Prospector
Funds, Inc.
Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund
Dear
Shareholder:
I
am writing to let you know that a meeting (the “Meeting”) of shareholders of the
Prospector Capital Appreciation Fund (the “Target Capital Appreciation Fund”)
and Prospector Opportunity Fund (“Target Opportunity Fund”, and together with
the Target Capital Appreciation Fund, the “Target Funds”) has been scheduled for
September 6, 2024, at 10:00 a.m., Eastern time, to be held at 370 Church Street,
Guilford, CT. If you plan to attend the Meeting, please follow the registration
instructions as outlined in the enclosed Proxy Statement/Prospectus. The Meeting
has been called to consider an important proposal affecting each Target Fund.
The enclosed Proxy Statement/Prospectus describes a proposal to reorganize the
Target Capital Appreciation Fund and Target Opportunity Fund into newly created
series within Managed Portfolio Series (the “Acquiring Entity”), which are
called the Prospector Capital Appreciation Fund (the “Acquiring Capital
Appreciation Fund”) and Prospector Opportunity Fund (“Acquiring Opportunity
Fund”, and together with the Acquiring Capital Appreciation Fund, the “Acquiring
Funds”). Each Acquiring Fund has the same investment objective, principal
investment strategies and principal risks as the corresponding Target Fund. The
primary purpose of the Reorganizations (defined below) is to provide
shareholders with the opportunity to continue their Prospector mutual fund
investment within a larger multiple series trust investment company whose
potential benefits may include, among other things, economies of scale and lower
expenses. In addition, Prospector Partners Asset Management, LLC, investment
adviser for the Target Funds and the Acquiring Funds, has contractually agreed
to limit each Acquiring Fund’s total net operating expense ratio (excluding
certain types of expenses) for a period of at least two years from the closing
date of the Reorganizations at an annual rate of 1.15%, which is lower than the
current expense cap of 1.25% for each Target Fund. Shareholders of each Target
Fund will receive shares of the corresponding Acquiring Fund in a transaction
that is intended to be a tax-free transaction under the Internal Revenue Code of
1986, as amended.
If
approved by shareholders, the Reorganizations will occur on or about September
9, 2024. On that date, each Acquiring Fund will acquire all of the assets
and assume all of the liabilities of the corresponding Target Fund; shareholders
of the Target Funds will receive a number of full and fractional shares of the
corresponding Acquiring Funds equal in aggregate net asset value to such
shareholder’s shares of the Target Fund held at the time of the exchange; and
the Target Funds will be dissolved (each transaction with respect to each Target
Fund and its corresponding Acquiring Fund, a “Reorganization,” and together the
“Reorganizations”). The merger of each Target Fund into its corresponding
Acquiring Fund will be treated as a separate Reorganization. Shareholders of
each Target Fund will vote separately to approve the applicable Reorganization.
The enclosed Proxy Statement/Prospectus describes the Reorganizations in greater
detail and contains important information about the Acquiring
Funds.
The
Reorganizations have been carefully reviewed by the Target Funds’ Board of
Directors (the “Target Fund Board”). The Target Fund Board is responsible for
protecting your interests as a shareholder. The Target Fund Board believes the
Reorganizations are in the best interests of the Target Funds and approved the
Reorganizations on May 23, 2024. The
Target Fund Board recommends that you vote in favor of the proposals and approve
the Reorganizations.
Please
read the enclosed materials and cast your vote on the proxy card(s) or by
telephone or via the internet. Please vote your shares promptly. Your vote is
extremely important, no matter how large or small your holdings may be. Thank
you for your participation in this important initiative.
Sincerely,
/s/
John D. Gillespie
John
D. Gillespie
President
August
16, 2024
Prospector
Funds, Inc.
370
Church Street
Guilford,
Connecticut 06437
Notice
of Special Meeting of Shareholders of the
Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund
A
special meeting (the “Meeting”) of shareholders of the Prospector Capital
Appreciation Fund (the “Target Capital Appreciation Fund”) and Prospector
Opportunity Fund (“Target Opportunity Fund”, and together with the Target
Capital Appreciation Fund, the “Target Funds”), each a series of Prospector
Funds, Inc. (the “Target Entity”), has been scheduled for September 6,
2024,
at 10:00
a.m.,
Eastern time, to be held at 370 Church Street, Guilford, CT, to vote on the
following proposals (the “Proposals”), and any other matters that may properly
come before the Meeting or any adjournment or postponement thereof:
Proposal
for the Prospector
Capital Appreciation Fund:
To
approve an Agreement and Plan of Reorganization by and between Prospector Funds,
Inc. (the “Target Entity”) and Managed Portfolio Series (the “Acquiring
Entity”), which provides for the reorganization of the Prospector
Capital Appreciation Fund
(the “Target Capital
Appreciation
Fund”) into a newly created series within the Acquiring Entity, which is also
called the Prospector
Capital Appreciation Fund
(the “Acquiring Capital
Appreciation
Fund”), providing for: (a) the acquisition of all of the assets and assumption
of all of the liabilities of the Target Capital
Appreciation
Fund by the Acquiring Capital
Appreciation
Fund in exchange for shares of the Acquiring Capital
Appreciation
Fund; (b) the distribution of such shares to the shareholders of the Target
Capital
Appreciation
Fund; and (c) the liquidation and termination of the Target Capital
Appreciation
Fund (the “Capital
Appreciation
Fund Reorganization”).
Proposal
for the Prospector
Opportunity Fund:
To
approve an Agreement and Plan of Reorganization by and between Prospector Funds,
Inc. (the “Target Entity”) and Managed Portfolio Series (the “Acquiring
Entity”), which provides for the reorganization of the Prospector
Opportunity Fund
(the “Target Opportunity
Fund”) into a newly created series within the Acquiring Entity, which is also
called the Prospector
Opportunity Fund
(the “Acquiring Opportunity
Fund”), providing for: (a) the acquisition of all of the assets and assumption
of all of the liabilities of the Target Opportunity
Fund by the Acquiring Opportunity
Fund in exchange for shares of the Acquiring Opportunity
Fund; (b) the distribution of such shares to the shareholders of the Target
Opportunity
Fund; and (c) the liquidation and termination of the Target Opportunity
Fund (the “Opportunity
Fund Reorganization”).
A
Proposal will be completed with respect to the applicable Target Fund only if
the Target Fund’s shareholders approve the Proposal. Shareholders of each Target
Fund will vote separately to approve the applicable Proposal. Fund shareholders
of record as of the close of business on July 24, 2024, are entitled to receive
notice of, and to vote at, the Meeting or any adjournment thereof.
The
Target Entity’s Board of Directors (the “Target Fund Board”) has approved the
Agreement and Plan of Reorganization for each Target Fund and recommends that
shareholders of each Target Fund cast their vote “FOR”
the Proposal as described in the accompanying Proxy Statement/Prospectus.
Please
vote your shares by completing the enclosed proxy card and returning it in the
enclosed postage paid return envelope or by voting by telephone or via the
internet using the instructions on the proxy card. If you are voting by mail,
please sign and promptly return the proxy card in the postage paid return
envelope regardless of the number of shares owned. Proxy card instructions may
be revoked at any time before they are exercised by submitting a written notice
of revocation or a subsequently executed proxy card or by participating in the
Meeting and casting your vote. Revocations must be received prior to the start
of the Meeting, which is currently scheduled for September 6,
2024,
at 10:00
a.m.,
Eastern time.
By
order of the Target Fund Board,
/s/
John D. Gillespie
John
D. Gillespie
President
August
16, 2024
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Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund
each
a series of
Prospector
Funds, Inc.
370
Church Street
Guilford,
Connecticut 06437
203-458-1500
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Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund
each
a series of
Managed
Portfolio Series
615
East Michigan Street
Milwaukee,
Wisconsin 53202
(414)
516-1712
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Proxy
Statement/Prospectus
August
16, 2024
This
Proxy Statement/Prospectus is provided in connection with the solicitation of
proxies to be voted at a special meeting of shareholders (the “Meeting”) of the
Prospector
Capital Appreciation Fund (the “Target Capital Appreciation Fund”) and
Prospector Opportunity Fund ("Target Opportunity Fund", and together with the
Target Capital Appreciation Fund, the “Target Funds”),
each a series of Prospector Funds, Inc. (the “Target Entity”). The Meeting is
scheduled for September 6,
2024,
at 10:00
a.m.,
Eastern time, to be held at 370 Church Street, Guilford, CT. At the Meeting, you
and other shareholders of the Target Funds will be asked to consider and vote
upon the following proposals (the “Proposals”) and any other matters that may
properly come before the Meeting or any adjournment or postponement thereof:
Proposal
for the Prospector Capital Appreciation Fund:
To
approve an Agreement and Plan of Reorganization by and between Prospector Funds,
Inc. (the “Target Entity”) and Managed Portfolio Series (the “Acquiring
Entity”), which provides for the reorganization of the Prospector Capital
Appreciation Fund (the “Target Capital Appreciation Fund”) into a newly created
series within the Acquiring Entity, which is also called the Prospector Capital
Appreciation Fund (the “Acquiring Capital Appreciation Fund”), providing for:
(a) the acquisition of all of the assets and assumption of all of the
liabilities of the Target Capital Appreciation Fund by the Acquiring Capital
Appreciation Fund in exchange for shares of the Acquiring Capital Appreciation
Fund; (b) the distribution of such shares to the shareholders of the Target
Capital Appreciation Fund; and (c) the liquidation and termination of the Target
Capital Appreciation Fund (the “Capital Appreciation Fund
Reorganization”).
Proposal
for the Prospector Opportunity Fund:
To
approve an Agreement and Plan of Reorganization by and between Prospector Funds,
Inc. (the “Target Entity”) and Managed Portfolio Series (the “Acquiring
Entity”), which provides for the reorganization of the Prospector Opportunity
Fund (the “Target Opportunity Fund”) into a newly created series within the
Acquiring Entity, which is also called the Prospector Opportunity Fund (the
“Acquiring Opportunity Fund”), providing for: (a) the acquisition of all of the
assets and assumption of all of the liabilities of the Target Opportunity Fund
by the Acquiring Opportunity Fund in exchange for shares of the Acquiring
Opportunity Fund; (b) the distribution of such shares to the shareholders of the
Target Opportunity Fund; and (c) the liquidation and termination of the Target
Opportunity Fund (the “Opportunity Fund Reorganization”).
If
shareholders of the Target Funds vote to approve the Agreement and Plan of
Reorganization (the “Plan”), shareholders of the Target Funds will receive
shares of their corresponding Acquiring
Capital
Appreciation
Fund or Acquiring Opportunity Fund (each, an “Acquiring Fund,” and together, the
“Acquiring Funds”)
in the respective Capital Appreciation Fund Reorganization or Opportunity Fund
Reorganization (each, a “Reorganization,” and together, the “Reorganizations”)
having a total dollar value equal to the value of their investment in the Target
Funds immediately prior to the Reorganizations, as determined pursuant to the
Plan. The Target Funds will then be liquidated and dissolved. The
Reorganizations are anticipated to be tax-free transactions for the Target Funds
and their shareholders.
The
Target Entity’s Board of Directors (the “Target Fund Board”) has approved the
Plan and has determined that approval of the Reorganizations is in the best
interests of the Target Funds, and that the interests of the existing
shareholders of the Target Funds will not be diluted as a result of the
Reorganizations. Accordingly,
the Target Fund Board recommends that shareholders of the Target Funds vote
“FOR” the Proposals.
The
Target Fund Board has fixed the close of business on July 24, 2024 as the
record date (“Record Date”) for the determination of Target Fund shareholders
entitled to notice of and to vote at the Meeting and at any adjournment or
postponement thereof. Shareholders will be entitled to one vote for each share
of each Target Fund held (and a proportionate fractional vote for each
fractional share held). The merger of each Target Fund into its corresponding
Acquiring Fund will be treated as a separate Reorganization. Shareholders of
each Target Fund will vote separately to approve the applicable Reorganization.
If any other proposals in addition to the Proposals properly come before the
Meeting or any adjournment or postponement thereof, then the shareholders of the
Target Funds will vote separately on each such proposal.
This
Proxy Statement/Prospectus sets forth certain information about the
Reorganizations and the Acquiring Funds that you should consider before voting
on the Proposals or investing in the Acquiring Funds. You should retain this
information for future reference. The Target Entity and Acquiring Entity are
separate registered open-end management investment companies. This Proxy
Statement/Prospectus, the enclosed Notice of Special Meeting of Shareholders,
and the enclosed proxy card will be mailed to eligible shareholders on or about
August 19, 2024.
Additional
information is available in the following materials:
•the
Statement of Additional Information dated August 16, 2024, relating to this
Proxy Statement/Prospectus (the “Proxy Statement SAI”);
•The
Target Funds’ audited financial statements and related report of the independent
registered public accounting firm included in the Target Funds’ Annual
Report to Shareholders for the fiscal year ended December
31,
2023
(the “Target Fund Annual Report”). The financial highlights for the Target Funds
contained in the Target Fund Annual Report are included in this Proxy
Statement/Prospectus as Exhibit
C.
The
Target Fund Prospectus and Statement of Additional Information to this Proxy
Statement/Prospectus are incorporated herein by reference and are legally deemed
to be part of this Proxy Statement/
Prospectus.
The Target Funds’ Prospectus, SAI, and Annual Report are available on the Target
Funds’ website at www.prospectorfunds.com. You can also request copies of these
materials, upon payment at the prescribed rates of the duplicating fee, by
electronic request to the SEC’s e-email address ([email protected]) or by
writing the SEC’s public reference library, SEC, Washington, D.C.
20549-1520.
The
documents listed above are on file with the U.S. Securities and Exchange
Commission (the “SEC”). Copies of the Target Funds’ documents are also available
at no cost by calling 1-877-734-7862. You may also obtain these documents from
the SEC’s website at www.sec.gov.
THESE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN
INVESTMENT IN THE ACQUIRING FUNDS IS NOT A DEPOSIT WITH A BANK AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. YOU MAY LOSE MONEY BY INVESTING IN THE ACQUIRING
FUNDS.
TABLE
OF CONTENTS
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Will
there be any tax consequences resulting from the
Reorganizations? |
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Will
my dividends be affected by the Reorganizations? |
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NO
DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS REGARDING THE REORGANIZATION OTHER
THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS OR RELATED SOLICITATION
MATERIALS ON FILE WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, AND YOU
SHOULD NOT RELY ON SUCH OTHER INFORMATION OR REPRESENTATIONS.
SUMMARY
OF KEY INFORMATION
The
following is a summary of certain information contained elsewhere in this Proxy
Statement/Prospectus, in the Plan, and/or in the Prospectus and SAI of the
Target Funds. Shareholders should read the entire Proxy Statement/Prospectus,
the Target Fund Prospectus, and the Target Fund SAI carefully for more complete
information.
WHY
ARE YOU SENDING ME THE PROXY STATEMENT/PROSPECTUS?
You
are receiving this Proxy Statement/Prospectus because you own shares in a Target
Fund as of the Record Date and, therefore, have the right to vote on the very
important Proposals described herein concerning the Target Funds. This Proxy
Statement/Prospectus contains information that shareholders should know before
voting on the Proposals.
This
document is both a proxy statement of the Target Funds and also a prospectus for
the Acquiring Funds.
ON
WHAT AM I BEING ASKED TO VOTE?
You
are being asked to approve a Plan under which the Target Capital Appreciation
Fund would be reorganized into the Acquiring Capital Appreciation Fund and the
Target Opportunity Fund would be reorganized into the Acquiring Opportunity
Fund, in each case within the Acquiring Entity. The Plan, with respect to the
Target Funds, provides for: (a) the transfer of all of the assets of the Target
Funds to the corresponding Acquiring Funds in exchange for shares of the
Acquiring Funds and the Acquiring Funds’ assumption of all of the Target Funds’
liabilities; (b) the distribution of shares of the Acquiring Funds to the
shareholders of the corresponding Target Funds; and (c) the liquidation and
termination of the Target Funds.
Each
Acquiring Fund has the same portfolio management team and investment objective,
and substantially similar investments policies, strategies, and risks as the
corresponding Target Fund. As a result of the Reorganizations (if approved by
shareholders), Target Fund shareholders will become Acquiring Fund shareholders,
and will receive shares in the corresponding Acquiring Fund having a total
dollar value equal to the total dollar value of the shares such shareholder held
in the Target Fund immediately prior to the Reorganizations. Target Fund
shareholders will receive shares of the Acquiring Funds as set forth in the
table below:
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| Target
Fund |
Corresponding
Acquiring Fund |
| Target
Capital Appreciation Fund |
Acquiring
Capital Appreciation Fund |
| Target
Opportunity Fund |
Acquiring
Opportunity Fund |
Shareholders
of each Target Fund will vote separately on the applicable Reorganization and
the merger of each Target Fund into the corresponding Acquiring Fund will be
treated as a separate Reorganization. Accordingly, shareholder approval and
consummation of one Reorganization is not contingent on shareholder approval and
consummation of the other Reorganization. Approval of the shareholders of a
Target Fund is needed to proceed with the Proposal with respect to the Target
Fund. The Meeting will be held on September 6,
2024
to consider the Proposals. If shareholders of a Target Fund do not approve
the Reorganization, the Target Fund Board will consider what further actions to
take with respect to such Target Fund, which could include proposing a
reorganization to a different acquiring fund or having the Target Fund continue
as a series of the Target Entity.
WHAT
ARE THE REASONS FOR THE PROPOSED REORGANIZATIONS?
The
primary purpose of the Reorganizations is to provide shareholders with the
opportunity to continue their Prospector mutual fund investment within a larger
multiple series trust investment company that offers a well-resourced
infrastructure, including in particular expertise and support for compliance and
regulatory matters impacting the Target Funds. The potential benefits of the
multiple series trust platform include (a) the potential for economies of scale
and lower expenses over time due to the larger asset size and potential for
asset growth of the multiple series trust platform and the ability for fixed
costs to be allocated across a larger asset base; and (b) greater access to
professionals and other resources of the platform including resources to
navigate increasing industry complexity and regulatory changes. These benefits
will allow Prospector Partners Asset Management, LLC (“Prospector” or the
“Adviser”), the Target Funds’ investment manager, to focus on investment-related
services.
The
Target Funds, managed by Prospector, as of March 31, 2024, had approximately
$292 million in assets. The Acquiring Entity is a multi-series registered
investment company created and operated by U.S. Bank Global Fund Services (“Fund
Services”). It is designed to allow third-party advisers to create and manage
separate mutual funds or ETFs within the Acquiring Entity and thereby benefit
from efficiencies and economies of scale associated with sharing a common
investment company structure with other funds. As of March 31, 2024, the
Acquiring Entity consisted of 29 separate funds with approximately $12.4 billion
in combined assets. Prospector anticipates that, following the proposed
Reorganizations, each Acquiring Fund’s annual fund operating expenses, both
prior to and after the application of any management fee or expense waivers,
will be lower than the corresponding Target Fund’s current annual fund operating
expenses. See “How do the Funds’ Expenses Compare?” below.
In
considering the Reorganizations and the Plan, the Target Fund Board considered
these and other factors in concluding that the Reorganizations would be in the
best interest of each Target Fund and its shareholders. The Target Fund Board’s
considerations are described in more detail in the section below entitled “THE
PROPOSED REORGANIZATIONS -- Target Fund Board Considerations in Approving the
Reorganizations”.
HOW
WILL THE INVESTMENTS OF THE ACQUIRING FUND BE MANAGED?
The
portfolio management team that serves each Target Fund will remain the portfolio
management team for the corresponding Acquiring Fund following the
Reorganizations. This Proxy Statement/Prospectus provides biographical
information about the key individuals who comprise the Target Funds' respective
portfolio management team.
HAS
THE TARGET FUND BOARD APPROVED THE REORGANIZATIONS?
Yes.
As discussed in more detail in the Proxy Statement/Prospectus, the Target Fund
Board carefully reviewed and considered each Reorganization and the Plan and,
upon the recommendation of Prospector, the investment adviser to each Target
Fund, unanimously approved the Plan and the Reorganizations. The
Target Fund Board unanimously recommends that shareholders of the Target Funds
vote “For” the Proposals, and thereby approve the Plan and
Reorganizations.
WHAT
EFFECT WILL THE REORGANIZATIONS HAVE ON ME AS A SHAREHOLDER?
As
a result of the Reorganizations, you will become a shareholder of the
corresponding Acquiring Fund. Immediately after the Reorganizations, you will
own shares of the corresponding Acquiring Fund
having
a total dollar value equal to the dollar value of the shares of the Target Fund
that you owned immediately prior to the Reorganizations. Prospector will serve
as the investment adviser to each Acquiring Fund, and will continue to manage
the assets according to the same investment objective and investment philosophy
currently in effect for each corresponding Target Fund.
HOW
DO THE FUNDS’ INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES COMPARE?
Investment
Objectives.
The
investment objective of each Acquiring Fund and its corresponding Target Fund is
capital appreciation. Each investment objective is fundamental and not be
changed without shareholder approval.
Principal
Investment Strategies.
Capital
Appreciation Fund
- The
principal investment strategies of the Target Capital Appreciation Fund and the
Acquiring Capital Appreciation Fund are the same. Under normal market
conditions, both Funds invest primarily in a variety of equity and
equity-related securities, including common stocks, convertible preferred and
convertible debt securities. Both Funds attempt to buy investments priced to
generate long-term total returns significantly above those of general stock
indices and U.S. treasuries. Using a value orientation, Prospector invests both
Funds in positions in the United States and other developed markets.
Prospector’s investment strategy for both Funds consists of bottom-up
fundamental value analysis with an emphasis on companies believed to have strong
balance sheets whose securities will better maintain their value relative to
peers in declining markets. In evaluating potential investments, Prospector on
behalf of both Funds also considers qualitative factors, including quality of
management, quality of product or service, overall franchise or brand value,
composition of the board of directors, and the uniqueness of the business model.
Prospector, on behalf of both Funds, looks for the presence of catalysts to
improve internal performance, such as a change in management, a new management
incentive program closely linked to the price of the stock, the sale of an
underperforming asset or business unit, or a positive change in industry
fundamentals. In pursuit of its value-oriented strategy, each Fund may invest
without regard to market capitalization. Each Fund may also engage in currency
transactions.
Opportunity
Fund - The
principal investment strategies of the Target Opportunity Fund and the Acquiring
Opportunity Fund are the same. Under normal market conditions, both Funds
invest primarily in a variety of equity and equity-related securities, including
common stocks. Both Funds attempt to buy investments priced to generate
long-term total returns significantly above those of general stock indices and
U.S. treasuries. Using a value orientation, Prospector invests both Funds in
positions in the United States and other developed markets. Prospector’s
investment strategy for both Funds consists of bottom-up fundamental value
analysis with an emphasis on companies believed to have strong balance sheets
whose securities will better maintain their value relative to peers in declining
markets. In evaluating potential investments, Prospector, on behalf of both
Funds, considers qualitative factors, including quality of management, quality
of product or service, overall franchise or brand value, composition of the
board of directors, and the uniqueness of the business model. Prospector, on
behalf of both Funds, looks for the presence of catalysts to improve internal
performance, such as a change in management, a new management incentive program
closely linked to the price of the stock, the sale of an underperforming asset
or business unit, or a positive change in industry fundamentals. In pursuit of
its value-oriented strategy, each Fund may invest substantially in small and
mid-cap companies. Each Fund may also engage in currency
transactions.
Refer
to the section below entitled “COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL
INVESTMENT STRATEGIES” for a more detailed comparison of the principal
investments strategies of each Acquiring Fund and its corresponding Target Fund.
HOW
DO THE FUNDS’ EXPENSES COMPARE?
The
following tables compare the annual fund operating expenses, expressed as a
percentage of net assets (“expense ratios”), of each Target Fund with the
estimated (pro
forma)
expense ratio of the corresponding Acquiring Fund assuming completion of the
Reorganization. You will indirectly pay various expenses because the Target
Funds and the Acquiring Funds pay fees and expenses that reduce the return on
your investment.
The
following tables describe the fees and expenses that you may pay if you buy,
hold or sell shares of the Target Funds or the Acquiring Funds. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the tables or expenses
below.
In addition, the Target Funds will pay the costs of the Reorganizations which
are not reflected in the tables below. Expenses of the Reorganizations are
considered extraordinary expenses, which are excluded from each Target Fund’s
expense limitation arrangement, and thus will be borne by the Target Fund
notwithstanding the expense limitation. See the section below entitled “COSTS OF
REORGANIZATIONS” for more information.
Prospector
has contractually agreed to limit each Acquiring Fund’s total net operating
expense ratio (excluding certain types of expenses described below) for a period
of at least two
years
from the closing date of the Reorganizations at an annual rate of 1.15%, which
is lower than the Target Funds’ current expense cap of 1.25%. Prospector
anticipates that, with the transition to a multi-series trust, each Acquiring
Fund’s expenses will be lower and, accordingly, has agreed to reduce the expense
cap of each Acquiring Fund. The Target Funds’ expense ratios provided below are
based on the audited financials for each Target Fund for the fiscal year ended
December 31, 2023. The (pro
forma)
expense ratios show projected estimated expenses, but actual expenses may be
higher or lower than those shown.
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Capital
Appreciation Fund |
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Shareholder
Fees
(fees
paid directly from your investment) |
Target
Fund |
Acquiring
Fund |
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Redemption
Fee (as a percentage of amount redeemed on shares held 60 days or
less) |
2.00% |
2.00% |
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Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
Target
Fund |
Acquiring
Fund |
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| Management
Fees |
1.00% |
1.00% |
| Distribution
and Service (12b-1) Fee |
0.03% |
0.03% |
| Other
Expenses |
0.73% |
0.53% |
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Acquired
Fund Fees and Expenses(1) |
0.01% |
0.01% |
| Total
Annual Fund Operating Expenses |
1.77% |
1.57% |
| Fee
Waiver and Expense Reimbursement |
(0.51)%(2) |
(0.41)%(3) |
|
Total
Annual Fund Operating Expenses After Fee Waiver and Expense
Reimbursement |
1.26% |
1.16% |
1.Acquired
Fund Fees and Expenses (“AFFE”) are indirect fees and expenses the Fund incurs
from investing in the shares of other mutual funds. (“Acquired Funds”).The
fees represent the Fund’s pro rata portion of the cumulative expenses charged by
the Acquired Funds and are not direct costs paid by Fund
shareholders.
2.Prospector
has contractually agreed to waive a portion of its fees and/or pay Target
Capital Appreciation Fund expenses (excluding interest, AFFE, brokerage
commissions and extraordinary expenses) in order to limit the Total Annual Fund
Operating Expenses After Fee Waiver and Expense Reimbursement for the Target
Capital Appreciation Fund to 1.25% of its average daily net assets. This expense
cap will remain in effect through at least September 30, 2025, and may only be
terminated or amended by the Target Fund Board. Fees waived and expenses paid by
Prospector may be recouped by Prospector for a period of three years following
the day on which such fee waiver and/or expense payment was made, if such
recoupment can be achieved without exceeding the expense cap in effect at the
time the fee waiver and/or expense payment occurred and the expense limit in
place at the time of recoupment. If the Reorganization occurs, the Adviser will
not recoup any fees previously waived or expenses previously reimbursed under
the Target Capital Appreciation Fund expense limitation agreement.
3.Prospector
has contractually agreed to waive a portion or all of its management fees and
pay Acquiring Capital Appreciation Fund expenses (excluding shareholder
servicing plan fees, front-end or contingent deferred loads, taxes,
leverage/borrowing interest, interest expense, dividends paid on short sales,
brokerage commissions, AFFE, expenses incurred in connection with any merger or
reorganization, or extraordinary expenses such as litigation) in order to limit
the total annual fund operating expenses after fee waiver and expense
reimbursement to 1.15% of average daily net assets of the Acquiring Capital
Appreciation Fund. Fees waived and expenses paid by Prospector may be recouped
by Prospector for a period of 36 months following the day on which such fee
waiver and/or expense payment was made, if such recoupment can be achieved
without exceeding the expense limit in effect at the time the fee waiver and/or
expense payment occurred and the expense limit in place at the time of
recoupment. The Operating Expenses Limitation Agreement cannot be terminated
through at least September 9, 2026. Thereafter, the agreement may be terminated
at any time upon 60 days’ written notice by the Acquiring Entity’s Board of
Trustees (the “Acquiring Entity Board”) or Prospector.
|
|
|
|
|
|
|
|
|
|
Opportunity
Fund |
|
Shareholder
Fees
(fees
paid directly from your investment) |
Target
Fund |
Acquiring
Fund |
|
|
|
|
Redemption
Fee (as a percentage of amount redeemed on shares held 60 days or
less) |
2.00% |
2.00% |
|
|
|
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
Target
Fund |
Acquiring
Fund |
|
|
|
| Management
Fees |
1.00% |
1.00% |
| Distribution
and Service (12b-1) Fee |
0.09% |
0.09% |
| Other
Expenses |
0.28% |
0.16% |
|
Acquired
Fund Fees and Expenses(1) |
0.01% |
0.01% |
| Total
Annual Fund Operating Expenses |
1.38% |
1.26% |
| Fee
Waiver and Expense Reimbursement |
(0.12)%(2) |
(0.10)%(3) |
|
Total
Annual Fund Operating Expenses After Fee Waiver and Expense
Reimbursement |
1.26% |
1.16% |
1.Acquired
Fund Fees and Expenses (“AFFE”) are indirect fees and expenses the Fund incurs
from investing in the shares of other mutual funds. (“Acquired Funds”).The
fees represent the Fund’s pro rata portion of the cumulative expenses charged by
the Acquired Funds and are not direct costs paid by Fund
shareholders.
2.Prospector
has contractually agreed to waive a portion of its fees and/or pay Target
Opportunity Fund expenses (excluding interest, AFFE, brokerage commissions and
extraordinary expenses) in order to limit the Total Annual Fund Operating
Expenses After Fee Waiver and Expense Reimbursement for the Target Opportunity
Fund to 1.25% of its average daily net assets. This expense cap will remain in
effect through at least September 30, 2025, and may only be terminated or
amended by the Target Fund Board. Fees waived and expenses paid by Prospector
may be recouped by Prospector for a period of three years following the day on
which such fee waiver and/or expense payment was made, if such recoupment can be
achieved without exceeding the expense cap in effect at the time the fee waiver
and/or expense payment occurred and the expense limit in place at the time of
recoupment. If the Reorganization occurs, the Adviser will not recoup any fees
previously waived or expenses previously reimbursed under the Target Opportunity
Fund expense limitation agreement.
3.Prospector
has contractually agreed to waive a portion or all of its management fees and
pay Acquiring Opportunity Fund expenses (excluding shareholder servicing plan
fees, front-end or contingent deferred loads, taxes, leverage/borrowing
interest, interest expense, dividends paid on short sales, brokerage
commissions, AFFE, expenses incurred in connection with any merger or
reorganization, or extraordinary expenses such as litigation) in order to limit
the total annual fund operating expenses after fee waiver and expense
reimbursement to 1.15% of average daily net assets of the Acquiring Opportunity
Fund. Fees waived and expenses paid by Prospector may be recouped by Prospector
for a period of 36 months following the day on which such fee waiver and/or
expense payment was made, if such recoupment can be achieved without exceeding
the expense limit in effect at the time the fee waiver and/or expense payment
occurred and the expense limit in place at the time of recoupment. The Operating
Expenses Limitation Agreement cannot be terminated through at least September 9,
2026. Thereafter, the agreement may be terminated at any time upon 60 days’
written notice by the Acquiring Entity’s Board of Trustees (the “Acquiring
Entity Board”) or Prospector.
EXPENSE
EXAMPLE
The
expense examples below are intended to help you compare the costs of investing
in the Target Funds and the Acquiring Funds with the cost of investing in other
funds. Pro
forma
combined costs of investing in the Acquiring Funds after giving effect to the
Reorganization of the Target Funds into the Acquiring Funds are also provided.
All costs are based upon the information set forth in the Fee Table above. The
examples assume you invest $10,000 for the time periods indicated and then
either redeem or do not redeem your shares at the end of those periods. The
examples also assume that your investment has a 5% return each year and that the
operating expenses remain equal to the Total Annual Fund Operating Expenses
After Fee Waiver and Expense Reimbursement, for one year for each Target Fund
and two years for each Acquiring Fund, and the Total Annual Fund Operating
Expenses thereafter. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Target
Capital Appreciation Fund |
One
Year |
Three
Years |
Five
Years |
Ten
Years |
|
$128 |
$508 |
$912 |
$2,042 |
|
|
|
|
|
|
Acquiring
Capital Appreciation Fund (pro
forma) |
One
Year |
Three
Years |
Five
Years |
Ten
Years |
|
$118 |
$413 |
$775 |
$1,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Target
Opportunity Fund |
One
Year |
Three
Years |
Five
Years |
Ten
Years |
|
$128 |
$425 |
$744 |
$1,647 |
|
|
|
|
|
|
Acquiring
Opportunity Fund (pro
forma) |
One
Year |
Three
Years |
Five
Years |
Ten
Years |
|
$118 |
$379 |
$672 |
$1,505 |
HOW
DO THE PERFORMANCE RECORDS OF THE FUNDS COMPARE?
If
the applicable Reorganization is approved, each Acquiring Fund will assume the
performance history of the corresponding Target Fund. The Acquiring Funds do not
have their own performance history because they have not yet commenced
operations.
HOW
DO THE INVESTMENT ADVISORY, OPERATING EXPENSES AND DISTRIBUTION ARRANGEMENTS FOR
THE FUNDS COMPARE?
Investment
Advisory Arrangements.
Prospector serves as the investment adviser for the Target Funds and the
Acquiring Funds. Prospector is located at 370 Church Street, Guilford, CT 06437.
Prospector is organized as a Delaware limited liability company and is
controlled by John D. Gillespie.
The
contractual advisory fees for the Target Funds and the Acquiring Funds are the
same and set forth below. Note that in a year where an Acquiring Fund recoups
previously waived advisory fees, its contractual advisory fee plus recouped
amounts could exceed the Target Fund’s contractual advisory fee.
|
|
|
|
|
|
| Target
Fund / Acquiring Fund |
Advisory
Fee Rate |
| Capital
Appreciation Fund |
1.00% |
| Opportunity
Fund |
1.00% |
A
description of the basis for the Target Funds’ Board approving the investment
advisory agreement with Prospector is available in the Target Funds’ Annual
Report for the fiscal year ended December 31, 2023. A description of the basis
for the Acquiring Funds’ Board approving the investment advisory agreement with
Prospector will be available in the Acquiring Funds’ Annual Report for the
fiscal year ended December 31, 2024.
Operating
Expenses
Both
the Target Funds and the Acquiring Funds are subject to certain operating
expense limitations.
Target
Funds
Prospector
has contractually agreed to waive a portion of its fees and/or pay Target Fund
expenses (excluding interest, acquired fund fees and expenses, brokerage
commissions and extraordinary expenses) in order to limit the Total Annual Fund
Operating Expenses After Fee Waiver and Expense Reimbursement for each of the
Target Funds to 1.25% of their respective average daily net assets. This expense
cap will remain in effect through at least September 30, 2025, and may only be
terminated or amended by the Target Fund Board. Fees waived and expenses paid by
Prospector may be recouped by Prospector for a period of three years following
the day on which such fee waiver and/or expense payment was made, if such
recoupment can be achieved without exceeding the expense cap in effect at the
time the fee waiver and/or expense payment occurred and the expense limit in
place at the time of recoupment. If the Reorganization occurs, the Adviser will
not recoup any fees previously waived or expenses previously reimbursed.
Acquiring
Funds
Prospector
has contractually agreed to waive a portion or all of its management fees and
pay Acquiring Fund expenses (excluding shareholder servicing plan fees,
front-end or contingent deferred loads, taxes, leverage/borrowing interest,
interest expense, dividends paid on short sales, brokerage commissions, AFFE,
expenses incurred in connection with any merger or reorganization, or
extraordinary expenses such as litigation) in order to limit the Total Annual
Fund Operating Expenses After Fee Waiver and Expense Reimbursement to 1.15% of
average daily net assets of each Acquiring Fund. Fees waived and expenses paid
by Prospector may be recouped by Prospector for a period of 36 months following
the day on which such fee waiver and/or expense payment was made, if such
recoupment can be achieved without exceeding the expense limit in effect at the
time the fee waiver and/or expense payment occurred and the expense limit in
place at the time of recoupment. The Operating Expenses Limitation Agreement
cannot be terminated through at least September 9, 2026. Thereafter, the
agreement may be terminated at any time upon 60 days’ written notice by the
Acquiring Entity Board or Prospector.
Distribution.
Quasar Distributors, LLC (“Quasar”), located at 3 Canal Plaza, Suite 100,
Portland, ME 04101, serves as the distributor for the Target Funds and for the
Acquiring Funds.
HOW
DO THE BOARDS AND THE FUNDS’ OTHER SERVICE PROVIDERS COMPARE?
The
Target Entity and the Acquiring Entity have different boards of
trustees/directors. However, except for the independent registered public
accounting firm, the Target Funds and Acquiring Funds have the same principal
service providers. The following table identifies the principal service
providers of the Target Funds and the Acquiring Funds:
|
|
|
|
|
|
|
|
|
| SERVICE
PROVIDER |
TARGET
FUNDS |
ACQUIRING
FUNDS |
| Accounting
Services/Administrator |
U.S.
Bank Global Fund Services |
U.S.
Bank Global Fund Services |
| Transfer
Agent |
U.S.
Bank Global Fund Services |
U.S.
Bank Global Fund Services |
| Custodian |
U.S.
Bank, National Association |
U.S.
Bank, National Association |
| Independent
Registered Accounting Firm |
Ernst
& Young, LLP |
Cohen
& Company, Ltd. |
HOW
DO THE TARGET FUNDS’ AND ACQUIRING FUNDS’ PURCHASE AND REDEMPTION PROCEDURES AND
EXCHANGE POLICIES COMPARE?
The
Target Funds’ and Acquiring Funds’ purchase and redemption procedures are
substantively the same. You may purchase or redeem shares of each Fund on any
day that the New York Stock Exchange (“NYSE”) is open for business. You may
purchase shares at a Fund’s net asset value per share calculated after a Fund's
Transfer Agent receives and accepts your purchase order in proper form.
All
investment minimums currently enforced by the Target Funds will be the same for
the Acquiring Funds. The Acquiring Funds’ investment minimums will not be
enforced for the Reorganizations, as applicable.
HOW
DO THE FUNDS’ SALES CHARGES AND DISTRIBUTION ARRANGEMENTS COMPARE?
The
Target Funds and Acquiring Funds do not charge front-end sales loads or
contingent deferred sales charges. The Target Funds and Acquiring Funds have the
same Rule 12b-1 fee as set forth in the following table:
|
|
|
|
|
|
| Target
Fund / Acquiring Fund |
Maximum
Rule 12b-1 Fee* |
| Capital
Appreciation Fund |
0.25% |
| Opportunity
Fund |
0.25% |
*
The Plan is characterized as a reimbursement plan since the fee will be paid as
reimbursement for, or in anticipation of, expenses incurred for distribution
related activity.
Because
these fees are paid out of a Fund’s assets on an on-going basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
WILL
THERE BE ANY TAX CONSEQUENCES RESULTING FROM THE REORGANIZATIONS?
Each
Reorganization is expected to constitute a “reorganization” within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).
This means that, in general, the shareholders of a Target Fund will recognize no
gain or loss for U.S. federal income tax purposes upon the exchange of all of
their shares in the Target Fund for shares in the corresponding Acquiring Fund.
Each Target Fund anticipates receiving a legal opinion from Stradley Ronon
Stevens & Young, LLP as to this and other expected U.S. federal income tax
consequences of the Reorganizations.
In
addition, the tax basis and holding period of a shareholder’s Target Fund shares
are expected to carry over to the Acquiring Fund shares the shareholder receives
as a result of the applicable Reorganization. At any time prior to the
consummation of a Reorganization, Target Fund shareholders may redeem their
Target Fund shares, generally resulting in the recognition of gain or loss to
such shareholders for U.S. federal income tax purposes. This Proxy
Statement/Prospectus relates only to the U.S. federal income tax consequences of
the Reorganizations. Shareholders should consult their tax adviser about state,
local and foreign tax consequences of the Reorganizations, if any.
For
more detailed information about the U.S. federal income tax consequences of the
Reorganization, please refer to the section below entitled “THE PROPOSED
REORGANIZATION – U.S. Federal Income Tax Considerations”.
WILL
MY DIVIDENDS BE AFFECTED BY THE REORGANIZATIONS?
No.
Each Target Fund and each Acquiring Fund generally distributes its net
investment income and net capital gains, if any, at least annually. There will
be no changes to this schedule as a result of the Reorganizations.
WHEN
ARE THE REORGANIZATIONS EXPECTED TO OCCUR?
If
shareholders of the Target Funds approve the Reorganizations, it is anticipated
that the Reorganizations will occur on or around September 9,
2024.
HOW
DO I CAST MY VOTE?
There
are several ways you can vote your shares, including by participating in the
Meeting and casting your vote, by mail, by telephone, or via the internet. The
proxy card that accompanies this Proxy Statement/Prospectus provides detailed
instructions on how you may vote your shares. If you properly fill in and sign
your proxy card and send it to us in time to vote at the Meeting, your “proxy”
(the individuals named on your proxy card) will vote your shares as you have
directed. If you sign your proxy card but do not make specific choices, your
proxy will vote your shares “FOR” the Proposal, as recommended by the Target
Fund Board, and in their best judgment on other matters to the extent permitted
by the proxy rules of the U.S. Securities and Exchange Commission.
WHO
WILL PAY FOR THE REORGANIZATIONS?
The
total costs of the Reorganizations are estimated to be approximately $130,000.
In recognition of the anticipated reduced costs for the Acquiring Funds over
time as a result of the Reorganizations, the Target Funds will pay the costs of
the Reorganizations. The allocation of this amount to the Target Funds shall be
borne by each Target Fund in proportion to the average net assets held by the
Target Funds collectively (except that audit transition fees shall be divided
equally) as of the close of business on July 24, 2024. The fees and
expenses related to the Reorganizations include, but are not limited to, legal
fees, project fees, audit transition fees, proxy printing and mailing costs,
proxy solicitation costs, and expenses of continued liability coverage or “tail”
insurance coverage for the directors and officers of the Target Entity. Expenses
of the Reorganizations are considered extraordinary expenses, which are excluded
from each Target Fund’s expense limitation arrangement, and thus will be borne
by the Target Fund notwithstanding the expense limitation. In the event the
Reorganizations are not approved by the Target Funds’ shareholders, the Target
Funds will bear the costs of the Reorganizations
WHAT
IF I DO NOT WISH THE TARGET FUND TO PARTICIPATE IN THE REORGANIZATIONS?
If
you do not wish to have your shares of a Target Fund exchanged for shares of the
corresponding Acquiring Fund as part of the Reorganizations, you may vote
against the Proposal and/or redeem your shares prior to the consummation of the
Reorganizations. If you redeem your shares, and if you do not hold shares in a
tax-advantaged account, you will generally recognize a taxable gain or loss
based on the difference between your tax basis in the shares and the amount you
receive for them.
MAY
I REVOKE MY PROXY?
Any
shareholder who has given a proxy has the right to revoke it any time prior to
its exercise by participating in the Meeting and casting your vote or by
submitting a letter of revocation or a later-dated proxy card at the address
indicated on the enclosed envelope provided with this Proxy
Statement/Prospectus. Any letter of revocation or later-dated proxy card must be
received prior to the Meeting (currently scheduled for September 6,
2024,
at 10:00
a.m.,
Eastern time) and must indicate your name and account number to be effective.
Proxies voted by telephone or internet may be revoked at any time before they
are voted at the Meeting in the same manner that proxies voted by mail may be
revoked (i.e., the shareholder may participate in the Meeting and revoke their
vote or submit a letter of revocation any time prior to the Meeting, or the
shareholder may submit a new vote (in any capacity) to change their vote as only
the shareholder’s most recent vote counts).
WHERE
CAN I FIND MORE INFORMATION ABOUT THE TARGET FUNDS?
For
more information with respect to the Target Funds concerning the following
topics, please refer to the following sections of the Target Fund Prospectus,
which has been made a part of this Proxy Statement/Prospectus by reference: (i)
see “Performance” for more information about the performance of the Target
Funds; (ii) see “Management” for more information about the management of the
Target Funds; (iii) see “Calculating Share Price” for more information about the
pricing of shares of each Target Fund; (iv) see “Dividends, Distributions and
Shareholder Taxes” for more information about tax consequences to shareholders
of various transactions in shares of the Target Funds and for more information
about each Target Fund’s policy with respect to dividends and distributions; and
(v) see “Financial Highlights” for more information about the Target Funds’
financial performance. See also Exhibit C — Financial Highlights.
PROPOSAL:
APPROVAL OF THE REORGANIZATIONS
You
are being asked to approve a Plan, under which each Target Fund would be
reorganized into the corresponding Acquiring Fund within the Acquiring Entity.
The Plan, with respect to each Target Fund, provides for: (a) the transfer of
all of the assets of the Target Fund to the corresponding Acquiring Fund in
exchange for shares of the Acquiring Fund and the Acquiring Fund’s assumption of
all of the corresponding Target Fund’s liabilities; (b) the distribution of
shares of the corresponding Acquiring Fund to the shareholders of the Target
Fund; and (c) the liquidation and termination of such Target Fund.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
COMPARISON
OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The
following section describes the investment objectives and principal investment
strategies of each Target Fund and Acquiring Fund, and compares other
characteristics of each Target Fund and Acquiring Fund. The investment
objectives of each Acquiring Fund and its corresponding Target Fund are
identical. The principal investment strategies of each Target Fund are
substantially identical to the principal investment strategies for the
corresponding Acquiring Fund. A comparison of the principal risks associated
with the Funds’ investment strategies is described below under “Comparison of
Principal Risks of Investing in the Funds.”
|
|
|
|
|
|
|
|
|
|
Target
Capital Appreciation Fund |
Acquiring
Capital Appreciation Fund |
| Form
of Organization |
A
series of the Target Entity, an open-end investment management company
organized as a Maryland corporation. |
A
series of the Acquiring Entity, an open-end investment management company
organized as a Delaware statutory trust. |
| Share
Classes |
Single
share class structure |
Same |
| Net
Assets as of March 31, 2024 |
$39.0
million |
N/A |
| Investment
Advisor |
Prospector |
Same |
| Portfolio
Managers |
Kevin
R. O’Brien, Jason A. Kish and Steven R. Labbe |
Same |
| Investment
Objectives |
The
investment objective of the Target Capital Appreciation Fund is capital
appreciation. |
Same |
| Principal
Investment Strategies |
The
following presents a side-by-side comparison of the principal investment
strategies of the Target Capital Appreciation Fund and Acquiring Capital
Appreciation Fund, which are substantially
identical. |
|
|
|
|
|
|
|
|
|
|
Under
normal market conditions, the Target Capital Appreciation Fund invests
primarily in a variety of equity and equity-related securities, including
common stocks, convertible preferred and convertible debt securities. The
Target Capital Appreciation Fund attempts to buy investments priced to
generate long-term total returns significantly above those of general
stock indices and U.S. treasuries. Using a value orientation, Prospector
invests in positions in the United States and other developed markets.
Prospector’s investment strategy consists of bottom-up fundamental value
analysis with an emphasis on companies believed to have strong balance
sheets whose securities will better maintain their value relative to peers
in declining markets. In evaluating potential investments, Prospector also
considers qualitative factors, including quality of management, quality of
product or service, overall franchise or brand value, composition of the
board of directors, and the uniqueness of the business model. Prospector
looks for the presence of catalysts to improve internal performance, such
as a change in management, a new management incentive program closely
linked to the price of the stock, the sale of an underperforming asset or
business unit, or a positive change in industry fundamentals. |
Same |
|
Prospector
believes that fundamental analysis can identify undervalued investment
opportunities. Substantial gains are possible whenever a security’s price
does not accurately reflect future cash flow and earnings power or where
current or future asset values have not been fully recognized. Prospector
believes that risk can be managed through a careful selection process that
focuses on the relationship between the actual market price of a security
and the intrinsic value of which the security represents an interest.
Prospector's security selection process reflects a defensive investment
style that seeks to participate in rising equity markets while mitigating
downside risk in declining markets. |
Same |
|
|
|
|
|
|
|
|
|
|
The
investment program of the Target Capital Appreciation Fund focuses on
value. Prospector believes that value will typically be manifest in one of
four ways: (1) inexpensive underlying assets as measured by analytical
techniques such as private market value, replacement cost, or mark to
market; (2) attractive corporate financial characteristics such as free
cash flow yield, dividend yield and price/earnings (P/E) ratio; (3)
depressed stock price (often known as contrarian investing); and (4)
companies with growth characteristics selling substantially less
expensively compared to their own history or other similar growers.
Suitable securities often look attractive on more than one measure of
value. |
Same |
|
Once
a company is identified as a potential investment, Prospector examines the
capital structure to determine whether any attractive convertible
securities are outstanding. In general, convertible securities: (1) have
higher yields than common stocks but lower yields than comparable
non-convertible securities; (2) may be subject to less fluctuation in
value than the underlying common stock because of their income and
redemption features; and (3) provide potential for capital appreciation if
the market price of the underlying common stock increases (and in those
cases may be thought of as “equity substitutes”). Because of the
conversion feature, the price of a convertible security will normally vary
in some proportion to changes in the price of the underlying common stock.
The underlying equity need not be a value situation if Prospector believes
that the downside is well protected by the bond-like characteristics of
the particular convertible security. |
Same |
|
The
distressed securities in which the Target Capital Appreciation Fund may
invest include all types of debt obligations, including corporate bonds,
debentures, notes, municipal bonds and, to the extent permitted by
applicable laws and regulations, securities issued by foreign issuers,
including foreign governments. |
Same |
|
|
|
|
|
|
|
|
|
|
The
Target Capital Appreciation Fund may invest in restricted securities
including, but not limited to, private placements of equity and/or debt
securities of private companies. In particular, the Target Capital
Appreciation Fund may invest in unregistered securities which may be sold
under Rule 144A of the Securities Act of 1933, as amended (“144A
Securities”). |
Same |
|
In
pursuit of its value-oriented strategy, the Target Capital Appreciation
Fund may invest without regard to market capitalization. The Target
Capital Appreciation Fund may also engage in currency
transactions. |
Same |
| Management
and Other Fees |
The
Target Capital Appreciation Fund pays a management fee to Prospector at an
annualized rate of 1.00% of the Target Capital Appreciation Fund’s average
daily net assets. |
Same |
|
Prospector
has contractually agreed to waive a portion of its fees and/or pay Target
Capital Appreciation Fund expenses (excluding interest, acquired fund fees
and expenses, brokerage commissions and extraordinary expenses) in order
to limit the Total Annual Fund Operating Expenses After Fee Waiver and
Expense Reimbursement for the Target Capital Appreciation Fund to 1.25% of
its average daily net assets. This expense cap will remain in effect
through at least September 30, 2025, and may only be terminated or amended
by the Target Fund Board. Fees waived and expenses paid by Prospector may
be recouped by Prospector for a period of three years following the day on
which such fee waiver and/or expense payment was made, if such recoupment
can be achieved without exceeding the expense cap in effect at the time
the fee waiver and/or expense payment occurred and the expense limit in
place at the time of recoupment. If the Reorganization occurs, the Adviser
will not recoup any fees previously waived or expenses previously
reimbursed. |
Prospector
has contractually agreed to waive a portion or all of its management fees
and pay Acquiring Capital Appreciation Fund expenses (excluding
shareholder servicing plan fees, front-end or contingent deferred loads,
taxes, leverage/borrowing interest, interest expense, dividends paid on
short sales, brokerage commissions, AFFE, expenses incurred in connection
with any merger or reorganization, or extraordinary expenses such as
litigation) in order to limit the Total Annual Fund Operating Expenses
After Fee Waiver and Expense Reimbursement to 1.15% of average daily net
assets of the Acquiring Capital Appreciation Fund. Fees waived and
expenses paid by Prospector may be recouped by Prospector for a period of
36 months following the day on which such fee waiver and/or expense
payment was made, if such recoupment can be achieved without exceeding the
expense limit in effect at the time the fee waiver and/or expense payment
occurred and the expense limit in place at the time of recoupment. The
Operating Expenses Limitation Agreement cannot be terminated through at
least September 9, 2026. Thereafter, the agreement may be terminated at
any time upon 60 days’ written notice by the Acquiring Entity Board or
Prospector. |
| Sales
Charges |
None |
Same |
| Distribution
and Rule 12b-1 Fees |
A
maximum amount of 0.25% annually. |
Same |
|
|
|
|
|
|
|
|
|
| Shareholder
Servicing Plan Fee |
None |
Same |
| 1940
Act Diversification |
The
Target Capital Appreciation Fund is diversified. |
Same |
|
|
|
|
|
|
|
|
|
|
Target
Opportunity Fund |
Acquiring
Opportunity Fund |
| Form
of Organization |
A
series of the Target Entity, an open-end investment management company
organized as a Maryland corporation. |
A
series of the Acquiring Entity, an open-end investment management company
organized as a Delaware statutory trust. |
| Mutual
Fund or ETF Structure |
Mutual
Fund |
Same |
| Share
Classes |
Single
share class structure |
Same |
| Net
Assets as of March 31, 2024 |
$251.6
million |
N/A |
| Investment
Advisor |
Prospector |
Same |
| Portfolio
Managers |
Kevin
R. O’Brien, Jason A. Kish and Steven R. Labbe |
Same |
| Investment
Objectives |
The
investment objective of the Target Opportunity Fund is capital
appreciation. |
Same |
| Principal
Investment Strategies |
The
following presents a side-by-side comparison of the principal investment
strategies of the Target Opportunity Fund and Acquiring Opportunity Fund,
which are substantially identical. |
|
|
|
|
|
|
|
|
|
|
Under
normal market conditions, the Target Opportunity Fund invests primarily in
a variety of equity and equity-related securities, including common
stocks. The Target Opportunity Fund attempts to buy investments priced to
generate long-term total returns significantly above those of general
stock indices and U.S. treasuries. Using a value orientation, Prospector
invests in positions in the United States and other developed markets.
Prospector’s investment strategy consists of bottom-up fundamental value
analysis with an emphasis on companies believed to have strong balance
sheets whose securities will better maintain their value relative to peers
in declining markets. In evaluating potential investments, Prospector
considers qualitative factors, including quality of management, quality of
product or service, overall franchise or brand value, composition of the
board of directors, and the uniqueness of the business model. Prospector
looks for the presence of catalysts to improve internal performance, such
as a change in management, a new management incentive program closely
linked to the price of the stock, the sale of an underperforming asset or
business unit, or a positive change in industry fundamentals. |
Same |
|
Prospector
believes that fundamental analysis can identify undervalued investment
opportunities. Substantial gains are possible whenever a security’s price
does not accurately reflect future cash flow and earnings power or where
current or future asset values have not been fully recognized. Prospector
believes that risk can be managed through a careful selection process that
focuses on the relationship between the actual market price of a security
and the intrinsic value of which the security represents an interest.
Prospector's security selection process reflects a defensive investment
style that seeks to participate in rising equity markets while mitigating
downside risk in declining markets. |
Same |
|
|
|
|
|
|
|
|
|
|
The
investment program of the Target Opportunity Fund focuses on value.
Prospector believes that value will typically be manifest in one of four
ways: (1) attractive corporate financial characteristics such as free cash
flow yield, dividend yield and price/earnings (P/E) ratio; (2) inexpensive
underlying assets as measured by analytical techniques such as private
market value, replacement cost, or mark to market; (3) depressed stock
price (often known as contrarian investing); and (4) companies with growth
characteristics selling substantially less expensively compared to their
own history or other similar growers. Suitable securities often look
attractive on more than one measure of value. |
Same |
|
In
pursuit of its value-oriented strategy, the Target Opportunity Fund may
invest substantially in small and mid-cap companies. For the purposes of
this investment policy, small to mid-cap companies are defined as
companies with market capitalizations at the time of purchase in the range
of $150 million to $30 billion. Prospector believes that, within the small
to mid-cap universe of equity securities, incremental returns can be
achieved by combining a disciplined quantitative approach with traditional
fundamental analysis. The Target Opportunity Fund has no fixed ratio for
small and mid-cap securities in its portfolio, and while its focus is on
securities of U.S. companies, it may invest in securities of non-U.S.
issuers as well. |
Same |
|
The
Target Opportunity Fund may also engage in currency
transactions. |
Same |
| Management
and Other Fees |
The
Target Opportunity Fund pays a management fee to Prospector at an
annualized rate of 1.00% of the Target Opportunity Fund’s average daily
net assets. |
Same |
|
|
|
|
|
|
|
|
|
|
Prospector
has contractually agreed to waive a portion of its fees and/or pay Target
Opportunity Fund expenses (excluding interest, acquired fund fees and
expenses, brokerage commissions and extraordinary expenses) in order to
limit the Total Annual Fund Operating Expenses After Fee Waiver and
Expense Reimbursement for the Target Opportunity Fund to 1.25% of its
average daily net assets. This expense cap will remain in effect through
at least September 30, 2025, and may only be terminated or amended by the
Target Fund Board. Fees waived and expenses paid by Prospector may be
recouped by Prospector for a period of three years following the day on
which such fee waiver and/or expense payment was made, if such recoupment
can be achieved without exceeding the expense cap in effect at the time
the fee waiver and/or expense payment occurred and the expense limit in
place at the time of recoupment. If the Reorganization occurs, the Adviser
will not recoup any fees previously waived or expenses previously
reimbursed. |
Prospector
has contractually agreed to waive a portion or all of its management fees
and pay Acquiring Opportunity Fund expenses (excluding shareholder
servicing plan fees, front-end or contingent deferred loads, taxes,
leverage/borrowing interest, interest expense, dividends paid on short
sales, brokerage commissions, AFFE, expenses incurred in connection with
any merger or reorganization, or extraordinary expenses such as
litigation) in order to limit the Total Annual Fund Operating Expenses
After Fee Waiver and Expense Reimbursement to 1.15% of average daily net
assets of the Acquiring Opportunity Fund. Fees waived and expenses paid by
Prospector may be recouped by Prospector for a period of 36 months
following the day on which such fee waiver and/or expense payment was
made, if such recoupment can be achieved without exceeding the expense
limit in effect at the time the fee waiver and/or expense payment occurred
and the expense limit in place at the time of recoupment. The Operating
Expenses Limitation Agreement cannot be terminated through at least
September 9, 2026. Thereafter, the agreement may be terminated at any time
upon 60 days’ written notice by the Acquiring Entity Board or
Prospector. |
| Sales
Charges |
None |
Same |
| Distribution
and Rule 12b-1 Fees |
A
maximum amount of 0.25% annually. |
Same |
| Shareholder
Servicing Plan Fee |
None |
Same |
| 1940
Act Diversification |
The
Target Opportunity Fund is diversified. |
Same |
PORTFOLIO
MANAGERS
The
following table identifies the portfolio managers for each of the Target Funds
and Acquiring Funds.
|
|
|
|
|
|
| Target
Fund / Acquiring Fund |
Portfolio
Managers |
| Capital
Appreciation Fund |
Kevin
R. O’Brien
Jason A. Kish
Steven R. Labbe |
| Opportunity
Fund |
Kevin
R. O’Brien
Jason A. Kish
Steven R.
Labbe |
Biographies
Kevin
R. O’Brien
Mr.
O’Brien has been a portfolio manager at Prospector since 2007. Mr. O’Brien has
been a portfolio manager or securities analyst for more than thirty years. In
April 2003, Mr. O’Brien became a portfolio manager of Prospector Partners, LLC.
In addition, from April 2003 through August 2005, Mr. O’Brien served as a
Managing Director of White Mountains Advisors, LLC. From April 1996 through
April 2003, Mr. O’Brien was an employee of Neuberger Berman, where he began as
an investment analyst (1996-1999), served as Vice President (1999-2001), and
Managing Director (2001-2003). At the end of Mr. O’Brien’s tenure at Neuberger
Berman, Mr. O’Brien’s responsibilities included the co-management of equity
assets of institutional investors and mutual funds. At Neuberger Berman, Mr.
O’Brien served as co-manager of the Neuberger Berman Genesis Fund. Mr. O’Brien
was responsible for following stocks in the financial services, consumer, and
technology sectors. From 1991 through 1996, Mr. O’Brien was an employee of Alex,
Brown & Sons, where he was an analyst following the financial services
industry. His coverage universe included property-casualty insurance, specialty
finance, asset management, and diversified financial services. Mr. O’Brien
received a B.S. magna cum laude from Central Connecticut State University in
1986. Additionally, Mr. O’Brien received a Chartered Financial Analyst
designation in 1995.
Jason
A. Kish
Mr.
Kish is a portfolio manager at Prospector and has been a portfolio manager or
securities analyst for more than twenty-five years. Mr. Kish joined Prospector
Partners, LLC, an affiliate of Prospector, in December 1997. He began as a
junior analyst, covering all industries, eventually serving as the
property-casualty analyst and became the Director of Research in 2010.
From 1995 to 1997, Mr. Kish worked as an auditor at Coopers & Lybrand, LLP
in Hartford, CT. Mr. Kish received a B.S.B.A. from Providence College in
1995. He received his Certified Public Accountant designation in 2000 and his
Chartered Financial Analyst designation in 2004.
Steven
R. Labbe
Mr.
Labbe is a portfolio manager at Prospector and has been a portfolio manager or
securities analyst for more than twenty-five years. Mr. Labbe joined Prospector
Partners, LLC, an affiliate of the Investment Manager, in March, 2012. He began
as an analyst, covering the insurance industry and gradually increased his
coverage to asset managers, exchanges, and brokers; he became a portfolio
manager in July, 2020. From 1996 to 2012, Mr. Labbe was employed as an analyst
with Langen McAlenney, a division of Janney Montgomery Scott, covering the
insurance industry. Mr. Labbe received a B.S. degree in
Mathematics,
from Central Connecticut State University in December 1995. He received his
Chartered Financial Analyst designation in 2001.
The
Target and Acquiring Funds’ Statements of Additional Information provide
additional information about the portfolio managers’ compensation, other
accounts managed by the portfolio managers and each portfolio manager’s
ownership of Fund shares.
COMPARISON
OF PRINCIPAL RISKS OF INVESTING IN THE FUNDS
The
principal risks of investing in the Acquiring Funds and the Target Funds are
discussed below. The principal risks of each Acquiring Fund and the principal
risks of each corresponding Target Fund are the same because the principal
investment strategies of the Funds are the same.
|
|
|
|
|
|
| Target
Capital Appreciation Fund |
Acquiring
Capital Appreciation Fund |
|
Stock
Market Risk,
which is the chance that stock prices overall will decline. Stock markets
tend to move in cycles, with periods of rising prices and periods of
falling prices. When the stock market is subject to significant
volatility, the risks associated with an investment in the Target Capital
Appreciation Fund may increase. Markets may experience periods of high
volatility and reduced liquidity and, during such periods, the Target
Capital Appreciation Fund may experience high levels of shareholder
redemptions, and may have to sell securities at times when the Target
Capital Appreciation Fund would otherwise not do so, potentially at
unfavorable prices. |
Same |
|
Convertible
Securities Risk,
which is the risk that, with respect to a convertible security and prior
to its conversion to equity, the price of the convertible security will
normally vary with changes in the price of the underlying equity security,
and the convertible security will generally offer interest or dividend
yields that are lower than non-convertible debt securities of similar
quality. |
Same |
|
Interest
Rate Risk,
which is the chance that changes in interest rates will affect the value
of investments in debt securities. When interest rates rise, the value of
existing investments in debt securities tends to fall and this decrease in
value may not be offset by higher income from new investments. Interest
rate risk is generally greater for fixed-income securities with longer
maturities or durations, but increasing interest rates may have an adverse
effect on the value of the Target Capital Appreciation Fund’s investment
portfolio as a whole. The Target Capital Appreciation Fund may be subject
to a greater risk of rising interest rates than would normally be the case
due to the recent end of a period of historically low rates and the
effects of potential central bank monetary policy, and government fiscal
policy, initiatives and market reactions to those
initiatives. |
Same |
|
Income
Risk,
which is the chance that the Capital Appreciation Fund’s income will
decline because of falling interest rates. |
Same |
|
Credit
Risk,
which is the chance that a debt issuer will fail to pay interest and
principal in a timely manner, or that negative perceptions of the issuer’s
ability to make such payments will cause the price of that debt to
decline. |
Same |
|
|
|
|
|
|
| Target
Capital Appreciation Fund |
Acquiring
Capital Appreciation Fund |
|
High
Yield Securities Risk,
which is the risk that debt securities in the lower rating categories are
subject to a greater probability of loss in principal and interest than
higher-rated securities and are generally considered to be predominantly
speculative with respect to the issuer’s capacity to pay interest and
repay principal. These securities may be subject to greater price
volatility due to such factors as specific corporate developments,
interest rate sensitivity and negative perceptions of the lower rated debt
securities market generally and may be more difficult to trade or dispose
of than other types of securities. |
Same |
|
Foreign
Securities Risk, which
is the risk associated with investments in securities of non-U.S. issuers.
The following factors make foreign securities more volatile: political,
economic and social instability; foreign securities may be harder to sell;
brokerage commissions and other fees may be higher for foreign securities;
and foreign companies may not be subject to the same disclosure and
reporting standards as U.S. companies. |
Same |
|
Currency
Risk,
which is the risk that the value of foreign securities may be affected by
changes in currency exchange rates. |
Same |
|
Smaller
and Mid-Sized Companies Risk,
which is the risk that the securities of such issuers may be comparatively
more volatile in price than those of companies with larger
capitalizations, and may lack the depth of management and established
markets for their products and/or services that may be associated with
investments in larger issuers. |
Same |
|
Value
Investing Risk,
which is the risk that value securities may not increase in price as
anticipated by the Investment Manager, and may even decline further in
value, if other investors fail to recognize the company’s value, or favor
investing in faster-growing companies, or if the events or factors that
the Investment Manager believes will increase a security’s market value do
not occur. |
Same |
|
Restricted
Securities Risk,
which is the risk that restricted securities may have terms that limit
their resale to other investors or may require registration under
applicable securities laws before they may be sold publicly. It may not be
possible to sell certain restricted securities at any particular time or
at an acceptable price. |
Same |
|
|
|
|
|
|
| Target
Opportunity Fund |
Acquiring
Opportunity Fund |
|
Stock
Market Risk,
which is the chance that stock prices overall will decline. Stock markets
tend to move in cycles, with periods of rising prices and periods of
falling prices. When the stock market is subject to significant
volatility, the risks associated with an investment in the Target
Opportunity Fund may increase. Markets may experience periods of high
volatility and reduced liquidity and, during such periods, the Target
Opportunity Fund may experience high levels of shareholder redemptions,
and may have to sell securities at times when the Target Opportunity Fund
would otherwise not do so, potentially at unfavorable
prices. |
Same |
|
|
|
|
|
|
| Target
Opportunity Fund |
Acquiring
Opportunity Fund |
|
Interest
Rate Risk,
which is the chance that changes in interest rates will affect the value
of investments in debt securities. When interest rates rise, the value of
existing investments in debt securities tends to fall and this decrease in
value may not be offset by higher income from new investments. Interest
rate risk is generally greater for fixed-income securities with longer
maturities or durations, but increasing interest rates may have an adverse
effect on the value of the Target Opportunity Fund's investment portfolio
as a whole. The Target Opportunity Fund may be subject to a greater risk
of rising interest rates than would normally be the case due to the recent
end of a period of historically low rates and the effects of potential
central bank monetary policy, and government fiscal policy, initiatives
and market reactions to those initiatives. |
Same |
|
Income
Risk,
which is the chance that the Target Opportunity Fund’s income will decline
because of falling interest rates. |
Same |
|
Credit
Risk,
which is the chance that a debt issuer will fail to pay interest and
principal in a timely manner, or that negative perceptions of the issuer’s
ability to make such payments will cause the price of that debt to
decline. |
Same |
|
Smaller
and Mid-Sized Companies Risk,
which is the risk that the securities of such issuers may be comparatively
more volatile in price than those of companies with larger
capitalizations, and may lack the depth of management and established
markets for their products and/or services that may be associated with
investments in larger issuers. |
Same |
|
Foreign
Securities Risk,
which is the risk associated with investments in securities of non-U.S.
issuers. The following factors make foreign securities more volatile:
political, economic and social instability; foreign securities may be
harder to sell; brokerage commissions and other fees may be higher for
foreign securities; and foreign companies may not be subject to the same
disclosure and reporting standards as U.S. companies. |
Same |
|
Currency
Risk,
which is the risk that the value of foreign securities may be affected by
changes in currency exchange rates. |
Same |
|
Value
Investing Risk,
which is the risk that value securities may not increase in price as
anticipated by the Investment Manager, and may even decline further in
value, if other investors fail to recognize the company’s value, or favor
investing in faster-growing companies, or if the events or factors that
the Investment Manager believes will increase a security’s market value do
not occur. |
Same |
COMPARISON
OF FUNDAMENTAL INVESTMENT RESTRICTIONS
The
1940 Act requires registered investment companies, such as the Target Funds and
Acquiring Funds, to adopt fundamental policies with respect to concentration of
investments in securities of issuers in particular industries, borrowing,
issuing senior securities, lending, investments in commodities, investments in
real estate, underwriting securities and diversification (if applicable).
Fundamental policies cannot be changed without approval by the vote of a
majority of the outstanding shares of a Fund. The phrase “majority of the
outstanding shares” means the vote of: (i) 67% or more of the Fund’s shares
present at a meeting, if more than 50% of the outstanding shares of the Fund are
present or represented by
proxy,
or (ii) more than 50% of the Fund’s outstanding shares, whichever is less. Each
Target Fund's fundamental policies are substantially similar to the
corresponding Acquiring Fund's fundamental policies. Any differences are not
expected to result in a material change to a Target Fund's principal investment
strategies, which will be substantially identical to the principal investment
strategies of each corresponding Acquiring Fund.
|
|
|
|
|
|
| Fundamental
Investment Policies |
| Target
Capital Appreciation Fund / Target Opportunity Fund |
Acquiring
Capital Appreciation Fund / Acquiring Opportunity Fund |
| As
a matter of fundamental policy, the Funds may not: |
As
a matter of fundamental policy, the Funds may not: |
| Purchase
or sell commodities, commodity contracts (except in conformity with
regulations of the Commodities Futures Trading Commission such that the
Fund would not be considered a commodity pool), or oil and gas interests
or real estate. Securities or other instruments backed by commodities are
not considered commodities or commodity contracts for purposes of this
restriction. Debt or equity securities issued by companies engaged in the
oil, gas, or real estate businesses are not considered oil or gas
interests or real estate for purposes of this restriction. First mortgage
loans and other direct obligations secured by real estate are not
considered real estate for purposes of this restriction. |
Same |
| Make
loans, except to the extent the purchase of debt obligations of any type
are considered loans and except that each Fund may lend portfolio
securities to qualified institutional investors in compliance with
requirements established from time to time by the SEC and the securities
exchanges on which such securities are traded. |
Same |
| Issue
securities senior to its stock or borrow money or utilize leverage in
excess of the maximum permitted by the 1940 Act, which is currently 33
1/3% of total assets (including 5% for emergency or other short-term
purposes). |
Issue
securities senior to its stock or borrow money or utilize leverage in
excess of the maximum permitted by the 1940 Act, which is currently 33
1/3% of total assets (including 5% for emergency or other short-term
purposes), and this restriction shall not prohibit a Fund from engaging in
options transactions and other derivatives transactions, reverse
repurchase agreements, purchasing securities on a when-issued, delayed
delivery, or forward delivery basis, or short sales in accordance with its
objectives and strategies. |
| Invest
more than 25% of the value of its assets in a particular industry (except
that U.S. government securities are not considered an industry). |
Same |
|
|
|
|
|
|
| Fundamental
Investment Policies |
| Target
Capital Appreciation Fund / Target Opportunity Fund |
Acquiring
Capital Appreciation Fund / Acquiring Opportunity Fund |
| As
a matter of fundamental policy, the Funds may not: |
As
a matter of fundamental policy, the Funds may not: |
| Act
as an underwriter except to the extent the Fund may be deemed to be an
underwriter when disposing of securities it owns or when selling its own
shares. |
Same |
| Except
as may be described in the Prospectus, purchase securities on
margin. |
Except
as may be described in the Prospectus or SAI, purchase securities on
margin. |
COMPARISON
OF SHAREHOLDER RIGHTS
The
Target Funds are each a series of the Target Entity, a Maryland corporation, and
the Acquiring Funds are each a series of the Acquiring Entity, a Delaware
statutory trust. The Target Entity is governed by Articles of Amendment and
Restatement dated September 7, 2007, as amended from time to time, its bylaws
and Maryland law. The Acquiring Fund is governed by an Amended and Restated
Agreement and Declaration of Trust dated November 16, 2016, its bylaws and
Delaware law. The governing instruments have certain principal differences to
one another, and therefore shareholders of the Funds may have different rights
(see
the bolded text below for specific differences).
Additional information about the Target Funds’ and Acquiring Funds’ governing
instruments is provided below .
SHARES.
The directors of the Target Entity and the trustees of the Acquiring Entity each
have the power to issue shares without shareholder approval. The
governing instruments of the Target Entity permit the Target Entity to issue
1,000,000,000 shares, subject to the ability of the directors of the Target
Entity to increase or decrease the aggregate number of authorized shares under
Maryland law, whereas the governing instruments of the Acquiring Entity permit
the trustees of the Acquiring Entity to issue additional shares without
limit.
The
governing instruments of both the Target Entity and Acquiring Entity are
explicit that shares of each have no preemptive rights.
SHAREHOLDER
MEETINGS.
Neither the Target Entity nor the Acquiring Entity is required to hold annual
meetings of shareholders. Shareholder meetings may be called by the board of
directors/trustees of either the Target Entity or Acquiring Entity or by certain
officers of the Target Entity.
A
meeting shall be called by the Secretary of the Target Entity upon the written
request of the holders of shares entitled to not less than a majority of all the
votes entitled to be cast at such meeting; provided that such holders prepay the
costs to the Target Entity of preparing and mailing the notice of the meeting.
VOTING
RIGHTS.
The 1940 Act provides that shareholders of the Target Funds and the Acquiring
Funds have the power to vote with respect to certain matters: specifically, for
the election of directors/trustees, the selection of auditors (under certain
circumstances), approval of investment advisory agreements and plans of
distribution, and amendments to policies, objectives or restrictions deemed to
be fundamental. The governing instruments of the Target Entity and the Acquiring
Entity provide that
shareholders
have the right to vote for the election and removal of directors/trustees to the
extent required by law.
The
governing instruments of the Target Entity and the Acquiring Entity further
provide that each shareholder is entitled to one vote for each full share held,
and a fractional vote for each fractional share held, and that each Target Fund
or Acquiring Fund, as applicable, will vote separately on matters relating
solely to it.
Shareholders
of the Acquiring Funds are not entitled to cumulative voting with respect to the
election of trustees. The governing instruments of the Target Entity are silent
on cumulative voting.
QUORUM
AND VOTING.
The governing instruments of the Target Entity and Acquiring Entity each provide
that, except as otherwise required applicable law, thirty-three
and one-third percent (33 and 1/3%)
of the shares present or represented by proxy and entitled to vote at a
shareholder meeting shall constitute a quorum and, if a quorum is present at any
meeting, a majority of the shares voted decide any question, except unless a
greater number is required by applicable law.
With
respect to the Target Entity and Acquiring Entity, if the 1940 Act requires
approval of a majority of the outstanding voting securities, then the vote
required by the 1940 Act is the lesser of: (a) 67% or more of the shares present
at the meeting, if the holders of more than 50% of the outstanding shares
entitled to vote are present or represented by proxy; or (b) more than 50% of
the outstanding shares entitled to vote.
SUBMISSION
OF SHAREHOLDER PROPOSALS.
The Target Entity and the Acquiring Entity do not have provisions in their
governing instruments that require shareholders to provide advance notice to the
Target Funds or Acquiring Funds, as applicable, in order to present a proposal
at a shareholder meeting. Nonetheless, the federal securities laws, which apply
to the Acquiring Funds and the Target Funds, require that certain conditions be
met to present any proposal at a shareholder meeting. The matters to be
considered and brought before an annual or special meeting of shareholders of
the Target Funds and the Acquiring Funds are limited to only those matters,
including the nomination and election of directors/trustees, which are properly
brought before the meeting. These requirements are intended to provide the
Target Fund Board or the Acquiring Entity Board the opportunity to better
evaluate the proposal and provide additional information to shareholders for
their consideration in connection with the proposal. Failure to satisfy the
requirements of these advance notice provisions means that a shareholder may not
be able to present a proposal at an annual or special shareholder
meeting.
DERIVATIVE
ACTIONS.
Under
the Delaware Statutory Trust Act, a shareholder may bring a derivative action if
trustees with authority to do so have refused to bring the action or if a demand
upon the trustees to bring the action is not likely to succeed. A shareholder
may bring a derivative action only if the shareholder is a shareholder at the
time the action is brought and: (1) was a shareholder at the time of the
transaction complained about or (2) acquired the status of shareholder by
operation of law or pursuant to the governing instruments from a person who was
a shareholder at the time of the transaction.
The
governing instruments of the Acquiring Entity additionally provide that:
•shareholders
owning at least 10% of an Acquiring Fund must join in bringing a derivative
action;
•a
shareholder of an Acquiring Fund may only bring a derivative action if the
following conditions are met: (i) the shareholder must make a pre-suit demand
upon the Acquiring Fund’s Trustees to bring the subject action unless an effort
to cause the Trustees to bring such an action is not likely to succeed; and a
demand on the Trustees shall only be deemed not likely to succeed and therefore
excused if a majority of the Trustees, or a majority of any committee
established to consider the merits of such action, has a personal financial
interest in the transaction at issue, and a Trustee shall not be deemed
interested in a transaction or otherwise disqualified from ruling on the merits
of a shareholder demand by virtue of the fact that such Trustee receives
remuneration for his service as a Trustee of the Acquiring Entity or as a
trustee or director of one or more investment companies that are under common
management with or otherwise affiliated with the Acquiring Entity; and (ii)
unless a demand is not required under clause (i) of this paragraph, the
Acquiring Fund’s Trustees must be afforded a reasonable amount of time to
consider such shareholder request and to investigate the basis of such claim;
and the Trustees shall be entitled to retain counsel or other advisors in
considering the merits of the request and may require an undertaking by the
shareholder making such request to reimburse the Acquiring Entity for the
expense of any such advisors in the event that the Trustees determine not to
bring such action. The Acquiring Fund’s Trustees may designate a committee of
two or more Trustees to consider a shareholder demand if necessary to create a
committee with a majority of Trustees who do not have a personal financial
interest in the transaction at issue.
Under
Maryland law, applicable case law at the time of a particular derivative action
will establish any requirements or limitations with respect to Target Fund
shareholder derivative actions.
For
the avoidance of doubt, the limitations stated herein regarding the ability of
the Acquiring Funds’ shareholders to bring a derivative action do not apply to
claims brought under the federal securities laws.
AMENDMENT
OF GOVERNING INSTRUMENTS.
The Articles of Incorporation and Agreement and Declaration of Trust for each of
the Target Entity and Acquiring Entity, respectively, may be amended pursuant to
approval of the directors/trustees, except that shareholders shall be entitled
to vote on changes to the extent required by the 1940 Act.
LIABILITY
OF SHAREHOLDERS.
The
governing instruments for the Acquiring Entity generally provide that
shareholders will not be subject to personal liability for the obligations of an
Acquiring Fund. Under Maryland law, shareholders of the Target Funds will
generally not be subject to personal liability for the obligations of a Target
Fund.
THE
PROPOSED REORGANIZATIONS
TARGET
FUND BOARD CONSIDERATIONS IN APPROVING THE REORGANIZATIONS
At
the Special Meetings, the Board, at the recommendation of the Adviser, resolved
to transition the Funds from a stand-alone, proprietary corporate structure to a
Fund Services-sponsored multiple series trust (“MST”) composed of independent
funds managed by unaffiliated investment advisers. The Adviser highlighted
Prospector’s long relationship with Fund Services, noting that the Funds would
not need to convert transfer agent or accounting records and would have the same
client service team after the
Transition,
which generally posed a lower risk of operational error in relation to other MST
sponsors. The Adviser noted the reputation of U.S. Bank and indicated that the
Acquiring Entity offers a well-resourced infrastructure, which includes, in
particular, expertise and support for compliance and regulatory matters, and
sound cybersecurity, anti-money laundering and know-your-customer (client
identity verification) protections, given its affiliation with a bank. The
Adviser specifically indicated that the potential benefits of being on the
Acquiring Entity platform include (i) the potential for economies of scale and
lower expenses over time due to the larger asset size and potential for asset
growth of the platform (compared to the platform of Prospector Funds, Inc.) and
the ability for fixed costs to be allocated across a larger asset base; (ii)
continuity in the services provided to the Funds from Fund Services as fund
accountant, fund administrator and transfer agent, and U.S. Bank, N.A. as
custodian; and (iii) access to professionals and other resources of the
platform, including resources to navigate increasing industry complexity and
regulatory changes.
SUMMARY
OF AGREEMENT AND PLAN OF REORGANIZATION
The
terms and conditions under which the Reorganizations are expected to be
consummated are set forth in the Plan. The following summary is qualified in its
entirety by reference to the Plan, a copy of which is attached as Exhibit
B
to this Proxy Statement/Prospectus.
The
Acquiring Funds have been newly established by the Acquiring Entity solely for
the purpose of effecting the Reorganizations and currently have no assets. With
respect to the Reorganizations, if shareholders of a Target Fund approve the
Plan and other closing conditions are satisfied or waived, all of the assets of
such Target Fund will be delivered to the corresponding Acquiring Fund’s
custodian for the account of such Acquiring Fund in exchange for the assumption
by the Acquiring Fund of all of the liabilities of the Target Fund and delivery
by the Acquiring Fund to the Target Fund, for further delivery to the holders of
record as of the Effective Time (as defined below) of the issued and outstanding
shares of the Target Fund of a number of shares of the Acquiring Fund, having an
aggregate net asset value equal to the value of the net assets of the Target
Fund held by the holders of record of the Target Fund shares, all determined and
adjusted as provided in the Plan. The value of your account with the Acquiring
Funds immediately after the Reorganizations is expected to be the same as the
value of your account with the Target Funds immediately prior to the
Reorganizations.
The
Target Entity and Acquiring Entity will be required to make representations and
warranties that are customary in reorganizations. If shareholders of the Target
Funds approve the Plan and if all of the closing conditions set forth in the
Plan are satisfied or waived, consummation of the Reorganizations (the
“Closing”) is expected to occur on or around September 9,
2024
(the “Closing Date”), immediately following the closing of regular trading on
the NYSE on the Closing Date (the “Effective Time”). Following receipt of the
requisite shareholder vote in favor of the Reorganizations and as soon as
reasonably practicable after the Closing, the outstanding shares of each Target
Fund will be terminated in accordance with their governing documents and
applicable law.
The
obligations of the Acquiring Entity and the Target Entity are subject to the
following conditions, among others:
•the
Acquiring Funds’ Registration Statement on Form N-14 under the 1933 Act shall be
on file with the SEC and shall be effective, and no stop-order suspending the
effectiveness of the Registration Statement shall have been issued;
•the
shareholders of the applicable Target Fund shall have approved the
Plan;
•the
Acquiring Funds and Target Funds shall have each delivered an officer’s
certificate certifying that all representations, covenants and warranties of or
with respect to the Funds made in the Plan are true and correct in all material
respects at and as of the effective date of the Plan, except as they may be
affected by the transactions contemplated by the Plan;
•The
Target Funds and Acquiring Funds receive a satisfactory opinion of tax counsel
substantially to the effect that each Reorganization is expected to be a
“reorganization” within the meaning of Section 368(a) of the Code, as described
in more detail in “U.S. Federal Income Tax Considerations” below.
Because
shareholders of each Target Fund will vote separately on the Proposals, a
Reorganization may be approved for a single Target Fund, even if shareholders of
the other Target Fund have not approved a Proposal. If that were the case,
management expects that the shareholder meeting would be adjourned for the
particular Target Fund to give more time to solicit shareholder votes in favor
of the Proposals. If the Reorganization of only one Target Fund is approved by
its shareholders, then the Target Fund that received shareholder approval of the
Reorganization will implement the Reorganization. If the Target Funds do not
receive shareholder approval of each Reorganization, they will continue to
operate under their current structure, and the Target Funds Board will consider
other possible courses of action, such as continuing to solicit proxy votes,
considering other service provider arrangements or reorganization options, or
possibly liquidating the Target Funds. The Plan may be terminated and the
Reorganizations may be abandoned at any time prior to Closing by mutual
agreement of the parties. The Plan may be amended or modified in a writing
signed by the parties to the Plan.
COSTS
OF REORGANIZATIONS
The
total costs of the Reorganizations are estimated to be approximately $150,042.
In recognition of the anticipated reduced costs for the Acquiring Funds over
time as a result of the Reorganizations, the Target Funds will pay the costs of
the Reorganizations. The allocation of this amount to the Target Funds shall be
borne by each Target Fund in proportion to the average net assets held by the
Target Funds collectively (except that audit transition fees shall be divided
equally) as of the close of business on July 24, 2024. The fees and
expenses related to the Reorganizations include, but are not limited to, legal
fees, project fees, audit transition fees, proxy printing and mailing costs,
proxy solicitation costs, and expenses of continued liability coverage or “tail”
insurance coverage for the directors and officers of the Target Entity. Expenses
of the Reorganizations are considered extraordinary expenses, which are excluded
from each Target Fund’s expense limitation arrangement, and thus will be borne
by the Target Fund notwithstanding the expense limitation. The Target Funds are
estimated to bear the amounts in the below table:
|
|
|
|
|
|
| Target
Capital Appreciation Fund |
$30,176 |
|
Target
Opportunity Fund |
$119,866 |
U.S.
FEDERAL INCOME TAX CONSIDERATIONS
The
following is a general summary of the material U.S. federal income tax
considerations of the Reorganizations and is based upon the current provisions
of the Code, the existing U.S. Treasury regulations thereunder, current
administrative rulings of the IRS and published judicial decisions, all of which
are subject to change. These considerations are general in nature and individual
shareholders
should
consult their own tax advisers as to the federal, state, local, and foreign tax
considerations applicable to them and their individual circumstances. These same
considerations generally do not apply to shareholders who hold their shares in
tax-advantaged accounts.
Each
Reorganization is intended to qualify as a “reorganization” under Section 368(a)
of the Code. As a condition to the closing of each Reorganization, the Target
Funds and the Acquiring Funds will receive an opinion from Stradley Ronon
Stevens & Young, LLP substantially to the effect that, as further described
below, on the basis of existing provisions of the Code, U.S. Treasury
regulations issued thereunder, current administrative rules, pronouncements and
court decisions, generally for U.S. federal income tax purposes:
•The
acquisition by each Acquiring Fund of all of the assets of each corresponding
Target Fund in exchange for the Acquiring Fund’s shares and the assumption by
each Acquiring Fund of the liabilities of the corresponding Target Fund,
followed by the distribution by the Target Fund to its shareholders of Acquiring
Fund shares in complete liquidation of the Target Fund, will qualify as a
reorganization within the meaning of Section 368(a) of the Code, and the Target
Fund and Acquiring Fund each will be a “party to the reorganization” within the
meaning of Section 368(b) of the Code.
•No
gain or loss will be recognized by a Target Fund upon the transfer of all of its
assets to, and assumption of its liabilities by, the corresponding Acquiring
Fund in exchange solely for the Acquiring Fund shares pursuant to Sections
361(a) and 357(a) of the Code.
•No
gain or loss will be recognized by an Acquiring Fund upon the receipt by it of
all of the assets of the Target Fund in exchange solely for the corresponding
Acquiring Fund shares and the assumption by the Acquiring Fund of the
liabilities of the Target Fund pursuant to Section 1032(a) of the
Code.
•No
gain or loss will be recognized by a Target Fund upon the distribution of the
corresponding Acquiring Fund shares to its shareholders in complete liquidation
of the Target Fund pursuant to Section 361(c)(1) of the Code.
•The
tax basis of each asset of a Target Fund received by the corresponding Acquiring
Fund will be the same as the tax basis of such asset to the Target Fund
immediately prior to the exchange pursuant to Section 362(b) of the
Code.
•The
holding period of each asset of a Target Fund received by the corresponding
Acquiring Fund will include the periods during which such asset was held by the
Target Fund pursuant to Section 1223(2) of the Code.
•No
gain or loss will be recognized by the shareholders of a Target Fund upon the
exchange of its Target Fund shares for the corresponding Acquiring Fund shares
(including fractional shares to which they may be entitled), pursuant to Section
354(a) of the Code.
•The
aggregate tax basis of Acquiring Fund shares received by each shareholder of the
corresponding Target Fund (including fractional shares to which they may be
entitled) will be the same as the aggregate tax basis of the shareholder’s
Target Fund shares exchanged therefor pursuant to Section 358(a)(1) of the
Code.
•The
holding period of Acquiring Fund shares received by each shareholder of the
corresponding Target Fund (including fractional shares to which they may be
entitled) will include the shareholder’s holding period of the Target Fund
shares surrendered in
exchange
therefor, provided that such Target Fund shares were held as a capital asset on
the date of the Reorganization pursuant to Section 1223(1) of the
Code.
The
opinion will be conditioned upon, among other things, the accuracy, as of the
Closing Date, of certain representations of the Target Funds and the Acquiring
Funds upon which Stradley Ronon Stevens & Young, LLP will rely in rendering
its opinion and will also be based on customary assumptions. It is possible that
the IRS or a court could disagree with Stradley Ronon Stevens & Young, LLP’s
opinion, which therefore cannot be free from doubt. A copy of the opinion will
be filed with the SEC and will be available for public inspection. Neither the
Target Funds nor the Acquiring Funds have requested or will request an advance
ruling from the IRS as to the U.S. federal tax consequences of the
Reorganizations.
Opinions
of counsel are not binding upon the IRS or the courts. If a Reorganization is
consummated but the IRS or the courts determine that the Reorganization does not
qualify as a “reorganization” within the meaning of Section 368(a) of the Code,
the Target Fund would recognize gain or loss on the transfer of its assets to
the Acquiring Fund and each shareholder of the Target Fund that held shares in a
taxable account would recognize a taxable gain or loss equal to the difference
between its tax basis in its Target Fund shares and the fair market value of the
shares of the Acquiring Fund it receives in the exchange.
The
tax attributes, including capital loss carryovers, if any, as of the date of
closing of a Reorganization, of the applicable Target Fund move to the
corresponding Acquiring Fund in the Reorganization and any such capital loss
carryovers would be available to offset future gains recognized by the Acquiring
Fund, subject to limitations under the Code. If, as is anticipated, at the time
of the Closing of a Reorganization, the applicable Acquiring Fund has either no
assets or nominal assets incident to its organization, there will be no change
of ownership of the corresponding Target Fund as a result of the Reorganization.
Thus, each Reorganization is not expected to result in any limitation on the use
by the applicable Acquiring Fund of the corresponding Target Fund’s capital loss
carryovers, if any. However, the capital loss carryovers of an Acquiring Fund,
as the successor in interest to the corresponding Target Fund, may subsequently
become subject to an annual limitation as a result of purchases or redemptions
of the Acquiring Fund shares or other reorganization transactions in which the
Acquiring Fund might engage post-Reorganization.
This
discussion is only a general summary of certain U.S. federal income tax
consequences. You should consult your tax adviser regarding the U.S. federal
income tax consequences as well as the state, local and foreign consequences to
you, if any, of a Reorganization in light of your particular
circumstances.
ACCOUNTING
SURVIVORSHIP
Each
Target Fund will be considered to be the accounting survivor of the
Reorganization, meaning that the corresponding Acquiring Fund will assume the
financial and performance history of the Target Fund.
TARGET
FUND BOARD RECOMMENDATION
The
Target Fund Board unanimously recommends that shareholders of each Target Fund
approve the proposed Reorganization pursuant to the Plan.
VOTING
INFORMATION
PROXY
STATEMENT/PROSPECTUS
You
are receiving this Proxy Statement/Prospectus and the enclosed proxy card
because the Target Fund Board is soliciting your proxy to vote on the Proposal
at the Meeting and at any adjournments of the Meeting. This Proxy
Statement/Prospectus gives you information about the business to be conducted at
the Meeting. Target Fund shareholders may vote by participating in the Meeting
and following the instructions below. You do not need to attend the Meeting to
vote. Instead, you may simply complete, sign, and return the enclosed proxy card
or vote by telephone or through a website established for that
purpose.
This
Proxy Statement/Prospectus, the enclosed Notice of Meeting of Shareholders, and
the enclosed proxy card are expected to be mailed on or about August 16, 2024 to
all shareholders entitled to vote.
Shareholders
may attend the Meeting. The Meeting will begin promptly on September 6,
2024,
at 10:00
a.m.,
Eastern time and be held at 370
Church Street, Guilford, CT.
Only Target Fund shareholders will be able to participate in the
Meeting.
Shareholders
of record of the Target Funds as of the close of business on the Record Date of
July 24, 2024 are entitled to vote at the Meeting. The number of
outstanding shares of each Target Fund on the Record Date are set forth below.
Each share is entitled to one vote for each full share held and a proportionate
fractional vote for each fractional share held.
|
|
|
|
|
|
| Target
Fund |
Outstanding
Shares |
| Target
Capital Appreciation Fund |
1,845,782 |
| Target
Opportunity Fund |
9,226,707 |
Proxies
will have the authority to vote and act on behalf of shareholders at any
adjournment of the Meeting. If a proxy is authorized to vote for a shareholder,
the shareholder may revoke the authorization at any time before it is exercised
by sending in another proxy card with a later date or by notifying the Secretary
of the Target Entity in writing at the address set forth on the cover page of
the Proxy Statement/Prospectus before the Meeting that the shareholder has
revoked its proxy. In addition, although merely attending the Meeting will not
revoke your proxy, if a shareholder participates in the Meeting, the shareholder
may withdraw the proxy and vote at the Meeting. However, if your shares are held
through a broker-dealer or other financial intermediary you will need to obtain
a “legal proxy” from them in order to vote your shares at the
Meeting.
Executed
proxies received prior to the Meeting on which no vote is indicated will be
voted “FOR” the Proposal.
QUORUM
REQUIREMENT AND ADJOURNMENT
A
“Quorum” is the minimum number of shares that must be present in order to
conduct the Meeting. A Quorum means one-third of the shares of a Target Fund
that are entitled to vote at the Meeting, present at the Meeting or represented
by proxy.
With
respect to each Target Fund, if sufficient votes to approve a Proposal are not
received by the date of the Meeting or any reconvened Meeting following an
adjournment, the Meeting or reconvened Meeting may be adjourned with respect to
such Target Fund to permit further solicitations of proxies. The persons named
as proxies on the enclosed proxy cards will vote their proxies in their
discretion on questions of adjournment and any other items (other than the
Proposal) that properly come before the Meeting. A majority of the votes cast by
shareholders of a Target Fund present or by proxy at the Meeting (whether or not
sufficient to constitute a quorum) may adjourn the Meeting.
Because
each Proposal is expected to “affect substantially” a shareholder’s rights or
privileges, a broker may not vote shares if the broker has not received
instructions from beneficial owners or persons entitled to vote, even if the
broker has discretionary voting power (i.e., the proposal is
non-discretionary).
Abstentions
will be counted for purposes of determining whether a quorum is present at the
Meeting. Abstentions will have the same effect as a vote “AGAINST” a Proposal
because an absolute percentage of affirmative votes is required to approve a
Proposal.
Broker
non-votes are proxies from brokers or nominees that indicate that they have not
received voting instructions from the beneficial owner or other person entitled
to vote shares on a particular matter for which the brokers or nominees do not
have discretionary authority to vote, such as the Proposals. Because the
Proposals are non-discretionary, the Target Funds do not expect to receive
broker non-votes.
VOTE
NECESSARY TO APPROVE THE PROPOSAL
Shareholders
of a Target Fund must approve the applicable Proposal by a 1940 Act Majority
vote of the outstanding voting securities of the Target Fund. A “1940 Act
Majority” of the outstanding voting securities of a fund means the lesser of (i)
67% or more of the voting securities of the fund that are present at a meeting
if holders of shares representing more than 50% of the outstanding voting
securities of the fund are present or represented by proxy or (ii) more than 50%
of the outstanding voting securities of the fund.
PROXY
SOLICITATION
In
addition to solicitations by mail, solicitations also may be made by
advertisement, telephone, telegram, facsimile transmission or other electronic
media, or personal contacts. The Target Funds will request broker/dealer firms,
custodians, nominees, and fiduciaries to forward proxy materials to the
beneficial owners of the shares of record.
In
addition to solicitations by mail, officers and employees of the Target Funds,
Prospector and their affiliates may, without extra pay, conduct additional
solicitations by telephone, telecopy, and personal interviews. The Target Funds
expect that any solicitations will be primarily by mail, but also may include
telephone, telecopy, or oral solicitations.
As
the Meeting date approaches, you may receive a telephone call from a
representative of the Target Funds if your votes have not yet been
received. Proxies that are obtained telephonically will be recorded in
accordance with procedures that are designed to ensure that both the identity of
the shareholder casting the vote and the voting instructions of the shareholder
are accurately determined.
In
all cases where a telephonic proxy is solicited, the Target Funds’
representative is required to ask for each shareholder’s full name and address,
and to confirm that the shareholder has received the proxy materials in the
mail. If the shareholder is a corporation or other entity, the Target Funds’
representative is required to ask for the person’s title and confirmation that
the person is authorized to direct the voting of the shares. If the information
elicited matches the information previously provided to the Target Funds, then
the Target Funds’ representative has the responsibility to explain the voting
process, read the Proposal listed on the proxy card, and ask for the
shareholder’s instructions on the Proposal. Although the Target Funds’
representative is permitted to answer questions about the process, he or she is
not permitted to recommend to the shareholder how to vote, other than to read
any recommendation set forth in this Proxy Statement/Prospectus. The Target
Funds’ representative will record the shareholder’s instructions on the card.
Within 72 hours, the shareholder will be sent a letter or mailgram to confirm
his or her vote and asking the shareholder to call the Target Funds immediately
if his or her instructions are not correctly reflected in the
confirmation.
SHARE
OWNERSHIP BY LARGE SHAREHOLDERS, MANAGEMENT AND DIRECTORS
A
list of the name, address, and percent ownership of each person who, as of
July 24, 2024, to the knowledge of the Target Funds, owned 5% or more of
the outstanding shares of each Target Fund can be found at Exhibit
A.
To
the best of the knowledge of the Target Entity, as of July 24, 2024, the
ownership of shares of the Target Funds by executive officers and directors of
the Target Funds as a group is as follows:
|
|
|
|
|
|
| Target
Fund |
Officer
and Director Ownership |
| Target
Capital Appreciation Fund |
24.67% |
| Target
Opportunity Fund |
8.58% |
OTHER
MATTERS
CAPITALIZATION
The
following tables show the capitalization of each Target Fund as of December 31,
2023, and of each Acquiring Fund on a pro
forma
combined basis (unaudited) as of the same date, giving effect to the proposed
Reorganizations. The following is an example of the number of shares of each
Acquiring Fund that would have been exchanged for the shares of the
corresponding Target Fund if the Reorganizations had been consummated on
December 31, 2023, and does not necessarily reflect the number of shares or
value of shares that will actually be received if the Reorganizations occur on
the Closing Date. The capitalizations of each Target Fund and the Acquiring Fund
are likely to be different on the Closing Date as a result of daily share
purchase, redemption, and market activity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital
Appreciation Fund |
|
| (unaudited) |
|
Target
Fund |
Adjustment |
Acquiring
Fund
(pro
forma)(1) |
|
| Prospector
Capital Appreciation Fund |
|
|
|
|
|
| Shares
Outstanding |
|
1,606,228 |
$0 |
1,606,228 |
|
| Net
Asset Value Per Share |
|
$20.81 |
$(0.02) |
$20.79 |
|
| Net
Assets |
|
$33,427,795 |
$(30,176)(2) |
$33,397,619 |
|
(1)Reflects
the conversion of Target Capital Appreciation Fund Shares for Acquiring Capital
Appreciation Fund Shares as a result of the Reorganization.
(2)Reflects
the costs of the Reorganization paid for by the Target Capital Appreciation
Fund.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Opportunity
Fund |
|
| (unaudited) |
|
Target
Fund |
Adjustment |
Acquiring
Fund
(pro
forma)(1) |
|
| Prospector
Opportunity Fund |
|
|
|
|
|
| Shares
Outstanding |
|
9,024,639 |
$0 |
9,024,639 |
|
| Net
Asset Value Per Share |
|
$25.67 |
$(0.01) |
$25.66 |
|
| Net
Assets |
|
$231,689,286 |
$(119,866)(2) |
$231,569,420 |
|
(1)Reflects
the conversion of Target Opportunity Fund Shares for Acquiring Opportunity Fund
Shares as a result of the Reorganization.
(2)Reflects
the costs of the Reorganization paid for by the Target Opportunity Fund.
DISSENTERS’
RIGHTS
If
a Reorganization is approved at the Meeting, shareholders of the applicable
Target Fund will not have the right to dissent and obtain payment of the fair
value of their shares. After the Reorganization, shareholders of the Target Fund
will hold shares of the corresponding Acquiring Fund, which may also be redeemed
at net asset value.
SHAREHOLDER
PROPOSALS
Shareholders
of the Target Funds wishing to submit proposals for inclusion in a proxy
statement for a future shareholder meeting must send their written proposal to
the Target Entity a reasonable time before the Target Fund Board’s solicitation
relating to that meeting is to be made. Shareholder proposals must meet certain
legal requirements established by the SEC, so there is no guarantee that a
shareholder’s proposal will actually be included in the next proxy statement.
The persons named as proxies in future proxy materials of the Target Funds may
exercise discretionary authority with respect to any shareholder proposal
presented at any subsequent shareholder meeting if written notice of that
proposal has not been received by the Target Funds within a reasonable period of
time before the Target Fund Board’s solicitation relating to that meeting is
made. Written proposals with regard to the Target Funds should be sent to the
Secretary of the Target Entity, at the address of the Target Funds given above.
If the proposed Reorganizations are approved and completed, shareholders of the
Target Funds will become shareholders of the Acquiring Funds and, thereafter,
will be subject to the shareholder proposal requirements of the Acquiring
Entity.
LEGAL
MATTERS
Certain
legal matters concerning the issuance of shares of the Acquiring Funds in
connection with the Reorganizations and the tax consequences of the
Reorganizations will be passed upon by Stradley Ronon Stevens & Young, LLP.
AUDITORS
The
financial statements of the Target Funds for the year ended December 31, 2023,
contained in the Target Funds’ Annual Report to Shareholders, has been audited
by Ernst & Young LLP, an independent registered public accounting firm.
Exhibit
A
OWNERSHIP
OF THE TARGET FUNDS
SIGNIFICANT
HOLDERS
The
following tables show, as of July 24, 2024, the accounts of the Target
Funds that own of record 5% or more of a class of the Target Funds. The Target
Entity has no information regarding the beneficial ownership of Target Funds
shares through accounts with financial intermediaries.
Target
Capital Appreciation Fund
|
|
|
|
|
|
|
|
|
|
Name
and Address
|
%
Ownership |
Type
of Ownership(1) |
Gillespie
Family 2000, LLC
c/o Cravath Swaine & Moore
825 Eighth
Avenue
New York, NY 10019-7416 |
27.99% |
Beneficial |
Richard
P. Howard
Guilford, CT 06437-2005 |
12.20% |
Beneficial |
SLW
International LLC
PO Box 550498
Houston, TX 77255-0498 |
10.65% |
Record |
John
D Gillespie 2012 Descendants Trust
PO Box 1752
Wilson, WY
83014-1752 |
6.65% |
Beneficial |
Juniper
Trust
For the exclusive benefit of its customers
Kemah, TX
77565-2537 |
6.36% |
Record |
Charles
Schwab & CO INC
Special Custody A/C FBO Customers
Attn Mutual
Funds
211 Main St
San Francisco, CA 94105-1901 |
6.32% |
Record |
(1)“Record”
ownership means the shareholder of record, or the exact name of the shareholder
on the account, i.e. “ABC Brokerage, Inc.” “Beneficial” ownership refers to the
actual pecuniary, or financial, interest in the security, i.e. “Jane Doe
Shareholder.”
Target
Opportunity Fund
|
|
|
|
|
|
|
|
|
|
Name
and Address
|
%
Ownership |
Type
of Ownership(1) |
National
Financial Services, LLC
For the exclusive benefit of its
customers
Attn: Mutual Funds Dept. 4th FL
499 Washington
Blvd
Jersey City, NJ 07310-1995 |
37.26% |
Record |
Charles
Schwab & CO INC
Special Custody A/C FBO Customers
Attn: Mutual
Funds
211 Main Street
San Francisco, CA 94105-1901 |
18.21% |
Record |
Gillespie
Family 2000, LLC
c/o Cravath Swaine & Moore
825 Eighth
Avenue
New York, NY 10019-7416 |
14.27% |
Beneficial |
Attn:
Mutual Fund Administrator
C/O Principal Financial
SEI Private Trust
Company
One Freedom Valley Drive
Oaks, PA 19456-9989 |
6.19% |
Record |
Brown
Brothers Harriman & Co. CUST
FBO BBH Private Banking
Private
Client Omnibus Acct
Attn: Mutual Fund Services
140 Broadway
New
York, NY 10005-1108 |
6.01% |
Record |
(1)“Record”
ownership means the shareholder of record, or the exact name of the shareholder
on the account, i.e. “ABC Brokerage, Inc.” “Beneficial” ownership refers to the
actual pecuniary, or financial, interest in the security, i.e. “Jane Doe
Shareholder.”
Exhibit
B
Agreement
and Plan of Reorganization
THIS
AGREEMENT AND PLAN OF REORGANIZATION (“AGREEMENT”) is made this […]
day of […],
2024 by and among: (i) Prospector Funds, Inc., an open-end registered investment
company (“TARGET ENTITY”), on behalf of its series, the Prospector Capital
Appreciation Fund and Prospector Opportunity Fund (each, a “TARGET FUND,” and
together, the “TARGET FUNDS”); (ii) Managed Portfolio Series, an open-end
registered investment company (“ACQUIRING ENTITY”), on behalf of its series, the
Prospector Capital Appreciation Fund and Prospector Opportunity Fund (each, an
“ACQUIRING FUND,” and together, the “ACQUIRING FUNDS,” and each Target Fund and
each Acquiring Fund, a “FUND”); and (iii) solely for the purposes of Sections
1.1(f), 11.1 and 11.2 of this Agreement, Prospector Partners Asset Management,
LLC (“Prospector”), investment adviser of each Target Fund and each Acquiring
Fund. Other than the Target Funds and the Acquiring Funds, no other series of
either the Target Entity or the Acquiring Entity are parties to this Agreement.
WHEREAS,
each of the Target Entity and the Acquiring Entity is an open-end investment
company of the management type registered with the Securities and Exchange
Commission (the “COMMISSION”); and
WHEREAS,
the parties hereto intend for the Acquiring Entity, on behalf of each Acquiring
Fund, and the Target Entity, on behalf of the corresponding Target Fund
(identified in the table provided in Schedule 1.1 of this Agreement), to enter
into a transaction pursuant to which: (i) the Acquiring Fund will acquire all of
the assets, property, and goodwill of the corresponding Target Fund in exchange
solely for (A) shares of the Acquiring Fund, and (B) the assumption by the
Acquiring Fund of all of the liabilities of the corresponding Target Fund, and
(ii) the corresponding Target Fund will distribute such shares of the Acquiring
Fund to shareholders of the corresponding Target Fund in redemption of all
outstanding shares of the Target Fund, in connection with the liquidation of the
Target Fund, all upon the terms and conditions hereinafter set forth in this
Agreement (each such transaction, a “REORGANIZATION” and, together, the
“REORGANIZATIONS”); and
WHEREAS,
each Acquiring Fund is, and will immediately prior to the Closing (defined in
Section 3.1) be, a shell series, without assets (other than nominal seed
capital) or liabilities, created for the purpose of acquiring the assets and
liabilities of the corresponding Target Fund; and
WHEREAS,
this Agreement is intended to be and is adopted as a “plan of reorganization”
within the meaning of Treasury Regulations Section 1.368-2(g); and
WHEREAS,
the parties hereto intend that each Reorganization contemplated by this
Agreement constitute a “reorganization” within the meaning of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (together, the
“CODE”); and
WHEREAS,
this Agreement provides for multiple Reorganizations, the parties hereto intend
that each Reorganization between an Acquiring Fund and a Target Fund be treated
as if it had been the subject of a separate agreement, and the consummation of
the Reorganization between a Target Fund and an Acquiring Fund shall not be
contingent on the approval by shareholders of another Target Fund or the
consummation of another Reorganization.
NOW,
THEREFORE, in consideration of the premises and of the covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties hereto
covenant and agree as follows:
1.DESCRIPTION
OF THE REORGANIZATIONS
1.1 Provided
that all conditions precedent to a Reorganization set forth herein have been
satisfied as of the Closing Date (as defined in Section 3.1), and based on the
representations and warranties each party provides to the others, the Target
Entity and the Acquiring Entity agree to take the following steps with respect
to that Reorganization:
(a) The
applicable Target Fund shall transfer all of its Assets, as defined and set
forth in Section 1.1(b), to the corresponding Acquiring Fund, and the Acquiring
Fund in exchange therefor shall assume all of the Liabilities of the Target
Fund, as defined and set forth in Section 1.1(c), and deliver to the Target Fund
the number of full and fractional shares of the Acquiring Fund determined in the
manner set forth in Section 2.
(b) The
assets of the Target Fund to be transferred to the corresponding Acquiring Fund
shall consist of all assets, property, and goodwill including, without
limitation, all cash, securities, commodities and futures interests, claims
(whether absolute or contingent, known or unknown, accrued or unaccrued and
including, without limitation, any interest in pending or future legal claims in
connection with past or present portfolio holdings, whether in the form of class
action claims, opt-out or other direct litigation claims, or regulator or
government-established investor recovery fund claims, and any and all resulting
recoveries) and dividends or interest receivable that are owned by the Target
Fund and any deferred or prepaid expenses shown as an asset on the books of the
Target Fund on the Closing Date (collectively, “ASSETS”).
(c) The
Target Fund will endeavor, consistent with its obligation to continue to pursue
its investment objective and employ its investment strategies in accordance with
the terms of its prospectus, to discharge all of its liabilities and obligations
prior to the Closing Date, other than those liabilities and obligations which
would otherwise be discharged at a later date in the ordinary course of
business. The Acquiring Fund shall assume all of the liabilities of the
corresponding Target Fund, whether accrued or contingent, known or unknown,
existing at the Closing Date (collectively, “LIABILITIES”).
(d) As
soon as reasonably practicable after the Closing, the Target Fund will
distribute to its shareholders of record (“TARGET FUND SHAREHOLDERS”) the shares
of the corresponding Acquiring Fund received by the Target Fund pursuant to
Section 1.1(a), and the Target Fund will as promptly as reasonably practicable
thereafter completely liquidate and dissolve. Each Target Fund Shareholder will
receive the number of full and fractional shares of the Acquiring Fund
corresponding to the shares of the Target Fund held by such Target Fund
Shareholder that has an aggregate net asset value equal to the aggregate net
asset value of the shares of the Target Fund held of record by such Target Fund
Shareholder at the Closing. Such distribution and liquidation will be
accomplished, with respect to the Target Fund’s shares, by the transfer of the
corresponding Acquiring Fund shares then credited to the account of the Target
Fund on the books of the Acquiring Fund to open accounts on the share records of
the Acquiring Fund in the names of the Target Fund Shareholders, representing
the respective number of Acquiring Fund shares due to such Target Fund
Shareholders. At the Closing, any outstanding certificates representing shares
of the Target Fund will be cancelled. The
Acquiring
Fund shall not issue certificates representing shares in connection with such
exchange, irrespective of whether Target Fund Shareholders hold their Target
Fund shares in certificated form.
(e) Ownership
of Acquiring Fund shares will be shown on the applicable Acquiring Fund’s books,
as such are maintained by the Acquiring Fund’s transfer agent.
(f) All
books and records of the Target Fund maintained by the Target Funds or by
Prospector, including all books and records required to be maintained under the
Investment Company Act of 1940 (the “1940 ACT”) and the rules and regulations
promulgated thereunder, shall be given to the corresponding Acquiring Fund on
the Closing Date (as defined below) by the Target Fund or by Prospector as the
case may be, and Prospector shall cause copies of all such books and records
maintained by the Target Fund’s administrator, custodian, distributor, or fund
accountant to be turned over to the Acquiring Fund or its agents as soon as
practicable following the Closing Date.
2.VALUATION
2.1 With
respect to each Reorganization:
(a) The
net asset value of the applicable Target Fund’s Assets to be acquired by the
corresponding Acquiring Fund hereunder shall be computed as of the Valuation
Time (defined below) by calculating the value of the Assets,
and
subtracting therefrom the amount of the Liabilities, in each case using the
valuation procedures established by the Target Entity’s valuation designee, as
designated by the Target Entity’s Board of Directors under Rule 2a-5 of the 1940
Act (“VALUATION DESIGNEE”), or such other valuation procedures as may be
mutually agreed upon by the parties (“VALUATION PROCEDURES”).
(b) The
number of shares issued by the applicable Acquiring Fund (including fractional
shares, if any, rounded to the nearest thousandth) in exchange for the
corresponding Target Fund’s Assets shall equal the number of shares of the
Target Fund outstanding as of the Valuation Time.
(c) The
net asset value per share of the applicable Acquiring Fund’s shares issued in
connection with the Reorganization shall be the net asset value of the
corresponding Target Fund computed as of the Valuation Time, using Valuation
Procedures, divided by the number of shares issued by the Acquiring
Fund.
(d) All
computations of value shall be made by the applicable Target Fund’s
administrator using the Valuation Procedures, subject to the oversight of the
Valuation Designee, and shall be subject to review by the Acquiring Funds’
administrator and, if requested by either the Target Entity or the Acquiring
Entity, by the independent registered public accountant of the requesting
party.
(e) “VALUATION
TIME” shall mean immediately after the close of regular trading on the New York
Stock Exchange (“NYSE”) on the Valuation Date.
(f) “VALUATION
DATE” shall mean the same business day as the Closing Date.
3.CLOSING
AND EFFECTIVE DATE
3.1 Each
Reorganization shall close on or around [
],
2024, or such other date as the parties may agree (the “CLOSING DATE”). All acts
taking place at the closing of a Reorganization (“CLOSING”) shall be deemed to
take place simultaneously as of immediately following the closing of regular
trading on the NYSE on the Closing Date unless otherwise agreed to by the
parties (the “CLOSING TIME”). The Closing of the Reorganizations shall be held
in person, by facsimile, email or such other communication means as the parties
may agree.
3.2 With
respect to each Reorganization:
(a) The
Target Fund’s portfolio securities, investments or other assets that are
represented by a certificate or other written instrument shall be transferred
and delivered by the Target Fund as of the Closing Date to the Acquiring Fund’s
custodian (the “ACQUIRING CUSTODIAN”) for the account of the Acquiring Fund duly
endorsed in proper form for transfer and in such condition as to constitute good
delivery thereof. The Target Entity shall direct the Target Fund’s custodian
(the “TARGET CUSTODIAN”) to deliver to the Acquiring Custodian as of the Closing
Date by book entry, in accordance with customary practices of the Target
Custodian and any securities depository (as defined in Rule 17f-4 under 1940
Act) in which the Assets are deposited, the Target Fund’s portfolio securities
and instruments so held. The cash to be transferred by the Target Fund shall be
delivered to the Acquiring Custodian by wire transfer of federal funds or other
appropriate means on the Closing Date. If the Target Fund is unable to make such
delivery on the Closing Date in the manner contemplated by this Section for the
reason that any of such securities or other investments purchased prior to the
Closing Date have not yet been delivered to the Target Fund or its broker, then
the Acquiring Fund may, in its sole discretion, waive the delivery requirements
of this Section with respect to said undelivered securities or other investments
if the Target Fund has, by or on the Closing Date, delivered to the Acquiring
Fund or the Acquiring Custodian executed copies of an agreement of assignment
and escrow and due bills executed on behalf of said broker or brokers, together
with such other documents as may be required by the Acquiring Fund or the
Acquiring Custodian, such as brokers’ confirmation slips.
(b) The
Target Entity shall direct the Target Custodian to deliver, at the Closing or
promptly thereafter, a certificate of an authorized officer stating that, except
as permitted by Section 3.2(a), the Assets have been delivered in proper form to
the Acquiring Fund at the Closing Time on the Closing Date.
(c) At
such time prior to the Closing Date as the parties mutually agree, the Target
Fund shall provide: (i) instructions and related information to the Acquiring
Fund or its transfer agent with respect to the Target Fund Shareholders,
including names, addresses, dividend reinvestment elections and tax withholding
status of the Target Fund Shareholders as of the date agreed upon (such
information to be updated as of the Closing Date, as necessary) and (ii) the
information and documentation maintained by the Target Fund or its agents
relating to the identification and verification of the Target Fund Shareholders
under the USA PATRIOT ACT and other applicable anti-money laundering laws, rules
and regulations and such other information as the Acquiring Fund may reasonably
request.
(d) The
Target Entity shall direct the transfer agent for the Target Fund (the “TARGET
TRANSFER AGENT”) to deliver to the Acquiring Fund at the Closing a certificate
of an authorized officer stating that its records, as provided to the Acquiring
Entity, contain the names and
addresses
of the Target Fund Shareholders and the number of outstanding shares owned by
each such shareholder immediately prior to the Closing. The Acquiring Fund shall
issue and deliver to the Secretary of the Target Entity a confirmation
evidencing the Acquiring Fund shares to be credited on the Closing Date, or
provide other evidence reasonably satisfactory to the Target Entity that such
Acquiring Fund shares have been credited to the Target Fund Shareholders’
accounts on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, assumption of liabilities, checks,
assignments, certificates, if any, receipts or other documents as such other
party or its counsel may reasonably request.
(e) In
the event that on the Valuation Date or the Closing Date (a) the NYSE or another
primary trading market for portfolio securities of the Target Fund (each, an
“EXCHANGE”) shall be closed to trading or trading thereupon shall be restricted,
or (b) trading or the reporting of trading on such Exchange or elsewhere shall
be disrupted so that, in the judgment of the Board of Trustees of the Acquiring
Entity or the Target Entity or the authorized officers of either of such
entities, accurate appraisal of the value of the net assets of the Target Fund
is impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting shall
have been restored.
4.REPRESENTATIONS
AND WARRANTIES
4.1 The
Target Entity, on behalf of itself or, where applicable, each applicable Target
Fund, represents and warrants to the Acquiring Entity and the corresponding
Acquiring Fund as follows:
(a) The
Target Fund is a duly established separate series of the Target Entity, which is
a corporation duly formed, validly existing, and in good standing under the laws
of the State of Maryland with power under its Articles of Incorporation and
By-Laws, to own all of its Assets, to carry on its business as it is now being
conducted and, subject to approval by the Target Fund’s shareholders, to enter
into this Agreement and perform its obligations hereunder;
(b) The
Target Entity is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act, and the registration of the issued and
outstanding shares of the Target Fund under the Securities Act of 1933, as
amended (“1933 ACT”), is in full force and effect;
(c)
No
consent, approval, authorization, or order of any court or governmental
authority under U.S. federal law or Maryland law or the Financial Industry
Regulatory Authority (“FINRA”) is required to be obtained for the consummation
by the Target Fund and the Target Entity of the transactions contemplated
herein, except such as have been obtained or will be obtained at or prior to the
Closing Date under the 1933 Act, the Securities Exchange Act of 1934, as amended
(“1934 ACT”), the 1940 Act and state securities laws;
(d) The
current prospectus and statement of additional information of the Target Fund
and each prospectus and statement of additional information of the Target Fund
used at any time during the Target Fund’s six (6) most recently completed fiscal
years conforms or conformed at the time of its use in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially
misleading;
(e) The
Target Fund is in compliance in all material respects with, and during the three
(3) years prior to the date of this Agreement was in compliance in all material
respects with, the requirements of, and the rules and regulations under, the
1933 Act, the 1934 Act and the 1940 Act, state securities laws and all other
applicable federal and state laws or regulations.
The
Target Fund is in compliance in all material respects with, and during the three
(3) years prior to the date of this Agreement was in compliance in all material
respects with,
its
investment objectives, policies, guidelines and restrictions and compliance
procedures, and the value of the net assets of the Target Fund is, and during
such period was, determined using portfolio valuation methods that, in the
reasonable judgment of the Target Fund, comply in all material respects with the
requirements of the 1940 Act and the rules and regulations of the Commission
thereunder and the pricing and valuation policies of the Target Fund and there
have been no material miscalculations of the net asset value of the Target Fund
or the net asset value per share of the Target Fund during the twelve (12) month
period preceding the date hereof that have not been remedied or will not be
remedied prior to the Closing Date in accordance with the Target Fund’s policies
and procedures that, individually or in the aggregate, would have a material
adverse effect on the Target Fund or its Assets, and all such calculations have
been made in accordance with the applicable provisions of the 1940
Act.
All
advertising and sales material used by the Target Fund during the twelve (12)
months prior to the date of this Agreement complied in all material respects, at
the time such material was used, with applicable law and the rules and
regulations of the FINRA.
(f) Except
as otherwise disclosed to and accepted by or on behalf of the corresponding
Acquiring Funds, the Target Fund will on the Closing Date have good title to the
respective Assets and full right, power, and authority to sell, assign, transfer
and deliver such Assets free of adverse claims, including any liens or other
encumbrances, and upon delivery and payment for such Assets, the corresponding
Acquiring Fund will acquire good and marketable title thereto, free of adverse
claims and subject to no restrictions on the full transfer thereof, including,
without limitation, such restrictions as might arise under the 1933 Act,
provided that, if disclosed in writing to the corresponding Acquiring Fund, the
Acquiring Fund will acquire Assets that are segregated as collateral for the
Target Fund’s derivative positions, if any, including without limitation, as
collateral for swap positions and as margin for futures positions, if any,
subject to such segregation and liens that apply to such Assets;
(g) The
Target Fund is not engaged currently, and the execution, delivery and
performance of this Agreement will not result, in (i) a violation of the Target
Entity’s Articles of Incorporation and By-Laws or a material violation of any
material agreement, indenture, instrument, contract, lease or other undertaking
to which the Target Fund or the Target Entity, on behalf of the Target Fund, is
a party or by which it is bound, or (ii) the acceleration of any material
obligation, or the imposition of any material lien, encumbrance, penalty, or
additional fee under any material agreement, indenture, instrument, contract,
lease, judgment or decree to which the Target Fund or the Target Entity, on
behalf of the Target Fund, is a party or by which it is bound;
(h) Except
as otherwise disclosed to and accepted, in writing, by or on behalf of the
Acquiring Funds, no litigation or administrative proceeding or investigation of
or before any court, tribunal, arbitrator, governmental body, regulatory agency
or FINRA is presently pending or, to the Target Entity’s or Target Fund’s
knowledge, threatened against the Target Entity with respect to the Target Fund
that, if adversely determined, would materially and adversely affect the Target
Entity’s or the Target Fund’s financial condition or the conduct of the Target
Fund’s business or the Target Fund’s ability to consummate the transactions
contemplated by this Agreement.
The
Target Fund and the Target Entity, without any special investigation or inquiry,
know of no facts that might form the basis for the institution of such
proceedings or investigation and neither the Target Entity nor the Target Fund
is a party to or subject to the provisions of any order, decree or judgment of
any court, governmental body,
regulatory
agency or FINRA that materially and adversely affects its business or its
ability to consummate the transactions herein contemplated.
The
Target Fund is not in violation of, and has not violated within the past three
years, nor, to the knowledge of the Target Entity, is the Target Fund under
investigation with respect to or has the Target Fund been threatened to be
charged with or given notice of any violation of, any applicable law or
regulation. The Target Fund (i) does not have outstanding any option to purchase
or other right to acquire shares of the Target Fund issued or granted by or on
behalf of the Target Fund to any person; (ii) has not entered into any contract
or agreement or amendment of any contract or agreement or terminated any
contract or agreement, in each case material to the operation of the Target
Fund, except as otherwise contemplated by this Agreement or as disclosed to the
Acquiring Fund; (iii) has not incurred any indebtedness, other than in the
ordinary course of business consistent with the investment objective and
policies of the Target Fund; (iv) has not entered into any amendment of its
Articles of Incorporation or By-laws that has not been disclosed to the
Acquiring Fund; (v) does not have outstanding any grant or imposition of any
lien, claim, charge or encumbrance (other than encumbrances arising in the
ordinary course of business) upon any asset of the Target Fund other than any
liens for taxes not yet due and payable; and (vi) has not entered into any
agreement or made any commitment to do any of the foregoing except as disclosed
to the Acquiring Fund;
(i) The
financial statements of the Target Fund for the Target Fund’s most recently
completed fiscal year have been audited by the independent registered public
accounting firm identified in the Target Fund’s prospectus or statement of
additional information included in the Target Fund’s registration statement on
Form N-1A (the “PROSPECTUS” and “STATEMENT OF ADDITIONAL INFORMATION”). Such
statements, as well as the unaudited, semi-annual financial statements for the
semi-annual period next succeeding the Target Fund’s most recently completed
fiscal year, if any, were prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) consistently
applied, and such statements present fairly, in all material respects, the
financial condition of the Target Fund as of such date in accordance with GAAP,
and there are no known contingent liabilities of the Target Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
(j) Since
the last day of the Target Fund’s most recently completed fiscal year, there has
not been any material adverse change in the Target Fund’s financial condition,
assets, liabilities or business, other than changes occurring in the ordinary
course of business. For purposes of this paragraph, a decline in net asset value
due to declines in market value of securities held by the Target Fund, the
redemption of Target Fund shares held by shareholders of the Target Fund,
distributions of the Target Fund’s net investment income and/or net recognized
gains, or the discharge of the Target Fund’s ordinary course liabilities shall
not constitute a material adverse change;
(k) On
the Closing Date, all material Returns (as defined below) of the Target Fund
required by law to have been filed by such date (including any extensions) shall
have been filed and were (at the time filed), are or will be true, correct and
complete in all material respects, and all Taxes (as defined below) of the
Target Fund shown as due to any government authority on any such Return shall
have been paid or provision shall have been made for the payment thereof. To the
knowledge of the Target Fund, no such Return is currently under audit by any
federal, state, local or foreign Tax authority, no assessment has been asserted
with respect to such Returns, there are no levies, liens or other encumbrances
on the Target Fund or its assets resulting from the non-payment of any Taxes. No
waivers of the time within which a Tax authority may assess such Taxes are
outstanding, nor are any written requests for such waivers pending. To the
Target Fund’s knowledge, no claim has ever been made by a taxing authority in a
jurisdiction where the Target Fund does not file a Return that the Target Fund
is or may be subject to taxation in that jurisdiction.
The
Target Fund is in compliance in all material respects
with
applicable regulations of the Internal Revenue Service pertaining to the
reporting of distributions on and redemptions of its shares of beneficial
interest and to withholding in respect of distributions to shareholders, and is
not liable for any material penalties that could be imposed thereunder. As used
in this Agreement, “Tax” or “Taxes” means any tax or other like assessment or
charge (including, but not limited to, excise tax and withholding on amounts
paid to or by any person), together with any interest, penalty, addition to tax
or additional amount imposed by any governmental authority (whether domestic,
foreign, federal, state or local) responsible for the imposition of any such
tax. “Return” means reports, returns, information returns, dividend reporting
forms, or other documents or reports of any nature or kind (including any
attached schedules, supplements and additional or supporting material) filed or
required to be filed or furnished or required to be furnished with respect to
Taxes, including any claim for refund, amended return or declaration of
estimated Taxes (and including any amendments with respect
thereto);
(l) The
Target Fund is a “regulated investment company,” within the meaning of Section
851(a) of the Code, that is treated as a separate corporation for U.S. federal
income tax purposes, and
that has filed an election to be a “regulated investment company” under the
Code. The Target Fund has qualified for treatment as a “regulated investment
company” for each taxable year since inception that has ended prior to the
Closing Date and, assuming the accuracy of Section 4.2(i) hereof, intends to
satisfy any applicable requirements of Part I of Subchapter M of the Code to
maintain such qualification for the period beginning on the first day of its
current taxable year and ending on the Closing Date. For each taxable year since
inception (or portion thereof), the Target Fund has been eligible to compute its
federal income tax under Section 852 of the Code. The Target Fund has not had at
any time since its inception (and will not have as of the Closing Date) any
material tax liability under Sections 852 or 4982 of the Code for any period
ended before the Closing Date. The Target Fund has no earnings or profits
accumulated in any taxable year in which the provisions of Subchapter M of the
Code did not apply to it.
The
Target Fund does not own any “converted property” (as that term is defined in
Treasury Regulation Section 1.337(d)-7(a)(2)) that is subject to the rules of
Section 1374 of the Code as a consequence of the application of Section
337(d)(1) of the Code and the Treasury Regulations promulgated
thereunder;
(m) The
Target Fund has not changed its taxable year end within the most recent 60-month
period ending on [
],
2024, nor will the Target Fund change its taxable year end prior to the Closing
Date, without the consent of the Acquiring Entity, whose consent will not be
unreasonably withheld;
(n) All
issued and outstanding shares of the Target Fund are, and on the Closing Date
will be, validly issued, fully paid and non-assessable by the Target Entity and,
in every state where offered or sold, such offers and sales have been in
compliance in all material respects with applicable registration and/or notice
requirements of the 1933 Act and state and District of Columbia securities laws
or exemptions therefrom;
(o) The
execution, delivery and performance of this Agreement will have been duly
authorized prior to the Closing Date by all necessary action, if any, on the
part of the Board of Directors of the Target Entity, on behalf of the Target
Fund, and subject to the approval of the shareholders of the Target Fund and the
due authorization, execution and delivery of this Agreement by the other parties
hereto, this Agreement will constitute a valid and binding obligation of the
Target Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors’ rights and to general equity
principles;
(p) Within
a timeframe mutually agreeable to the parties, the Target Fund will provide the
Acquiring Entity with such information relating to the Target Fund as is
reasonably necessary for the preparation of the N-14 Registration Statement (as
defined in Section 5.1(b)) in connection with
the
meeting of shareholders of the Target Fund to approve this Agreement and such
information, as of the date provided through the date of the meeting of
shareholders of the Target Fund, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading, on the effective date of such
N-14 Registration Statement, provided, however, that the representations and
warranties in this paragraph shall not apply to statements in or omissions from
the N-14 Registration Statement made in reasonable reliance upon and in
conformity with information that was furnished by the Acquiring Entity for use
therein;
(q) The
books and records of the Target Fund are true and correct in all material
respects and contain no material omissions with respect to information required
to be maintained under the laws, rules and regulations applicable to the Target
Fund;
(r) The
Target Fund is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code, although it may
have claims against creditors in such a Title 11 or similar case;
(s) The
Target Fund has no unamortized or unpaid organizational fees or
expenses;
(t) Except
as otherwise disclosed in writing to and accepted by or on behalf of the
Acquiring Entity, the Target Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with any liability known to
the Target Fund prior to the Closing Date;
(u) The
Target Fund has not been notified in writing that any examinations of the
Returns of the Target Fund are currently in progress or threatened, and the
Target Fund has not been notified in writing that a deficiency has been asserted
or assessed against it as a result of any audit by the Internal Revenue Service
or any state, local or foreign taxing authority, and, to the knowledge of the
Target Fund, there are no levies, liens or other encumbrances related to Taxes
existing or known to the Target Fund to be threatened or pending with respect to
the Assets of the Target Fund (other than liens for Taxes not yet due and
payable);
(v) The
Target Entity has adopted and implemented written policies and procedures in
accordance with Rule 38a-1 under the 1940 Act relating to the Target Fund;
and
(w) The
Target Entity has adopted and implemented written policies and procedures
related to insider trading and a code of ethics that complies with all
applicable provisions of Section 17(j) of the 1940 Act and Rule 17j-1
thereunder.
4.2 The
Acquiring Entity, on behalf of itself or, where applicable, each Acquiring Fund,
represents and warrants to the Target Entity and the corresponding Target Fund
as follows:
(a) The
Acquiring Fund is duly organized as a separate series of the Acquiring Entity,
which is a statutory trust duly formed, validly existing, and in good standing
under the laws of the State of Delaware with power under its Amended and
Restated Agreement and Declaration of Trust and Amended and Restated By-laws
(“ORGANIZATIONAL DOCUMENTS”) to own all of its Assets, to carry on its business
as it is now being conducted and to enter into this Agreement and perform its
obligations hereunder;
(b) The
Acquiring Entity is a registered investment company classified as a management
company of the open-end type, and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect;
(c) The
registration of the shares of the Acquiring Fund to be issued in the
Reorganization under the 1933 Act will be in full force and effect on the
Closing Date;
(d) No
consent, approval, authorization, or order of any court, governmental authority
under U.S. federal law or Delaware law or FINRA is required to be obtained for
the consummation by the Acquiring Fund and the Acquiring Entity of the
transactions contemplated herein, except such as have been or will be obtained
at or prior to the Closing Date under the 1933 Act, the 1934 Act, the 1940 Act
and state securities laws;
(e) The
prospectuses and statements of additional information of the Acquiring Fund,
including supplements thereto, to be used in connection with the Reorganization
and the prospectus and statement of additional information of the Acquiring Fund
that will be in effect on the Closing Date and that is included in the Acquiring
Entity’s registration statement on Form N-1A, will conform at the time of their
use in all material respects to the applicable requirements of the 1933 Act and
the 1940 Act and the rules and regulations of the Commission thereunder and will
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(f) On
the Closing Date, prior to the Closing, the Acquiring Fund will have never had
any assets other than nominal seed capital contributed by the initial
shareholder of the Acquiring Fund in accordance with Section 14(a) of the 1940
Act and in exchange for a nominal number of shares of the Acquiring Fund
(“INITIAL SHARES”).
The
Initial Shares have been or will be redeemed by the Acquiring Fund prior the
Closing for the price for which they were issued, and any price paid for the
Initial Shares shall at all times have been held by the Acquiring Fund in a
non-interest bearing account;
(g) The
Acquiring Fund is not engaged currently, and the execution, delivery and
performance of this Agreement will not result, in (i) a violation of the
Acquiring Entity’s Organizational Documents or a material violation of any
material agreement, indenture, instrument, contract, lease or other undertaking
to which the Acquiring Fund or the Acquiring Entity, on behalf of the Acquiring
Fund, is a party or by which it is bound, or (ii) the acceleration of any
material obligation, or the imposition of any material lien, encumbrance,
penalty, or additional fee under any material agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquiring Fund or the Acquiring
Entity, on behalf of the Acquiring Fund, is a party or by which it is
bound;
(h) Except
as otherwise disclosed to and accepted, in writing, by or on behalf of the
Target Fund, no litigation or administrative proceeding or investigation of or
before any court, tribunal, arbitrator, governmental body, regulatory agency or
FINRA is presently pending or, to the Acquiring Entity’s or Acquiring Fund’s
knowledge, threatened against the Acquiring Entity with respect to the Acquiring
Fund that, if adversely determined, would materially and adversely affect the
Acquiring Entity’s or the Acquiring Fund’s financial condition, the conduct of
the Acquiring Fund’s business or the Acquiring Fund’s ability to consummate the
transactions contemplated by this Agreement. The Acquiring Fund and the
Acquiring Entity, without any special investigation or inquiry, know of no facts
that might form the basis for the institution of such proceedings or
investigation and neither the Acquiring Entity nor the Acquiring Fund is a party
to or subject to the provisions of any order, decree or judgment of any court,
governmental body, regulatory agency or FINRA that materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated;
(i) The
Acquiring Fund is, and will be at the time of Closing, a new series portfolio of
the Acquiring Entity, without assets or liabilities, formed for the purpose of
receiving the Assets and assuming the Liabilities of the corresponding Target
Fund in connection with the Reorganization and,
accordingly,
the Acquiring Fund has not commenced operations, prepared books of account and
related records or financial statements or issued any shares except the Initial
Shares issued to its initial shareholder to secure any required initial
shareholder approvals;
(j) By
the Closing, the Acquiring Entity’s Board of Trustees and Officers shall have
taken all actions as are necessary under the 1933 Act, 1934 Act, 1940 Act and
any applicable state securities laws for the Acquiring Fund to commence or have
commenced operations as series of a registered open-end management investment
company, including, without limitation, approving and executing investment
advisory contracts in the manner required by the 1940 Act and approving and
executing such other contracts as are necessary for the operation of the
Acquiring Fund;
(k) As
of the Closing Date, no federal, state or other Tax Returns of the Acquiring
Fund will have been required by law to have been filed, and no Taxes will be due
by the Acquiring Fund.
As
of the Closing Date, the Acquiring Fund will not have been required to pay any
assessments and the Acquiring Fund will not have any Tax
liabilities.
Consequently,
as of the Closing Date, the Acquiring Fund will not be under audit by any
federal, state, local or foreign Tax authority and there will have been no Tax
assessment asserted with respect to the Acquiring Fund, no levies, liens or
other encumbrances on the Acquiring Fund, and no waivers of the time to assess
any Taxes;
(l) The
Acquiring Fund: (i) was formed for the purpose of implementing the
Reorganization, (ii) has not filed any income tax return, and intends to
continue to qualify to be a regulated investment company under Subchapter M of
the Code for its taxable year which includes the Closing Date; (iii) holds and
has held no property other than de minimis assets related to its formation or
maintenance of its legal status and has and has had no tax attributes other than
attributes related to such de minimis assets, and (iv) is a “fund,” as defined
in Section 851(g)(2) of the Code, that is treated as a separate corporation
under Section 851(g)(1) of the Code and the consummation of the transactions
contemplated by the Agreement will not cause the Acquiring Fund to fail to
continue the Target Fund’s qualification as a regulated investment company from
and after the Closing Date. The Acquiring Fund has no earnings or profits
accumulated in any taxable year in which the provisions of Subchapter M of the
Code did not apply to it;
(m) All
issued and outstanding shares of the Acquiring Fund on the Closing Date will be,
validly issued, fully paid and non-assessable by the Acquiring Entity and, in
every state where offered or sold, such offers and sales will be in compliance
in all material respects with applicable registration and/or notice requirements
of the 1933 Act and state and District of Columbia securities laws or exemptions
therefrom;
(n) The
execution, delivery and performance of this Agreement will have been duly
authorized prior to the Closing Date by all necessary action, if any, on the
part of the Board of the Trustees of the Acquiring Entity, on behalf of the
Acquiring Fund, and subject to the approval of shareholders of each Target Fund
and the due authorization, execution and delivery of this Agreement by the other
parties hereto, this Agreement will constitute a valid and binding obligation of
the Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors’ rights and to general equity
principles;
(o) The
shares of the Acquiring Fund to be issued and delivered to the corresponding
Target Fund, for the account of the Target Fund Shareholders, pursuant to the
terms of this Agreement, will on the Closing Date have been duly authorized and,
when so issued and delivered, will be
validly
issued
shares, and, upon receipt of the Target Fund’s Assets in accordance with the
terms of this Agreement, will be fully paid and non-assessable by the Acquiring
Entity and the Acquiring Fund;
(p) The
Acquiring Fund is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code;
(q) The
Acquiring Fund has no unamortized or unpaid organizational fees or expenses for
which they expect to be reimbursed by the Target Fund, directly or indirectly;
(r) The
information provided by the Acquiring Entity for use in the N-14 Registration
Statement will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading, on the effective date of such N-14 Registration
Statement, provided, however, that the representations and warranties in this
paragraph shall not apply to statements in or omissions from the N-14
Registration Statement made in reasonable reliance upon and in conformity with
information that was furnished by the Target Entity for use
therein;
(s) A
true and correct copy of the (i) Certificate of Trust, (ii) Amended and Restated
Agreement and Declaration of Trust, and (iii) Amended and Restated Bylaws, each
of the Acquiring Entity, were filed with the Commission on February 4, 2011,
October 24, 2017 and May 5, 2011, respectively, and each, as so filed, is in
full force and effect and enforceable in accordance with its respective
terms;
(t) The
Acquiring Entity has adopted and implemented written policies and procedures in
accordance with Rule 38a-1 under the 1940 Act relating to the Acquiring Fund;
and
(u) The
Acquiring Entity has adopted and implemented written policies and procedures
related to insider trading and a code of ethics that complies with all
applicable provisions of Section 17(j) of the 1940 Act and Rule 17j-1
thereunder.
5.COVENANTS
5.1
With
respect to each Reorganization, each Target Fund and its corresponding Acquiring
Fund covenant and agree, respectively, as follows:
(a) The
Target Fund and Acquiring Fund: (i) will operate its business in the ordinary
course and substantially in accordance with past practices between the date
hereof and the Closing Date for the Reorganization, it being understood that
such ordinary course of business for the Target Fund during that time period may
include the declaration and payment of customary dividends and distributions,
and any other distribution that may be advisable, and (ii) shall use its
reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct its business operations in the ordinary course in
all material respects.
(b) The
parties hereto shall cooperate in preparing, and the Acquiring Entity shall file
with the Commission, a registration statement on Form N-14 under the 1933 Act
which shall properly register the Acquiring Fund shares to be issued in
connection with the Reorganization and include a proxy statement with respect to
the votes of the shareholders of the Target Fund to approve the Reorganization
(the “N-14 REGISTRATION STATEMENT”).
(c) The
Target Entity will call a meeting of the shareholders of the Target Fund to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the
transactions
contemplated herein. Each Target Fund will consider and Act upon this Agreement
separately.
(d) The
Target Fund covenants that the Acquiring Fund shares to be issued pursuant to
this Agreement are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms of this Agreement.
(e) The
Target Fund will assist the Acquiring Fund in obtaining such information as the
Acquiring Fund reasonably request concerning the beneficial ownership of the
Target Fund’s shares.
(f) The
Target Entity, on behalf of the Target Fund, will provide the Acquiring Fund
with: (1) a statement of the respective tax basis and holding period of all
investments to be transferred by the Target Fund to the Acquiring Fund, (2) a
copy (which may be in electronic form) of the shareholder ledger accounts
including, without limitation, the name, address and taxpayer identification
number of each shareholder of record, the number of shares of beneficial
interest held by each shareholder, the dividend reinvestment elections
applicable to each shareholder, and the backup withholding and nonresident alien
withholding certifications, notices or records on file with the Target Fund with
respect to each shareholder, including such information as the Acquiring Entity
may reasonably request concerning Target Fund shares or Target Fund Shareholders
in connection with the Acquiring Fund’s cost basis reporting and related
obligations under Sections 1012, 6045, 6045A, and 6045B of the Code and related
Treasury Regulations following the Closing for all of the shareholders of record
of the Target Fund as of the close of business on the Valuation Date, who are to
become shareholders of the corresponding Acquiring Fund as a result of the
transfer of Assets (the “TARGET FUND SHAREHOLDER DOCUMENTATION”), (3) the tax
books and records of the Target Fund (including but not limited to any income,
excise or information returns, as well as any transfer statements (as described
in Treas. Reg. section 1.6045A-1 and section 1.6045B-1(a))) for purposes of
preparing any returns required by law to be filed by the Target Fund for tax
periods ending after the Closing Date, and (4) all FASB ASC 740-10-25 (formerly
FIN 48) workpapers and supporting statements pertaining to the Target Fund (the
“FIN 48 WORKPAPERS”). The foregoing information will be provided within such
timeframes as is mutually agreed by the parties.
(g) Subject
to the provisions of this Agreement, the Acquiring Fund and the Target Fund will
each take, or cause to be taken, all action, and do or cause to be done all
things, reasonably necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement.
(h) As
promptly as reasonably practicable after the Closing, the Target Fund will make
one or more liquidating distributions to its shareholders consisting of the
shares of the Acquiring Fund received at the Closing, as set forth in Section
1.1(d) hereof.
(i) After
the Closing Date, the Target Entity, on behalf of the Target Fund, shall deliver
to the Acquiring Fund a statement of the earnings and profits (accumulated and
current) of the Target Fund for federal income tax purposes that will be carried
over to the Acquiring Fund under Section 381 of the Code.
(j) The
parties intend that the Reorganization will qualify as a reorganization within
the meaning of Section 368(a) of the Code. None of the parties to the
Reorganization shall take any action or cause any action to be taken (including,
without limitation the filing of any Return) that, to its knowledge, is
inconsistent with such treatment or results in the failure of the Reorganization
to qualify as a reorganization within the meaning of Section 368(a) of the Code.
(k) Any
reporting responsibility of the Target Fund, including, but not limited to, the
responsibility for filing regulatory reports, preparing Returns relating to tax
periods ending on or prior to the Closing Date (whether due before or after the
Closing Date), or other documents with the Commission, any state securities
commission, and any Federal, state or local tax authorities or any other
relevant regulatory authority, is and shall remain the responsibility of the
Target Fund, except as otherwise is mutually agreed by the parties in
writing.
Since
the parties hereto contemplate that the Reorganization described herein will
qualify as a reorganization described in Section 368(a)(1)(F) of the Code, any
Returns required to be prepared by the Target Fund pursuant to this Section
5.1(k) shall, if necessary, be signed by an officer of the Acquiring Entity
based on a certification issued by an appropriate officer of the Target Entity
(on behalf of the Target Fund) to the Acquiring Entity (on behalf of the
Acquiring Fund) certifying that such Returns are, to the best of the knowledge
and belief of Target Entity, true, correct, and complete.
(l) The
Target Entity, on behalf of the Target Fund, shall deliver to the Acquiring Fund
copies of: (1) the federal, state and local income tax returns filed by or on
behalf of the Target Fund for the prior three (3) taxable years; and (2) any of
the following that have been issued to or for the benefit of or that otherwise
affect the Target Fund and which have continuing relevance: (a) rulings,
determinations, holdings or opinions issued by any federal, state, local or
foreign tax authority and (b) legal opinions.
(m) The
Target Entity, on behalf of the Target Fund, agrees that the acquisition of all
Assets and Liabilities of the Target Fund by the Acquiring Entity, on behalf of
the Acquiring Fund, includes any right of action against current and former
service providers of the Target Fund, such right to survive for the statute of
limitation of any such claim. For the avoidance of all doubt, the Target Entity
hereby assigns to the Acquiring Entity all rights, causes of action, and other
claims against third parties relating to the Target Fund, whether known or
unknown, contingent or non-contingent, inchoate or choate, or
otherwise.
(n) The
Target Entity and the Acquiring Entity will coordinate with their respective
administrators to provide a valuation check to determine whether the use of the
Acquiring Fund’s Valuation Procedures will result in material differences in the
prices of the portfolio securities of the Target Fund as compared to the prices
of the same portfolio securities determined using the Target Fund’s valuation
procedures, such valuation check to be conducted no later than one month prior
to the Closing Date and again within one week of the Closing Date on mutually
agreeable dates. In the event that such valuation check reveals material pricing
differences, the Target Entity and the Acquiring Entity will work together, in
good faith, to eliminate or minimize such differences prior to the
Closing.
(o) The
Acquiring Entity covenants that it will not make any material changes to the
Acquiring Fund’s Valuation Procedures prior to the Closing Date without
providing the Target Entity with written notice of such changes at least ten
days prior to the effective date of such changes.
6.CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE TARGET FUNDS
6.1 With
respect to the Reorganization, the
obligations of the Target Entity, on behalf of the Target Funds, to consummate
the transactions provided for herein and the effectiveness of the
Reorganizations shall be subject, at the Target Funds’ election, to the
performance by the Acquiring Entity and the Acquiring Funds of all of the
obligations to be performed by it hereunder on or before the Closing Date, and,
in addition thereto, the following conditions:
(a) All
representations, covenants, and warranties of the Acquiring Entity and the
Acquiring Funds contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date;
(b) The
Acquiring Entity shall have delivered to the Target Entity on the Closing Date a
certificate executed in its name by its President or Vice President and
Treasurer, in form and substance reasonably satisfactory to the Target Entity
and dated as of the Closing Date, to the effect that the representations,
covenants, and warranties of or with respect to the Acquiring Funds made in this
Agreement are true and correct in all material respects at and as of the Closing
Date, except as they may be affected by the transactions contemplated by this
Agreement;
(c) The
Acquiring Entity and the Acquiring Funds shall have performed all of the
covenants and complied with all of the provisions
required by this Agreement to be performed or complied with by the Acquiring
Entity and the Acquiring Funds, on or before the Closing Date;
(d) The
Acquiring Entity
has not made any material changes to the Acquiring Funds’ Valuation Procedures
between the date of this Agreement and the Closing Date, except as provided in
Section 5.1(o) herein;
(e) The
Target Entity
shall have received a favorable opinion of Stradley Ronon Stevens & Young,
LLP (“STRADLEY RONON”), counsel to the Acquiring Entity, dated the Closing Date
and in a form satisfactory to the Target Entity, to the following
effect:
(i) The
Acquiring Entity is a statutory trust duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power to own
all of its properties and assets and to carry on its business as presently
conducted. Each Acquiring Fund has been established as a separate series of the
Acquiring Entity under the Organizational Documents of the Acquiring
Entity;
(ii) This
Agreement has been duly authorized, executed and to such counsel’s knowledge,
delivered by the Acquiring Entity, on behalf of the Acquiring Funds, and,
assuming the N-14 Registration Statement complies with the applicable federal
securities laws, and assuming the due authorization, execution and delivery of
this Agreement by all other parties, is the valid and binding obligation of the
Acquiring Entity enforceable against the Acquiring Entity on behalf of the
Acquiring Funds in accordance with its terms, except as the same may be limited
by bankruptcy, fraudulent transfer, insolvency, moratorium, reorganization or
other similar laws relating to or affecting the enforcement of creditors’ rights
generally and other equitable principles;
(iii)
The
shares of each Acquiring Fund to be issued for transfer to the corresponding
Target Fund’s shareholders as provided by this Agreement are duly authorized and
upon such transfer and delivery will be validly issued and outstanding and,
assuming receipt by the Acquiring Fund of the consideration contemplated hereby,
fully paid and nonassessable shares in the Acquiring Fund, and no shareholder of
the Acquiring Fund has any preemptive right of subscription or purchase in
respect thereof;
(iv) The
execution and delivery of this Agreement did not, and the performance by the
Acquiring Entity of its obligations hereunder will not, violate the Acquiring
Entity’s Organizational Documents;
(v)
The
Acquiring Entity is registered with the Commission as an open-end management
investment company under the 1940 Act, and, to such counsel’s knowledge, its
registration with the Commission under the 1940 Act is in full force and
effect;
(vi) Except
as disclosed in writing to the Target Entity, such counsel knows of no material
legal proceedings pending against the Acquiring Funds or the Acquiring Entity;
and
(vii) To
the knowledge of such counsel, no consent, approval, authorization or order of
any court or governmental authority under U.S. federal law or Delaware law is
required to be obtained by the Acquiring Entity in order to
consummate
the
transactions contemplated by this Agreement except such as have been obtained.
(f) In
connection with the opinion contemplated by Section 6.1(e) of this Agreement, it
is understood that counsel may reasonably rely upon the representations made in
this Agreement as well as certificates of officers of the Acquiring
Entity.
(g) The
Acquiring Funds’ registration statement on Form N-1A filed by the Acquiring
Entity with the Commission to register the offer of shares of the Acquiring
Funds will be in effect on the Closing Date.
(h) Each
Acquiring Fund agrees that all rights to indemnification and all limitations of
liability existing in favor of its corresponding Target Fund's current and
former directors and officers, acting in their capacities as such, shall survive
the Reorganization as obligations of such Acquiring Fund and shall continue in
full force and effect, without any amendment thereto, and shall constitute
rights which may be asserted against such Acquiring Fund, its successors or
assigns.
7.CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS
7.1 With
respect to the Reorganization, the obligations of the Acquiring Entity, on
behalf of the Acquiring Funds, to consummate the transactions provided for
herein and the effectiveness of the Reorganizations shall be subject, at the
Acquiring Funds’ election, to the performance by the Target Entity and the
Target Funds of all of the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following
conditions:
(a) All
representations, covenants, and warranties of the Target Entity and the Target
Funds contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date;
(b) The
Target Entity shall have delivered to the Acquiring Entity on the Closing Date a
certificate executed in its name by its President or Vice President and
Treasurer, in form and substance reasonably satisfactory to the Acquiring Entity
and dated as of the Closing Date, to the effect that the representations,
covenants,
and
warranties of or with respect to the Target Funds made in this Agreement are
true and correct in all material respects at and as of the Closing Date, except
as they may be affected by the transactions contemplated by this
Agreement;
(c) The
Target Entity, on behalf of the applicable Target Fund, shall have delivered to
the Acquiring Entity (i) the items listed in clauses (1), (2), and (4) of
Section 5.1(f) hereof and (ii) to the extent permitted by applicable law, all
information pertaining to, or necessary or useful in the calculation or
demonstration of, the investment performance of the Target Fund;
(d) The
Target Custodian shall have delivered the certificate contemplated by Section
3.2(b) of this Agreement, duly executed by an authorized officer of the Target
Custodian;
(e) The
Target Entity and the Target Funds shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Target Entity and the Target Funds, on or before the
Closing Date;
(f) The
Acquiring Entity shall have received a favorable opinion of Seward & Kissel
LLP, counsel to the Target Entity, dated the Closing Date and in a form
satisfactory to the Acquiring Entity, to the following effect:
(i) The
Target Entity is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Maryland and has the power to own all of
its properties and assets and to carry on its business as presently conducted.
Each Target Fund has been established as a separate series of the Target Entity
under the Articles of Incorporation of the Target Entity;
(ii) This
Agreement has been duly authorized, executed and, to such counsel’s knowledge,
delivered by the Target Entity, on behalf of the Target Funds, and, assuming the
N-14 Registration Statement complies with the applicable federal securities laws
and assuming the due authorization, execution and delivery of this Agreement by
all other parties, is the valid and binding obligation of the Target Entity
enforceable against the Target Entity, on behalf of the Target Funds, in
accordance with its terms, except as the same may be limited by bankruptcy,
fraudulent transfer, insolvency, moratorium, reorganization, or other similar
laws relating to or affecting the enforcement of creditors’ rights generally and
other equitable principles;
(iii) The
execution and delivery of this Agreement did not, and the performance by the
Target Entity of its obligations hereunder, including the transfer of the
Assets, will not, violate the Target Entity’s Articles of Incorporation and
By-Laws;
(iv) The
Target Entity is registered with the Commission as an open-end management
investment company under the 1940 Act, and, to such counsel’s knowledge, its
registration with the Commission under the 1940 Act is in full force and
effect;
(v) Except
as disclosed in writing to the Acquiring Entity, such counsel knows of no
material legal proceedings pending against the Target Funds or the Target
Entity; and
(vi) To
the knowledge of such counsel, no consent, approval, authorization or order of
any court or governmental authority under U.S. federal law or Maryland law is
required to be obtained by the Target Entity in order to consummate the
transactions contemplated by this Agreement except such as have been obtained;
and
(g) In
connection with the opinion contemplated by Section 7.1(f) of this Agreement, it
is understood that counsel may reasonably rely upon the representations made in
this Agreement as well as certificates of officers of the Target
Entity.
8.FURTHER
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND THE TARGET
FUNDS
With
respect to the Reorganization, if any of the conditions set forth below have not
been satisfied on or before the Closing Date with respect to the Target Funds or
the Acquiring Funds, the
Acquiring
Entity or Target Entity, respectively, shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 The
Agreement shall have been approved by the requisite vote of the holders of the
outstanding shares of each Target Fund in accordance with the provisions of the
Target Entity’s Articles of Incorporation and By-Laws, Maryland law, and the
1940 Act. Notwithstanding anything herein to the contrary, neither the Target
Funds nor the Acquiring Funds may waive the condition set forth in this Section
8.1. The consummation of one Reorganization between a Target Fund and an
Acquiring Fund shall not be contingent on the approval by shareholders of
another Target Fund;
8.2 On
the Closing Date, no action, suit or other proceeding shall be pending or, to
the Target Entity’s or the Acquiring Entity’s knowledge, threatened before any
court or governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein;
8.3 All
consents of other parties and all other consents, orders and permits of Federal,
state and local regulatory authorities deemed necessary by the Acquiring Fund or
the Target Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of the Acquiring Funds or
the Target Funds, provided that either party hereto may for itself waive any of
such conditions;
8.4 The
N-14 Registration Statement shall have become effective under the 1933 Act and
no stop orders suspending the effectiveness thereof shall have been issued and,
to the best knowledge of the parties hereto, no investigation or proceeding for
that purpose shall have been instituted or be pending, threatened or known to be
contemplated under the 1933 Act; and
8.5 With
respect to each Reorganization, the Target Entity (on behalf of the applicable
Target Fund) and the Acquiring Entity (on behalf of the corresponding Acquiring
Fund) shall have received on or before the Closing Date an opinion of Stradley
Ronon, in form and substance reasonably acceptable to the Target Entity and the
Acquiring Entity, as to the matters set forth on Schedule 8.5. In rendering such
opinion, Stradley Ronon may request and rely upon representations contained in
certificates of officers of the Target Entity, the Acquiring Entity and others,
and the officers of the Target Entity and the Acquiring Entity shall use their
best efforts to make available such truthful certificates. Such opinion shall
contain such limitations as shall be in the opinion of Stradley Ronon
appropriate to render the opinions expressed therein.
Subject
to receipt of the certificates referenced in this Section 8.5 and absent a
change of law or change of fact between the date of this Agreement and the
Closing, the Target Entity and the Acquiring Entity agree that such opinion
shall state that the Reorganization will qualify as a “reorganization” under
Section 368(a)(1)(F) of the Code. Notwithstanding anything herein to the
contrary, neither the Acquiring Entity nor the Target Entity may waive the
conditions set forth in this paragraph 8.5.
9.FEES
AND EXPENSES
9.1 The
parties hereto represent and warrant to each other that there are no brokers or
finders entitled to receive any payments in connection with the transactions
provided for herein.
9.2 The
total costs of the Reorganizations are the responsibility of the Target Funds,
all to be expensed and paid by the Target Funds prior to the Closing
Date.
The
costs of each Reorganization shall include, but not be limited to, costs
associated with: preparation, printing and distribution of the N-14 Registration
Statement; legal fees and accounting fees with respect to the Reorganizations
and the N-14 Registration Statement, including legal fees of counsels to the
Target Entity and the Acquiring Entity, as
well
as counsels to the Board of Directors of the Target Entity and the Board of
Trustees of the Acquiring Entity; expenses of holding shareholder meetings;
auditor fees, project fees, proxy solicitation and tabulation costs, board
meeting fees applicable to the Reorganizations; obtaining any required tail
insurance; and all necessary taxes in connection with the delivery of the
Assets, including all applicable federal and state stock transfer stamps.
10.COOPERATION
AND EXCHANGE OF INFORMATION
Prior
to the Closing and for a reasonable time thereafter, the Target Entity and the
Acquiring Entity will provide each other and their respective representatives
with such cooperation, assistance and information as is reasonably necessary:
(i) for the filing of any Return, for the preparation for any audit, and for the
prosecution or defense of any claim, suit or proceeding relating to any proposed
adjustment, or (ii) for any financial accounting purpose. Each such party or
their respective agents will retain until the applicable period for assessment
under applicable law (giving effect to any and all extensions or waivers) has
expired all Returns, schedules and work papers and all material records or other
documents relating to Tax matters and financial reporting of tax positions of
the Target Funds and the Acquiring Funds for the taxable period first ending
after the Closing of the Reorganization and for all prior taxable periods for
which the statute of limitation had not run at the time of the Closing, provided
that the Target Entity shall not be required to maintain any such documents that
it has delivered to the Acquiring Funds.
If
applicable, the Acquiring Funds shall receive certificates following the
Closing, promptly upon reasonable request, from the principal executive officer
and principal financial officer, or persons performing similar functions, of the
Target Entity to the effect that such principal executive officer and principal
financial officer, or persons performing similar functions, of the Target Entity
have concluded that, based on their evaluation of the effectiveness of the
Target Entity’s disclosure controls and procedures (as defined in Rule 30a-3(c)
under the 1940 Act), to the best of their knowledge, the design and operation of
such procedures were effective to provide reasonable assurance regarding the
reliability of information provided by the Target Entity to the Acquiring Entity
with respect to the Target Funds’ operations prior to the Closing that is
required to be disclosed by the Acquiring Entity on Forms N-CSR and N-PORT or
any forms adopted by the Commission in replacement of Forms N-CSR or
N-PORT.
11.INDEMNIFICATION
11.1 Prospector
and Acquiring Entity each agrees to indemnify and hold harmless the Target
Entity and each of the Target Entity’s officers and directors and the Target
Funds from and against any and all losses, claims, damages, stated liabilities
or expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which the Target Entity or any of its
directors or officers or the Target Funds may become subject, insofar as such
loss, claim, damage, liability or expense (or actions with respect thereto)
arises out of or is based on any breach by the Acquiring Entity, on behalf of
the Acquiring Funds, of any of its representations, warranties, covenants or
agreements set forth in this Agreement. This indemnification obligation shall
survive the termination of this Agreement and the Closing.
11.2 Prospector
and Target Entity agrees to indemnify and hold harmless the Acquiring Entity and
each of the Acquiring Entity’s officers and trustees and the Acquiring Funds
from and against any and all losses, claims, damages, stated liabilities or
expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which the Acquiring Entity or any of
its trustees or officers or the Acquiring Funds may become subject, insofar as
such loss, claim, damage, liability or expense (or actions with respect thereto)
arises out of or is based on any breach by the Target Entity, on behalf of the
Target Funds, of any of its representations, warranties, covenants or agreements
set
forth in this Agreement. This indemnification obligation shall survive the
termination of this Agreement and the Closing.
12.ENTIRE
AGREEMENT; SURVIVAL OF WARRANTIES AND COVENANTS
12.1 Except
as described in Section 9.2, each party agrees that no party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
12.2 The
representations, warranties and covenants contained in this Agreement or in any
document delivered pursuant hereto or in connection herewith shall survive the
consummation of the transactions contemplated hereunder. The covenants to be
performed after the Closing shall survive the Closing.
13.TERMINATION
This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned (i) by mutual agreement of the Acquiring Entity and the Target Entity;
(ii) by either the Acquiring Entity or the Target Entity if the Closing shall
not have occurred on or before [
],
2024, unless such date is extended by mutual agreement of the Acquiring Entity
and the Target Entity; (iii) by either the Acquiring Entity or the Target Entity
if one or more other parties shall have materially breached its obligations
under this Agreement or made a material misrepresentation herein or in
connection herewith; (iv) by the Acquiring Entity if any condition precedent to
its obligations set forth herein has not been fulfilled or waived by the
Acquiring Entity; (v) by the Target Entity if any condition precedent to its
obligations set forth herein has not been fulfilled or waived by the Target
Entity; or (vi) after a determination by the Acquiring Entity’s or the Target
Entity’s board of trustees/directors that the consummation of the transactions
contemplated herein is not in the best interest of the party, and giving notice
to the other party hereto. In the event of any such termination, this Agreement
shall become void and there shall be no liability hereunder on the part of any
party or their respective directors, trustees or officers, except for (i) any
such material breach or intentional misrepresentation or (ii) the parties’
respective obligations under Section 11, as to each of which all remedies at law
or in equity of the party adversely affected shall survive. However, a
termination pursuant to this provision shall not relieve the parties of their
obligations pursuant to Section 9.2 to bear expenses relating to the
Reorganization, as specified in section 9.2, which were incurred prior to the
termination.
14.AMENDMENTS
This
Agreement may be amended, modified or supplemented in a writing signed by the
parties hereto to be bound by such Amendment; provided, however, that following
the meeting of Target Fund Shareholders pursuant to paragraph 5.1(c) of this
Agreement, no such amendment may have the effect of changing any provisions to
the detriment of such shareholders.
15.HEADINGS;
GOVERNING LAW; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY; PUBLICITY;
SEVERABILITY; EFFECT OF ELECTRONIC DOCUMENTS
15.1 The
Article and Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
15.2 This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware and applicable Federal law, without regard to its principles
of conflicts of laws.
15.3 This
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns, but no assignment or transfer hereof or of
any rights or obligations hereunder shall be made by any party without the
written consent of the other parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this
Agreement.
15.4 This
agreement may be executed in any number of counterparts, each of which shall be
considered an original.
15.5 It
is expressly agreed that the obligations of the parties hereunder shall not be
binding upon any of their respective directors or trustees, shareholders,
nominees, officers, agents, or employees personally, but shall bind only the
property of: (a) the Target Funds, as provided in the Target Entity’s Articles
of Incorporation and By-Laws, or the Acquiring Funds, as provided in their
respective Organizational Documents, as applicable; and (b) the other parties.
The execution and delivery of this Agreement have been authorized by the
directors or trustees of the Target Entity and the Acquiring Entity on behalf of
the Target Funds and Acquiring Funds, respectively, and signed by authorized
officers of the Target Entity and Acquiring Entity, acting as such.
Such
authorization by such directors or trustees and such execution and delivery by
such officers shall not be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but shall bind only the
property of the Acquiring Funds or Target Funds.
15.6 Any
public announcements or similar publicity with respect to this Agreement or the
transactions contemplated herein will be made at such time and in such manner as
the parties mutually shall agree in writing, provided that nothing herein shall
prevent either party from making such public announcements as may be required by
applicable law, as determined by the disclosing party on the advice of counsel,
in which case the party issuing such statement or communication shall advise the
other party prior to such issuance.
15.7
Whenever
possible, each provision and term of this Agreement shall be interpreted in a
manner to be effective and valid, but if any provision or term of this Agreement
is held to be prohibited by law or invalid, then such provision or term shall be
ineffective only in the jurisdiction or jurisdictions so holding and only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provision or term or the remaining
provisions or terms of this Agreement.
15.8 A
facsimile or electronic (e.g., PDF) signature of an authorized officer of a
party hereto on this Agreement and/or any transfer or closing document shall
have the same effect as if executed in the original by such
officer.
15.9 Each
party specifically acknowledges and agrees that any liability under this
Agreement with respect to an Acquiring Fund or a Target Fund, or in connection
with the transactions contemplated herein with respect to an Acquiring Fund or a
Target Fund, shall be discharged only out of the assets of that Acquiring Fund
or Target Fund, and that no other series of the Acquiring Entity or the Target
Entity shall be liable with respect thereto.
16.CONFIDENTIALITY
Each
party will hold, and will cause its board members, officers, employees,
representatives, agents and affiliated persons to hold, in strict confidence,
and not disclose to any other person, and not use in any way except in
connection with the transactions herein contemplated, without the prior written
consent
of the disclosing party, all confidential information obtained from the
disclosing party in connection with the transactions contemplated by this
Agreement, except such information may be disclosed: (i) to governmental or
regulatory bodies, and, where necessary, to any other person in connection with
the obtaining of consents or waivers as contemplated by this Agreement; (ii) if
required by court order or decree or applicable law; (iii) if it is publicly
available through no act or failure to act of such party; (iv) if it was already
known to such party on a non-confidential basis on the date of receipt; (v)
during the course of or in connection with any litigation, government
investigation, arbitration, or other proceedings based upon or in connection
with the subject matter of this Agreement, including, without limitation, the
failure of the transactions contemplated hereby to be consummated; or (vi) if it
is otherwise expressly provided for herein.
In
the event of a termination of this Agreement, each party agrees that it, along
with its board members, employees, representative agents and affiliated persons,
shall, and shall cause their affiliates to, except with the prior written
consent of the other party, keep secret and retain in strict confidence, and not
use for the benefit of itself or themselves, nor disclose to any other persons,
any and all confidential or proprietary information relating to the disclosing
party and their related parties and affiliates, whether obtained through their
due diligence investigation, this Agreement or otherwise, except such
information may be disclosed: (i) if required by court order or decree or
applicable law; (ii) if it is publicly available through no act or failure to
act of such party; (iii) if it was already known to such party on a
non-confidential basis on the date of receipt; (iv) during the course of or in
connection with any litigation, government investigation, arbitration, or other
proceedings based upon or in connection with the subject matter of this
Agreement, including, without limitation, the failure of the transactions
contemplated hereby to be consummated; or (v) if it is otherwise expressly
provided for herein.
17.NOTICES
Any
notice, report, statement or demand required or permitted by any provisions of
this Agreement shall be in writing and shall be given by facsimile, personal
service or prepaid or certified mail addressed to:
FOR
TARGET ENTITY:
Prospector
Funds, Inc.
370
Church Street
Guilford,
Connecticut 06437
Attn.:
Pete Perugini
WITH
A COPY TO:
Seward
& Kissel LLP
One
Battery Park Plaza
New
York, NY 10004
Attn:
Patricia A. Poglinco
FOR
ACQUIRING ENTITY:
Managed
Portfolio Series
615
East Michigan Street
Milwaukee,
WI 53202
Attn.:
Brian Wiedmeyer
WITH
A COPY TO:
Stradley
Ronon Stevens & Young, LLP
2005
Market Street, Suite 2600
Philadelphia,
Pennsylvania 19103
Attn:
Michael P. O’Hare
FOR
PROSPECTOR:
370
Church Street
Guilford,
Connecticut 06437
Attn.:
Pete Perugini
[SIGNATURE
PAGE FOLLOWS]
AGREEMENT
AND PLAN OF REORGANIZATION
SIGNATURE
PAGE
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as set forth below.
PROSPECTOR
FUNDS, INC.,
on
behalf of its series
Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund
By:
Name:
Title:
MANAGED
PORTFOLIO SERIES
on
behalf of its series
Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund
By:
Name:
Title:
PROSPECTOR
PARTNERS ASSET MANAGEMENT, LLC,
solely for the purposes of Sections 1.1(f), 11.1 and 11.2 of this
Agreement
By:
Name:
Title:
AGREEMENT
AND PLAN OF REORGANIZATION
SCHEDULE
1.1
TARGET
FUNDS AND CORRESPONDING ACQUIRING FUNDS
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| Target
Fund |
Corresponding
Acquiring Fund |
|
Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund |
Prospector
Capital Appreciation Fund
Prospector
Opportunity Fund |
AGREEMENT
AND PLAN OF REORGANIZATION
SCHEDULE
8.5
TAX
OPINION
i.The
acquisition by the Acquiring Fund of all of the Assets of its corresponding
Target Fund in exchange for the Acquiring Fund shares and the assumption by the
corresponding Acquiring Fund of the Liabilities of its corresponding Target
Fund, followed by the distribution by the Target Fund to its shareholders of the
Acquiring Fund shares in complete liquidation of the Target Fund, will qualify
as a reorganization within the meaning of Section 368(a)(1) of the Code, and the
Target Fund and Acquiring Fund each will be a “party to the reorganization”
within the meaning of Section 368(b) of the Code.
ii.No
gain or loss will be recognized by the Target Fund upon the transfer of all of
its Assets to, and assumption of its Liabilities by, its corresponding Acquiring
Fund in exchange solely for the Acquiring Fund shares pursuant to Sections
361(a) and 357(a) of the Code.
iii.No
gain or loss will be recognized by the Acquiring Fund upon the receipt by it of
all of the Assets of its corresponding Target Fund in exchange solely for the
Acquiring Fund shares and the assumption by the Acquiring Fund of the
Liabilities of its corresponding Target Fund pursuant to Section 1032(a) of the
Code.
iv.No
gain or loss will be recognized by the Target Fund upon the distribution of its
corresponding Acquiring Fund shares to its shareholders in complete liquidation
of the Target Fund pursuant to Section 361(c)(1) of the Code.
v.The
tax basis of each Asset of the Target Fund received by its corresponding
Acquiring Fund will be the same as the tax basis of such Asset to the Target
Fund immediately prior to the exchange pursuant to Section 362(b) of the
Code.
vi.The
holding period of each Asset of the Target Fund received by its corresponding
Acquiring Fund will include the periods during which such Asset was held by the
Target Fund pursuant to Section 1223(2) of the Code.
vii.No
gain or loss will be recognized by the shareholders of the Target Fund upon the
exchange of their Target Fund shares for its corresponding Acquiring Fund shares
(including fractional shares to which they may be entitled), pursuant to Section
354(a) of the Code.
viii.The
aggregate tax basis of the Acquiring Fund shares received by each shareholder of
the Target Fund (including fractional shares to which they may be entitled) will
be the same as the aggregate tax basis of the shareholder’s Target Fund shares
exchanged therefor pursuant to Section 358(a)(1) of the Code.
ix.The
holding period of the Acquiring Fund shares received by each shareholder of the
Target Fund (including fractional shares to which they may be entitled) will
include the shareholder’s holding period of the Target Fund shares surrendered
in exchange therefor, provided that such Target Fund shares were held as a
capital asset on the date of the Reorganization pursuant to Section 1223(1) of
the Code.
x.The
taxable year of the Target Fund will not end as a result of the Reorganization.
For the purposes of Section 381 of the Code, the Acquiring Fund will succeed to
and take into account, as of the date of the transfer as defined in Section
1.381(b)-1(b) of the regulations issued by the United States Department of the
Treasury (the “Income Tax Regulations”), the items of the Target Fund described
in Section 381(c) of the Code as if there had been no Reorganization,
subject
to the conditions and limitations specified in Sections 381, 382, 383 and 384 of
the Code and, if applicable, the Income Tax Regulations promulgated
thereunder.
Notwithstanding
anything to the contrary herein, we express no opinion as to the effect of the
Reorganization on the Target Funds, the Acquiring Funds or any Target Fund
shareholders with respect to any asset (including without limitation any stock
held in a passive foreign investment company as defined in section 1297(a) of
the Code or any contract described in Section 1256(b) of the Code) as to which
any unrealized gain or loss is required to be recognized for federal income tax
purposes upon the transfer of such asset regardless of whether such transfer
would otherwise be a nonrecognition transaction under the Code.
Exhibit
C
FINANCIAL
HIGHLIGHTS
The
financial highlights in the following tables are intended to help you understand
each Target Fund’s financial performance for the fiscal periods indicated and
are included in the Target Funds’ prospectus which is incorporated herein by
reference. Certain information reflects financial results for a single
Fund share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
derived from the financial statements audited by Ernst & Young, LLP, for the
most recent fiscal year ended December 31, 2023.
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|
Capital
Appreciation Fund |
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|
Year
Ended December 31, |
|
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|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
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| For
a Fund share outstanding |
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|
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|
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| throughout
the year |
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| NET
ASSET VALUE: |
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| Beginning
of year |
$ |
19.28 |
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|
$ |
21.26 |
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|
$ |
19.60 |
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|
$ |
18.80 |
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|
$ |
16.34 |
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| OPERATIONS: |
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Net
investment income(1) |
0.11 |
|
|
0.11 |
|
|
0.09 |
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|
0.12 |
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|
0.14 |
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| Net
realized and unrealized |
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| gain
(loss) on investments |
2.06 |
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|
(0.93) |
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|
4.32 |
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|
1.07 |
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|
3.47 |
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| Total
from operations |
2.17 |
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|
(0.82) |
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|
4.41 |
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|
1.19 |
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|
3.61 |
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| LESS
DISTRIBUTIONS: |
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|
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|
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| From
net investment income |
(0.11) |
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|
(0.11) |
|
|
(0.20) |
|
|
(0.02) |
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|
(0.12) |
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|
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| From
net realized gains |
(0.53) |
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|
(1.05) |
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|
(2.55) |
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|
(0.37) |
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|
(1.03) |
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| Total
distributions |
(0.64) |
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|
(1.16) |
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|
(2.75) |
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|
(0.39) |
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|
(1.15) |
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| NET
ASSET VALUE: |
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| End
of year |
$ |
20.81 |
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$ |
19.28 |
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$ |
21.26 |
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|
$ |
19.60 |
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|
$ |
18.80 |
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TOTAL
RETURN(3) |
11.34 |
% |
|
(4.07) |
% |
|
23.25 |
% |
|
6.40 |
% |
|
22.33 |
% |
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| SUPPLEMENTAL
DATA AND RATIOS: |
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| Net
assets, end of year (in thousands) |
$ |
33,428 |
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$ |
27,445 |
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$ |
29,839 |
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$ |
26,163 |
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$ |
29,371 |
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| Ratio
of expenses to average net assets: |
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| Before
expense reimbursement |
1.76 |
% |
|
1.76 |
% |
|
1.78 |
% |
|
2.00 |
% |
|
1.95 |
% |
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|
| After
expense reimbursement |
1.25 |
% |
|
1.25 |
% |
|
1.25 |
% |
|
1.25 |
% |
|
1.29 |
% |
(2) |
|
| Ratio
of net investment income (loss) |
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|
|
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| to
average net assets: |
|
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|
|
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|
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|
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| Before
expense reimbursement |
0.09 |
% |
|
0.07 |
% |
|
(0.17) |
% |
|
(0.09) |
% |
|
0.08 |
% |
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| After
expense reimbursement |
0.60 |
% |
|
0.58 |
% |
|
0.36 |
% |
|
0.66 |
% |
|
0.74 |
% |
|
|
| Portfolio
turnover rate |
41 |
% |
|
33 |
% |
|
32 |
% |
|
40 |
% |
|
25 |
% |
|
|
(1)Per
share amounts are calculated in accordance with SEC Form N-1A instructions. Net
investment income data was derived by adding (deducting) the increase (decrease)
per share in undistributed net investment income for the period to (from)
dividends from net investment income per share for the period.
(2)On
September 5, 2019, the Adviser lowered the limit of annual operating expenses
from 1.30% to 1.25% of average daily net assets.
(3)Total
return is a measure of the change in the value of an investment in the Fund over
the years covered and assumes the reinvestment of capital gains and income
distributions. Returns shown reflect waivers of fee and operating expenses in
effect. In the absence of such waivers, total return would be reduced. The
returns do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opportunity
Fund |
|
|
|
Year
Ended December 31, |
|
|
|
2023 |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
|
| For
a Fund share outstanding |
|
|
|
|
|
|
|
|
|
|
|
| throughout
the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET
ASSET VALUE: |
|
|
|
|
|
|
|
|
|
|
|
| Beginning
of year |
$ |
23.14 |
|
|
$ |
25.63 |
|
|
$ |
22.78 |
|
|
$ |
22.18 |
|
|
$ |
18.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(1) |
0.15 |
|
|
0.17 |
|
|
0.11 |
|
|
0.13 |
|
|
0.23 |
|
|
|
| Net
realized and unrealized |
|
|
|
|
|
|
|
|
|
|
|
| gain
(loss) on investments |
2.53 |
|
|
(1.71) |
|
|
4.99 |
|
|
1.06 |
|
|
4.49 |
|
|
|
| Total
from operations |
2.68 |
|
|
(1.54) |
|
|
5.10 |
|
|
1.19 |
|
|
4.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LESS
DISTRIBUTIONS: |
|
|
|
|
|
|
|
|
|
|
|
| From
net investment income |
(0.03) |
|
|
(0.17) |
|
|
(0.10) |
|
|
(0.17) |
|
|
(0.23) |
|
|
|
| From
net realized gains |
(0.12) |
|
|
(0.78) |
|
|
(2.15) |
|
|
(0.42) |
|
|
(0.78) |
|
|
|
| Total
distributions |
(0.15) |
|
|
(0.95) |
|
|
(2.25) |
|
|
(0.59) |
|
|
(1.01) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NET
ASSET VALUE: |
|
|
|
|
|
|
|
|
|
|
|
| End
of year |
$ |
25.67 |
|
|
$ |
23.14 |
|
|
$ |
25.63 |
|
|
$ |
22.78 |
|
|
$ |
22.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
RETURN(3) |
11.63 |
% |
|
(6.20) |
% |
|
22.88 |
% |
|
5.43 |
% |
|
25.73 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| SUPPLEMENTAL
DATA AND RATIOS: |
|
|
|
|
|
|
|
|
|
|
|
| Net
assets, end of year (in thousands) |
$ |
231,689 |
|
|
$ |
210,587 |
|
|
$ |
241,130 |
|
|
$ |
224,011 |
|
|
$ |
142,685 |
|
|
|
| Ratio
of expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
| Before
expense reimbursement |
1.37 |
% |
|
1.34 |
% |
|
1.34 |
% |
|
1.39 |
% |
|
1.50 |
% |
|
|
| After
expense reimbursement |
1.25 |
% |
|
1.25 |
% |
|
1.25 |
% |
|
1.25 |
% |
|
1.29 |
% |
(2) |
|
| Ratio
of net investment income |
|
|
|
|
|
|
|
|
|
|
|
| to
average net assets: |
|
|
|
|
|
|
|
|
|
|
|
| Before
expense reimbursement |
0.51 |
% |
|
0.58 |
% |
|
0.28 |
% |
|
0.63 |
% |
|
0.85 |
% |
|
|
| After
expense reimbursement |
0.63 |
% |
|
0.67 |
% |
|
0.37 |
% |
|
0.77 |
% |
|
1.06 |
% |
|
|
| Portfolio
turnover rate |
32 |
% |
|
44 |
% |
|
29 |
% |
|
52 |
% |
|
27 |
% |
|
|
(1)Per
share amounts are calculated in accordance with SEC Form N-1A instructions. Net
investment income data was derived by adding (deducting) the increase (decrease)
per share in undistributed net investment income for the period to (from)
dividends from net investment income per share for the period.
(2)On
September 5, 2019, the Adviser lowered the limit of annual operating expenses
from 1.30% to 1.25% of average daily net assets.
(3)Total
return is a measure of the change in the value of an investment in the Fund over
the years covered and assumes the reinvestment of capital gains and income
distributions. Returns shown reflect waivers of fee and operating expenses in
effect. In the absence of such waivers, total return would be reduced. The
returns do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares.
STATEMENT
OF ADDITIONAL INFORMATION
TO
THE
REGISTRATION
STATEMENT ON FORM N-14 FILED BY:
Managed
Portfolio Series
on
behalf of its series
Prospector
Capital Appreciation Fund (“Acquiring Capital Appreciation Fund”)
Prospector
Opportunity Fund (“Acquiring Opportunity Fund”)
(each,
an “Acquiring Fund”, together the “Acquiring Funds”)
615
East Michigan Street
Milwaukee,
Wisconsin 53202
Relating
to the September 6,
2024
Special Meeting of Shareholders of:
Prospector
Capital Appreciation Fund (“Target Capital Appreciation Fund”)
Prospector
Opportunity Fund (“Target Opportunity Fund”)
each
series of Prospector Funds, Inc.
(each,
a “Target Fund”, together the “Target Funds”)
August
16, 2024
This
Statement of Additional Information (“SAI”), which is not a prospectus,
supplements and should be read in conjunction with the Proxy
Statement/Prospectus dated August 16, 2024, relating specifically to the Special
Meeting of Shareholders of the Target Funds to be held on September 6,
2024
(the “Proxy Statement/Prospectus”). Copies of the Proxy Statement/Prospectus may
be obtained at no charge by calling 1-877-734-7862.
CONTENTS
OF THE SAI
This
SAI consists of the cover page and the information set forth below. The
Acquiring Funds have not commenced operation as of the date of this SAI.
Accordingly, the financial statements for the Acquiring Funds are not available.
Copies of the Acquiring Funds’ annual and semi-annual reports, may be obtained
when available, without charge, by visiting
https://www.prospectorfunds.com.
The
Acquiring Funds may be referred to in this SAI as a “Fund” or the “Funds.”
GENERAL
INFORMATION
This
Statement of Additional Information relates to:(a) the acquisition of all of the
assets and assumption of all of the liabilities of the Target Funds by the
corresponding Acquiring Funds in exchange for shares of the Acquiring Funds; (b)
the distribution of shares of the corresponding share class of each Acquiring
Fund to the shareholders of the corresponding Target Fund; and (c) the
liquidation and termination of the Target Funds (the “Reorganizations”). Target
Fund shareholders will receive shares of the Acquiring Fund as set forth in the
table below:
|
|
|
|
|
|
| Target
Fund |
Corresponding
Acquiring Fund |
| Target
Capital Appreciation Fund |
Acquiring
Capital Appreciation Fund |
| Target
Opportunity Fund |
Acquiring
Opportunity Fund |
Further
information is included in the Proxy Statement/Prospectus and in the documents
listed below, which are incorporated by reference into this Statement of
Additional Information.
INCORPORATION
OF DOCUMENTS BY REFERENCE INTO THE STATEMENT OF ADDITIONAL
INFORMATION
The
Acquiring Funds are each a series of Managed Portfolio Series (the “Acquiring
Entity” or the "Trust"). This Statement of Additional Information incorporates
by reference the following documents, which have been filed with the U.S.
Securities and Exchange Commission and will be sent to any shareholder
requesting this Statement of Additional Information:
•The
audited financial statements and related report of the independent public
accounting firm included in the Target Funds’ Annual
Report to Shareholders for the fiscal year ended December
31,
2023
(“Target Fund Annual Report”). Only the audited financial statements and related
report of the independent registered public accounting firm included in the
Target Fund Annual Report are incorporated herein by reference and no other
parts of the Target Fund Annual Report are incorporated by
reference.
SUPPLEMENTAL
FINANCIAL INFORMATION
Under
the Agreement and Plan of Reorganization, the Target Funds are proposed to be
reorganized into the Acquiring Funds. A table showing the fees and expenses of
each of the Acquired Fund and Target Fund and the fees and expenses of the
Acquiring Funds on a pro forma basis after giving effect to the proposed
Reorganization is included in the section titled “How do the Funds’ Expenses
Compare?” of the Prospectus/Proxy Statement. The Target Funds will be the
accounting survivors of the Reorganizations, meaning that each Acquiring Fund
will assume the financial and performance history of the corresponding Target
Fund. Additionally, there are no material differences in accounting policies of
the Target Funds as compared to those of the Acquiring Funds.
The
Reorganizations are not expected to result in a material change to the Target
Funds' investment portfolio due to the investment restrictions of the Acquiring
Funds. Accordingly, a schedule of investments of the Target Funds modified to
reflect such changes is not included.