) have not achieved assets under management of at least $2.775
billion and the S&P 500 Index[RegTM] is above 1,000 by calendar year-end 2008,
then the base subadvisory fee for 2009 will be increased by an amount equal to
5% of the gross base investment advisory fee payable to CSIM with respect to
each Fund.
34
For each year thereafter, in the event that (i) the Funds collectively
(excluding the AXA Rosenberg U.S. Small Capitalization Fund, but including the
AXA Rosenberg VIT Value Long/Short Equity Fund) have not by year-end achieved
50% of the end of period assets under management target (which shall not be
lower than the 2007 target) recommended by CSIM and AXA Rosenberg, and (ii) the
S&P 500 Index[RegTM] is above 1,000, then the base subadvisory fee for the
following year will be adjusted upward by an amount equal to 5% of the gross
base investment subadvisory fee payable to CSIM with respect to each Fund.
In each case, the Performance Adjustment and the assets under management
adjustment will be made independently of each other.
TRUSTEES' CONSIDERATIONS
The Trustees, including the Independent Trustees voting separately, approved
the Proposed Subadviser Agreement for each Fund at a meeting held on November
3, 2003, subject to approval by each Fund's shareholders and, if the new
advisory and subadvisory arrangements are approved by some but not all of the
Voting Funds, a determination by the Trustees that implementation is
appropriate. The Trustees also held meetings on September 10 and October 15,
2003 to consider the Management Agreement and ask questions of representatives
of CSIM and AXA Rosenberg. The Independent Trustees also held separate meetings
in person or by telephone on August 6, August 29, September 10, September 16,
September 24 and October 15, 2003 to discuss each Proposed Subadviser Agreement
and other information provided by CSIM and AXA Rosenberg pursuant to their
requests. The Trustees received written and oral information from AXA Rosenberg
regarding AXA Rosenberg's key personnel. The Trustees reviewed AXA Rosenberg's
qualifications to act as subadviser and its track record as investment adviser
to the portfolios. In recommending that shareholders approve each Proposed
Subadviser Agreement, the Trustees carefully evaluated the experience of AXA
Rosenberg's key personnel in institutional investing and the quality of
services AXA Rosenberg is expected to provide, and has in the past provided, to
each Fund, including, but not limited to: (1) the fee and expense ratios of
comparable mutual funds, including those that have subadvisory relationships;
(2) the performance of the Funds since commencement of operations; (3) the
nature and quality of services expected to be rendered to each Fund by AXA
Rosenberg; (4) the distinct investment objectives and policies of the Funds;
(5) the history, reputation, qualification and background of AXA Rosenberg as
well as the qualifications of its personnel and its financial condition; (6)
its performance record; and (7) other factors deemed relevant. The Trustees
also reviewed the fees to be paid to AXA Rosenberg under the agreement in
comparison to those being charged in the relevant segment of the mutual fund
business and considered the appropriateness of the weighting given to the fixed
and variable components of such fees. Also influencing the Board's decision
were considerations of whether the Performance Adjustment is reasonably
structured, and in particular
35
whether it (a) will unduly reward AXA Rosenberg for random short-term
fluctuations in the market, (b) will be measured against appropriate indices of
securities, (c) will give rise to significant costs in connection with the
implementation or adjustment of such indices, or (d) will give rise to
volatility in AXA Rosenberg's fee revenues that would have a significant impact
on its financial health and, in particular, on its ability to provide quality
services to the Funds. In this regard, the Trustees also considered the fact
that CSIM, and not the shareholders of any Fund, would pay or recoup any
Performance Adjustment to the fee payable to AXA Rosenberg.
Based on this evaluation, the Trustees considered whether each Proposed
Subadviser Agreement would be in the best interests of each Fund and the Fund's
shareholders. One of the issues influencing the Trustees' decision was that
either AXA Rosenberg or its predecessor has been the investment adviser to the
Funds since their inception, and that it will continue to manage the assets of
each Fund on a day-to-day basis. Accordingly, for the reasons noted above,
together with other factors and information considered relevant, the Trustees
concluded that each Proposed Subadviser Agreement would be in the best interest
of each Fund and the Fund's shareholders.
ABOUT AXA ROSENBERG INVESTMENT MANAGEMENT, LLC
AXA Rosenberg is wholly-owned by AXA Rosenberg Group LLC. AXA Rosenberg Group
LLC is contractually controlled jointly by AXA IM Rose, Inc., Barr Rosenberg,
Kenneth Reid and Rosenberg Alpha L.P.
AXA IM Rose Inc. is wholly-owned by AXA IM Holdings U.S. Inc. AXA IM Holdings
Inc. is wholly-owned by AXA Investment Managers S.A., a French societe anonyme,
which, in turn, is owned, collectively, by AXA SA, a French holding company,
AXA Assurances IARD, a French societe anonyme, AXA UK Plc, a British public
limited company, AXA Colonia Konzern AG, a German Aktiengesellschaft. AXA
Assurances IARD, AXA UK Plc and AXA Colonia Konzern AG are owned by AXA SA
(more than 90% directly).
Finaxa, a French holding company, beneficially owns more than 25% of the voting
securities of, and therefore controls, AXA SA. Mutuelles Axa, a group of four
French mutual insurance companies, one of which controls Finaxa, acting as a
group, controls both AXA SA and Finaxa. Rosenberg Alpha L.P. is controlled by
Barr Rosenberg as their Managing General Partner. Each of these entities may be
deemed a controlling person of AXA Rosenberg.
AXA Rosenberg is located at Four Orinda Way, Building E, Orinda, California
94563.
The following is a list of the directors and principal executive officers of
AXA Rosenberg. The principal business address of the directors and the
principal executive officers, as it relates to their duties at AXA Rosenberg,
is the same as the address for AXA Rosenberg.
36
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS
NAME POSITION
- ---- --------
Stephane Prunet ........... Global Chief Executive Officer
Edward H. Lyman ........... President
Kenneth Reid .............. Global Chief Investment Officer
William E. Ricks .......... Chief Executive Officer and Chief Investment Officer
of North America
Barr Rosenberg ............ Chairman
EMPLOYEES OF AXA ROSENBERG WHO ARE OFFICERS OF THE FUNDS
Listed below are the names of each current officer of the Funds who is also an
officer or employee of AXA Rosenberg.
POSITION WITH POSITION WITH
NAME THE FUNDS AXA ROSENBERG
- ---- --------- -------------
Edward H. Lyman ........ President President
Kenneth Reid ........... Trustee Global Chief Investment Officer
Thomas Mead ............ Vice President Director, Research
Heidi Khashabi
Ridley ............... Vice President Managing Director,
AXA Rosenberg
Mutual Funds
Sara Donaldson ......... Vice President/Compliance US Compliance Director
Officer/Clerk
Richard L. Saalfeld..... Vice President Director, Business Development
William Wiebe .......... Vice President and Chief Chief Legal Counsel
Legal Officer
SIMILAR FUNDS MANAGED BY AXA ROSENBERG
Except for the sole series of the Barr Rosenberg Variable Insurance Trust --
the AXA Rosenberg VIT Value Long/Short Equity Fund (whose (i) net assets as of
September 30, 2003 were $9,470,128.16, (ii) contractual rate of compensation is
1.50% and (iii) effective rate of compensation is not known because this fund
has not been operational for a complete fiscal year) -- which is managed by AXA
Rosenberg as a variable-insurance-product clone of the AXA Rosenberg Value
Long/ Short Equity Fund, AXA Rosenberg does not act as investment adviser for
any mutual funds that have investment objectives similar to the Funds.
37
SUBMISSION OF SHAREHOLDER PROPOSALS
The Trust is not required to hold annual shareholders' meetings and does not
intend to do so. The Trust may hold special meetings as required or deemed
desirable by its Board of Trustees or for other purposes.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a future shareholder meeting should send their written submissions to the Trust
at 3435 Stelzer Road, Columbus, OH 43219. Proposals must be received a
reasonable time in advance of a proxy solicitation to be included. Submission
of a proposal does not guarantee inclusion in a proxy statement because
proposals must comply with certain federal securities regulations.
ADDITIONAL INFORMATION
INFORMATION ABOUT TRUST OFFICERS
The table below provides basic information about the Trust's current officers.
The mailing address of each officer is c/o Barr Rosenberg Series Trust, 3435
Stelzer Road, Columbus, OH 43219. There is no stated term of office for the
officers of the Trust. If shareholders approve the proposals, it is anticipated
that the Board of Trustees will replace certain officers with individuals who
are employees of CSIM.
POSITION WITH
THE TRUST AND
THE LENGTH BUSINESS EXPERIENCE
NAME OF TIME SERVED DURING THE PAST FIVE YEARS
- ---- -------------- --------------------------
Edward H. Lyman, 60 ......... President President, AXA Rosenberg Group LLC,
8 Months; May 2002 to present; Chief Operating
Vice President Officer, AXA Rosenberg Group LLC,
7 Years January 1999 to April 2002; Chief
Executive Officer, AXA Rosenberg
Global Services LLC, January 1999 to
April 2002; Executive Vice President,
Barr Rosenberg Investment
Management, Inc. and General Counsel
to the Rosenberg Group of companies,
1990 to 1998.
38
POSITION WITH
THE TRUST AND
THE LENGTH BUSINESS EXPERIENCE
NAME OF TIME SERVED DURING THE PAST FIVE YEARS
- ---- -------------- --------------------------
Sara Donaldson, 44 ............. Vice U.S. Compliance Director, AXA
President/ Rosenberg Global Services LLC,
Compliance January 2003 to present; Global
Officer 1 Services Coordinator and Paralegal,
Year; AXA Rosenberg Global Services LLC,
Clerk 5 Years January 1999 to January 2003;
Paralegal, Barr Rosenberg Investment
Management, September 1997 to
December 1998.
Elizabeth Lawrence, 39 ......... Vice President Senior Vice President, BISYS Fund
14 months Services, 2001 to present; Vice
President and Senior Manager, Client
Services and Operations, PFPC, Inc.,
1999 to 2001; Director of Client
Services, PFPC, Inc., 1997 to 1999.
Thomas Mead, 55 ................ Vice President Global Research Director, Barr
8 Months Rosenberg Research Center LLC, May
2002 to present; Deputy Director, Barr
Rosenberg Research Center LLC,
January 1999 to April 2002; Director,
Strategy Implementation, Rosenberg
Institutional Equity Management,
January 1994 to December 1998.
Heidi Khashabi Ridley,
34 ........................... Vice President Managing Director, AXA Rosenberg
8 Months Mutual Funds, a division of AXA
Rosenberg Investment Management
LLC, January 2003 to present; Senior
Vice President, Wells Fargo Funds
Management Group LLC, April 2001
to January 2003; Managing Director
& Principal, Montgomery Asset
Management LLC, May 1992 to April
2001.
39
POSITION WITH
THE TRUST AND
THE LENGTH BUSINESS EXPERIENCE
NAME OF TIME SERVED DURING THE PAST FIVE YEARS
- ---- -------------- --------------------------
Richard L. Saalfeld, 60 ......... Vice President Director, Business Development,
8 Months; AXA Rosenberg Investment
President Management, LLC, January 2003 to
4 Years present; President and Chief
Executive Officer, AXA Rosenberg
Mutual Funds, a division of AXA
Rosenberg Investment Management
LLC, January 1999 to January 2003;
President and Chief Executive Officer
of mutual fund unit of Rosenberg
Institutional Equity Management,
June 1996 to December 1998.
Troy Sheets, 32 ................. Chief Vice President of Financial Services,
Financial BISYS Fund Services, 2002 to
Officer present; Senior Manager, KPMG LLP,
14 Months 1993 to 2002.
William R. Weibe, 43 ............ Vice Chief Legal Counsel, AXA Rosenberg
President/ Global Services LLC, September
Chief Legal 1998 to present.
Officer 5
Months
Ryan Louvar, 31 ................. Clerk 14 Counsel of Legal Services, BISYS
Months Fund Services, 2000 to present;
Attorney, Hill, Farrer & Burrill LLP,
1999 to 2000; Attorney, Knapp
Petersen & Clarke, PC, 1997 to 1999.
Alaina V. Metz, 36 .............. Assistant Vice President, BISYS Fund Services,
Clerk 6 Years 1995 to present.
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
The Funds' independent accountant is PricewaterhouseCoopers LLP ("PwC").
PwC conducts an annual audit of the Funds' financial statements, assists in the
preparation of the Funds' federal and state income tax returns and the Trust's
filings with the Securities and Exchange Commission, and consults with the
Trust as to matters of accounting and federal and state income taxation. During
the Audit Committee's most recent consideration of whether to recommend PwC as
independent accountants for the Funds, the Audit Committee considered whether
the
40
provision of any non-audit services to the Funds by PWC was compatible with
maintaining PwC's independence.
Representatives of PwC are not expected to be present at the Meeting but have
been given an opportunity to make a statement if they so desire and will be
available should any matter arise requiring their presence.
AUDIT FEES -- The aggregate fees billed for professional services rendered for
the audit of the Funds' annual financial statements for the most recent fiscal
year and the review of the financial statements included in the Funds' reports
to shareholders were $231,375.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES -- The were no
fees billed by PwC for the most recent fiscal year for professional services
rendered for financial information systems design and implementation services
provided to the Funds, AXA Rosenberg or any entity that controls, is controlled
by or is under common control with AXA Rosenberg that provides services to the
Funds.
ALL OTHER FEES -- There were $733,374 in fees billed by PwC for the most recent
fiscal year for other services provided to the Funds, AXA Rosenberg and any
entity that controls, is controlled by or is under common control with AXA
Rosenberg that provides services to the Funds.
ABOUT THE TRUST
5% OWNERSHIP INFORMATION
To the knowledge of the Trust as of December 5, 2003, the following persons
owned beneficially or of record more than 5% of the noted class of shares of
the noted Fund. The Funds have no knowledge as to whether the listed beneficial
owner has the right to acquire beneficial ownership of shares of any class of a
Fund.
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
AXA ROSENBERG ENHANCED 500-INST
EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES
1290 AVENUE OF THE AMERICAS 12TH FL
C/O ROSEMARIE SHOMSTEIN
NEW YORK NY 10104 ..................... 500,000 85.92%
41
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ............... 80,950.737 13.91%
AXA ROSENBERG ENHANCED 500-INV
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............ 154,558.073 56.55%
CNA TRUST CORPORATION
THE COMFORT EMPLOYEE 401K PSP
PO BOX 5024
COSTA MESA CA 92628-5024 ............. 36,171.321 13.23%
WEXFORD SECURITIES LLC FBO
MS MARIA C RIVERA-DEROSALES
10609 WHEELHOUSE CIR
BOCA RATON FL 33428-1217 ............. 18,937.049 6.93%
WEXFORD SECURITIES LLC FBO
WEXFORD CLEARING C F
15122 SW 74TH PL
IRA DTD 05 22 03
MIAMI FL 33158-2141 .................. 14,676.231 5.37%
AXA ROSENBERG EUROPEAN-INST
SPS SOCIETE DE PLACEMENTS SELECTIONNES
46 AVENUE DE LA GRANDE ARMEE
PARIS FRANCE 067 75017 ............... 764,056.307 99.38%
AXA ROSENBERG EUROPEAN-INV
DONALDSON LUFKIN JENRETTE
SECURITIES CORPORATION INC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............ 1,066.305 82.68%
BARR ROSENBERG FUNDS DISTRIBUTOR INC
60 STATE ST
ATTN LEGAL SERVICES
BOSTON MA 02109 ...................... 223.403 17.32%
42
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
AXA ROSENBERG GLOBL LONG/SHORT
EQTY-INST
BARR & JUNE ROSENBERG FOUNDATION
17 LA PUNTA
ORINDA CA 94563 ....................... 813,686.58 74.54%
ROSENBERG ALPHA LP
4 ORINDA WAY
ORINDA CA 94563 ....................... 215,376.974 19.73%
AXA ROSENBERG GLOBL LONG/SHORT EQTY-INV
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 502,894.164 57.91%
NATIONAL INVESTOR SERVICES FBO
097-50000-19
55 WATER STREET 32ND FLOOR
NY NY 10041 999 ....................... 89,438.443 10.30%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............. 82,124.029 9.46%
NATIONAL FINANCIAL SERVICES CORPORATION
ONE WORLD FINANCIAL CENTER
ATTENTION MUTUAL FUNDS DEPT 5TH FLOOR
NEW YORK NY 10281 ..................... 67,645.987 7.79%
AXA ROSENBERG INTL EQUITY-INST
EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
1290 AVENUE OF THE AMERICAS 12TH FL
C/O ROSEMARIE SHOMSTEIN
NEW YORK NY 10104 ..................... 1,000,000 86.62%
AXA ROSENBERG GROUP
4 ORINDA WAY
ORINDA CA 94563 ....................... 102,647.825 8.89%
43
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
AXA ROSENBERG INTL EQUITY-INV
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ............ 207,562.735 67.78%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ......... 49,704.362 16.23%
NATIONAL FINANCIAL SVCS CORP
FOR EXCLUSIVE BENEFIT OF OUR CUST
200 LIBERTY ST
NEW YORK NY 10281 ................. 39,503.891 12.90%
AXA ROSENBERG INTL SMALL CAP-INST
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ............ 2,264,225.04 56.94%
NATIONAL INVESTOR SERVICES FBO
097-50000-19
55 WATER STREET 32ND FLOOR
NY NY 10041 999 ................... 678,223.23 17.05%
BOST & CO
PO BOX 3198
MUTUAL FUNDS OPERATIONS
PITTSBURGH PA 15230-3198 .......... 499,886.096 12.57%
FTC & CO
ACCOUNT 9946
PO BOX 173736
DATALYNX
DENVER CO 80217 ................... 284,505.289 7.15%
44
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
AXA ROSENBERG INTL SMALL CAP-INV
NATIONAL FINANCIAL SERVICES CORPORATION
ONE WORLD FINANCIAL CENTER
ATTENTION MUTUAL FUNDS DEPT 5TH FLOOR
NEW YORK NY 10281 ..................... 1,923,067.612 37.23%
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 1,196,151.758 23.16%
NATIONAL INVESTOR SERVICES FBO
381-25599-16
55 WATER STREET 32ND FLOOR
NY NY 10041 ........................... 788,732.07 15.27%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............. 393,753.309 7.62%
FTC & CO
ACCOUNT 9999
PO BOX 173736
DATALYNX
DENVER CO 80217-3736 .................. 326,328.114 6.32%
AXA ROSENBERG US DISCOVERY-INST
UNION BANK TR NOMINEE
FBO PIPE TRADES DC 36 DB PL-MUTUAL
PO BOX 85484
SAN DIEGO CA 92186 .................... 1,021,696.909 18.75%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............. 966,914.074 17.74%
ALA LOCAL ONE INDUSTRY PENSION FUND
113 UNIVERSITY PL
NEW YORK NY 10003 ..................... 777,572.552 14.27%
45
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
BNY WESTERN TRUST CO
NORCAL WASTE SYSTEMS INC.
550 KEARNY ST
SAN FRANCISCO CA 94108 ................ 693,703.308 12.73%
WEST BEND MUTUAL INSURANCE COMPANY
1900 S 18TH AVE
WEST BEND WI 53095 .................... 478,468.9 8.78%
WELLS FARGO BANK MINNESOTA NA
MISSOURI AUTO CLUB EMP RET PLAN
PO BOX 1533
MINNEAPOLIS MN 55480-1533 ............. 428,839.869 7.87%
NORTHERN TRUST CO TRUSTEE FBO
APPLETON COATED 22-16031
PO BOX 92956 CHICAGO IL 60675 286,792.453 5.26%
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 274,541.226 5.04%
AXA ROSENBERG US DISCOVERY-INV
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............. 188,919.159 82.09%
NATIONAL FINANCIAL SERVICES CORPORATION
ONE WORLD FINANCIAL CENTER
ATTENTION MUTUAL FUNDS DEPT 5TH FLOOR
NEW YORK NY 10281 ..................... 17,837.123 7.75%
AXA ROSENBERG US LG/MD CP LNG/SHT EQ-INS
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 1,027,657.596 47.55%
46
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
NATIONAL INVESTOR SERVICES FBO
097-50000-19
55 WATER STREET 32ND FLOOR
NY NY 10041 999 ...................... 571,363.002 26.43%
BARR & JUNE ROSENBERG FOUNDATION
17 LA PUNTA
ORINDA CA 94563 ...................... 371,254.307 17.18%
NATIONAL FINANCIAL SERVICES LLC
FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS
200 LIBERTY STREET
NEW YORK NY 10281 .................... 120,419.25 5.57%
AXA ROSENBERG US LG/MD CP LNG/SHT EQ-INV
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ............... 266,637.116 32.56%
BARR ROSENBERG SERIES TRUST
3435 STELZER ROAD
COLUMBUS OH 43219 .................... 213,484.71 26.07%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............ 204,353.327 24.95%
AXA ROSENBERG US LRG CAP-INST
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ............... 2,026,638.836 49.11%
AXA CORPORATE SOLUTIONS SA
40 RUE DU COLISEE
PARIS FRANCE 067 75008 ............... 1,108,143.54 26.86%
L RAY ADAMS
OREGON STEEL MILLS INC
1000 SW BROADWAY
PORTLAND OR 97205 .................... 466,948.43 11.32%
47
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
MATTHEW S SHAPIRO & DONALD C JONES
ORTHOPEDIC HEALTHCARE NORTHWEST PC
1200 HILYARD
ATTN DEBRA BRISTER
EUGENE OR 97401 ...................... 241,129.111 5.84%
AXA ROSENBERG US LRG CAP-INV
NATIONAL FINANCIAL SERVICES LLC
FOR EXCLUSIVE BENEFIT OF OUR CUSTOMERS
200 LIBERTY STREET
NEW YORK NY 10281 .................... 16,937.421 39.92%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............ 16,231.839 38.26%
BENJAMIN STOCKTON HOWARD
12703 BRUCEVILLE RD
ELK GROVE CA 95758 ................... 5,197.505 12.25%
AXA ROSENBERG US SMALL CAP-ADV
SMITH BARNEY INC
333 W 34TH ST
NEW YORK NY 10001 .................... 564,009.308 17.27%
FTC AND CO
P O BOX 173736
DENVER CO 80217-3736 ................. 282,471.507 8.65%
FAHNESTOCK CO INC F B O
LAURA LEONARD
2315 LINCOLNWOOD DR
EVANSTON IL 60201-2048 ............... 267,850.058 8.20%
AXA ROSENBERG US SMALL CAP-INST
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ............... 18,150,309.039 28.12%
48
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 07303-9998 ............. 3,790,089.895 5.87%
NATIONAL FINANCIAL SERVICES CORPORATION
ONE WORLD FINANCIAL CENTER
ATTENTION MUTUAL FUNDS DEPT 5TH FLOOR
NEW YORK NY 10281 ..................... 3,711,806.878 5.75%
AXA ROSENBERG US SMALL CAP-INV
MAC & CO
PO BOX 534005
PITTSBURGH PA 15253 ................... 6,846,529.336 36.87%
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 4,557,871.743 24.55%
NATIONAL FINANCIAL SERVICES CORPORATION
ONE WORLD FINANCIAL CENTER
ATTENTION MUTUAL FUNDS DEPT 5TH FLOOR
NEW YORK NY 10281 ..................... 3,024,957.565 16.29%
MERRILL LYNCH PIERCE FENNER & SMITH INC
FOR THE SOLE BENEFIT OF ITS CUSTOMERS
4800 DEER LAKE DRIVE EAST
JACKSONVILLE FL 32246 ................. 1,199,427.186 6.46%
AXA ROSENBERG VALUE LONG/SHORT
EQTY-INST
LEHMAN BROTHERS SPECIAL FINL INC
3 WORLD FINANCIAL CENTER 6TH FL
NEW YORK NY 10285 ..................... 3,432,971.272 39.15%
CHARLES SCHWAB & CO INC .
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 2,074,940.896 23.66%
49
Percent of the
Class Total
Assets Held
by the
Fund/Class No. of Shares Shareholder
- ---------- ------------- --------------
ROSENBERG ALPHA LP
4 ORINDA WAY
ORINDA CA 94563 ....................... 1,185,265.918 13.52%
BARR & JUNE ROSENBERG FOUNDATION
17 LA PUNTA
ORINDA CA 94563 ....................... 973,475.048 11.10%
AXA ROSENBERG VALUE LONG/SHORT EQTY-INV
CHARLES SCHWAB & CO INC
THE EXCLUSIVE USE OF OUR CUSTOMERS
101 MONTGOMERY ST
ATTN MUTUAL FUNDS
SAN FRANCISCO CA 94104 ................ 880,467.024 27.69%
FTC AND CO
P O BOX 173736
DENVER CO 80217-3736 .................. 519,775.997 16.34%
NATIONAL FINANCIAL SERVICES CORPORATION
ONE WORLD FINANCIAL CENTER
ATTENTION MUTUAL FUNDS DEPT 5TH FLOOR
NEW YORK NY 10281 ..................... 419,142.894 13.18%
PERSHING LLC
P O BOX 2052
JERSEY CITY NJ 073039998 .............. 369,164.482 11.61%
NATIONAL INVESTOR SERVICES FBO
097-50000-19
55 WATER STREET 32ND FLOOR
NY NY 10041 999 ....................... 217,104.866 6.83%
SEI TRUST COMPANY
C/O 370 REINVEST
ONE FREEDOM VALLEY DRIVE
OAKS PA 19456 ......................... 164,260.651 5.17%
50
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
This table shows the number of shares of a Fund beneficially owned by each
Trustee and certain executive officers of the Trust as of October 15, 2003. The
Trust has no knowledge as to whether any Trustee has the right to acquire
beneficial ownership of shares in a Fund. In cases where the amount owned of a
Fund is more than 1% of the Fund's assets, the percentage is noted. Unless
otherwise noted, each Trustee owns less than 1% of the outstanding shares of
the Fund.
NAME AND AMOUNT
ADDRESS* OF AND NATURE PERCENT
BENEFICIAL OF BENEFICIAL OF
NAME OF FUND OWNER OWNERSHIP FUND
- ------------ ----------- ------------- -------
AXA Rosenberg U.S. Small
Capitalization Fund ............ Nils H. Hakansson 3,604 --
AXA Rosenberg U.S. Small
Capitalization Fund ............ Dwight M. Jaffee 2,921.614 --
AXA Rosenberg U.S. Small
Capitalization Fund ............ William F. Sharpe 1,306 --
AXA Rosenberg U.S. Small
Capitalization Fund ............ Kenneth Reid 49,856.792 --
AXA Rosenberg Enhanced
500 Fund ....................... William F. Sharpe 989 --
AXA Rosenberg International
Equity Fund .................... William F. Sharpe 1,015 --
AXA Rosenberg
International Small
Capitalization Fund ............ Nils H. Hakansson 418 --
AXA Rosenberg
International Small
Capitalization Fund ............ Dwight M. Jaffee 689.767 --
AXA Rosenberg
International Small
Capitalization Fund ............ William F. Sharpe 1,255 --
AXA Rosenberg U.S. Large/
Mid Capitalization
Long/Short Equity Fund ......... Dwight M. Jaffee 563.247 --
AXA Rosenberg Value
Long/Short Equity Fund ......... Nils H. Hakansson 1160 --
51
NAME AND AMOUNT
ADDRESS* OF AND NATURE PERCENT
BENEFICIAL OF BENEFICIAL OF
NAME OF FUND OWNER OWNERSHIP FUND
- ------------ ----------- ------------- -------
AXA Rosenberg Value
Long/Short Equity Fund ......... Dwight M. Jaffee 16,353.018 --
AXA Rosenberg Value
Long/Short Equity Fund ......... William F. Sharpe 1,162 --
AXA Rosenberg Global
Long/Short Equity Fund ......... Kenneth Reid 42,644.191 2.15%
- ----------------
* The address of the Trustees is c/o Barr Rosenberg Series Trust, 3435
Stelzer Road, Columbus, Ohio 43219.
OTHER SERVICE PROVIDERS
Barr Rosenberg Funds Distributor, Inc. ("BRFD"), a wholly-owned subsidiary of
The BISYS Group, Inc., is the principal underwriter for the Funds. Its
principal offices are located at 3435 Stelzer Road, Columbus, Ohio 43219. If
the proposals are approved by shareholders, it is expected that Schwab will be
engaged as principal underwriter for the Funds in lieu of BRFD.
Pursuant to agreements dated January 1, 2003 that, if not renewed, will expire
by their terms on September 30, 2005, BISYS Fund Services Ohio, Inc., located
at 3435 Stelzer Road, Columbus, Ohio 43219, is the Funds' administrator,
transfer agent, dividend paying agent and fund accountant.
Custodial Trust Company, located at 101 Carnegie Center, Princeton, New Jersey
08540, and State Street Bank and Trust Company, Mutual Funds Division, located
at Boston, Massachusetts 02102, serve as custodians for the Funds.
FUND TRANSACTIONS
During the fiscal year ended March 31, 2003, the Funds did not pay any
brokerage commissions to any affiliate of the Funds.
OTHER BUSINESS
As of the date of this proxy statement, the Trustees know of no business to
come before the Meeting other than as set forth in the Notice of the Special
Meeting. However, if any other matters come properly before the Meeting, it is
their intention that Proxies that do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
52
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
BARR ROSENBERG SERIES TRUST
MANAGEMENT CONTRACT
Management Contract executed as of , 2003, between BARR ROSENBERG SERIES
TRUST, a Massachusetts business trust (the "Trust"), on behalf of the Laudus
Rosenberg Fund (the "Fund"), and CHARLES SCHWAB INVESTMENT MANAGEMENT,
INC., a Delaware corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the trustees of the Trust (the "Trustees")
and to such policies as the Trustees may determine, the Manager will, at
its expense, (i) furnish continuously an investment program for the Fund
and will make investment decisions on behalf of the Fund and place all
orders for the purchase and sale of its portfolio securities, and (ii)
furnish all necessary office space and equipment, provide bookkeeping and
clerical services required to perform its duties in clause (i) above and
pay all salaries, fees and expenses of the Trustees and officers of the
Trust who are affiliated persons of the Manager. In the performance of its
duties, the Manager will comply with the provisions of the Second Amended
and Restated Agreement and Declaration of Trust and By-laws of the Trust,
each as amended from time to time, and the Fund's stated investment
objectives, policies and restrictions.
(b) In the selection of brokers, dealers or futures commissions merchants
(collectively, "brokers") and the placing of orders for the purchase and
sale of portfolio investments for the Fund, the Manager shall seek to
obtain the most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best
efforts to obtain for the Fund the most favorable price and execution
available, the Manager, bearing in mind the Fund's best interests at all
times, shall consider all factors it deems relevant, including, by way of
illustration, the price, the size of the transaction, the nature of the
market for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker involved and the quality
of service rendered by the broker in other transactions. Subject to such
policies as the Trustees may determine, the Manager shall not be deemed to
have acted
53
unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Trust to pay, on behalf
of the Fund, a broker that provides brokerage and research services to the
Manager or any affiliated person of the Manager an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with
respect to the Fund and to other clients of the Manager and any affiliated
person of the Manager as to which the Manager or any affiliated person of
the Manager exercises investment discretion.
(c) Notwithstanding Section 1(a) above and subject to the provisions of the
Second Amended and Restated Agreement and Declaration of Trust of the Trust
and the Investment Company Act of 1940, as amended (the "1940 Act"), the
Manager, at its expense, may select and contract with an investment
sub-adviser (the "Subadviser") for the Fund to perform, subject to the
supervision of the Manager, some or all of the services for which it is
responsible pursuant to paragraphs (a) and (b) of this Section 1
(including, but not limited to, the selection of brokers). The Manager will
compensate the Subadviser for its services to the Fund.
(d) The Manager shall not be obligated to pay any expenses of or for the Trust
or of or for the Fund not expressly assumed by the Manager pursuant to this
Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and employees
of the Trust may be a shareholder, partner, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlling,
controlled by or under common control with the Manager, and that the Manager
and any person controlling, controlled by or under common control with the
Manager may have an interest in the Trust. It is also understood that the
Manager and persons controlling, controlled by or under common control with the
manager have and may have advisory, management service, distribution or other
contracts with other organizations and persons, and may have other interests
and businesses.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Fund will pay to the Manager as compensation for the Manager's services
rendered, for the facilities furnished and for the expenses borne by the
Manager pursuant to Section 1, a fee, computed and paid monthly at the annual
rate (based on the number of days elapsed through the end of the month) of
[ ]% of the Fund's net asset value as of the last business day of the month.
Such fee shall be payable for each month within five (5) business days after
the end of such month.
54
In the event that the expenses of the Fund exceed any expense limitation which
the Manager may, by written notice to the Trust, voluntarily declare to be
effective with respect to the Fund, subject to such terms and conditions as the
Manager may prescribe in such notice, the compensation due the Manager shall be
reduced, and, if necessary, the Manager shall bear the Fund's expenses to the
extent required by such expense limitation.
If the Manager shall serve for less than the whole of a month, the foregoing
compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment (as defined in the 1940 Act); and this
Contract shall not be materially amended unless such amendment is approved by
the affirmative vote of a majority of the outstanding shares of the Fund, and
by the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the Trustees who are not interested persons of
the Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall continue in effect until _____, 2005 and thereafter for
successive annual periods, provided that such continuance is specifically
approved at least annually (a) by the affirmative vote of a majority of the
outstanding shares of the Fund or by the Trust's Board of Trustees, and (b) by
the vote of a majority of the Trust's trustees who are not parties to this
agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, or (c) as otherwise permitted by the 1940 Act or the rules and
regulations thereunder. This Contract may be terminated at any time by a vote
of a majority of the Fund's outstanding voting securities or by a vote of a
majority of the Trust's entire Board of Trustees on 60 days' written notice to
the Manager or by the Manager on 60 days' written notice to the Trust. Unless
terminated automatically as set forth in Section 4, this Agreement may only be
terminated in accordance with the provisions of this Section 5.
If the continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such continuance
of this Contract as provided herein, the Manager may continue to serve
hereunder in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
6. CERTAIN DEFINITIONS
For the purposes of this Contract, the "affirmative vote of a majority of the
outstanding shares" of the Fund means the affirmative vote, at a duly called
and held meeting of shareholders, (a) of the holders of 67% or more of the
shares of the Fund present (in person or by proxy) and entitled to vote at such
meeting, if the holders of
55
more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders of more than
50% of the outstanding shares of the Fund entitled to vote at such meeting,
whichever is less.
For the purposes of this Contract, the terms "affiliated person," "control,"
"interested person" and "assignment" shall have their respective meanings
defined in the 1940 Act and the rules and regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under said Act; the term "specifically approve at least annually"
shall be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the 1934 Act and the rules and regulations
thereunder.
7. NONLIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust, to
the Fund or to any shareholder, officer, director or Trustee thereof, for any
act or omission in the course of, or connected with, rendering services
hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Second Amended and Restated Agreement and Declaration of Trust of
the Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Fund.
56
IN WITNESS WHEREOF, BARR ROSENBERG SERIES TRUST and CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC. have each caused this instrument to be signed in duplicate on
its behalf by its duly authorized representative, all as of the day and year
first above written.
BARR ROSENBERG SERIES TRUST
By ______________________________________
Title:
CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
By ______________________________________
Title:
57
EXHIBIT B
FORM OF SUBADVISER AGREEMENT
LAUDUS ROSENBERG ___________ FUND
SUBADVISER AGREEMENT
Subadviser Agreement executed as of _______, 2003 among CHARLES SCHWAB
INVESTMENT MANAGEMENT, INC., a Delaware corporation (the "Manager"), AXA
ROSENBERG INVESTMENT MANAGEMENT LLC, a Delaware limited liability company (the
"Subadviser") and BARR ROSENBERG SERIES TRUST, a Massachusetts business trust
(the "Trust").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY SUBADVISER TO THE TRUST.
(a) Subject always to the control of the trustees of the Trust (the "Trustees")
and the supervision of the Manager, the Subadviser, at its expense, will
furnish continuously an investment program for the Laudus Rosenberg
_________________ Fund series of the Trust (the "Fund") and will make
investment decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities and all other investments,
including exercising discretion to select brokers and dealers to execute
such transactions. For avoidance of doubt, the Manager and the Trust hereby
agree that the Manager shall have no authority for the selection of brokers
and/or the day-to-day placing of orders in connection with the Fund,
subject only to the Manager's general supervisory obligations. In the
performance of its duties, the Subadviser (i) will comply with the
provisions of the Trust's then-current Declaration of Trust and By-laws,
including any amendments thereto (upon receipt of such amendments by the
Subadviser), and the investment objectives, policies and restrictions of
the Fund as set forth in its then-current Prospectus and Statement of
Additional Information (copies of which will be supplied to the Subadviser
upon filing with the Securities and Exchange Commission) and (ii) will
comply with such investment guidelines as may be agreed upon from time to
time between the Trustees and the Subadviser. The Subadviser and the
Manager shall each make its officers and employees available to the other
from time to time at reasonable times to review investment policies of the
Fund and to consult with each other regarding the investment affairs of the
Fund.
(b) The Subadviser, at its expense, will furnish (i) all necessary investment
and management facilities, including salaries of personnel, required for it
to execute its duties hereunder faithfully and (ii) administrative
facilities, including bookkeeping, clerical personnel and equipment
necessary for the efficient conduct of the investment affairs of the Fund,
including oversight of the pricing of the Fund's portfolio and reasonable
assistance in obtaining prices for portfolio
58
securities (but excluding determination of net asset value, shareholder
accounting services and fund accounting services).
(c) In the selection of brokers, dealers or futures commissions merchants
(collectively, "brokers") and the placing of orders for the purchase and
sale of portfolio investments for the Fund, the Subadviser shall comply
with such policies established by the Trustees and communicated to the
Subadviser in writing and shall seek to obtain for the Fund the most
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for the
Fund the most favorable price and execution available, the Subadviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market for the security, the
amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial
stability of the broker involved and the quality of service rendered by the
broker in other transactions. Subject to such policies as the Trustees may
determine and communicate to the Subadviser in writing, the Subadviser
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker that provides brokerage and research
services to the Subadviser or any affiliated person of the Subadviser an
amount of commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker would have charged for
effecting that transaction, if the Subadviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker, viewed in terms of
either that particular transaction or the Subadviser's overall
responsibilities with respect to the Fund and to other clients of the
Subadviser and any affiliated person of the Subadviser as to which the
Subadviser or any affiliated person of the Subadviser exercises investment
discretion.
(d) The Subadviser shall not be obligated to pay any expenses of or for the
Trust or of or for the Fund not expressly assumed by the Subadviser
pursuant to this Section 1.
(e) The Subadviser will keep and maintain all books and records with respect to
the Fund's assets and transactions required by paragraph (f) of Rule 31a-1
under the Investment Company Act of 1940, as amended (the "1940 Act").
Subadviser will use commercially reasonable efforts to furnish to the
Manager any such information relating to Subadviser's services under this
Agreement needed by Manager and the Fund to keep and maintain the other
books and records of the Fund required by Rule 31a-1 under the 1940 Act.
Subadviser will use commercially reasonable efforts to furnish to Manager
any other information relating to the Fund's assets that must be filed by
the Fund with the SEC or sent
59
to shareholders under the 1940 Act, and any exemptive or other relief
granted by the SEC. Subadviser agrees that all records that it maintains on
behalf of the Fund are property of the Fund, and Subadviser will surrender
promptly to Fund any of such records upon the Fund's request and at the
Fund's expense; provided, however, Subadviser may retain copies of such
records. In addition, Subadviser will preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any such records as are required to be
maintained by it pursuant to this Agreement, and will transfer said records
to any successor subadviser upon its termination as subadviser (or, if
there is no successor subadviser, to the Manager.)
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and employees
of the Trust may be a shareholder, partner, director, officer or employee of,
or be otherwise interested in, the Subadviser, and in any person controlling,
controlled by or under common control with the Subadviser, and that the
Subadviser and any person controlling, controlled by or under common control
with the Subadviser may have an interest in the Trust. It is also understood
that the Subadviser and persons controlling, controlled by or under common
control with the Subadviser have and may have advisory, management service,
distribution or other contracts with other organizations and persons, and may
have other interests and businesses.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUBADVISER.
The Manager will pay to the Subadviser as compensation for the Subadviser's
services rendered, for the facilities furnished and for the expenses borne by
the Subadviser pursuant to Section 1, a fee in accordance with Schedule A of
this Agreement.
4. AMENDMENTS OF THIS AGREEMENT
This Agreement shall not be amended except by a writing executed by each of the
parties hereto.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall continue in effect until ______, 2005 and thereafter for
successive annual periods, provided that such continuance is specifically
approved at least annually (a) by the affirmative vote of a majority of the
outstanding shares of the Fund or by the Trust's Board of Trustees, and (b) by
the vote of a majority of the Trust's trustees who are not parties to this
agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, or (c) as otherwise permitted by the 1940 Act or the rules and
regulations thereunder. This Agreement may be terminated at any time by a vote
of a majority of the Fund's outstanding voting securities or by a vote of a
majority of the Trust's entire Board of Trustees on 60 days' written notice to
the Subadviser or by the Subadviser on 60 days' written notice to the Trust.
This
60
Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act). This Agreement may only be terminated in accordance
with the provisions of this paragraph 5.
6. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority of the
outstanding shares" means the affirmative vote, at a duly called and held
meeting of shareholders, (a) of the holders of 67% or more of the shares of the
Fund present (in person or by proxy) and entitled to vote at such meeting, if
the holders of more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person", "control",
"interested person" and "assignment" shall have their respective meanings
defined in the 1940 Act and the rules and regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities and Exchange
Commission under the 1940 Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the 1940 Act and the
rules and regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the 1934 Act and the rules and
regulations thereunder.
7. USE OF NAMES.
The Subadviser owns the right to use the names "Rosenberg" and "AXA Rosenberg"
in connection with investment-related services or products, and such names may
be used by the Trust, the Manager and the Fund only with the consent of the
Subadviser. The Subadviser consents to the use by the Trust and the Manager of
the names "Rosenberg" in the name of the Fund and "AXA Rosenberg" in any
materials prepared in connection with the Fund, but only for so long as (i)
this agreement shall remain in full force (except that the Manager and the Fund
shall be permitted to use such names in reference to the Fund's former name and
the Subadviser's former role as subadvisor for a reasonable transition period
of not less than six months nor more than twelve months after the termination
of this Agreement and for periods thereafter as may be required for disclosure
in a regulatory filing, subject in each case to the Subadviser's prior
approval, which shall not be unreasonably withheld), and (ii) each of the Trust
and Manager shall fully perform, fulfill and comply with all provisions of this
agreement expressed herein to be performed, fulfilled or complied with by it.
No such name shall be used by the Trust or the Manager at any time or in any
place or for any purposes or under any conditions except as provided in this
section. The foregoing limited authorization by the Subadviser to the Trust and
Manager to use the names "Rosenberg" and/or "AXA Rosenberg" is not exclusive of
the right of the Subadviser itself to use, or to authorize others to use, said
names; the Trust and Manager acknowledge and agree that as among the
Subadviser, the Trust and the Manager, the Subadviser has the exclusive right
to use,
61
or to authorize others to use, said names; and the Trust and Manager agree, on
behalf of the Fund, to take such action as may reasonably be requested by the
Subadviser to give full effect to the provisions of this section (including,
without limitation, consenting to such use of said names). Without limiting the
generality of the foregoing, the Trust and Manager agree that, upon any
termination of this agreement or upon the violation of any of its provisions by
the Trust or Manager, each of the Trust and Manager will use its best efforts
to change the name of the Trust and Fund so as to eliminate all reference, if
any, to the names "Rosenberg" and "AXA Rosenberg" and will not thereafter
transact any business in a name containing the name "Rosenberg" or "AXA
Rosenberg" in any form or combination whatsoever, or designate itself as the
same entity as or successor to an entity of such name, or otherwise use the
name "Rosenberg" or "AXA Rosenberg" or any other reference to the Subadviser,
except as provided in this section. Such covenants on the part of the Trust and
Manager shall be binding upon them, their trustees, directors, officers,
stockholders, creditors and all other persons claiming under or through it and
shall survive the termination of this Agreement.
8. NONLIABILITY OF SUBADVISER.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Subadviser, or reckless disregard of its obligations and duties
hereunder, the Subadviser shall not be subject to any liability to the Manager,
to the Trust, to the Fund, or to any shareholder, officer, director or Trustee
thereof, for any act or omission in the course of, or connected with, rendering
services hereunder.
9. EXERCISE OF VOTING RIGHTS.
Except with the agreement or on the specific instructions of the Trustees or
the Manager, the Subadviser shall exercise or procure the exercise of any
voting right attaching to investments of the Fund.
10. NOTICES.
All notices, requests and consents shall be in writing and shall be personally
delivered or mailed by registered mail, postage prepaid, to the other party at
such address as may be furnished in writing by such party.
11. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Second Amended and Restated Agreement and Declaration of Trust of
the Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Fund.
62
IN WITNESS WHEREOF, CHARLES SCHWAB INVESTMENT MANAGEMENT, INC., AXA
ROSENBERG INVESTMENT MANAGEMENT LLC and BARR ROSENBERG SERIES TRUST have each
caused this instrument to be signed in duplicate on its behalf by its duly
authorized representative, all as of the day and year first above written.
CHARLES SCHWAB INVESTMENT
MANAGEMENT, INC.
By: ------------------------------------
Title:
AXA ROSENBERG INVESTMENT
MANAGEMENT LLC
By: ------------------------------------
Title:
BARR ROSENBERG SERIES TRUST
By: ------------------------------------
Title:
63
SCHEDULE A -- FEES
(ALL FUNDS OTHER THAN THE AXA ROSENBERG U.S. SMALL
CAPITALIZATION FUND)
The Manager will pay to the Subadviser as compensation for the services
rendered, the facilities furnished and the expenses borne by the Subadviser
pursuant to Section 1, in arrears for each calendar quarter, a fee, equal to
(1) the Sub-Advisory Base Fee (as defined below), plus or minus (2) the
Performance Adjustment (as defined below), if any.
1. The Sub-Advisory Base Fee shall be computed in arrears, with respect to any
calendar quarter, by multiplying each Quarterly Sub-Advisory Base Rate (as
defined below) for such quarter by the applicable tranche (as described
below) of the average daily net assets of the Fund over such quarter, and
adding the products thereof. Each Quarterly Sub-Advisory Base Rate for a
particular quarter shall equal the respective Annual Sub-Advisory Base Rate
for such quarter divided by four. The Annual Sub-Advisory Base Rate for any
particular calendar quarter shall equal (i) with respect to the Initial
Tranche (as defined below in paragraph 2) of average daily net assets of
the Fund, [45% of the gross annual investment advisory rate payable to the
Manager by the Fund (the "Investment Advisory Contractual Rate") under the
Management Agreement between the Manager and the Fund]; (ii) with respect
to the Second Tranche (as defined below in paragraph 2) of average daily
net assets of the Fund, [40% of the Investment Advisory Contractual Rate];
and (iii) with respect to the Third Tranche (as defined below in paragraph
2) of average daily net assets of the Fund, [30% of the Investment Advisory
Contractual Rate]. The Sub-Advisory Base Fee for a partial quarter (if this
Agreement becomes effective or is terminated on other than the first or the
last day of a calendar quarter, respectively) shall be based on the average
daily net assets of the Fund over, and shall be prorated based on the
number of days in, such partial quarter.
2. The Initial Tranche of average daily net assets shall consist of all assets
up to [Fund assets as of closing date(1)], and notwithstanding any other
provision of this Schedule A, if, for any given quarter, the Fund's assets
do not exceed [Fund assets as of closing date], all of its average daily
net assets shall be in the Initial Tranche. If, and only if, the Fund's
average daily net assets over a quarter exceed [Fund assets as of closing
date], the Second Tranche of average daily net assets shall equal the
Fund's PRO RATA portion of the aggregate average daily net assets of all
funds sub-advised by the Subadviser as of the closing date
- ----------------
(1) References in this Schedule A to the assets of any one or more Funds as of
the closing date shall not include any assets over which the Sub-Adviser or
its affiliates have investment discretion (other than by virtue of
Sub-Adviser's position as investment adviser or sub-investment adviser to
the relevant Fund) that are redeemed out of the applicable Fund(s) within
90 days of the closing date.
64
(including the AXA Rosenberg VIT Value Long/Short Equity Fund) other than
the AXA Rosenberg U.S. Small Capitalization Fund (the "Existing Funds")
that exceed [aggregate assets of existing funds as of closing date] but do
not exceed $2.5 billion (such proration to be proportional to the relative
excesses, if any for any particular Fund, of the existing funds' average
daily net assets for such quarter over their respective assets as of the
closing date (as set forth on Schedule B to this Agreement)); provided,
however, that if the assets as of the closing date of any Existing Fund (as
set forth on Schedule B) exceed such Fund's average daily net assets over
the relevant quarter, the amount of such excess (the "Second Tranche
Excess") shall be allocated PRO RATA first among all other Existing Funds,
including the Fund if applicable, that have assets in excess of their
respective assets as of the closing date (as set forth on Schedule B), and,
if such excess assets of the Existing Funds are insufficient to permit full
allocation of the Second Tranche Excess, the remaining Second Tranche
Excess shall be allocated PRO RATA among all Funds, if any, sub-advised by
the Subadviser that are not Existing Funds; and provided further that
neither the Fund nor any other Existing Fund shall receive any allocation
of the Second Tranche Excess if its average daily net assets over the
quarter do not exceed [Fund assets as of closing date] (for the Fund) or
such Existing Fund's respective assets as of the closing date (as set forth
on Schedule B). Any portion of Second Tranche Excess allocated to the Fund
for a particular quarter shall be considered part of the Initial Tranche,
as described above, for purposes of calculating the Sub-Advisory Base Fee
for such quarter. If, and only if, the Fund's average daily net assets over
a quarter exceed [Fund assets as of closing date], the Third Tranche of
average daily net assets shall equal the Fund's PRO RATA portion of the
aggregate average daily net assets of the Existing Funds, if any, in excess
of $2.5 billion (such proration to be proportional to the average daily net
assets for such quarter of those Existing Funds whose average daily net
assets exceed their respective assets as of the closing date (as set forth
on Schedule B)).
Example of Second Tranche Excess Allocation:
Assume three Funds with assets under management as of the closing date as
follows:
Fund A Fund B Fund C Total
------ ------ ------ -----
$200 million $300 million $500 million $1 billion
Assume further average daily net assets over a quarter as follows:
Fund A Fund B Fund C Total
------ ------ ------ -----
$300 million $100 million $900 million $1.3 billion
In this example, all of Fund B's average daily net assets over the quarter
would be in its Initial Tranche because they fall short of its assets under
management as
65
of the closing date. The difference between Fund B's assets as of the
closing and its average daily net assets over the quarter ($200 million)
constitutes Second Tranche Excess, which would be allocated between Fund A
and Fund C (each of which has average daily net assets over the quarter
that exceed its respective assets under management as of the closing date)
PRO RATA according to the amount of such excesses. The excesses equal, for
Fund A, $300 - $200 million = $100 million, and for Fund C, $900 million -
$500 million = $400 million, so the $200 million shortfall from Fund B
would be allocated according to a 1:4 ratio between Fund A and Fund C,
respectively, or $40 million to Fund A and $160 million to Fund C.
Accordingly, $240 million of Fund A and $660 million of Fund C, together
with Fund B's $100 million, or a total of $1 billion, would be Initial
Tranche assets. The remaining $60 million of Fund A and $240 million of
Fund C, or a total of $300 million, would be in the Second Tranche of those
Funds.
3. The Sub-Advisory Base Fee shall be subject to upward adjustment for each
quarter in calendar year 2008 if, (a) as of 4:00 p.m. Eastern time on the
last business day of 2007, the aggregate assets under management for all
Paragon Funds sub-advised by the Subadviser (excluding assets of the AXA
Rosenberg U.S. Small Capitalization Fund ("Small Cap Fund Assets"), but
including the assets of the AXA Rosenberg VIT Value Long/Short Equity Fund)
do not exceed $2,025,000,000, and (b) the S&P 500 Index is above 1000. Such
upward adjustment shall equal the product of (a) 5% of the Fund's
Investment Advisory Contractual Rate, and (b) the average daily net assets
of the Fund over such quarter. The Sub-Advisory Base Fee shall also be
subject to upward adjustment for each quarter in calendar year 2009 if, (a)
as of 4:00 p.m. Eastern time on the last business day of 2008, the
aggregate assets under management for all Laudus Funds sub-advised by the
Subadviser (excluding the Small Cap Fund Assets, but including the assets
of the AXA Rosenberg VIT Value Long/Short Equity Fund) do not exceed
$2,775,000,000, and (b) the S&P 500 Index is above 1000. Such upward
adjustment shall equal the product of (a) 5% of the Fund's Investment
Advisory Contractual Rate, and (b) the average daily net assets of the Fund
over such quarter. The Sub-Advisory Base Fee shall also be subject to
upward adjustment for each quarter of each calendar year beginning with
2010 if, (a) as of 4:00 p.m. Eastern time on the last business day of the
previous calendar year, the aggregate assets under management for all
Paragon Funds sub-advised by the Subadviser (excluding the Small Cap Fund
Assets, but including the assets of the AXA Rosenberg VIT Value Long/Short
Equity Fund) do not exceed 50% of the aggregate assets under management
target for such year for such Funds established from time to time in the
manner as may be agreed upon by Manager and Subadviser (provided always
that such aggregate target amount shall not be less than $4,050,000,000),
and (b) the S&P 500 Index is above 1000. Such upward adjustment shall equal
the product of (a) 5% of the Fund's Investment
66
Advisory Contractual Rate, and (b) the average daily net assets of the Fund
over such quarter.
4. The Performance Adjustment, if any, for any particular calendar quarter
shall also be calculated in arrears and shall be equal to the product of
(a) the Adjustment Rate (as defined below), (b) the Fund's Investment
Advisory Contractual Rate divided by four, and (c) the average daily net
assets of the Fund over the Rolling Period (as defined below). The
Adjustment Rate shall equal [5 for Group A Funds, 2.5 for Group B Funds, 2
for Group C Funds] times (i) the Performance Difference for such quarter
minus [1.0% for Group A Funds, 2.0% for Group B Funds, 2.5% for Group C
Funds], if such Performance Difference is positive, or (ii) the Performance
Difference for such quarter plus [1.0% for Group A Funds, 2.0% for Group B
Funds, 2.5% for Group C Funds], if such Performance Difference is negative;
provided, however, that the Adjustment Rate shall equal zero (and
accordingly there shall be no Performance Adjustment) in the event that the
Performance Difference is neither greater than [1%, 2%, 2.5% ] nor less
than negative [1%, 2%, 2.5%]; and provided further that the Adjustment Rate
shall in no event be greater than positive 5% or less than negative 5%. For
purposes of the foregoing, the term "Performance Difference" for any
particular quarter shall mean the difference between the Fund's Investment
Performance (as defined below) for the Rolling Period (as defined below)
ending on the last day of the quarter, and the Record (as defined below) of
[the relevant benchmark] for the same rolling period; the term "Investment
Performance" shall mean the daily-compounded rate of return, reflecting all
income, dividends and capital actions as of the date occurring or earned by
the Fund, net of all expenses of the Fund, expressed as a percentage; the
term "Record" shall mean the total return of [the relevant benchmark],
expressed as a percentage; and the term "Rolling Period" shall mean a
period consisting of twelve calendar quarters, or such shorter period as
has elapsed since [closing date], with the most recent quarter substituted
for the earliest such quarter as time passes, but in no event shall the
Rolling Period be less than four calendar quarters.
67
SCHEDULE A -- FEES
(AXA Rosenberg U.S. Small Capitalization Fund only)
The Manager will pay to the Subadviser as compensation for the services
rendered, the facilities furnished and the expenses borne by the Subadviser
pursuant to Section 1, in arrears for each calendar quarter, a fee, equal to
(1) the Sub-Advisory Base Fee (as defined below), plus or minus (2) the
Performance Adjustment (as defined below), if any.
The Sub-Advisory Base Fee shall be computed in arrears, with respect to any
calendar quarter, by multiplying each Quarterly Sub-Advisory Base Rate (as
defined below) for such quarter by the applicable portion (as described below)
of the average daily net assets of the Fund over such quarter, and adding the
products thereof. Each Quarterly Sub-Advisory Base Rate for a particular quarter
shall equal the respective Annual Sub-Advisory Base Rate for such quarter
divided by four. The Annual Sub-Advisory Base Rate for any particular calendar
quarter shall equal (i) [80% of the gross annual investment advisory rate
payable to the Manager by the Fund (the "Investment Advisory Contractual Rate")
under the Management Agreement between the Manager and the Fund] with respect to
average daily net assets of the Fund up to [Fund's assets as of closing
date(1)]; and (ii) [45% of the Investment Advisory Contractual Rate] with
respect to average daily net assets of the Fund in excess of [Fund's assets as
of closing date]. The Sub-Advisory Base Fee for a partial quarter (if this
Agreement becomes effective or is terminated other than on the first or the last
day of a calendar quarter, respectively) shall be based on the average daily net
assets of the Fund over, and shall be prorated based on the number of days in,
such partial quarter.
The Performance Adjustment, if any, for any particular calendar quarter shall
also be calculated in arrears and shall be equal to the product of (a) the
Adjustment Rate (as defined below), (b) [the Investment Advisory Contractual
Rate divided by four], and (c) the average daily net assets of the Fund over
the Rolling Period (as defined below). The Adjustment Rate shall equal 2.5
times (i) the Performance Difference for such quarter minus 2.0%, if such
Performance Difference is positive, or (ii) the Performance Difference for such
quarter plus 2.0%, if such Performance Difference is negative; provided,
however, that the Adjustment Rate shall equal zero (and accordingly there shall
be no Performance Adjustment) in the event that the Performance Difference is
neither greater than 2.0% nor less than negative 2.0%; and provided further
that the Adjustment Rate shall be neither greater than positive
- ----------------
(1) References in this Schedule to the assets of any one or more Funds as of
the closing date shall not include any assets over which the Sub-Adviser or
its affiliates have investment discretion (other than by virtue of
Sub-Adviser's position as investment adviser or sub-investment advisor to
the relevant Fund) that are redeemed out of the applicable Fund(s) within
90 days of the closing date.
68
5% nor less than negative 5%. For purposes of the foregoing, the term
"Performance Difference" for any particular quarter shall mean the difference
between the Fund's Investment Performance (as defined below) for the Rolling
Period (as defined below) ending on the last day of the quarter and the Record
(as defined below) of the Russell 2000 Index for the same Rolling Period; the
term "Investment Performance" shall mean the daily-compounded rate of return,
reflecting all income, dividends and capital actions as of the date occurring
or earned by the Fund, net of all expenses of the Fund, expressed as a
percentage; the term "Record" shall mean the total return, expressed as a
percentage; and the term "Rolling Period" shall mean a period consisting of
twelve calendar quarters, or such shorter period as has elapsed since [closing
date], with the most recent quarter substituted for the earliest such quarter
as time passes, but in no event shall the Rolling period be less than four
calendar quarters.
SCHEDULE B
(Fund Assets of the Closing Date)
Fund Assets as of the Closing Date
- ---- -----------------------------
AXA Rosenberg U.S. Discovery Fund ..............
AXA Rosenberg Enhanced 500 Fund ................
AXA Rosenberg U.S. Large Capitalization Fund
AXA Rosenberg International Equity Fund ........
AXA Rosenberg International Small
Capitalization Fund ..........................
AXA Rosenberg European Fund ....................
AXA Rosenberg U.S. Long/Short Equity Fund ......
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund .......................
AXA Rosenberg Value Long/Short Equity
Fund .........................................
AXA Rosenberg Global Long/Short Equity
Fund .........................................
AXA Rosenberg U.S. Small Capitalization
Fund .........................................
AXA Rosenberg VIT Value Long/Short Equity
Fund .........................................
69
EXHIBIT C
FUND BENCHMARK
- ---- ---------
AXA Rosenberg European Fund ........................... MSCI Europe Index
AXA Rosenberg Global Long/Short Equity Fund ........... 90 Day T-Bill
AXA Rosenberg International Equity Fund ............... MSCI EAFE Index
AXA Rosenberg International Small
Capitalization Fund .................................. Nomura Global Small
Cap Index
AXA Rosenberg U.S. Large/Mid Capitalization
Long/Short Equity Fund ............................... 90 Day T-Bill
AXA Rosenberg U.S. Discovery Fund ..................... Russell 2500 Index
AXA Rosenberg U.S. Large Capitalization Fund .......... Russell 1000 Index
AXA Rosenberg U.S. Long/Short Equity Fund ............. 90 Day T-Bill
AXA Rosenberg U.S. Small Capitalization Fund .......... Russell 2000 Index
AXA Rosenberg Value Long/Short Equity Fund ............ 90 Day T-Bill
TOTAL ASSETS UNDER MANAGEMENT TARGETS (IN MILLIONS)
2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------
End of Period AUM .......... $1,199 $1,589 $2,149 $2,884 $4,050 $5,550
Average AUM ............... $1,394 $1,869 $2,516 $3,467 $4,800
70
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THREE EASY WAYS TO VOTE YOUR PROXY
PROXY TABULATOR Read the Proxy Statement and have the Proxy card at hand.
P.O. BOX 9132 TELEPHONE: Call 1-800-690-6903 and follow the simple instructions.
HINGHAM, MA 02043-9132 INTERNET: Go to www.proxyweb.com and follow the on-line directions.
MAIL: Vote, sign, date and return your proxy by mail.
If you vote by Telephone or Internet, you do not need to mail your proxy.
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*** CONTROL NUMBER: 999 999 999 99 ***
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FUND NAME PRINTS HERE THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
OF BARR ROSENBERG SERIES TRUST
The undersigned hereby appoint(s) Sara Donaldson and Heidi K. Ridley, and each
of them (with full power of substitution), the proxies of the undersigned to
attend the Special Meeting of Shareholders to be held on January 30, 2004 (the
"Special Meeting"), at the offices of Charles Schwab & Co., 101 Montgomery
Street, San Francisco, California, at 11:00 a.m. Pacific Time and any
adjournments thereof, to vote all of the shares of the above referenced Fund
that the signer(s) would be entitled to vote at the Special Meeting and on any
matter incident to the conduct of the Special Meeting, all as set forth in the
Notice of Special Meeting of Shareholders and Proxy Statement of the Board of
Trustees. Said proxies are directed to vote or refrain from voting pursuant to
the Proxy Statement as indicated upon the matter set forth on the reverse side
of this card.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned Shareholder. If you sign without otherwise indicating a vote on
any of the proposals, this Proxy will be voted for each proposal set forth on
the reverse side of this card. If no indication is made with respect to a
proposal, this Proxy will be voted as recommended by the Board of Trustees for
such proposal. As to any other matter, the shares will be voted by said proxies
in accordance with their judgment. The undersigned acknowledges receipt with
this Proxy of a copy of the Notice of Special Meeting of Shareholders and the
Proxy Statement of the Board of Trustees, and revokes any proxy heretofore given
with respect to the votes covered by this Proxy.
DATE ___________________
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Please vote, date and sign and promptly return
this proxy card in the enclosed envelope.
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arrow] Shareholder(s) signs here (Sign in the Box)
Please print and sign your name in the space provided to authorize
the voting of your shares as indicated and return promptly. When signing on
behalf of a corporation, partnership, estate, trust or in any other
representative capacity, please sign your name and title. For joint accounts,
each joint owner must sign.
[down arrow] ROSENBERG RE -R
Please fill in box(es) as shown using black or blue ink or number 2 pencil. /X/
PLEASE DO NOT USE FINE POINT PENS.
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1. To elect the following three Trustees: FOR WITHHOLD FOR ALL
(01) Mariann Byerwalter as an Independent Trustee. ALL ALL EXCEPT*
(02) William A. Hasler as an Independent Trustee.
(03) Jeffrey M. Lyons as an Interested Trustee. / / / / / / 1.
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*To withhold authority to vote for any individual, mark the box "FOR ALL EXCEPT"
and write the nominee's number on the line above.
FOR AGAINST ABSTAIN
2. Vote to approve a Management Agreement between
Charles Schwab Investment Management, Inc. / / / / / / 2.
("CSIM") and the Trust on behalf of the Fund
(ALL FUNDS EXCEPT THE AXA ROSENBERG ENHANCED
500 FUND).
3. Vote to approve a Subadviser Agreement among
CSIM, AXA Rosenberg Investment Management LLC / / / / / / 3.
and the Trust on behalf of the Fund
(ALL FUNDS EXCEPT THE AXA ROSENBERG
ENHANCED 500 FUND).
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PLEASE SIGN AND DATE ON THE REVERSE SIDE.
[down arrow] ROSENBERG RE -R [down arrow]
[LOGO] Rosenberg
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M U T U A L F U N D S
www.axarosenbergfunds.com 800.555.5737
Dear AXA Rosenberg Mutual Fund Shareholder:
We are proposing through a Fund Adoption to appoint Charles Schwab
Investment Management Inc. ("CSIM") as the Investment Advisor to the AXA
Rosenberg Mutual Funds (collectively the "Fund Family" or "AXA Rosenberg
Funds," and each individually a "Fund"). Under the proposed adoption
agreement AXA Rosenberg Investment Management LLC ("AXA Rosenberg") will
maintain its role as the day-to-day portfolio manager of the Funds through
a sub-advisory relationship with each Fund. Additionally, as part of the
agreement the Fund Family will be re-branded as the Laudus Rosenberg Funds
and will continue to offer no-load Institutional, Investor and Adviser
share classes. These proposed arrangements are summarized below and
described in detail in the enclosed Shareholder Proxy Statement.
Before outlining the proposed changes to our Fund Family, we wanted to
address the growing concern and media coverage relating to improper "market
timing" and "late day" trading in the mutual fund industry.
First, with regard to the AXA Rosenberg Funds, we are pleased to report
that our internal review, as well as a review by the Funds' distributor,
fund administrator, fund accountant and transfer agent, to date has
revealed no inappropriate late day trading arrangements or activities and
confirmed that the AXA Rosenberg Fund Family has established controls and
procedures for deterring market timing (primarily through the imposition of
a 2% "early redemption" fee for redemptions made within one month of
purchase). We will, of course, continue to actively monitor and review the
situation.
You may have also heard some news recently about a limited number of
trading issues at the U.S. Trust and brokerage subsidiaries of The Charles
Schwab Corporation. CSIM, which is a separate Charles Schwab subsidiary,
has been conducting its own review of the SchwabFunds policies and
procedures regarding market timing and late day trading. We are pleased to
report that CSIM has confirmed to us and to the AXA Rosenberg Funds' Board
of Trustees that, to date, it has found no improper or illegal trading by
CSIM personnel for their own accounts, or any special arrangements between
CSIM and third parties to permit market timing or illegal late day trading
of SchwabFunds. CSIM has made several detailed presentations to our Board
of Trustees regarding these matters and has undertaken to keep AXA
Rosenberg and the Board of Trustees informed as their ongoing review of the
situation continues.
Both AXA Rosenberg and CSIM recognize that your investment in the AXA
Rosenberg Funds reflects the trust you have placed in those of us
responsible for safeguarding and managing your wealth. It is a
responsibility that we undertake with the utmost of integrity, and
commitment to high ethical standards. We appreciate the continued
opportunity to serve and reaffirm our commitment to you, our valued
shareholders. All of us at AXA Rosenberg are excited about this opportunity
to join with CSIM to continue to bring you quality investment solutions and
value-added support services.
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What Changes?
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Expenses
As part of the adoption agreement, three adjustments have been proposed
which would lower or limit the Funds' expense structure. First, breakpoints
will be introduced on the Investment Advisory fee for each Fund; second,
the expense caps currently in place through a "Fee Limitation Agreement" in
effect between AXA Rosenberg and each Fund will be reduced by 0.01%;
Finally, Schwab will extend the "Fee Limitation Agreement" for the next
three years, until March 31, 2007.
One Source
If you choose to purchase your investment through Charles Schwab & Co. all
Funds and classes will be made available through Schwab's no-transaction
fee OneSource platform.
Larger Fund Family
CSIM manages $143 billion in 49 mutual funds. Your Fund will have the
increased benefits of the expanded oversight and resources of the tenth
largest fund complex in the United States.
Board of Directors
The Fund Family will have several new board members for your consideration,
but will retain its "super-majority" (75%) of independent trustees. In
order to provide continuity, Professor Nils Hakansson, Ph.D. will remain as
one of the Fund Family's independent trustees going forward.
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What Remains the Same?
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Investment Process
There will be no change to the investment process, which utilizes our
proprietary stock selection and risk models to identify potential holdings
and build portfolios. Along with CSIM, we strongly believe in our objective
and disciplined approach to investing, which will remain unchanged.
Fund Management
AXA Rosenberg will continue to retain day-to-day responsibility for the
portfolio management of the Funds. The same team at AXA Rosenberg will be
responsible for overseeing our process and ensuring its consistent
application across all of the portfolios.
Availability
It is our goal that each Fund will be available through the same
intermediaries after the adoption, and we plan on expanding availability in
the future.
Commitment
AXA Rosenberg and CSIM remain committed to shareholders in terms of Fund
performance, communications and service.
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Why is Your Vote Important?
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After careful review of the adoption proposal, the full Board of Trustees
unanimously agreed that the proposal was in the best interest of the Fund
Family and its shareholders and voted to approve the adoption, which is
more fully described in the accompanying Proxy Statement.
Your timely vote is important, regardless of how many shares you own.
Please read the accompanying proxy statement to learn more about the issues
for which we are seeking your vote. For your convenience you may vote on
the proposals by Internet or touch-tone telephone (see enclosed
instructions), or simply complete the enclosed proxy card(s) and return by
mail. Please make every effort to vote promptly to avoid additional
mailings or having our proxy solicitor, D.F. King, telephone you.
A special meeting of the shareholders of the AXA Rosenberg Funds will be
held at 11:00am PST on January 30th, 2004 to vote on the proposed adoption.
The meeting will be held at the offices of Charles Schwab Corporation at
101 Montgomery Street, 2nd floor in San Francisco. If you are unable to
attend the meeting, please make sure you vote your shares using one of the
methods described above so that your vote will be represented.
Thank you in advance for reviewing and responding to the enclosed
materials. We value the trust and confidence you have shown us through your
investment in the AXA Rosenberg Mutual Funds and look forward to continuing
to serve your investment needs in the future.
Sincerely,
/s/ EDWARD H. LYMAN
Edward H. Lyman
President 800.447.3332
AXA Rosenberg Mutual Funds AXAROSENBERGFUNDS.COM
This notice must be preceded or accompanied by a prospectus which should be
read carefully before investing or sending money. Distributor: Barr
Rosenberg Funds Distributor, Inc. Investment. Advisor: AXA Rosenberg
Investment Management
The accompanying proxy statement outlines important
issues affecting the AXA Rosenberg Mutual Funds.
Please take time to read it, then cast you vote.
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THREE EASY WAYS
TO VOTE YOUR PROXY
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Voting is easy. Simply choose the method that is most
convenient for you.
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[1] VOTE BY TELEPHONE
Have your proxy card handy. Call the toll-free
number that appears on the card. Then simply enter
the control number printed on the card and follow
the prompts to record your vote.
[2] VOTE BY INTERNET
Go to the web site listed on your proxy card and
enter your control number. Follow the simple
instructions to cast your vote.
[3] VOTE BY MAIL
Simply fill out the proxy card and return it to us
in the enclosed postage paid envelope.
DO NOT MAIL the proxy card if you vote by phone or
Internet.
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[LOGO] Rosenberg
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Remember, your vote matters. Please vote today!
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