N-Q 1 d527754dnq.htm N-Q N-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05547

 

 

The Laudus Trust

(Exact name of registrant as specified in charter)

 

 

211 Main Street, San Francisco, California 94105

(Address of principal executive offices) (Zip code)

 

 

Marie Chandoha

The Laudus Trust

211 Main Street, San Francisco, California 94105

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (415) 636-7000

Date of fiscal year end: March 31

Date of reporting period: December 31, 2017

 

 

 

 

Item 1. Schedule of Investments.

Laudus Trust
Laudus Mondrian International Equity Fund
Portfolio Holdings as of December 31, 2017 (Unaudited)
The following are the portfolio holdings as of the report date. For more information, please refer to the fund’s semiannual or annual shareholder reports.    
 
Security Number
of Shares 		Value ($)
Common Stock 99.2% of net assets
 
Australia 1.8%
QBE Insurance Group Ltd. 263,454 2,186,811
 
China 2.7%
China Mobile Ltd. 331,000 3,347,085
 
France 5.6%
Compagnie de Saint-Gobain 53,565 2,948,015
Sanofi 44,292 3,813,184
    6,761,199
 
Germany 10.1%
Allianz SE 13,884 3,177,321
Daimler AG 48,033 4,061,691
Deutsche Telekom AG 120,904 2,137,149
SAP SE 26,455 2,959,659
    12,335,820
 
Hong Kong 3.3%
CK Hutchison Holdings Ltd. 254,500 3,188,961
WH Group Ltd. 705,000 795,881
    3,984,842
 
Italy 6.6%
Enel S.p.A. 658,854 4,051,470
Eni S.p.A. 239,590 3,964,720
    8,016,190
 
Japan 15.8%
Canon, Inc. 55,200 2,056,647
FUJIFILM Holdings Corp. 14,700 599,833
Honda Motor Co., Ltd. 136,800 4,668,642
Isuzu Motors Ltd. 63,500 1,060,277
Mitsubishi Electric Corp. 145,100 2,404,681
Takeda Pharmaceutical Co., Ltd. 81,200 4,597,355
Tokio Marine Holdings, Inc. 84,200 3,829,671
    19,217,106
 
Netherlands 3.4%
Koninklijke Ahold Delhaize N.V. 187,647 4,125,036
 
Singapore 5.3%
Singapore Telecommunications Ltd. 862,000 2,298,199
United Overseas Bank Ltd. 208,522 4,110,598
    6,408,797
 
Security Number
of Shares 		Value ($)
Spain 6.6%
Banco Santander S.A. 238,132 1,561,248
Iberdrola S.A. 479,182 3,709,483
Telefonica S.A. 283,487 2,760,523
    8,031,254
 
Sweden 3.3%
Telia Co. AB 900,473 4,013,750
 
Switzerland 8.5%
ABB Ltd. 143,413 3,841,221
Novartis AG 37,996 3,197,456
Zurich Insurance Group AG 10,800 3,283,670
    10,322,347
 
Taiwan 3.1%
Taiwan Semiconductor Manufacturing Co., Ltd. 485,154 3,714,859
 
United Kingdom 23.1%
BP plc 615,310 4,316,578
GlaxoSmithKline plc 177,746 3,147,740
Kingfisher plc 838,448 3,822,869
Lloyds Banking Group plc 4,634,132 4,249,415
National Grid plc 165,447 1,950,376
Royal Dutch Shell plc, A Shares (a) 7,192 239,673
Royal Dutch Shell plc, A Shares (a) 9,874 329,626
Royal Dutch Shell plc, B Shares 119,267 4,016,200
Tesco plc 1,587,445 4,484,835
WPP plc 86,537 1,563,355
    28,120,667
Total Common Stock
(Cost $94,987,538)   120,585,763

Other Investment Company 0.3% of net assets
 
United States 0.3%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.21% (b) 338,535 338,535
Total Other Investment Company
(Cost $338,535)   338,535
At 12/31/17, the values of certain foreign securities held by the fund aggregating $111,482,178 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees.
(a) Securities are traded on separate exchanges for the same entity.
(b) The rate shown is the 7-day yield.
 
 
1

 

Laudus Mondrian International Equity Fund
Portfolio Holdings (Unaudited) continued
The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017:
Description Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Other Significant
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3) 		Total  
Assets          
Common Stock1 $— $88,480,254 $— $88,480,254  
Hong Kong 795,881 3,188,961 — 3,984,842  
United Kingdom 8,307,704 19,812,963 — 28,120,667  
Other Investment Company1 338,535 — — 338,535  
Total $9,442,120 $111,482,178 $— $120,924,298  
1 As categorized in Portfolio Holdings.
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers in the amount of $5,721,604 from Level 2 to Level 1 for the period ended December 31, 2017. The transfers between Level 2 and Level 1 were primarily due to the use of international fair valuation by the fund. There were no transfers in or out of Level 3 during the period. Fund investments in underlying mutual funds are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds, which could be Level 1, Level 2 or Level 3.
2

 

Laudus Trust
Laudus Mondrian Emerging Markets Fund
Portfolio Holdings as of December 31, 2017 (Unaudited)
The following are the portfolio holdings as of the report date. For more information, please refer to the fund’s semiannual or annual shareholder reports.    
 
Security Number
of Shares 		Value ($)
Common Stock 98.3% of net assets
 
Brazil 11.7%
CCR S.A. 865,781 4,216,927
Cielo S.A. 837,136 5,934,688
Embraer S.A. ADR 401,192 9,600,525
Hypermarcas S.A. 264,000 2,865,153
Itau Unibanco Holding S.A. ADR 667,210 8,673,730
Suzano Papel e Celulose S.A. 1,099,700 6,196,193
    37,487,216
 
China 16.2%
China Construction Bank Corp., Class H 14,046,000 12,930,078
China Mobile Ltd. 1,031,000 10,425,513
China Resources Power Holdings Co., Ltd. 4,247,291 7,899,723
CSPC Pharmaceutical Group Ltd. 1,314,000 2,647,212
Dongfeng Motor Group Co., Ltd., Class H 5,644,000 6,812,483
WH Group Ltd. 9,811,000 11,075,730
    51,790,739
 
Hong Kong 1.9%
Sands China Ltd. 1,188,000 6,114,923
 
India 13.5%
Bajaj Auto Ltd. 172,170 8,992,142
HCL Technologies Ltd. 432,949 6,040,360
Housing Development Finance Corp., Ltd. 215,345 5,766,644
Infosys Ltd. 154,797 2,515,978
Infosys Ltd. ADR 155,624 2,524,221
Larsen & Toubro Ltd. 201,285 3,963,450
Lupin Ltd. 175,802 2,436,214
Reliance Industries Ltd. 159,954 2,305,634
Vedanta Ltd. 1,665,578 8,580,311
    43,124,954
 
Indonesia 1.8%
PT Bank Rakyat Indonesia (Persero) Tbk 21,553,500 5,782,550
 
Kazakhstan 0.9%
KazMunaiGas Exploration Production JSC GDR 212,397 2,761,161
 
Malaysia 5.5%
AMMB Holdings Berhad 6,037,900 6,579,476
Genting Malaysia Berhad 4,857,200 6,757,113
Tenaga Nasional Berhad 1,103,600 4,157,784
    17,494,373
 
Mexico 2.5%
Fibra Uno Administracion S.A. de C.V. 5,403,338 8,007,795
 
Security Number
of Shares 		Value ($)
Peru 1.3%
Credicorp Ltd. 19,547 4,054,634
 
Philippines 1.2%
PLDT, Inc. ADR 127,091 3,822,897
 
Qatar 1.3%
Qatar National Bank SAQ 124,463 4,340,993
 
Republic of Korea 13.5%
Hyundai Mobis Co., Ltd. 11,525 2,831,325
Korea Electric Power Corp. 127,035 4,515,638
Korea Zinc Co., Ltd. 8,484 3,906,975
Samsung Electronics Co., Ltd. 6,003 14,262,589
Samsung SDI Co., Ltd. 20,087 3,829,503
Shinhan Financial Group Co., Ltd. 158,575 7,319,377
SK Telecom Co., Ltd. 26,760 6,674,065
    43,339,472
 
Russia 4.0%
Gazprom PJSC ADR 2,083,568 9,188,535
Lukoil PJSC ADR 63,998 3,689,485
    12,878,020
 
South Africa 6.7%
Barclays Africa Group Ltd. 393,744 5,768,124
Growthpoint Properties Ltd. 803,514 1,796,338
Sasol Ltd. 152,385 5,267,641
Woolworths Holdings Ltd. 1,619,796 8,550,324
    21,382,427
 
Taiwan 9.5%
Asustek Computer, Inc. 613,000 5,757,464
Mega Financial Holding Co., Ltd. 9,028,153 7,279,873
Taiwan Mobile Co., Ltd. 994,000 3,590,739
Taiwan Semiconductor Manufacturing Co., Ltd. 1,816,719 13,910,748
    30,538,824
 
Thailand 2.0%
Kasikornbank PCL NVDR 926,000 6,576,747
 
Turkey 3.6%
Eregli Demir ve Celik Fabrikalari TAS 1,272,926 3,358,587
Turkiye Garanti Bankasi A/S 1,313,468 3,711,651
Turkiye Halk Bankasi A/S 1,527,076 4,339,665
    11,409,903
 
 
 
3

 

Laudus Mondrian Emerging Markets Fund
Portfolio Holdings (Unaudited) continued
Security Number
of Shares 		Value ($)
United Arab Emirates 1.2%
Emaar Malls PJSC 6,652,693 3,858,209
Total Common Stock
(Cost $264,004,151)   314,765,837

Preferred Stock 0.4% of net assets
 
India 0.4%
Vedanta Ltd. 7.50% * 8,985,240 1,471,086
Total Preferred Stock
(Cost $1,401,644)   1,471,086

Other Investment Company 1.1% of net assets
 
United States 1.1%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.21% (a) 3,593,252 3,593,252
Total Other Investment Company
(Cost $3,593,252)   3,593,252
At 12/31/17, the values of certain foreign securities held by the fund aggregating $166,847,705 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees.
* Non-income producing security.
(a) The rate shown is the 7-day yield.
   
ADR – American Depositary Receipt
GDR – Global Depositary Receipt
NVDR – Non-Voting Depositary Receipt
 
 
The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017:
Description Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Other Significant
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3) 		Total  
Assets          
Common Stock1 $— $24,101,573 $— $24,101,573  
Brazil 27,335,601 10,151,615 — 37,487,216  
China 11,075,730 40,715,009 — 51,790,739  
India 17,556,723 25,568,231 — 43,124,954  
Indonesia 5,782,550 — — 5,782,550  
Kazakhstan 2,761,161 — — 2,761,161  
Malaysia 13,336,589 4,157,784 — 17,494,373  
Mexico 8,007,795 — — 8,007,795  
Peru 4,054,634 — — 4,054,634  
Philippines 3,822,897 — — 3,822,897  
Qatar 4,340,993 — — 4,340,993  
Republic of Korea 13,412,365 29,927,107 — 43,339,472  
Russia 12,878,020 — — 12,878,020  
South Africa 10,346,662 11,035,765 — 21,382,427  
Taiwan 9,348,203 21,190,621 — 30,538,824  
United Arab Emirates 3,858,209 — — 3,858,209  
Preferred Stock1 1,471,086 — — 1,471,086  
Other Investment Company1 3,593,252 — — 3,593,252  
Total $152,982,470 $166,847,705 $— $319,830,175  
1 As categorized in Portfolio Holdings.
4

 

Laudus Mondrian Emerging Markets Fund
Portfolio Holdings (Unaudited) continued
The funds policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were security transfers in the amount of $14,050,785 and $101,108,599 from Level 1 to Level 2 and from Level 2 to Level 1, respectively, for the period ended December 31, 2017. The transfers between Level 1 and Level 2 were primarily due to the use of international fair valuation by the fund. There were no transfers in or out of Level 3 during the period. Fund investments in underlying mutual funds are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds, which could be Level 1, Level 2 or Level 3.
5

 

Laudus Trust
Laudus Mondrian International Government Fixed Income Fund
Portfolio Holdings as of December 31, 2017 (Unaudited)
The following are the portfolio holdings as of the report date. For more information, please refer to the fund’s semiannual or annual shareholder reports.
For fixed-rate obligations, the rate shown is the interest rate (the rate established when the obligation was issued). For variable-rate obligations, the rate shown is the rate as of the report date based on each security’s rate reset date. The reference rate and spread used is shown parenthetically in the security description, if available; if not, the reference rate is described in a footnote. The maturity date shown for all the securities is the final legal maturity.    
 
Security
Rate, Maturity Date 		Face Amount
(local currency) 		Value ($)
Government Bonds 88.7% of net assets
 
Australia 6.0%
Australia Government Bond
5.75%, 05/15/21 (AUD) 610,000 530,853
3.25%, 04/21/25 (AUD) 1,386,000 1,133,466
4.75%, 04/21/27 (AUD) 3,650,000 3,348,662
    5,012,981
 
Austria 4.8%
Austria Government Bond
6.25%, 07/15/27 (EUR) 2,148,000 3,971,786
 
Belgium 4.0%
Kingdom of Belgium Government Bond
1.00%, 06/22/26 (EUR) 2,670,000 3,347,554
 
Canada 3.0%
Canadian Government Bond
0.75%, 09/01/21 (CAD) 1,500,000 1,149,559
1.50%, 06/01/26 (CAD) 1,280,000 977,128
5.00%, 06/01/37 (CAD) 350,000 399,860
    2,526,547
 
Finland 4.5%
Finland Government Bond
1.63%, 09/15/22 (EUR) 1,800,000 2,341,066
0.50%, 09/15/27 (EUR) 1,200,000 1,427,159
    3,768,225
 
France 7.8%
France Government Bond OAT
0.00%, 05/25/20 (EUR) (a) 1,345,000 1,631,903
0.50%, 05/25/25 (EUR) 1,000,000 1,219,042
5.75%, 10/25/32 (EUR) 775,000 1,527,241
1.25%, 05/25/36 (EUR) 850,000 1,002,938
3.25%, 05/25/45 (EUR) 710,000 1,149,841
    6,530,965
 
Germany 8.5%
Bundesobligation
0.00%, 10/08/21 (EUR) (a) 1,000,000 1,217,288
Bundesrepublik Deutschland
0.00%, 08/15/26 (EUR) (a) 1,500,000 1,755,966
0.50%, 08/15/27 (EUR) 500,000 603,853
Security
Rate, Maturity Date 		Face Amount
(local currency) 		Value ($)
Bundesschatzanweisungen
0.00%, 06/14/19 (EUR) (a) 934,000 1,132,209
Kreditanstalt fuer Wiederaufbau
2.05%, 02/16/26 (JPY) 230,000,000 2,389,114
    7,098,430
 
Japan 19.2%
Japan Government Five Year Bond
0.10%, 09/20/19 (JPY) 50,000,000 445,519
0.10%, 06/20/21 (JPY) 124,000,000 1,108,758
Japan Government Ten Year Bond
0.60%, 03/20/24 (JPY) 306,000,000 2,829,941
0.10%, 06/20/26 (JPY) 212,000,000 1,897,877
Japan Government Thirty Year Bond
2.40%, 12/20/34 (JPY) 275,000,000 3,236,758
Japan Government Twenty Year Bond
1.60%, 06/20/30 (JPY) 274,000,000 2,861,863
0.20%, 06/20/36 (JPY) 430,000,000 3,620,499
    16,001,215
 
Malaysia 3.1%
Malaysia Government Bond
4.05%, 09/30/21 (MYR) 2,420,000 608,348
4.18%, 07/15/24 (MYR) 7,150,000 1,790,592
4.25%, 05/31/35 (MYR) 670,000 159,340
    2,558,280
 
Mexico 3.7%
Mexico Government Bond
6.50%, 06/10/21 (MXN) 26,000,000 1,278,479
7.50%, 06/03/27 (MXN) 9,600,000 482,986
7.75%, 11/23/34 (MXN) 26,280,000 1,337,249
    3,098,714
 
Netherlands 4.7%
Netherlands Government Bond
0.00%, 01/15/22 (EUR) (a) 388,000 470,681
5.50%, 01/15/28 (EUR) 1,938,490 3,459,770
    3,930,451
 
New Zealand 4.5%
New Zealand Government Bond
5.00%, 03/15/19 (NZD) 200,000 147,097
5.50%, 04/15/23 (NZD) 1,605,000 1,321,115
 
 
6

 

Laudus Mondrian International Government Fixed Income Fund
Portfolio Holdings (Unaudited) continued
Security
Rate, Maturity Date 		Face Amount
(local currency) 		Value ($)
4.50%, 04/15/27 (NZD) 2,799,000 2,271,525
    3,739,737
 
Poland 3.0%
Poland Government Bond
2.50%, 07/25/26 (PLN) 3,250,000 884,683
5.75%, 04/25/29 (PLN) 4,600,000 1,646,879
    2,531,562
 
Singapore 4.5%
Singapore Government Bond
2.00%, 07/01/20 (SGD) 1,450,000 1,093,368
2.38%, 06/01/25 (SGD) 2,350,000 1,808,030
2.88%, 09/01/30 (SGD) 1,000,000 800,404
    3,701,802
 
Spain 7.4%
Spain Government Bond
1.40%, 01/31/20 (EUR) 1,900,000 2,358,300
1.60%, 04/30/25 (EUR) 2,050,000 2,574,042
4.20%, 01/31/37 (EUR) 813,000 1,252,944
    6,185,286
Total Government Bonds
(Cost $69,786,305)   74,003,535
Security
Rate, Maturity Date 		Face Amount
(local currency) 		Value ($)
Supranational* 9.4% of net assets
Asian Development Bank
2.35%, 06/21/27 (JPY) 360,000,000 3,884,709
European Investment Bank
2.15%, 01/18/27 (JPY) 375,000,000 3,983,736
Total Supranational
(Cost $8,073,377)   7,868,445
Security Number
of Shares 		Value ($)
Other Investment Company 1.0% of net assets
 
United States 1.0%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.21% (b) 823,804 823,804
Total Other Investment Company
(Cost $823,804)   823,804
 
 
7

 

Laudus Mondrian International Government Fixed Income Fund
Portfolio Holdings (Unaudited) continued
In addition to the above, the fund held the following at December 31, 2017:
Expiration Date Counterparty Currency
to be
Received 		Amount of
Currency
to be
Received 		Currency
to be
Delivered 		Amount of
Currency
to be
Delivered 		Unrealized
Appreciation
(Depreciation)
($)
Forward Foreign Currency Exchange Contracts            
01/31/2018 State Street Bank & Trust Co. AUD 189,500 USD 146,321 1,539
01/31/2018 State Street Bank & Trust Co. AUD 78,500 USD 60,220 1,031
01/31/2018 State Street Bank & Trust Co. EUR 144,500 USD 172,660 998
01/31/2018 State Street Bank & Trust Co. EUR 547,000 USD 652,872 4,505
01/31/2018 State Street Bank & Trust Co. EUR 1,548,000 USD 1,826,793 33,572
01/31/2018 State Street Bank & Trust Co. GBP 163,000 USD 214,008 6,265
01/31/2018 State Street Bank & Trust Co. GBP 9,813,500 USD 12,964,134 297,531
01/31/2018 State Street Bank & Trust Co. NZD 250,000 USD 175,304 1,810
01/31/2018 State Street Bank & Trust Co. NZD 59,000 USD 40,907 892
01/31/2018 State Street Bank & Trust Co. SGD 161,000 USD 118,755 1,676
01/31/2018 State Street Bank & Trust Co. SGD 212,500 USD 156,078 2,875
01/31/2018 State Street Bank & Trust Co. USD 57,098 AUD 75,500 (1,812)
01/31/2018 State Street Bank & Trust Co. USD 55,144 AUD 72,000 (1,035)
01/31/2018 State Street Bank & Trust Co. USD 5,063,299 AUD 6,509,000 (15,443)
01/31/2018 State Street Bank & Trust Co. USD 673,515 EUR 566,500 (7,297)
01/31/2018 State Street Bank & Trust Co. USD 170,088 EUR 143,000 (1,768)
01/31/2018 State Street Bank & Trust Co. USD 236,515 GBP 176,500 (2,002)
01/31/2018 State Street Bank & Trust Co. USD 1,750,221 GBP 1,302,000 (9,262)
01/31/2018 State Street Bank & Trust Co. USD 186,707 GBP 138,000 218
01/31/2018 State Street Bank & Trust Co. USD 203,943 GBP 155,000 (5,519)
01/31/2018 State Street Bank & Trust Co. USD 173,507 GBP 131,000 (3,522)
01/31/2018 State Street Bank & Trust Co. USD 39,291 NZD 57,000 (1,091)
01/31/2018 State Street Bank & Trust Co. USD 51,837 NZD 75,000 (1,297)
01/31/2018 State Street Bank & Trust Co. USD 3,754,234 NZD 5,434,500 (95,871)
01/31/2018 State Street Bank & Trust Co. USD 19,802 SGD 27,000 (394)
01/31/2018 State Street Bank & Trust Co. USD 3,894,779 SGD 5,298,500 (68,589)
Net Unrealized Appreciation on Forward Foreign Currency Exchange Contracts 138,010
* Supranational bonds represent the debt of international organizations or institutions such as the World Bank, the International Monetary Fund, regional multilateral development banks and others.
(a) Zero Coupon Bond.
(b) The rate shown is the 7-day yield.
   
AUD – Australian dollar
CAD – Canadian dollar
EUR – euro currency
GBP – Great British pound
JPY – Japanese yen
MXN – Mexican peso
MYR – Malaysian ringgit
NZD – New Zealand dollar
PLN – Polish zloty
SGD – Singapore dollar
USD – U.S. dollar
    
8

 

Laudus Mondrian International Government Fixed Income Fund
Portfolio Holdings (Unaudited) continued
The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017:
Description Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Other Significant
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3) 		Total  
Assets          
Government Bonds1 $— $74,003,535 $— $74,003,535  
Supranational — 7,868,445 — 7,868,445  
Other Investment Company1 823,804 — — 823,804  
Forward Foreign Currency Exchange Contracts2 — 352,912 — 352,912  
Liabilities          
Forward Foreign Currency Exchange Contracts2 — (214,902) — (214,902)  
Total $823,804 $82,009,990 $— $82,833,794  
1 As categorized in Portfolio Holdings.
2 Forward foreign currency exchange contracts are valued at unrealized appreciation or depreciation.
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended December 31, 2017. Fund investments in underlying mutual funds are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds, which could be Level 1, Level 2 or Level 3.
9

 

Laudus Mondrian Funds
Notes to Portfolio Holdings
Under procedures approved by the funds’ Board of Trustees (the Board), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the funds to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The funds value the securities in their portfolios every business day. The funds use the following policies to value various types of securities:
•   Bonds and notes: Fixed income investments are generally valued using an evaluated price at the mid-point of the bid/ask spread provided by an approved, independent pricing service (mid-price). To determine the evaluated mid-price, a pricing service may use a variety of techniques and inputs. Techniques may include, but are not limited to, spread models that calculate an investment-specific price relative to a benchmark or yield curve models that establish a price based on yields of comparable bonds along a range of maturities. Inputs differ by valuation approach and technique, as appropriate, and examples of inputs may include, but are not limited to, interest rates, market conditions, comparable bonds, market trades, projected cash flows, credit reviews and issuer news.
•   Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at the mean of the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
•   Securities for which no quoted value is available: The Board has adopted procedures to fair value each fund’s securities when market prices are not “readily available” or are unreliable. For example, a fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. Each fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that a fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the funds pursuant to the valuation procedures.
•   Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the funds valuing their holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, each fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the Net Asset Value (NAV) of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of a fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the funds pursuant to these procedures.
•   Forward foreign currency exchange contracts (forwards): Forwards are valued based on that day’s forward exchange rates or by using an interpolated forward exchange rate for contracts with interim settlement dates.
•   Underlying funds: Mutual funds are valued at their respective NAVs.
In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the funds disclose the fair value of their investments in a hierarchy that prioritizes the significant inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the funds determine that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
The three levels of the fair value hierarchy are as follows:
•   Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.
10

 

Laudus Mondrian Funds
Notes to Portfolio Holdings (continued)
•   Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)—Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the funds value their holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets.
•   Level 3—significant unobservable inputs (including the funds’ own assumptions in determining the fair value of investments)—Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the funds use one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the funds in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the funds in the absence of market information. Assumptions used by the funds due to the lack of observable inputs may significantly impact the resulting fair value and therefore the funds’ results of operations.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
REG87099DEC17
11

Laudus Trust
Laudus U.S. Large Cap Growth Fund
Portfolio Holdings as of December 31, 2017 (Unaudited)
The following are the portfolio holdings as of the report date. For more information, please refer to the fund’s semiannual or annual shareholder reports.    
 
Security Number
of Shares 		Value ($)
Common Stock 99.6% of net assets
 
Banks 5.2%
Bank of America Corp. 1,690,562 49,905,390
First Republic Bank 286,670 24,837,089
Wells Fargo & Co. 333,875 20,256,196
    94,998,675
 
Capital Goods 4.0%
Caterpillar, Inc. 72,800 11,471,824
Honeywell International, Inc. 156,716 24,033,966
Roper Technologies, Inc. 70,538 18,269,342
TransDigm Group, Inc. 69,391 19,056,156
    72,831,288
 
Commercial & Professional Services 1.7%
Equifax, Inc. 260,676 30,738,914
 
Consumer Durables & Apparel 1.4%
NIKE, Inc., Class B 418,576 26,181,929
 
Consumer Services 1.3%
Domino’s Pizza, Inc. 130,526 24,664,193
 
Diversified Financials 2.5%
Berkshire Hathaway, Inc., Class B * 139,595 27,670,521
S&P Global, Inc. 107,764 18,255,222
    45,925,743
 
Energy 2.0%
Halliburton Co. 581,483 28,417,074
Pioneer Natural Resources Co. 46,510 8,039,254
    36,456,328
 
Food, Beverage & Tobacco 3.8%
Constellation Brands, Inc., Class A 218,956 50,046,773
Dr Pepper Snapple Group, Inc. 200,531 19,463,539
    69,510,312
 
Health Care Equipment & Services 7.7%
Becton, Dickinson & Co. 139,192 29,795,439
Boston Scientific Corp. * 954,168 23,653,825
UnitedHealth Group, Inc. 397,744 87,686,642
    141,135,906
 
Security Number
of Shares 		Value ($)
Materials 4.8%
DowDuPont, Inc. 429,441 30,584,788
The Sherwin-Williams Co. 61,923 25,390,907
Vulcan Materials Co. 245,577 31,524,719
    87,500,414
 
Pharmaceuticals, Biotechnology & Life Sciences 5.6%
Alexion Pharmaceuticals, Inc. * 218,342 26,111,520
Biogen, Inc. * 66,412 21,156,871
Illumina, Inc. * 98,557 21,533,719
Vertex Pharmaceuticals, Inc. * 112,105 16,800,055
Zoetis, Inc. 231,585 16,683,383
    102,285,548
 
Real Estate 1.1%
Equinix, Inc. 30,393 13,774,715
SBA Communications Corp. * 36,680 5,992,045
    19,766,760
 
Retailing 17.0%
Amazon.com, Inc. * 117,370 137,260,694
Netflix, Inc. * 217,222 41,697,935
The Home Depot, Inc. 215,427 40,829,879
The Priceline Group, Inc. * 30,658 53,275,633
Ulta Salon, Cosmetics & Fragrance, Inc. * 161,202 36,054,440
    309,118,581
 
Semiconductors & Semiconductor Equipment 5.0%
ASML Holding N.V. 154,669 26,884,566
Broadcom Ltd. 104,281 26,789,789
NVIDIA Corp. 122,777 23,757,349
Teradyne, Inc. 311,056 13,023,915
    90,455,619
 
Software & Services 32.1%
Activision Blizzard, Inc. 233,535 14,787,436
Adobe Systems, Inc. * 197,577 34,623,394
Alibaba Group Holding Ltd. ADR * 78,527 13,540,411
Alphabet, Inc., Class A * 93,156 98,130,530
Autodesk, Inc. * 323,041 33,864,388
Electronic Arts, Inc. * 172,351 18,107,196
Facebook, Inc., Class A * 354,540 62,562,128
MercadoLibre, Inc. 59,206 18,629,760
Microsoft Corp. 1,250,085 106,932,271
PayPal Holdings, Inc. * 406,475 29,924,690
Tencent Holdings Ltd. 1,318,700 68,253,160
Visa, Inc., Class A 749,196 85,423,328
    584,778,692
 
 
 
1

 

Laudus U.S. Large Cap Growth Fund
Portfolio Holdings (Unaudited) continued
Security Number
of Shares 		Value ($)
Technology Hardware & Equipment 1.4%
Apple, Inc. 148,377 25,109,840
 
Telecommunication Services 0.5%
Zayo Group Holdings, Inc. * 229,884 8,459,731
 
Transportation 2.5%
Southwest Airlines Co. 141,612 9,268,505
Union Pacific Corp. 266,208 35,698,493
    44,966,998
Total Common Stock
(Cost $1,231,659,159)   1,814,885,471

Other Investment Company 0.8% of net assets
 
Money Market Fund 0.8%
State Street Institutional U.S. Government Money Market Fund, Premier Class 1.21% (a) 13,949,214 13,949,214
Total Other Investment Company
(Cost $13,949,214)   13,949,214
At 12/31/17, the value of a foreign security held by the fund totaling $68,253,160 was adjusted from its closing market value in accordance with international fair valuation procedures approved by the fund’s Board of Trustees.
* Non-income producing security.
(a) The rate shown is the 7-day yield.
   
ADR – American Depositary Receipt
 
 
The following is a summary of the inputs used to value the fund’s investments as of December 31, 2017:
Description Quoted Prices in
Active Markets for
Identical Assets
(Level 1) 		Other Significant
Observable Inputs
(Level 2) 		Significant
Unobservable Inputs
(Level 3) 		Total  
Assets          
Common Stock1 $1,230,106,779 $— $— $1,230,106,779  
Software & Services 516,525,532 68,253,160 — 584,778,692  
Other Investment Company1 13,949,214 — — 13,949,214  
Total $1,760,581,525 $68,253,160 $— $1,828,834,685  
1 As categorized in Portfolio Holdings.
The fund’s policy is to recognize transfers between Level 1, Level 2 and Level 3 as of the beginning of the fiscal year. There were no transfers between Level 1, Level 2 and Level 3 for the period ended December 31, 2017. Fund investments in underlying mutual funds are classified as Level 1, without consideration to the classification level of the investments held by the underlying mutual funds, which could be Level 1, Level 2 or Level 3.
2

 

Laudus U.S. Large Cap Growth Fund
Notes to Portfolio Holdings
Under procedures approved by the fund’s Board of Trustees (the Board), the investment adviser has formed a Pricing Committee to administer the pricing and valuation of portfolio securities and other assets and to ensure that prices used for internal purposes or provided by third parties reasonably reflect fair market value. Among other things, these procedures allow the fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The fund values the securities in its portfolio every business day. The fund uses the following policies to value various types of securities:
•   Securities traded on an exchange or over-the-counter: Traded securities are valued at the closing value for the day, or, on days when no closing value has been reported, at the mean of the most recent bid and ask quotes. Securities that are primarily traded on foreign exchanges are valued at the official closing price or the last sales price on the exchange where the securities are principally traded with these values then translated into U.S. dollars at the current exchange rate, unless these securities are fair valued as discussed below.
•   Securities for which no quoted value is available: The Board has adopted procedures to fair value the fund’s securities when market prices are not “readily available” or are unreliable. For example, the fund may fair value a security when it is de-listed or its trading is halted or suspended; when a security’s primary pricing source is unable or unwilling to provide a price; or when a security’s primary trading market is closed during regular market hours. The fund makes fair value determinations in good faith in accordance with the fund’s valuation procedures. The Pricing Committee considers a number of factors, including unobservable market inputs when arriving at fair value. The Pricing Committee may employ techniques such as the review of related or comparable assets or liabilities, related market activities, recent transactions, market multiples, book values, transactional back-testing, disposition analysis and other relevant information. The Pricing Committee regularly reviews these inputs and assumptions to calibrate the valuations. Due to the subjective and variable nature of fair value pricing, there can be no assurance that the fund could obtain the fair value assigned to the security upon the sale of such security. The Board convenes on a regular basis to review fair value determinations made by the fund pursuant to the valuation procedures.
•   Foreign equity security fair valuation: The Board has adopted procedures to fair value foreign equity securities that are traded in markets that close prior to the fund valuing its holdings. By fair valuing securities whose prices may have been affected by events occurring after the close of trading, the fund seeks to establish prices that investors might expect to realize upon the current sales of these securities. This methodology is designed to deter “arbitrage” market timers, who seek to exploit delays between the change in the value of a fund’s portfolio holdings and the Net Asset Value (NAV) of the fund’s shares, and seeks to help ensure that the prices at which the fund’s shares are purchased and redeemed are fair and do not result in dilution of shareholder interest or other harm to shareholders. When fair value pricing is used at the open or close of a reporting period, it may cause a temporary divergence between the return of the fund and that of its comparative index or benchmark. The Board regularly reviews fair value determinations made by the fund pursuant to these procedures.
•   Underlying funds: Mutual funds are valued at their respective NAVs.
In accordance with the authoritative guidance on fair value measurements and disclosures under generally accepted accounting principles in the United States of America (GAAP), the fund discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the valuation. If the fund determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value.
The three levels of the fair value hierarchy are as follows:
•   Level 1—quoted prices in active markets for identical securities—Investments whose values are based on quoted market prices in active markets, and whose values are therefore classified as Level 1 prices, include active listed equities. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices, without consideration to the classification level of the specific investments held by an underlying fund.
•   Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)—Investments that trade in markets that are not considered to be active, but whose values are based on quoted market prices, dealer quotations or valuations provided by alternative pricing sources supported by observable inputs are classified as Level 2 prices. These generally include U.S. government and sovereign obligations, most government agency securities, investment-grade corporate bonds, certain mortgage products, less liquid listed equities, and state, municipal and provincial obligations. In addition, international securities whose markets close hours before the fund values its holdings may require fair valuations due to significant movement in the U.S. markets occurring after the daily close of the foreign markets. The Board has approved a vendor that calculates fair valuations of international equity securities based on a number of factors that appear to correlate to the movements in the U.S. markets.
3

 

Laudus U.S. Large Cap Growth Fund
Notes to Portfolio Holdings (continued)
•   Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments)—Investments whose values are classified as Level 3 prices have significant unobservable inputs, as they may trade infrequently or not at all. When observable prices are not available for these securities, the fund uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used by the fund in estimating the value of Level 3 prices may include the original transaction price, quoted prices for similar securities or assets in active markets, completed or pending third-party transactions in the underlying investment or comparable issuers, and changes in financial ratios or cash flows. Level 3 prices may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the fund in the absence of market information. Assumptions used by the fund due to the lack of observable inputs may significantly impact the resulting fair value and therefore the fund’s results of operations.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
REG60662DEC17
4

Item 2. Controls and Procedures.

(a) Based on their evaluation of Registrant’s disclosure controls and procedures, as of a date within 90 days of the filing date, Registrant’s Chief Executive Officer, Marie Chandoha and Registrant’s Chief Financial Officer, Mark Fischer, have concluded that Registrant’s disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to Registrant’s officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above.

 

(b) During Registrant’s last fiscal quarter, there have been no changes in Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that the above officers believe to have materially affected, or to be reasonably likely to materially affect, Registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

Separate certifications for Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), are attached.

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) The Laudus Trust

 

By:  

/s/ Marie Chandoha

  Marie Chandoha
  President and Chief Executive Officer
Date:   February 16, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ Marie Chandoha

  Marie Chandoha
  President and Chief Executive Officer
Date:   February 16, 2018
By:  

/s/ Mark Fischer

  Mark Fischer
  Chief Financial Officer
Date:   February 16, 2018