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: 811-08759
Laudus Institutional Trust
(Exact name of registrant as specified in charter)
211 Main St, San Francisco, California 94105
(Address of principal executive offices) (Zip code)
Marie Chandoha
Laudus Institutional Trust
211 Main St, 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, 2013
 
 
Item 1. Schedule of Investments.

 

 

Laudus Institutional Trust
Laudus Mondrian Institutional Emerging Markets Fund
 
Portfolio Holdings  as of December 31, 2013 (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.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  94 .7%   Common Stock     364,709,414       356,088,868  
  4 .5%   Preferred Stock     22,209,021       16,778,914  
  1 .0%   Other Investment Company     3,668,350       3,668,350  
 
 
  100 .2%   Total Investments     390,586,785       376,536,132  
  (0 .2)%   Other Assets and Liabilities, Net             (643,803 )
 
 
  100 .0%   Net Assets             375,892,329  
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Common Stock  94.7% of net assets
 
Brazil 8.6%
                 
 
Energy 0.0%
Petroleo Brasileiro S.A. ADR
    8,200       120,458  
                 
 
Food, Beverage & Tobacco 1.5%
Ambev S.A. ADR
    771,000       5,666,850  
                 
 
Materials 0.7%
Vale S.A. ADR
    163,400       2,491,850  
                 
 
Software & Services 1.5%
Cielo S.A.
    201,700       5,586,731  
                 
 
Transportation 3.3%
CCR S.A.
    947,000       7,152,193  
EcoRodovias Infraestrutura e Logistica S.A.
    836,500       5,266,060  
                 
              12,418,253  
                 
 
Utilities 1.6%
CPFL Energia S.A. ADR
    385,000       6,163,850  
                 
              32,447,992  
 
Chile 2.3%
                 
 
Utilities 2.3%
Enersis S.A. ADR
    566,100       8,485,839  
 
China 17.0%
                 
 
Capital Goods 2.6%
Beijing Enterprises Holdings Ltd.
    998,500       9,918,373  
                 
 
Energy 1.4%
China Shenhua Energy Co., Ltd., Class H
    1,718,000       5,437,061  
                 
 
Health Care Equipment & Services 2.9%
Mindray Medical International Ltd. ADR
    295,000       10,726,200  
                 
 
Household & Personal Products 1.5%
Hengan International Group Co., Ltd.
    493,500       5,838,746  
                 
 
Retailing 1.9%
Belle International Holdings Ltd.
    6,098,456       7,084,955  
                 
 
Telecommunication Services 4.2%
China Mobile Ltd.
    1,502,500       15,650,524  
                 
 
Utilities 2.5%
China Resources Power Holdings Co., Ltd.
    3,886,000       9,223,246  
                 
              63,879,105  
 
Hong Kong 1.7%
                 
 
Consumer Services 1.7%
Sands China Ltd.
    804,800       6,595,601  
 
India 5.7%
                 
 
Banks 2.5%
Axis Bank Ltd.
    260,740       5,498,004  
Housing Development Finance Corp., Ltd.
    311,337       4,008,640  
                 
              9,506,644  
                 
 
Capital Goods 2.1%
Larsen & Toubro Ltd.
    455,838       7,905,961  
                 
 
Diversified Financials 0.8%
Rural Electrification Corp., Ltd.
    798,832       2,854,135  
                 
 
Energy 0.3%
Cairn India Ltd.
    192,574       1,009,131  
                 
              21,275,871  
 
Indonesia 6.2%
                 
 
Automobiles & Components 1.5%
PT Astra International Tbk
    10,038,500       5,622,097  
                 
 
Banks 3.5%
PT Bank Mandiri (Persero) Tbk
    9,615,000       6,222,933  
PT Bank Rakyat Indonesia (Persero) Tbk
    11,724,500       7,007,974  
                 
              13,230,907  
                 
 
Utilities 1.2%
PT Perusahaan Gas Negara (Persero) Tbk
    12,230,500       4,508,318  
                 
              23,361,322  
 
Kazakhstan 1.3%
                 
 
Energy 1.3%
KazMunaiGas Exploration Production GDR
    305,466       4,795,816  
 
 
 
  1

 

 
 Laudus Mondrian Institutional Emerging Markets Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
 
Malaysia 3.9%
                 
 
Consumer Services 1.4%
Genting Malaysia Berhad
    3,871,200       5,182,626  
                 
 
Diversified Financials 2.5%
Ammb Holdings Berhad
    4,293,900       9,502,134  
 
Mexico 7.6%
                 
 
Banks 2.2%
Grupo Financiero Santander Mexico S.A.B. de C.V., Class B ADR
    615,700       8,398,148  
                 
 
Real Estate 3.6%
Fibra Uno Administracion S.A. de C.V.
    4,176,800       13,378,300  
                 
 
Telecommunication Services 1.8%
America Movil S.A.B. de C.V., Series L ADR
    293,800       6,866,106  
                 
              28,642,554  
 
Peru 2.3%
                 
 
Banks 2.3%
Credicorp Ltd.
    64,595       8,573,694  
 
Philippines 2.5%
                 
 
Telecommunication Services 2.5%
Philippine Long Distance Telephone Co. ADR
    156,000       9,372,480  
 
Republic of Korea 8.3%
                 
 
Automobiles & Components 4.4%
Hyundai Mobis
    59,194       16,479,835  
                 
 
Semiconductors & Semiconductor Equipment 3.9%
Samsung Electronics Co., Ltd.
    11,369       14,814,342  
                 
              31,294,177  
 
Russia 4.5%
                 
 
Banks 2.1%
Sberbank of Russia ADR
    631,830       7,942,103  
                 
 
Energy 2.4%
Gazprom OAO ADR
    1,028,540       8,896,871  
                 
              16,838,974  
 
South Africa 4.2%
                 
 
Capital Goods 1.5%
Bidvest Group Ltd.
    229,283       5,873,845  
                 
 
Food, Beverage & Tobacco 2.7%
SABMiller plc
    198,520       10,091,596  
                 
              15,965,441  
 
Taiwan 6.0%
                 
 
Semiconductors & Semiconductor Equipment 3.7%
Taiwan Semiconductor Manufacturing Co., Ltd.
    3,974,224       14,032,814  
                 
 
Telecommunication Services 2.3%
Taiwan Mobile Co., Ltd.
    2,645,000       8,549,198  
                 
              22,582,012  
 
Thailand 2.7%
                 
 
Energy 2.7%
PTT PCL
    1,163,200       10,124,017  
 
Turkey 4.4%
                 
 
Energy 2.4%
Tupras-Turkiye Petrol Rafinerileri A/S
    441,452       8,815,030  
                 
 
Telecommunication Services 2.0%
Turk Telekomunikasyon A/S
    2,761,443       7,659,458  
                 
              16,474,488  
 
United Kingdom 2.6%
                 
 
Food, Beverage & Tobacco 2.6%
Unilever plc
    238,896       9,829,568  
 
United States 2.9%
                 
 
Consumer Services 2.9%
Yum! Brands, Inc.
    143,700       10,865,157  
                 
Total Common Stock
(Cost $364,709,414)     356,088,868  
         
                 
                 
 
 Preferred Stock  4.5% of net assets
 
Brazil 4.5%
                 
 
Energy 1.7%
Petroleo Brasileiro S.A.
    850,700       6,162,136  
                 
 
Materials 2.8%
Vale S.A. ADR
    757,800       10,616,778  
                 
Total Preferred Stock
(Cost $22,209,021)     16,778,914  
         
                 
                 
 
 
 
2 

 

 
 Laudus Mondrian Institutional Emerging Markets Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Other Investment Company  1.0% of net assets
 
United States 1.0%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00%  (a)
    3,668,350       3,668,350  
                 
Total Other Investment Company
(Cost $3,668,350)     3,668,350  
         
 
End of Investments.
 
At 12/31/13, the tax basis cost of the fund’s investments was $395,655,207 and the unrealized appreciation and depreciation were $12,867,997 and ($31,987,072), respectively, with a net unrealized depreciation of ($19,119,075).
 
At 12/31/13, the values of certain foreign securities held by the fund aggregating $239,383,265 were adjusted from their closing market values in accordance with international fair valuation procedures approved by the fund’s Board of Trustees.
 
(a) The rate shown is the 7-day yield.
 
     
ADR —
  American Depositary Receipt
GDR —
  Global Depositary Receipt
 
 
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 halfway between 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, 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. 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 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 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.
 
 
 
  3

 

 
 Laudus Mondrian Institutional Emerging Markets Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
  •  Short-term securities (60 days or less to maturity): Short-term securities are valued at amortized cost, which approximates market value.
 
  •  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.
 
  •  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. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
 
  •  Level 3 — significant unobservable inputs (including the fund’s own assumption 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.
 
 
 
4 

 

 
 Laudus Mondrian Institutional Emerging Markets Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the fund’s investments as of December 31, 2013:
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Common Stock 1
    $—       $162,063,240       $—       $162,063,240  
Brazil 1
    —       18,004,984       —       18,004,984  
Energy
    120,458       —       —       120,458  
Food, Beverage & Tobacco
    5,666,850       —       —       5,666,850  
Materials
    2,491,850       —       —       2,491,850  
Utilities
    6,163,850       —       —       6,163,850  
Chile 1
    8,485,839       —       —       8,485,839  
China 1
    —       53,152,905       —       53,152,905  
Health Care Equipment & Services
    10,726,200       —       —       10,726,200  
Kazakhstan 1
    4,795,816       —       —       4,795,816  
Mexico 1
    28,642,554       —       —       28,642,554  
Peru 1
    8,573,694       —       —       8,573,694  
Philippines 1
    9,372,480       —       —       9,372,480  
Russia 1
    16,838,974       —       —       16,838,974  
Thailand 1
    10,124,017       —       —       10,124,017  
United States 1
    10,865,157       —       —       10,865,157  
Preferred Stock
                               
Brazil 1
    —       6,162,136       —       6,162,136  
Materials
    10,616,778       —       —       10,616,778  
Other Investment Company 1
    3,668,350       —       —       3,668,350  
                                 
Total
    $137,152,867       $239,383,265       $—       $376,536,132  
                                 
 
     
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 $16,423,171 from Level 1 to Level 2 for the period ended December 31, 2013. 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 securities during the period.
 
REG60670DEC13-00
 
 
 
  5

 

Laudus Institutional Trust
Laudus Mondrian Institutional International Equity Fund
 
Portfolio Holdings  as of December 31, 2013 (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.
 
                         
        Cost
  Value
Holdings by Category   ($)   ($)
 
  99 .0%   Common Stock     19,834,265       24,009,523  
  1 .5%   Other Investment Company     378,579       378,579  
 
 
  100 .5%   Total Investments     20,212,844       24,388,102  
  (0 .5)%   Other Assets and Liabilities, Net             (132,012 )
 
 
  100 .0%   Net Assets             24,256,090  
 
                 
    Number
  Value
Security   of Shares   ($)
 
 Common Stock  99.0% of net assets
 
Australia 2.7%
                 
 
Insurance 2.7%
AMP Ltd.
    72,367       284,433  
QBE Insurance Group Ltd.
    36,085       372,242  
                 
              656,675  
 
China 1.6%
                 
 
Telecommunication Services 1.6%
China Mobile Ltd.
    37,000       385,404  
 
France 13.0%
                 
 
Capital Goods 2.8%
Compagnie de Saint-Gobain
    12,541       690,846  
                 
 
Energy 2.9%
Total S.A.
    11,321       694,876  
                 
 
Food & Staples Retailing 1.5%
Carrefour S.A.
    8,889       352,834  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.2%
Sanofi
    7,369       786,971  
                 
 
Telecommunication Services 2.6%
Orange S.A.
    49,835       618,708  
                 
              3,144,235  
 
Germany 7.5%
                 
 
Automobiles & Components 2.1%
Daimler AG - Reg’d
    5,824       505,432  
                 
 
Telecommunication Services 3.8%
Deutsche Telekom AG - Reg’d
    53,155       915,870  
                 
 
Utilities 1.6%
RWE AG
    10,958       401,490  
                 
              1,822,792  
 
Israel 3.3%
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.3%
Teva Pharmaceutical Industries Ltd. ADR
    20,200       809,616  
 
Italy 2.8%
                 
 
Energy 2.8%
Eni S.p.A.
    27,678       668,801  
 
Japan 15.2%
                 
 
Food & Staples Retailing 2.3%
Seven & I Holdings Co., Ltd.
    14,300       569,375  
                 
 
Household & Personal Products 3.0%
Kao Corp.
    23,000       724,082  
                 
 
Insurance 2.4%
Tokio Marine Holdings, Inc.
    17,700       592,413  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 2.5%
Takeda Pharmaceutical Co., Ltd.
    13,300       610,005  
                 
 
Semiconductors & Semiconductor Equipment 1.5%
Tokyo Electron Ltd.
    6,500       358,168  
                 
 
Technology Hardware & Equipment 3.0%
Canon, Inc.
    22,800       727,511  
                 
 
Telecommunication Services 0.5%
NTT DOCOMO, Inc.
    6,600       108,677  
                 
              3,690,231  
 
Netherlands 5.7%
                 
 
Food & Staples Retailing 3.3%
Koninklijke Ahold N.V.
    44,073       792,042  
                 
 
Media 2.4%
Reed Elsevier N.V.
    28,122       597,698  
                 
              1,389,740  
 
Singapore 3.2%
                 
 
Banks 1.9%
United Overseas Bank Ltd.
    27,442       463,414  
                 
 
Telecommunication Services 1.3%
Singapore Telecommunications Ltd.
    104,000       302,196  
                 
              765,610  
 
Spain 8.1%
                 
 
Banks 2.0%
Banco Santander S.A.
    52,566       472,699  
                 
 
Telecommunication Services 2.7%
Telefonica S.A.
    40,078       655,306  
 
 
 
  1

 

 
 Laudus Mondrian Institutional International Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
                 
    Number
  Value
Security   of Shares   ($)
                 
 
Utilities 3.4%
Iberdrola S.A.
    130,169       830,707  
                 
              1,958,712  
 
Switzerland 11.9%
                 
 
Capital Goods 3.5%
ABB Ltd. - Reg’d  *
    31,763       839,814  
                 
 
Food, Beverage & Tobacco 2.0%
Nestle S.A. - Reg’d
    6,612       484,593  
                 
 
Insurance 3.1%
Zurich Insurance Group AG  *
    2,626       761,708  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.3%
Novartis AG - Reg’d
    10,151       813,596  
                 
              2,899,711  
 
Taiwan 1.6%
                 
 
Semiconductors & Semiconductor Equipment 1.6%
Taiwan Semiconductor Manufacturing Co., Ltd.
    111,839       394,899  
 
United Kingdom 22.4%
                 
 
Energy 6.6%
BP plc
    95,598       774,737  
Royal Dutch Shell plc, Class A
    22,913       818,057  
                 
              1,592,794  
                 
 
Food & Staples Retailing 2.9%
Tesco plc
    127,480       707,939  
                 
 
Food, Beverage & Tobacco 3.3%
Unilever plc
    19,581       805,676  
                 
 
Pharmaceuticals, Biotechnology & Life Sciences 3.4%
GlaxoSmithKline plc
    30,613       817,902  
                 
 
Telecommunication Services 3.0%
Vodafone Group plc
    187,193       737,014  
                 
 
Utilities 3.2%
National Grid plc
    58,243       761,772  
                 
              5,423,097  
                 
Total Common Stock
(Cost $19,834,265)     24,009,523  
         
                 
                 
 
 Other Investment Company  1.5% of net assets
 
United States 1.5%
State Street Institutional U.S. Government Money Market Fund, Institutional Class 0.00%  (a)
    378,579       378,579  
                 
Total Other Investment Company
(Cost $378,579)     378,579  
         
 
End of Investments.
 
At 12/31/13, the tax basis cost of the fund’s investments was $20,987,923 and the unrealized appreciation and depreciation were 3,954,086 and ($553,907), respectively, with a net unrealized appreciation of $3,400,179.
 
At 12/31/13, the values of certain foreign securities held by the fund aggregating $23,199,907 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
Reg’d —
  Registered
 
     
AUD —
  Australian dollar
USD —
  U.S. dollar
 
In addition to the above, the fund held the following at 12/31/13:
 
 
                                             
            Amount of
      Amount of
  Unrealized
        Currency
  Currency
  Currency
  Currency
  Appreciation
        to be
  to be
  to be
  to be
  (Depreciation)
Expiration Date   Counterparty   Received   Received   Delivered   Delivered   ($)
 
 Forward Foreign Currency Exchange Contracts
                                         
                                             
01/31/2014
  State Street Bank London     AUD       63,000       USD       56,150       (1,313 )
01/31/2014
  State Street Bank London     USD       533,868       AUD       599,000       32,846  
01/31/2014
  State Street Bank London     USD       34,759       AUD       39,000       460  
01/31/2014
  State Street Bank London     USD       69,073       AUD       77,500       119  
                                     
Net Unrealized Appreciation on Forward Foreign Currency Exchange Contracts
    32,112  
         
 
 
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.
 
 
 
2 

 

 
 Laudus Mondrian Institutional International Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
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 halfway between 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, 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. 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 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 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.
 
  •  Forward foreign currency exchange contracts: 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.
 
  •  Short-term securities (60 days or less to maturity): Short-term securities are valued at amortized cost, which approximates market value.
 
  •  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 and futures contracts. Investments in mutual funds are valued daily at their NAVs, which are classified as Level 1 prices.
 
 
 
  3

 

 
 Laudus Mondrian Institutional International Equity Fund
 

 
Portfolio Holdings   (Unaudited) 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 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. As investments whose values are classified as Level 2 prices include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
 
  •  Level 3 — significant unobservable inputs (including the fund’s own assumption 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. The following is a summary of the inputs used to value the fund’s investments as of December 31, 2013:
 
Assets Valuation Input
 
                                 
    Quoted Prices in
      Significant
   
    Active Markets for
  Significant Other
  Unobservable
   
    Identical Assets
  Observable Inputs
  Inputs
   
Description
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
 
Common Stock 1
    $—       $23,199,907       $—       $23,199,907  
Israel 1
    809,616       —       —       809,616  
Other Investment Company 1
    378,579       —       —       378,579  
                                 
Total
    $1,188,195       $23,199,907       $—       $24,388,102  
                                 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contracts 2
    $—       $33,425       $—       $33,425  
                                 
                                 
Liabilities Valuation Input
                 
 
Other Financial Instruments
                               
Forward Foreign Currency Exchange Contracts 2
    $—       ($1,313 )     $—       ($1,313 )
 
     
1
  As categorized in Portfolio Holdings.
2
  Forward foreign currency exchange contracts are not included in Investments and 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, 2013.
 
 
 
4 

 

 
 Laudus Mondrian Institutional International Equity Fund
 

 
Portfolio Holdings   (Unaudited) continued
 
The fund invested in forward foreign currency exchange contracts (“forwards”) during the period ended December 31, 2013. The fund invested in forwards to hedge part of the fund’s exposure to currencies that were deemed to be overvalued by the sub-adviser.
 
REG60672DEC13-00
 
 
 
  5

 

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 Principal Financial Officer, George Pereira, 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) Laudus Institutional Trust
         
By:
  /s/ Marie Chandoha
 
Marie Chandoha 		   
 
  President and Chief Executive Officer    
 
       
Date:
  2/12/2014    
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:
  2/12/2014    
 
       
By:
  /s/ George Pereira
 
George Pereira 		   
 
  Chief Financial Officer    
 
       
Date:
  2/12/2014