0001137439-13-000406.txt : 20131220 0001137439-13-000406.hdr.sgml : 20131220 20131220102544 ACCESSION NUMBER: 0001137439-13-000406 CONFORMED SUBMISSION TYPE: DEF 14C PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20131018 FILED AS OF DATE: 20131220 DATE AS OF CHANGE: 20131220 EFFECTIVENESS DATE: 20131220 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTIMUM FUND TRUST CENTRAL INDEX KEY: 0001227523 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14C SEC ACT: 1934 Act SEC FILE NUMBER: 811-21335 FILM NUMBER: 131290200 BUSINESS ADDRESS: STREET 1: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 800.914.0278 MAIL ADDRESS: STREET 1: 2005 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: BOB TRUST DATE OF NAME CHANGE: 20030415 0001227523 S000002421 OPTIMUM INTERNATIONAL FUND C000006447 OPTIMUM INTERNATIONAL FUND CLASS A OAIEX C000006448 OPTIMUM INTERNATIONAL FUND CLASS B OBIEX C000006449 OPTIMUM INTERNATIONAL FUND CLASS C OCIEX C000006450 OPTIMUM INTERNATIONAL FUND INSTITUTIONAL CLASS OIIEX DEF 14C 1 oftdef14c12202013.htm oftdef14c12202013.htm
SCHEDULE 14C
 
(RULE 14C-101)
 
INFORMATION REQUIRED IN INFORMATION STATEMENT
 
SCHEDULE 14C INFORMATION
 
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _______)

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Optimum Fund Trust

(Name of Registrant as Specified in Its Charter)

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OPTIMUM FUND TRUST
 
OPTIMUM INTERNATIONAL FUND
 
2005 Market Street
 
Philadelphia, PA 19103-7094
 
INFORMATION STATEMENT
 
This Information Statement is being furnished on behalf of the Board of Trustees (“Trustees” or “Board”) of the Optimum Fund Trust (the “Trust”) to inform shareholders of the Optimum International Fund (the “Fund”) about a recent change related to the Fund’s sub-advisory arrangements.  The change was approved by the Board of the Trust on the recommendation of the Fund’s investment manager, Delaware Management Company (the “Manager”), without shareholder approval as is permitted by an order of the U.S. Securities and Exchange Commission (“SEC”).  WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
 
This Information Statement is being mailed on or about Dec. 31, 2013 to shareholders of record of the Fund as of Dec. 20, 2013.
 
INTRODUCTION
 
The Manager is the investment manager to each series of the Trust, including the Fund.  The Manager employs a “manager of managers” arrangement in managing the assets of the Trust.  This permits the Manager, subject to approval by the Board, to hire, terminate, or replace sub-advisers unaffiliated with the Trust or the Manager (“unaffiliated sub-advisers”), and to modify material terms and conditions of sub-advisory agreements with unaffiliated sub-advisers, without shareholder approval.  Section 15(a) of the Investment Company Act of 1940 (the “1940 Act”) generally requires that the shareholders of a mutual fund approve an agreement pursuant to which a person serves as investment adviser or sub-adviser of the fund.  In order to use the “manager of managers” authority discussed above, the Manager, the Trust, and certain Delaware Investments affiliates requested and received an exemptive order from the SEC on Nov. 7, 2006 (the “SEC Order”).  The SEC Order exempts the Manager, the Trust and other Delaware Investments affiliates from certain of the shareholder approval requirements of Section 15(a) of the 1940 Act and allows the Trust’s Board, subject to certain conditions, to appoint new, unaffiliated sub-advisers and approve new sub-advisory agreements on behalf of the Trust without shareholder approval.  The Manager has ultimate responsibility (subject to oversight by the Board) to supervise the sub-advisers and recommend the hiring, termination, and replacement of the sub-advisers to the Board.

Consistent with the terms of the SEC Order, the Board, including a majority of the Trustees who are not “interested persons” of the Trust or of the Manager (the “Independent Trustees”), at a Board meeting held on Sept. 19, 2013 (the “Meeting”), approved a sub-advisory agreement (the “Sub-advisory Agreement”) between the Manager and EARNEST Partners, LLC (“EARNEST”), under which EARNEST would serve as the sub-adviser to the Fund, replacing Mondrian Investment Partners Limited (“Mondrian”).

The sub-advisory agreement between Mondrian and the Manager, on behalf of the Fund, was terminated on Oct. 7, 2013.  The decision to terminate the sub-advisory agreement was based upon certain factors, including but not limited to the desire to replace Mondrian with a sub-adviser who may be more compatible from an investment perspective with the Fund’s other sub-adviser, BlackRock Advisors LLC (“BlackRock”).

 
 
 

The Trust and the Manager have agreed to comply with certain conditions when acting in reliance on the relief granted in the SEC Order. These conditions require, among other things, that within ninety (90) days of hiring a new sub-adviser, the affected fund will notify the shareholders of the fund of the changes. This Information Statement provides such notice of the changes and presents details regarding EARNEST and the Sub-advisory Agreement.

THE INVESTMENT MANAGER
 
The Manager is located at 2005 Market Street, Philadelphia, Pennsylvania 19103-7094, and is a series of Delaware Management Business Trust, which is an indirect subsidiary of Delaware Management Holdings, Inc. (“DMH”), which in turn is an indirect subsidiary, and subject to the ultimate control, of Macquarie Group Limited (“Macquarie”).  The Manager is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940 (the “Advisers Act”).
 
The Manager provides investment advisory services to the Fund pursuant to the Investment Management Agreement dated Jan. 4, 2010 between the Trust and the Manager (the “Management Agreement”).  The Trust employs the Manager to generally manage the investment and reinvestment of the assets of the Fund.  In so doing, the Manager may hire one or more sub-advisers to carry out the investment program of the Fund, subject to the approval of the Board. The Manager continuously reviews and supervises the investment program of the Fund. The Manager furnishes periodic reports to the Board regarding the investment program and performance of the Fund. The Manager has hired LPL Financial Corporation (“LPL”), a registered broker/dealer and investment adviser, as a consultant to assist with this process.

Pursuant to the Management Agreement, the Manager has full discretion and responsibility, subject to the overall supervision of the Trust’s Board, to select and contract with one or more investment sub-advisers, to manage the investment operations and composition of the Fund, and to render investment advice for the Fund, including the purchase, retention, and dispositions of investments, securities and cash contained in the Fund. The Management Agreement obligates the Manager to implement decisions with respect to the allocation or reallocation of the Fund’s assets among one or more current or additional sub-advisers, and to monitor the sub-advisers’ compliance with the Fund’s investment objective, policies and restrictions.  Under the Management Agreement, the Trust will bear the expenses of conducting its business.  In addition, the Manager pays the salaries of all officers and Trustees of the Trust who are officers, directors or employees of the Manager or its affiliates.

For these services, the Fund pays the Manager a fee calculated at an annual rate of 0.8750% on average daily net assets up to $50 million; 0.8000% on average daily net assets from $50 million to $100 million; 0.7800% of average daily net assets from $100 million to $300 million; 0.7650% of average daily net assets from $300 million to $400 million; and 0.7300% of average daily net assets over $400 million.  The Manager has agreed to waive a portion of its fees and/or to reimburse expenses of the Fund to the extent that the Fund’s expenses (excluding any 12b-1 plan expenses, taxes, interest, inverse floater program expenses, brokerage fees, certain insurance costs, and non-routine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) exceed certain levels.  After giving effect to the fee waiver and expense reimbursements, the Manager received advisory fees of $2,320,342 from the Fund for the fiscal year ended March 31, 2013.

The key executives and each trustee of the Manager and their principal occupations are: Patrick P. Coyne, Trustee and President; See Yeng Quek, Trustee and Executive Vice President/Managing Director/Head of Fixed Income Investments; David P. O’Connor, Trustee and Executive Vice President/Strategic Investment Relationships and Initiatives/General Counsel; Michael J. Hogan,

 
 
 

Executive Vice President/Head of Equity Investments; and Philip N. Russo, Executive Vice President/Chief Administrative Officer.  The address of each person listed is 2005 Market Street, Philadelphia, Pennsylvania 19103-7094.

THE SUB-ADVISER
 
EARNEST is located at 1180 Peachtree Street NE, Suite 2300, Atlanta, GA 30309.  EARNEST was founded in 1998 and registered as an investment adviser with the U.S. Securities and Exchange Commission in 1999.  As of Sept. 30, 2013, EARNEST managed approximately $23.9 billion in assets across numerous clients, including municipalities, states, corporations, endowments, eleemosynary groups, and universities. EARNEST’s experience managing pooled accounts includes acting as a sub-adviser for several mutual funds.  The Sub-advisory Agreement between EARNEST and the Manager is dated Sept. 30, 2013.

EARNEST was approved by the Board to serve as a sub-adviser to the Fund at the Meeting.  EARNEST is not affiliated with the Manager, and EARNEST discharges its responsibilities subject to the oversight and supervision of the Manager.  EARNEST is compensated out of the fees that the Manager receives from the Fund.  There will be no increase in the advisory fees paid by the Fund to the Manager as a consequence of the replacement of Mondrian by EARNEST and the implementation of the Sub-advisory Agreement.  The fees paid by the Manager to EARNEST depend upon the fee rates negotiated by the Manager and on the percentage of the Fund’s assets allocated to EARNEST by the Manager.  In accordance with procedures adopted by the Board, EARNEST may effect Fund portfolio transactions through an affiliated broker-dealer and the affiliated broker-dealer may receive brokerage commissions in connection therewith as permitted by applicable law.

EARNEST serves as an investment sub-adviser to the registered investment companies listed below, which has an investment objective similar to the Fund’s investment objective:

Fund
Assets as of
Sept. 30, 2013
Annual Sub-Advisory Fee Rate
(as a percentage of
average daily net assets)
Hancock Horizon Diversified International Fund
$337,204,985
0.46%
SEI World Equity Ex-US Fund
$1,242,892,299
0.37%
AXA Multi Manager International Equity Portfolio
$62,421,837
0.50%
Northern Trust Company MM International Equity Mutual Fund
$483,394,219
0.40%
Prudential AST New Discovery Asset Allocation Portfolio
$34,430,389
0.45%


The names and principal occupations of the principal executive officers of EARNEST and the EARNEST portfolio manager primarily responsible for this Fund are listed below. The address of each principal executive officer listed below, as it relates to the person’s position with EARNEST, is 1180 Peachtree Street NE, Suite 2300, Atlanta, GA 30309:

 
 
 



Name
Position
Paul E. Viera
Chief Executive Officer, Partner and Portfolio Manager
John G. Whitmore II
Chief Operating Officer and Partner
James M. Wilson
Chief Compliance Officer

THE SUB-ADVISORY AGREEMENT
 
The Sub-advisory Agreement was approved by the Board at the Meeting, which was called for the purpose of approving the Sub-advisory Agreement for an initial term of two years.  Thereafter, continuance of the Sub-advisory Agreement will require the annual approval of the Board, including a majority of the Independent Trustees.  The Sub-advisory Agreement provides that it will terminate automatically in the event of its assignment, except as otherwise provided by applicable law or the SEC Order.

The terms of the Sub-advisory Agreement, other than the rate of compensation paid by the Manager to EARNEST, are substantially similar to the sub-advisory agreement between the Manager and Mondrian, the Fund’s prior sub-adviser.

The Sub-advisory Agreement provides that EARNEST, among other duties, will make all investment decisions for its allocated portion of the Fund’s investment portfolio.  EARNEST, subject to the supervision of the Board and the Manager, will conduct an ongoing program of investment, evaluation, and, if appropriate, sale and reinvestment of its allocated portion of the Fund’s assets.  EARNEST also will perform certain other administrative and compliance-related functions in connection with the management of its allocated portion of the Fund’s investment portfolio.

The Sub-advisory Agreement provides for EARNEST to be compensated based on the average daily net assets of the Fund allocated to EARNEST.  EARNEST is compensated from the fees that the Manager receives from the Fund.  EARNEST generally will pay all expenses it incurs in connection with its activities under the Sub-advisory Agreement, other than the costs of the Fund’s portfolio securities and other investments.

The Sub-advisory Agreement may be terminated without the payment of any penalty, by: (i) the Manager or the Trust at any time on written notice to EARNEST, or (ii) EARNEST, on not less than sixty (60) days’ written notice to the Manager and the Trust.


THE MANAGER’S RECOMMENDATION AND
THE BOARD OF TRUSTEES’ CONSIDERATIONS
 
The Manager recommended the approval of the Sub-advisory Agreement among the Trust, the Manager and EARNEST. The Board considered and reviewed information about EARNEST, including: investment performance information for an account managed by EARNEST having a comparable mandate to that of the Fund;  the compatibility of EARNEST’s investment policy and methodology with the other sub-advisor to the Fund (BlackRock);  material regarding the experience and qualifications of EARNEST personnel responsible for providing portfolio management services;  information concerning its organizational structure and the experience of its investment management personnel;  a “due diligence” report describing various material items in relation to EARNEST’s personnel, organization and policies; copies of their compliance policies and procedures and its Code of Ethics;  and information on the sub-advisory fees to be charged under the Sub-advisory Agreement along with copies of such Sub-advisory Agreement. Information was also provided on the fee schedules for comparable accounts managed by EARNEST.

 
 
 

In considering such information and materials, the Independent Trustees received assistance and advice from and met separately with independent counsel.  The materials prepared by Fund management specifically in connection with the approval of the Sub-advisory Agreement were sent to the Independent Trustees in advance of the Meeting.  While attention was given to all information furnished, the following discusses some primary factors taken into account by the Board in its consideration of the Sub-advisory Agreement.

Nature, Extent and Quality of Services. In considering the nature, extent and quality of the services to be provided by EARNEST, the Board reviewed materials provided by EARNEST regarding the experience and qualifications of personnel who will be responsible for managing EARNEST’s portion of the Fund, and placed weight on EARNEST’s performance in managing an existing account (the “EARNEST Account”) in a similar investment strategy to the one they would employ for the Fund. The Board also considered that EARNEST would co-manage the Fund with another adviser, BlackRock. The Board considered the compatibility of the two advisers’ investment philosophies and methodologies. Based upon these considerations, the Board determined that the nature, extent and quality of the services to be provided by EARNEST under the Sub-advisory Agreement were satisfactory.

Investment Performance. The Board reviewed information on the performance of the EARNEST Account over various time periods.  The Board also reviewed an analysis showing the projected composite investment performance of the Fund that would have resulted from combining the performance of EARNEST in managing the EARNEST Account with the performance of BlackRock in managing its portion of the Fund over various time periods measured in several different ways.  In respect to such analysis, the Board noted that EARNEST’s investment style seemed a good complement to that followed by BlackRock, and EARNEST’s investment strategy seemed to provide a better ability to offset BlackRock’s investment biases.  The Board believed such information and analysis evidenced the benefits to the Fund and high quality of portfolio management services expected to be provided by EARNEST under the Sub-advisory Agreement.

Sub-Advisory Fee; Profitability; and Economies of Scale.  The Board was provided with a description of fees to be charged by EARNEST under the Sub-advisory Agreement for the Fund, which showed them to be lower than the sub-advisory fees charged by Mondrian under its sub-advisory agreement. The Board also was provided with information showing that EARNEST’s fees were competitive with those charged by EARNEST to other comparable investment companies or accounts, and was informed by Fund management that EARNEST’s fees were competitive with fees of other investment managers being considered as possible sub-advisers to the Fund.  The Board was informed that EARNEST may receive certain fall-out benefits in connection with its relationship with the Fund, such as soft-dollar arrangements. The Board also noted that the management fee paid by the Fund to DMC would stay the same at current asset levels. Information about EARNEST’s estimated profitability from its relationship with the Fund was not available because it had not begun to provide services to the Fund. The investment management fees for the Fund contained breakpoints with the Fund’s asset size being at a high enough level to benefit from such breakpoints.  Based upon such facts, the Board believed that the fees to be charged by EARNEST under the Sub-advisory Agreement were fair and reasonable in relation to the services being provided.
 
 
 
GENERAL INFORMATION
 
Distributor
The Fund’s distributor, Delaware Distributors, L.P. (“Distributor”), located at 2005 Market Street, Philadelphia, PA 19103-7094, serves as the national distributor of the Trust’s shares under a

 
 
 

Distribution Agreement dated Jan. 4, 2010.  The Distributor is an affiliate of the Manager and bears all of the costs of promotion and distribution, except for payments by the Class A, Class B and Class C shares under their respective Rule 12b-1 Plans.  The Distributor is an indirect subsidiary of DMH, and, therefore, of Macquarie.  The Distributor has agreed to use its best efforts to sell shares of the Fund. Shares of the Fund are offered on a continuous basis by the Distributor and may be purchased through authorized investment dealers. The Board annually reviews fees paid to the Distributor.

Transfer Agent, Administrator and Fund Accountant
Delaware Service Company, Inc. (“DSC”), located at 2005 Market Street, Philadelphia, PA 19103-7094, serves as the Trust’s shareholder servicing, dividend disbursing and transfer agent.  DSC provides fund accounting and financial administration oversight services to the Fund.  Those services include overseeing the Fund’s pricing process, the calculation and payment of Fund expenses, and financial reporting in shareholder reports, registration statements, and other regulatory filings.  Additionally, DSC manages the process for the payment of dividends and distributions and the dissemination of Fund net asset values and performance data.  DSC is an affiliate of the Manager, and is an indirect subsidiary of DMH and, therefore, of Macquarie.

The Bank of New York Mellon, One Wall Street, New York, NY 10286, provides fund accounting and financial administration services to the Fund.  Those services include performing functions related to calculating the Fund’s net asset value and providing financial reporting information, regulatory compliance testing and other related accounting services.

Payments to Affiliated Brokers
The Fund made payments in the amount of $224 to an affiliated broker for the fiscal year ended March 31, 2013.

Record of Beneficial Ownership
As of Dec. 20, 2013, the Fund believes that there were no accounts holding 5% or more of the outstanding shares of any Class of the Fund.  As of Dec. 20, 2013, the Fund’s officers and Trustees owned less than 1% of the outstanding shares of each Class of the Fund.

Householding
Only one copy of this Information Statement may be mailed to households, even if more than one person in a household is a Fund shareholder of record; unless the Trust has received instructions to the contrary.  If you need additional copies of this Information Statement, please contact your participating securities dealer or other financial intermediary.  If you do not want the mailing of an Information Statement to be combined with those for other members of your household in the future, or if you are receiving multiple copies and would rather receive just one copy for the household, please contact your participating securities dealer or other financial intermediary.

Financial Information
Shareholders can obtain a copy of the Trust’s most recent Annual Report and any Semi-Annual Report following the Annual Report, without charge, by contacting their participating securities dealer or other financial intermediary, or if a shareholder owns Trust shares directly through the Trust's service agent, by calling toll free at 800-914-0278.