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As filed with the Securities and Exchange Commission on September 26, 1997
File No. 811-9136
SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
OLD MUTUAL EQUITY GROWTH ASSETS SOUTH AFRICA FUND (EXACT NAME OF REGISTRANT AS
SPECIFIED IN CHARTER)
61 FRONT STREET, HAMILTON 11, BERMUDA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(441) 296-1201
MELANIE J. SAUNDERS
61 FRONT STREET, HAMILTON 11, BERMUDA
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO: ROGER P. JOSEPH, BINGHAM, DANA & GOULD LLP,
150 FEDERAL STREET, BOSTON, MA 02110
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TABLE OF CONTENTS
DOCUMENT SECTIONS
Item 4. General Description of Registrant. 2
Item 5. Management of the Fund. 2
Item 6. Capital Stock and Other Securities. 2
Item 7. Purchase of Securities Being Offered. 2
Item 8. Redemption or Repurchase. 2
Item 9. Pending Legal Proceedings. 2
Item 10. Cover Page. 39
Item 11. Table of Contents. 40
Item 12. General Information and History. 41
Item 13. Investment Objective and Policies. 41
Item 14. Management of the Fund. 51
Item 15. Control Persons and Principal Holders of Securities. 54
Item 16. Investment Advisory and Other Services. 56
Item 17. Brokerage Allocation and Other Practices. 61
Item 18. Capital Stock and Other Securities. 62
Item 19. Purchase, Redemption and Pricing of Securities. 65
Item 20. Tax Status. 67
Item 21. Underwriters. 70
Item 22. Calculation of Performance Data. 70
Item 23. Financial Statements. 70
Item 24. Financial Statements and Exhibits. 70
Item 25. Persons Controlled by or under Common Control with Registrant. 72
Item 26. Number of Holders of Securities. 72
Item 27. Indemnification. 74
Item 28. Business and Other Connections of Investment Adviser. 74
Item 29. Principal Underwriters. 83
Item 30. Location of Accounts and Records. 84
Item 31. Management Services. 86
Item 32. Undertakings. 86
EXHIBITS
Exhibit 6(c). 83
Exhibit 1(b) 88
Exhibit 6(c) 103
FULL CONTENTS
Item 4. General Description of Registrant. 2
Item 5. Management of the Fund. 2
Item 6. Capital Stock and Other Securities. 2
Item 7. Purchase of Securities Being Offered. 2
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Item 8. Redemption or Repurchase. 2
Item 9. Pending Legal Proceedings. 2
Item 10. Cover Page. 39
Item 11. Table of Contents. 40
Item 12. General Information and History. 41
Item 13. Investment Objective and Policies. 41
Item 14. Management of the Fund. 51
Item 15. Control Persons and Principal Holders of Securities. 54
Item 16. Investment Advisory and Other Services. 56
Item 17. Brokerage Allocation and Other Practices. 61
Item 18. Capital Stock and Other Securities. 62
Item 19. Purchase, Redemption and Pricing of Securities. 65
Item 20. Tax Status. 67
Item 21. Underwriters. 70
Item 22. Calculation of Performance Data. 70
Item 23. Financial Statements. 70
Item 24. Financial Statements and Exhibits. 70
Item 25. Persons Controlled by or under Common Control with Registrant. 72
Item 26. Number of Holders of Securities. 72
Item 27. Indemnification. 74
Exhibit 6(c). 74
Item 28. Business and Other Connections of Investment Adviser. 74
Item 29. Principal Underwriters. 83
Item 30. Location of Accounts and Records. 84
Item 31. Management Services. 86
Item 32. Undertakings. 86
EXHIBIT INDEX 87
Exhibit 1(c) 87
William Francois de la Harpe Beck 88
William L. Boyan 88
Thomas Haskins Davis 88
William Langley 88
Michael John Levett 88
Exhibit 6(c) 89
By: William Langley 103
By: Alric Wiggill 104
By: Kevin Jacobs 104
By: Bruce Watts 104
EXHIBIT 9(i) 105
EXHIBIT 11 107
EXHIBIT 27
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EXPLANATORY NOTE
Shares of beneficial interest in the Registrant are not registered under
the Securities Act of 1933, as amended (the "1933 Act"), because such shares are
issued solely in private placement transactions which do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in
the Registrant may be made only by entities which are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any shares of beneficial interest in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
See "Investment Objective and Policies," "South Africa," "Investment
Considerations" and "General Information" in the Private Placement Memorandum
which is attached hereto and incorporated herein by reference.
Item 5. Management of the Fund.
See "Management and Administration," "Offering of Shares - Expense
Reimbursement" and "General Information" in the Private Placement Memorandum
attached hereto.
Item 6. Capital Stock and Other Securities.
See "Summary of the Offering-Dividends," "Valuation of Shares," "Tax
Matters," "General Information" and "Additional Information" in the Private
Placement Memorandum attached hereto.
Item 7. Purchase of Securities Being Offered.
See "Valuation of Shares," "Offering of Shares" and "General
Information" in the Private Placement Memorandum attached hereto.
Item 8. Redemption or Repurchase.
See "Redemptions" and "General Information - Purchase Right" in the
Private Placement Memorandum attached hereto.
Item 9. Pending Legal Proceedings.
Not applicable.
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CONFIDENTIAL Offeree:
PRIVATE PLACEMENT MEMORANDUM Number:
OMEGA SOUTH AFRICA FUND
(OLD MUTUAL EQUITY GROWTH ASSETS SOUTH AFRICA FUND)
OFFERING OF
SHARES OF BENEFICIAL INTEREST
This document is to be distributed only when accompanied by a copy of the
most recent annual or semi-annual report of the Fund. The most recent annual or
semi-annual report of the Fund forms part of, and is incorporated by reference
in, this Private Placement Memorandum.
The Shares offered hereby have not been and will not be registered under the
Securities Act of 1933, as amended, or any state securities laws. The Fund has
registered as an investment company under the Investment Company Act of 1940, as
amended. Neither the Securities and Exchange Commission nor any state securities
authority has reviewed this Private Placement Memorandum or passed upon the
merits of this offering.
The Shares are subject to restrictions on transfer. There is no public
market for the Shares, and none is expected to develop.
This Private Placement Memorandum does not constitute an offer to sell, or
the solicitation of an offer to purchase, the Shares in any jurisdiction in
which such offer or solicitation is not authorized or to or from any person
unless the name of such person and a control number appear above on this cover
page.
This Private Placement Memorandum is confidential and is not to be
reproduced or circulated, in whole or in part, without the prior written
approval of the Fund or a Placement Agent.
The Placement Agents have not independently verified any of the information
contained in this Private Placement Memorandum (financial, legal, or otherwise),
and no representation or warranty, express or implied, is made by the Placement
Agents as to the accuracy or completeness of the information contained herein.
No person is authorized to give any information or make any representation not
contained in this Private Placement Memorandum in connection with the Offering
and, if given or made, such information or representation must not be relied on
as having been authorized by the Fund or the Placement Agents. The delivery of
this Private Placement Memorandum at any time does not imply that information in
this Private Placement Memorandum is correct as of any time subsequent to the
date of this Private Placement Memorandum.
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[FLEMING MARTIN LOGO] [RAND INTERNATIONAL SECURITIES LOGO] [SBC WARBURG INC. LOGO]
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PLACEMENT AGENTS
June 1, 1997
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INVESTMENT HIGHLIGHTS
OLD MUTUAL HAS CREATED A UNIQUE FUND STRUCTURE OFFERING INSTITUTIONAL
INVESTORS INSTANT ACCESS TO THE SOUTH AFRICAN MARKET. THE FUND COMBINES THE
LIQUIDITY OF AN OPEN-END FUND WITH THE PORTFOLIO STABILITY AND REDUCED TRADING
COSTS ASSOCIATED WITH A CLOSED-END FUND.
SOUTH AFRICA
- South Africa, with the largest economy in Africa, has exciting growth
potential no longer constrained by international sanctions.
- The earnings of companies included in The Johannesburg Stock Exchange
("JSE") Actuaries All Share Index are forecast to grow by approximately
18% over the twelve months to March 31, 1998 and by approximately 20% for
the subsequent twelve months to March 31, 1999. Assuming constant share
prices and projected earnings growth, the price earnings multiple of the
JSE Actuaries All Share Index, which at March 31, 1997 was 15.2 times,
would fall to 12.8 times at March 31, 1998 and to 10.7 times at March 31,
1999.*
OLD MUTUAL
- Old Mutual, the parent company of the Fund's Adviser, is South Africa's
largest financial institution with over U.S.$40 billion of assets under
management, which includes over U.S.$25 billion of equity securities.
- Old Mutual has actively managed South African equity portfolios for over
30 years and has a South Africa team of over 60 investment professionals.
THE FUND
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Size: Approximately U.S.$1 billion at March 31, 1997.
Investors can therefore establish significant
holdings.
Established Portfolio: Immediate exposure to the JSE without market impact or
initial acquisition costs for the portfolio's
underlying securities.
Redemptions: Any amount on any Business Day.
Liquidity: Redemptions funded by a separate pool of securities
held by Old Mutual Fund Holdings rather than through
sales of portfolio securities. This substantially
reduces Fund trading costs.
Management Fee: 0.60% per annum of daily net assets.
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THE ABOVE INVESTMENT HIGHLIGHTS ARE QUALIFIED IN THEIR ENTIRETY BY THE
INFORMATION SET FORTH ELSEWHERE IN THIS PRIVATE PLACEMENT MEMORANDUM (THIS
"MEMORANDUM"). INVESTORS SHOULD CAREFULLY REVIEW THIS MEMORANDUM BEFORE
INVESTING.
- ------------
* Based upon the average earnings forecasts provided by Smith Borkum Hare (Pty)
Ltd; Deutsche Morgan Grenfell (SA) (Pty) Ltd; and Fleming Martin Securities
Ltd, three South African brokerage firms that are not affiliated with Old
Mutual. Fleming Martin Securities Ltd is affiliated with Fleming Martin Inc,
one of the Placement Agents.
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OLD MUTUAL
EQUITY GROWTH ASSETS
SOUTH AFRICA FUND
SUMMARY OF THE OFFERING
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE INFORMATION SET FORTH
ELSEWHERE IN THIS PRIVATE PLACEMENT MEMORANDUM (THIS "MEMORANDUM"). INVESTORS
SHOULD CAREFULLY REVIEW THIS MEMORANDUM BEFORE INVESTING.
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FUND.............................. Old Mutual Equity Growth Assets South Africa Fund (the
"OMEGA South Africa Fund") is a Massachusetts business
trust that seeks long-term total return in excess of
that of The Johannesburg Stock Exchange ("JSE")
Actuaries All Share Index from investment in equity
securities of South African issuers. Under normal
circumstances, at least 95% of the Fund's total assets
will be invested in equity securities of South African
issuers that are listed on a securities exchange.
For purposes of the Fund's investment policies, a South
African issuer is an issuer that meets one of the
following tests: (i) its principal offices or operations
are located in South Africa; or (ii) it derives at least
50% of its revenues from operations or investments in
South Africa. See "INVESTMENT OBJECTIVE AND POLICIES".
MASTER TRUST...................... Rather than directly acquire and manage its own
portfolio of securities, the OMEGA South Africa Fund
invests all of its investable assets in Old Mutual South
Africa Equity Trust (the "Master Trust"), a
Massachusetts trust with its principal place of business
in Bermuda that has the same investment objective as the
OMEGA South Africa Fund.
ALL REFERENCES IN THIS MEMORANDUM TO THE "FUND" APPLY TO
BOTH THE OMEGA SOUTH AFRICA FUND AND THE MASTER TRUST,
EXCEPT AS OTHERWISE INDICATED.
INVESTMENT ADVISER................ Old Mutual Asset Managers (Bermuda) Limited (the
"Adviser") is the investment adviser to the Master
Trust. The Adviser is a wholly-owned subsidiary of the
South African Mutual Life Assurance Society ("Old
Mutual"), which is the largest (in terms of 1996
year-end total assets) and oldest insurer in South
Africa. At June 30, 1996 Old Mutual had total assets
under management of over U.S.$40 billion. The OMEGA
South Africa Fund does not have a separate investment
adviser, because it invests all of its investable assets
in the Master Trust.
The Master Trust pays the Adviser a management fee of
0.60% per annum of the Master Trust's daily net assets
(the "Management Fee"). The Management Fee accrues daily
on an annualized basis and is paid monthly in arrears.
See "MANAGEMENT AND ADMINISTRATION -- Adviser".
INITIAL PORTFOLIO................. Shortly before the launch of the OMEGA South Africa
Fund, Old Mutual transferred to the Master Trust a
portfolio of South African securities (the "Initial
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Portfolio") from Old Mutual's main proprietary
investment portfolio (the "Old Mutual Main Fund") with a
market value of approximately U.S.$1 billion and
holdings in 60 South African issuers. At the time of its
transfer, the Initial Portfolio generally reflected the
equity holdings of the Old Mutual Main Fund.
As consideration for the acquisition of the Initial
Portfolio and for an initial capital contribution, the
Master Trust issued substantially all of its beneficial
interest to Old Mutual Fund Holdings (Bermuda) Limited
("Old Mutual Fund Holdings"), a wholly-owned subsidiary
of Old Mutual.
FUND STRUCTURE.................... The OMEGA South Africa Fund will invest the proceeds of
this offering of Shares (the "Offering") in the Master
Trust, which will then apply the proceeds to redeem a
corresponding portion of the interest of Old Mutual Fund
Holdings in the Master Trust.
Old Mutual Fund Holdings will, in turn, invest the
proceeds received from the Master Trust in Old Mutual
Global Assets Fund Limited, a mutual fund organized
under the laws of Bermuda that invests in a portfolio of
South African and international securities (the "Global
Fund"). Old Mutual initially capitalized the Global Fund
with approximately U.S.$500 million of South African
securities. At March 31, 1997 the net assets of the
Global Fund were in excess of U.S.$649 million.
Investors in Shares will not acquire any interest in the
Global Fund. Instead, the Global Fund is designed to
provide a pool of securities to fund redemptions of
Shares, as noted under "Redemptions and Liquidity
Facility" below. Old Mutual Fund Holdings is the sole
shareholder of the Global Fund. See "LIQUIDITY FACILITY
AND THE GLOBAL FUND".
VALUATION OF SHARES............... The net asset value per Share is determined as of 10:00
a.m. (Eastern time) on each day on which the New York
Stock Exchange is open for trading (a "Business Day").
The Fund generally values JSE listed securities based on
their current JSE ruling price, and converts prices from
South African rand ("S.A. Rand") to U.S.dollars using
exchange rates prevailing as of the time the net asset
value is to be determined. Trading may take place in
securities held by the Master Trust on days that are not
Business Days and on which it will not be possible to
purchase or redeem Shares. See "VALUATION OF SHARES".
OFFERING AND SUBSCRIPTION
PROCEDURE......................... The OMEGA South Africa Fund is offering Shares on a
continuous basis at a price equal to their net asset
value. A sales charge of up to 0.35% of that price may
be applied by the Placement Agents. Investors that wish
to subscribe for Shares are required to complete the
subscription form circulated by the Placement Agents.
The office of the Transfer Agent will be open to accept
subscription forms from 12:00 noon to 4:00 p.m. (Eastern
time) on every
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Business Day. Subscription forms received by 4:00 p.m.
(Eastern time) on any Business Day will be processed
based on the net asset value as determined on the next
Business Day. Subscription forms reaching the Transfer
Agent after 4:00 p.m. (Eastern time) on any Business Day
will be deemed to have been received at 12:00 noon
(Eastern time) on the next Business Day. Full payment
for Shares is due in cash by 3:00 p.m. (Eastern time) on
the second Business Day following receipt (or deemed
receipt) of the subscription form by the Transfer Agent.
The minimum purchase for any investor is U.S.$5 million,
provided the minimum purchase may, in particular
circumstances, be reduced for certain investors to not
less than U.S.$1 million.
The Shares are being offered and sold only to investors
that are "accredited investors" as defined in Regulation
D under the Securities Act of 1933, as amended (the
"1933 Act"). See "OFFERING OF SHARES".
PLACEMENT ARRANGEMENTS............ The OMEGA South Africa Fund has engaged Fleming Martin
Inc., Rand International Securities LLC, and SBC Warburg
Inc. to act as placement agents for the Offering (the
"Placement Agents"). Each of the Placement Agents will
be entitled to apply a sales charge of up to 0.35% of
the net asset value of the Shares placed by it. Old
Mutual Fund Holdings may, from its own resources, make
additional payments to the Placement Agents or other
parties of 0.25% of the price of Shares sold in the
Offering. See "OFFERING OF SHARES -- Offering".
REDEMPTIONS AND LIQUIDITY
FACILITY.......................... Investors may request redemption of Shares on any
Business Day. The office of the Transfer Agent will be
open to accept redemption requests from 12:00 noon to
4:00 p.m. (Eastern time) on every Business Day.
Redemption requests reaching the Transfer Agent after
4:00 p.m. (Eastern time) on any Business Day will be
deemed to have been received at 12:00 noon (Eastern
time) on the next Business Day.
In order to fund redemptions, the OMEGA South Africa
Fund will redeem a corresponding portion of its interest
in the Master Trust. To the extent required to provide
funds for redeeming Shares, Old Mutual Fund Holdings
will withdraw monies from the Global Fund and invest
those monies in the Master Trust (the "Liquidity
Facility"). Old Mutual Fund Holdings may not terminate
the Liquidity Facility without giving at least 120 days
notice to registered holders of Shares ("Shareholders")
for so long as the Adviser serves as investment adviser
to the Master Trust. Any termination of the Liquidity
Facility would not affect Shareholder redemption rights.
Shares will be redeemed at net asset value (as next
determined) subject to a redemption fee charged by the
OMEGA South Africa Fund of 0.65% of redemption proceeds
(the "Redemption Fee"). For so long as Old Mutual Fund
Holdings provides the Liquidity Facility, the
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OMEGA South Africa Fund will pay to Old Mutual Fund
Holdings amounts collected in respect of the Redemption
Fee as compensation for the Liquidity Facility.
The Fund believes that the Liquidity Facility
substantially reduces the trading costs of the Fund. See
"REDEMPTIONS" and "LIQUIDITY FACILITY AND THE GLOBAL
FUND".
TRANSFER OF SHARES................ There is no public market for the Shares, and none is
expected to develop. Transfers of Shares are subject to
restrictions for purposes of complying with securities
laws. One or more broker-dealers, including the
Placement Agents, may on a private basis arrange
purchases and sales of Shares. However, no party is
obligated to arrange purchases and sales of Shares, and
there can be no assurance that any private market for
Shares will, if established, be continued. See "GENERAL
INFORMATION -- Transfers of Shares".
DIVIDENDS......................... Dividend income from the OMEGA South Africa Fund is not
expected to be a significant portion of the long-term
total return. Substantially all of the Fund's net income
from dividends and interest will be distributed to
Shareholders semi-annually on or about the last day of
June and December of each year. The Fund's net realized
capital gains will be distributed to the Shareholders at
least annually. Dividends may be automatically
reinvested at the written election of the investor,
provided the OMEGA South Africa Fund reserves the right
to suspend or terminate this reinvestment privilege.
NON-U.S. FUND..................... The Old Mutual SAGA Fund, a mutual fund organized under
the laws of Bermuda (the "Non-U.S. Fund"), also invests
in the Master Trust. Shares of the Non-U.S. Fund are
offered outside of the U.S. to non-U.S. investors. The
operating expenses, distribution policies, and sales
charges of the OMEGA South Africa Fund and the Non-U.S.
Fund may not be the same.
CERTAIN TAX MATTERS............... For investors subject to U.S. federal income tax, OMEGA
South Africa Fund dividends and capital gains
distributions will be subject to federal income tax and
may be subject to state and local taxes. Prior to
purchasing Shares, investors should consult with their
tax advisers concerning the consequences of an
investment in the OMEGA South Africa Fund. See "TAX
MATTERS".
INVESTMENT COMPANY ACT............ Each of the OMEGA South Africa Fund and the Master Trust
has registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940
Act"). Neither the Securities and Exchange Commission
nor any state securities authority has reviewed this
Memorandum or passed upon the merits of the Fund or the
Shares.
ERISA............................. Assets of the Fund will not be considered "plan assets"
of Shareholders that are pension or benefit plans
subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). The OMEGA South Africa
Fund
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6
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does not impose a limit on the number of Shares that may
be held by ERISA investors. See "ERISA MATTERS".
MANAGEMENT AND ADMINISTRATION..... The Fund is supervised by a board of trustees. State
Street Bank and Trust Company, either directly or
through an indirect wholly-owned subsidiary, provides
certain administrative services to the Fund. See
"MANAGEMENT AND ADMINISTRATION".
CUSTODIAN AND SUB-CUSTODIAN....... State Street Bank and Trust Company serves as custodian
for the Master Trust and the OMEGA South Africa Fund.
Standard Bank of South Africa serves as sub-custodian
for the Master Trust's South African registered assets.
TRANSFER AGENT.................... State Street Bank and Trust Company serves as transfer
agent for the OMEGA South Africa Fund (the "Transfer
Agent").
VOTING RIGHTS..................... Shareholders are entitled to vote on the election of the
trustees of the Fund and on certain important matters,
including (i) certain amendments to the declarations of
trust of the OMEGA South Africa Fund and the Master
Trust, (ii) changes in the investment objective and
fundamental investment restrictions, and (iii) material
amendments to the investment advisory agreement between
the Master Trust and the Adviser, or the adoption of a
new investment advisory agreement.
REPORTS TO SHAREHOLDERS........... The OMEGA South Africa Fund will furnish to Shareholders
audited annual financial statements for its fiscal years
ending June 30 and unaudited semi-annual financial
statements for the six month periods to December 31. In
addition, the OMEGA South Africa Fund will provide
annual tax information to Shareholders.
EXPENSES.......................... The OMEGA South Africa Fund and the Master Trust are
responsible for the ongoing expenses of conducting their
affairs. The Adviser will, if necessary, reduce or
rebate a portion of the Management Fee so that ordinary
operating expenses of the OMEGA South Africa Fund,
including its share of the Management Fee and the
amortization of certain organizational expenses, will
not exceed 1.00% per annum of its daily net assets. See
"GENERAL INFORMATION -- Expenses". The OMEGA South
Africa Fund will reimburse the Adviser for certain
marketing expenses incurred (or advanced to the
Placement Agents or others) by the Adviser in the
placement of Shares, provided the amount of such
reimbursements in any year will not exceed 0.05% of the
average daily net assets of the OMEGA South Africa Fund
for such year. See "OFFERING OF SHARES -- Expense
Reimbursement".
INVESTMENT CONSIDERATIONS......... The Fund invests primarily in securities of South
African issuers and is, as a result, particularly
subject to risks affecting South Africa. Investment in
South Africa is subject to various risks, including
political uncertainties. South African securities
markets are less liquid than securities markets in more
developed countries. See "INVESTMENT CONSIDERATIONS".
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INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term total return in excess of that
of the JSE Actuaries All Share Index from investment in equity securities of
South African issuers. There can be no assurance that the Fund will achieve its
investment objective.
INVESTMENT POLICIES
The OMEGA South Africa Fund seeks to achieve its investment objective by
investing all of its investable assets in the Master Trust.
The Master Trust seeks to achieve its investment objective by investing in
equity securities of South African issuers. Under normal circumstances, at least
95% of the Master Trust's total assets will be invested in equity securities of
South African issuers that are listed on a securities exchange. The Master Trust
may invest up to 5% of its total assets in securities that are, at the time of
the investment, not listed on a securities exchange (although such investments
will generally be limited to securities that are expected to be listed on an
exchange within a reasonable period of time).
In managing the Master Trust's assets the Adviser will not speculate for
short-term gain but will focus on securities that, in the Adviser's opinion, are
likely to show long-term improvements in profits and cash flow. Less weight will
be accorded to short-term and cyclical factors. This approach is designed to
result in strong dividend growth and capital appreciation. Historically, South
African issuers have retained a high proportion of earnings and, if this policy
continues, it is likely that the long-term total return would largely be in the
form of capital appreciation.
For purposes of the Master Trust's investment policies, a South African
issuer is an issuer that meets one of the following tests: (i) its principal
offices or operations are located in South Africa; or (ii) it derives at least
50% of its revenues from operations or investments in South Africa. Equity
securities are defined as common stock, securities convertible into common
stock, and securities that participate in profits in a similar manner to common
stock. Equity securities may be purchased in the form of American Depositary
Receipts, European Depositary Receipts, Global Depositary Receipts, or other
similar securities representing equity securities.
CERTAIN RESTRICTIONS
LIMITATION ON INVESTMENT IN A SINGLE ISSUER. The Master Trust will not
purchase securities of any issuer if, upon completion of the purchase, (i) more
than 7.5% of the Master Trust's assets (taken at market value) would be invested
in securities of the issuer, or (ii) the Master Trust would own in excess of 10%
of the voting securities of the issuer.
LIMITATION ON INVESTMENT IN OLD MUTUAL GROUP CONTROLLED ISSUERS. The Fund
will not purchase securities of any issuer in which Old Mutual, its wholly-owned
subsidiaries, and investment vehicles managed by Old Mutual or its wholly-owned
subsidiaries (collectively, the "Old Mutual Group") own in the aggregate in
excess of 50% of the outstanding equity interest or where the acquisition would
result in the Old Mutual Group owning in the aggregate in excess of 50% of the
outstanding equity interest, provided this restriction (i) will not apply to the
OMEGA South Africa Fund's investment in the Master Trust and (ii) will not
prohibit the Fund from electing to receive dividends consisting of securities,
or exercising rights issued in a rights offering, upon the same terms generally
available to other investors. The acquisition of the Initial Portfolio was not
subject to this limitation. The Fund may, therefore, hold securities of certain
issuers in which the Old Mutual Group owns in excess of 50% of the outstanding
equity interest.
LIMITATION ON CONTROL OR PARTICIPATION IN TAKEOVERS. The Fund will not
participate in any effort to replace the management of any issuer or take legal
or management control of any
8
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issuer, provided this restriction will not prohibit the Fund from (i) accepting
a tender or takeover offer made generally to holders of particular securities or
(ii) voting its securities, or granting a proxy to vote its securities, in any
proxy contest that is not, directly or indirectly, organized by a member of the
Old Mutual Group. This restriction will not apply to the OMEGA South Africa
Fund's investment in the Master Trust.
BORROWING. The Fund will not borrow money or purchase securities on margin,
except the Fund may, as a temporary measure for extraordinary or emergency
purposes, borrow from banks in an amount not to exceed 5% of the value of the
Fund's net assets.
TEMPORARY INVESTMENTS. For temporary defensive purposes, the Master Trust
may invest in high quality money market or short-term debt securities
denominated in U.S. dollars or another currency.
SHORT POSITIONS. The Master Trust will not make short sales of securities
or maintain a short position.
HEDGING AND DERIVATIVE SECURITIES. The Master Trust does not intend to
engage in currency hedging, although the Master Trust reserves the right to do
so. While the Master Trust is permitted to purchase derivative securities, it
does not expect that these will represent a significant portion of its
portfolio. Not more than 5% of the net assets of the Master Trust may be applied
to margin payments on futures contracts (other than hedging contracts).
LENDING OF SECURITIES. The Master Trust may lend its securities to approved
institutional borrowers. Any such loan will be required to be secured
continuously by collateral, including cash or U.S. Treasury obligations,
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. The value of the securities loaned will not exceed
33 1/3% of the value of the Master Trust's net assets.
PORTFOLIO TURNOVER. The Master Trust will sell securities whenever the
Adviser believes that an issuer's long-term potential to increase its cash flow
and dividends has been reduced or if cash is needed to invest in issuers which
have better long-term growth potential, without regard to the length of time the
securities have been held. The Adviser does not intend to pursue short-term
trading opportunities. The turnover rate of the Master Trust is not expected to
exceed 25% annually.
ADDITIONAL RESTRICTIONS
Certain other restrictions are described under "GENERAL INFORMATION --
Certain Conflicts of Interest". The registration statements of the OMEGA South
Africa Fund and the Master Trust under the 1940 Act contain additional
restrictions on the investment policies of the Fund. A copy of the registration
statement of each of the OMEGA South Africa Fund and the Master Trust will be
provided to potential investors upon request. The registration statement of each
of the OMEGA South Africa Fund and the Master Trust can be inspected without
charge at the office of the Securities and Exchange Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained therefrom at prescribed rates.
GENERAL
The investment objective of the OMEGA South Africa Fund described under
"Investment Objective" above may not be changed materially except by a majority
vote of Shareholders.
The Master Trust has undertaken to the OMEGA South Africa Fund and the
Non-U.S. Fund that it will not make any material change to its investment
objective described under "Investment Objective" above or to its investment
policies described under "Investment Policies"
9
<PAGE>
above except in unforeseen circumstances and with the approval of a majority
vote of the Shareholders and a majority vote of shareholders of the Non-U.S.
Fund.
Except as otherwise indicated, the investment policy and restrictions of the
OMEGA South Africa Fund and the investment restrictions of the Master Trust may
be changed without Shareholder approval.
The percentage limitations set forth above, as well as those described
elsewhere in this Memorandum and in the registration statements of the OMEGA
South Africa Fund and the Master Trust under the 1940 Act, are measured and
applied only at the time an investment is made or another relevant action is
taken by the Fund.
SOUTH AFRICA
South Africa, with the largest economy in Africa in terms of GDP, has, in
the opinion of the Adviser, exciting growth potential no longer constrained by
international sanctions. The Adviser believes that South Africa combines the
potential of a developing economy with the infrastructure and corporate culture
more typical of an advanced industrialized country.
GENERAL
Until April 1994, political power in South Africa lay largely in the hands
of the white minority. The system of apartheid created considerable social and
political tensions and led to the progressive isolation of South Africa from the
world community. In April 1994, the Government of National Unity (the
"Government") was formed as a result of South Africa's first multi-racial, fully
democratic elections. The Government's majority party is the African National
Congress ("ANC"), which is led by President Nelson Mandela. The success of the
elections removed important obstacles to growth and created an environment that
is more conducive to both domestic and foreign investments. Negotiations on a
permanent constitution for South Africa were completed on schedule in May 1996.
After ratification by the Constitutional Court, the permanent constitution was
signed into law on December 10, 1996.
Although generally smooth, the transition to democratic rule has been
accompanied by localized violence and social unrest which may continue in the
future. At the end of June 1996, the National Party, which was a minority party
in the Government, left the Government. The Inkatha Freedom Party ("IFP") is
still a minority partner in the Government.
THE STATE OF THE BUSINESS CYCLE
The South African economy has been in recovery from June 1993, following the
longest post-war recession from March 1989 to May 1993. The recovery from around
mid-1993 was partly of a cyclical nature in the form of rising commodity prices,
a sharp recovery in agricultural output following the end of the drought in
1993, and rising exports owing to the upswing in the economies of some of South
Africa's trading partner countries. More fundamentally, in the view of the
Adviser, the relatively smooth political transition, the official end of
sanctions, and the gradual normalization of the country's international
relations strongly supported the recovery through improved business (local and
foreign) and consumer confidence.
Real GDP growth rates of 1.3%, 2.7% and 3.4% were registered in the years
1993, 1994 and 1995, respectively. In 1996 a bumper farming season compensated
for a downturn in the goods-producing sectors of the economy, and real GDP rose
by an estimated 3.1%. Cheap imports, slower inventory building and another steep
fall in gold output were the main reasons for this downturn in production.
Growth prospects for 1997 were weakened by the increase in interest rates in
reaction to the weakening currency in 1996.
Between February and December 1996 the S.A. Rand per U.S. dollar exchange
rate weakened by more than 25%. This was due to a number of factors, including
initially a perceived
10
<PAGE>
overvaluation of the S.A. Rand, increasing pessimism regarding the longer term
growth potential and management of the economy, and worries about the health of
President Mandela. The draining of liquidity from the South African economy
through a sudden bout of capital outflows forced the South African Reserve Bank
to increase its Bank Rate by two percentage points during 1996.
However, the S.A. Rand per U.S. dollar exchange rate appreciated by more
than 7% during the first three months of 1997. This appreciation followed a
change in sentiment regarding the outlook for the expected improvement in
reserves, with capital inflows forecast to exceed a projected small current
account deficit. The Adviser does not expect a large or sustained net outflow of
capital during 1997 given the expected healthier current account, some progress
on privatization and tighter fiscal policy. This view is supported by the fact
that South Africa had a net inflow of capital in 1996 -- in spite of the
negative sentiment shift. However, the Adviser believes a large net inflow of
capital is also unlikely because substantial privatization proceeds might be
offset by further exchange control relaxation.
Despite the interruption caused by the currency depreciation, the Adviser
believes that the more competitive currency, stronger world economic growth in
1997, another good farming season and stable gold production should boost the
goods producing sectors that suffered in 1996. This, the Adviser believes,
combined with the Government's long-term macro-economic strategy, should lead to
increased domestic and international confidence in the South African economy.
The Government's macro-economic strategy, released during June 1996, includes
measures aimed at maintaining the competitive advantages resulting from the 1996
weakening of the exchange rate and achieving a faster reduction of the
Government's budget deficit (in effect a fiscal policy designed to be more
supportive of monetary policy). The strategy also seeks a further reduction in
inflation, an acceleration of tariff reductions, and a more flexible labor
market. The March 1997 Budget was drawn up within the guidelines of this
strategy -- with the budgeted deficit before borrowing at 4% of GDP. The Adviser
is of the opinion that this strategy will promote economic stability and
investor confidence.
Thus, although the currency depreciation in 1996 probably forced some
short-term slowdown on the economy, the Adviser believes that the long term
prospects remain good.
The following table shows the current real GDP growth forecasts for 1997,
1998, and 1999 of four prominent South African institutions:
REAL GDP GROWTH FORECASTS
% CHANGE
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Bureau for Economic Research............................. 3.1 3.8 3.7
BOE NatWest Securities Ltd............................... 2.4 3.3 4.2
Deutsche Morgan Grenfell (SA) (Pty) Ltd.................. 2.0 3.5 4.0
Fleming Martin Securities Ltd.*.......................... 2.1 3.1 3.5
</TABLE>
* Fleming Martin Securities Ltd. is affiliated with Fleming Martin Inc.,
one of the Placement Agents.
SOUTH AFRICA'S INHERENT STRENGTHS
The South African economy is substantial by the standard of the "emerging
market" countries. It is by far the largest economy in Africa, with a GDP of
over U.S.$126 billion, more than twice the size of any other African economy.
The Adviser believes that there are particular features that could enhance
the performance of the South African economy in the longer term.
11
<PAGE>
THE REMOVAL OF SANCTIONS. With the lifting of sanctions, South Africa has
had improving access to world markets and should continue to benefit from global
economic recovery. The Adviser believes that the removal of trade barriers,
together with South Africa's full participation in the Marrakech Agreement on
world trade, is leading to considerable changes in the economy, offering
attractive opportunities for domestic and foreign investors. South African
exporters are benefiting from new trade flows.
PUBLIC SECTOR INVESTMENT. Given the underdeveloped state of large parts of
South Africa and its rapid population growth, the Adviser expects that the
Government will continue to make substantial investments in infrastructure and
development projects. Housing, electrification, and water provision remain
important priorities, and several related sectors, such as construction,
engineering, and building materials, may benefit from development projects.
ACCESS TO FOREIGN CAPITAL. By the end of 1995 total outstanding foreign
debt amounted to U.S. $32.0 billion, or 24.0% of GDP, down from 42.9% of GDP in
1985. Between the beginning of 1985 and the end of 1995, the share of export
earnings absorbed by interest payments on the outstanding debt declined from
11.5% to 6.4%. The Adviser believes that these lower levels of foreign debt,
combined with South Africa's enhanced international standing, have allowed the
country access to international capital markets. This more favorable environment
has resulted in capital flows (not related to reserves) reversing from an
outflow of S.A. Rand 15.2 billion in 1993 to inflows of S.A. Rand 4.3 billion in
1994 and a further S.A. Rand 19.2 billion in 1995. In 1996, despite the
sentiment swings around the time of the Rand depreciation, inflows of S.A. Rand
3.9 billion were experienced. The Adviser does not expect a large or sustained
net outflow of capital this year (based on a healthier current account, some
progress on privatization and tighter fiscal policy). However, the Adviser
believes a large inflow of capital is also unlikely because substantial
privatization proceeds might be offset by exchange control relaxation.
A SOPHISTICATED BUSINESS ENVIRONMENT. South Africa's corporate environment
is, in the opinion of the Adviser, generally characterized by large, well
organized companies, of which a number are world class in their respective
industries. Many of these companies have considerable technical expertise and
entrepreneurial skills. Furthermore, a strong framework of commercial law
exists.
MINERAL WEALTH. South Africa is a leading world supplier of gold, platinum,
chromium, diamonds, and other strategic minerals.
ECONOMIC MANAGEMENT
The Adviser believes that the economic policies of the Government are
broadly market-oriented and that the maintenance of macro-economic stability
will remain a high priority. Evidence of this is to be found in the abolition of
the financial rand system, South Africa's signing of the Marrakech Agreement on
world trade, and the stated intention of the Government to gradually reduce the
budget deficit and pursue the sale of certain state assets. These intentions of
the Government were reaffirmed in its macro-economic strategy document released
on June 14, 1996 and in the Budget for the 1997/1998 fiscal year released on
March 12, 1997.
Over the past several years, the South African Reserve Bank has pursued a
conservative monetary policy aimed at protecting the exchange rate and reducing
inflation. This policy has brought results in containing inflation, with average
inflation being reduced from 15.3% in 1991 to 7.4% in 1996. However, largely due
to the currency depreciation in 1996, the annual rate of inflation rose from a
low of 5.5% in April 1996 to 9.6% in March 1997. Nevertheless, the Adviser
expects the annual rate of inflation to move substantially lower over the next
12 months.
Furthermore, South Africa's relations with the International Monetary Fund
and the World Bank have been normalized, and the Adviser expects that this will
have a stabilizing effect upon economic management.
12
<PAGE>
THE JOHANNESBURG STOCK EXCHANGE
The aggregate market capitalization of South African equity securities
listed on the JSE was S.A. Rand 1,211 billion (U.S.$274 billion) as at March 31,
1997. The actual float for public trading is significantly smaller than the
aggregate market capitalization because of the large number of long-term
holdings by listed holding companies in listed subsidiaries and associates, the
existence of listed pyramid companies, and cross holdings between listed
companies. Historically, liquidity on the JSE (measured by reference to the
total market value of securities traded as a percentage of the total market
capitalization) has been low, being 11.9% in the year ended March 31, 1997.
Although as at March 31, 1997 there were 618 listed companies on the JSE, market
capitalization and trading is concentrated in a relatively small number of
companies. As at that date the 15 largest companies by market capitalization
represented approximately 36% of the JSE Actuaries All Share Index. The average
annual dividend yield for companies comprising the JSE Actuaries All Share Index
as at March 31, 1997 was approximately 2.4%.
Legislation implementing fundamental changes to the JSE was approved by the
South African parliament late in 1995. This has had a profound impact on the
JSE, including a move from floor based trading to screen trading, the abolition
of single capacity trading, removal of restrictions on corporate membership, the
introduction of limited liability of members, and a move from fixed to
negotiated commissions.
South Africa was included in both the Morgan Stanley Capital International
("MSCI") and the International Finance Corporation ("IFC") emerging market
indices in March and April 1995, respectively. South Africa has a significant
representation in these emerging markets indices with weightings of 11.1% in
MSCI's Emerging Markets Global Index, 8.2% in the IFC's Global Index, and 13.1%
in the IFC's Investable Index as of March 31, 1997.
The following table shows the compound annual average increase, in U.S.
dollar terms, in the JSE Actuaries All Share Index compared with the S&P 500
Index over the periods listed below to March 31, 1997.
<TABLE>
<CAPTION>
PERIODS TO MARCH 31, 1997
-------------------------------------
3 YEARS 5 YEARS 10 YEARS
----------- ----------- -----------
<S> <C> <C> <C>
JSE Actuaries All Share Index*.................... 8.9% 20.5% 17.5%
S&P 500 Index..................................... 19.3% 13.4% 10.0%
</TABLE>
- ---------------
* Figures converted to U.S. dollars using the Financial S.A. Rand exchange rate
where applicable.
INVESTMENT CONSIDERATIONS
An investment in the Shares is subject to a number of risks. Certain of
these risks are set forth below.
CONCENTRATION IN SOUTH AFRICAN SECURITIES
The Fund invests primarily in securities of South African issuers and, as a
result, is particularly subject to risks affecting South Africa and its economy
and securities markets. Investors in the Fund may therefore be subject to
greater risk and volatility than investors in investment vehicles with more
geographically diverse investment portfolios.
SOCIAL AND POLITICAL RISKS
South Africa is undergoing a period of unprecedented social and political
change. This has been accompanied by high levels of crime, violence, and social
unrest in some areas, which may continue. While some of the reasons for this
unrest have been addressed by the recent constitutional changes, others, such as
inadequate housing, education, health care, and employment opportunities, remain
to be addressed for large segments of the population. In some areas
13
<PAGE>
inter-tribal and inter-community antagonisms, channeled through political
rivalries, particularly between the ANC and the IFP, have been additional causes
of violence. There can be no assurance that the South African government will be
able to bring this violence and social unrest under control or create sufficient
wealth to satisfy the socio-economic needs of the less privileged sections of
the population.
The ANC, which comprises the majority party in the Government, has in the
past espoused a socialist economic program, including nationalization of South
African industry and mineral resources and high levels of taxation. In recent
years prominent figures in the ANC have distanced themselves from socialism and
have supported more market-oriented policies. Senior ANC officials have
continued to confirm that privatization is official ANC and Government policy.
In the macro-economic strategy document released by the Ministry of Finance on
June 14, 1996, these market-oriented policies were announced as official
Government policy. These policies were reaffirmed in the March 1997 Budget.
However, there can be no assurance that market-oriented policies will be
pursued.
The ANC's national executive has indicated concern regarding the dominant
position of a number of conglomerates in the South African market. This may lead
to a tightening of antitrust rules, with uncertain results.
The Government is a coalition that includes the ANC and the IFP. The
National Party left the Government at the end of June 1996 to become the
official opposition. The present term of the Government will end in 1999, and
under the terms of the recently enacted constitution, a constitutional coalition
government will not be required after 1999. With the prospect of single party
rule after 1999, the run-up to the next election may be characterized by intense
political rivalry which could include a flare-up in politically driven social
unrest. Such unrest may continue into the new government's term of office.
In terms of its social and political infrastructure, South Africa currently
has many of the characteristics of an emerging market. Investors should
recognize that investing in emerging market jurisdictions involves certain
considerations not usually associated with investing in securities in more
developed capital markets. Investors should carefully consider their ability to
assume such risks before making an investment in the Fund.
South Africa enjoys a developed legal and commercial infrastructure with a
strong and independent judiciary and central bank. While the Government has
indicated that it supports, and the recently completed constitution protects,
their continued independence, there remains the possibility that they will come
under greater political control. In particular, the South African Reserve Bank's
attempts to maintain a responsible monetary policy may conflict with the desire
of the South African Government to effect substantial and expensive social
programs.
President Mandela currently plays an important role in the South African
political structure. It is not possible to predict the consequences of a change
in President.
ECONOMIC RISKS
GROWTH. Economic growth is an essential element in raising standards of
living for underprivileged sectors of the South African population, and there
are many potential problems that could either inhibit or extinguish that growth.
However, there remain a number of structural issues, such as balance of payments
vulnerability, the insufficiency of domestic savings in both the private and
public sectors, and uncompetitive production processes, which may inhibit
sustained economic growth in South Africa.
INFLATION. Until the early 1990s, South African inflation had persisted at
annual rates of between 10% and 20%. More recently, the South African Reserve
Bank has played a major role in bringing that rate to below 10%, although
inflation rose again during the course of 1996 and into 1997 largely due to the
currency depreciation. Although the Government's macro-economic
14
<PAGE>
strategy, released in June 1996, sets out the reduction of inflation as one of
the main objectives of monetary policy, there can be no guarantee that the South
African Government will be able, or will have as a primary objective the desire,
to keep inflation under control.
BALANCE OF PAYMENTS/ACCESS TO FOREIGN CAPITAL. Although South Africa
currently has low levels of foreign debt, its foreign exchange reserves are
depleted, amounting at the end of March 1997 to only U.S.$2.8 billion or less
than 6 weeks of imports of goods and services. If South Africa fails to maintain
a balance of payments surplus or is not able to access sources of foreign
capital, the Government would probably have to raise interest rates and deflate
the economy.
GOVERNMENT SPENDING. A major aspect of the current Government's policy is
to develop a more even distribution of wealth among the population. While the
Adviser believes that there is scope for limited tax increases, the risk remains
that, if taxes and/or government borrowings increase significantly, there could
be severe adverse consequences for the South African economy.
COMMODITIES. Although only approximately 10% of South Africa's GDP directly
involves mining and quarrying activities, the country remains exposed to any
steep fall in world commodity prices.
AGRICULTURAL CONDITIONS. Rainfall patterns are variable in South Africa,
and droughts occur frequently in certain parts of the country, resulting in
major fluctuations in agricultural output. Fluctuations in agricultural output
can significantly influence economic and inflation trends.
INCREASED COMPETITION/LOWER TARIFFS. Following the lifting of sanctions and
the election of a new government, foreign companies have begun to re-enter the
South African markets. The presence of foreign competition in South African
markets may affect the profitability and share price of some South African
listed companies. South Africa is also a signatory to the Marrakech Agreement on
tariff reduction. In future years the scaling back of tariff protection may
adversely impact the performance of certain South African companies.
EXCHANGE CONTROLS. South Africa has a system of strict exchange controls
applicable to residents, domestic institutions, and local companies. Foreign
investors are generally not subject to exchange controls. Currently foreign
investors can freely repatriate both capital and investment returns subject to
compliance with certain exchange control approval procedures. Although the
Government and the South African Reserve Bank are following a policy of
gradually easing exchange controls, (as was announced in the March 1997 Budget),
there can be no assurance that exchange controls will not be tightened or that
non-South African residents (such as the Master Trust) will not be made subject
to restrictions on dealings in assets located or realized in South Africa. In
addition there can be no assurance that a South African administration will not
seek to reverse or modify exchange control approvals granted in relation to the
establishment of the Fund. In the event exchange controls are lifted, the
volatility of South African financial markets may increase. In addition, South
Africa has on prior occasions imposed a dual currency system, and reimposition
of such a system might reduce the value of the Fund's assets.
MARKET CHARACTERISTICS
The securities markets of South Africa are comparatively small, with the
majority of market capitalization and trading volume concentrated in a
relatively small number of companies. In addition, there is a significant degree
of cross-ownership among companies and a concentration of ownership in a
relatively small number of persons, including the Old Mutual Group.
Consequently, the Fund's investments may experience greater price volatility and
lower liquidity than a portfolio invested in equity securities of U.S.
companies.
15
<PAGE>
CURRENCY RISKS
The Master Trust's assets are invested in securities denominated in S. A.
Rand, and income from these investments is received in S.A. Rand. As a result,
the Fund's net asset value and distributions, which are measured in U.S.
dollars, would be adversely affected if the value of the S. A. Rand declines
relative to the U.S. dollar. Historically, the S. A. Rand has tended to
depreciate against the U.S. dollar and between February and December 1996 the
S.A. Rand per U.S. dollar exchange rate weakened by more than 25%.
TAXATION RISKS
It is possible that the South African government will significantly raise
taxes. South Africa does not currently impose tax on capital gains. There can be
no assurance that a capital gains tax to which the Master Trust may be subject
will not be introduced in the future.
REPORTING STANDARDS
Companies in South Africa are subject to accounting, auditing, and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. There is less publicly available information about
South African companies than about U.S. companies. South African companies are
not subject to the same degree of regulation as are U.S. issuers with respect to
such matters as insider trading rules, restrictions on market manipulation,
shareholder proxy requirements, and timely disclosure of information.
TRANSACTION COSTS
Transaction costs, including brokerage commissions for transactions both on
and off the securities exchanges in South Africa, are generally higher than in
the U.S.
UNLISTED SECURITIES
The Master Trust may invest up to 5% of its total assets in securities that
are not listed on a securities exchange. These securities may be subject to more
abrupt or erratic changes in value than listed securities, and it may be
difficult and expensive for the Master Trust to dispose of these securities.
NON-DIVERSIFIED FUND
Each of the OMEGA South Africa Fund and the Master Trust is a
non-diversified investment company, which means that it is not limited by the
1940 Act in the proportion of its assets that may be invested in the securities
of a single issuer. Each of the OMEGA South Africa Fund and the Master Trust
intends, however, to comply with diversification requirements imposed on
regulated investment companies by the Code. See "GENERAL INFORMATION --
Organization".
PRIOR EXPERIENCE OF THE ADVISER
While Old Mutual has substantial experience in investment management,
neither Old Mutual nor the Adviser, prior to November 1995, advised an
investment company registered under the 1940 Act.
16
<PAGE>
MANAGEMENT AND ADMINISTRATION
TRUSTEES
Each of the OMEGA South Africa Fund and the Master Trust is supervised by a
board of trustees, a majority of whom are not affiliated with the Adviser or Old
Mutual. The current trustees of the OMEGA South Africa Fund and the Master Trust
are the same and are listed below. Asterisks indicate those trustees that are
"interested persons" (as defined in the 1940 Act) of the Fund.
*MICHAEL JOHN LEVETT, South African (aged 57), is the Chairman and Group
Chief Executive of Old Mutual, having been Chief Executive since 1985. He serves
as Chairman of the board of trustees of the OMEGA South Africa Fund and the
Master Trust. He has held, and continues to hold, a number of non-executive
directorships, including Barlow Limited, an industrial company, Nedcor Limited,
a bank holding company, SASOL Limited, a chemicals company, and South African
Breweries Limited. His address is Mutualpark, Jan Smuts Drive, Pinelands, South
Africa.
WILLIAM LESTER BOYAN, American (aged 60), has been a director of John
Hancock Mutual Life Insurance Company since 1983 and was appointed as President
and Chief Operations Officer in 1992. His address is John Hancock Place, Boston,
Massachusetts.
THOMAS HASKINS DAVIS, Bermudian (aged 49), is President and Chief Executive
Officer of Winchester Global Trust Company Limited. He was President of
Mid-Ocean Trust Company Limited from 1994 to 1995 and was Manager Corporate
Trust at Bank of Bermuda from 1979 to 1993. His address is Williams House, 20
Reid Street, Hamilton, Bermuda.
MICHEL JOHN DREW, Bermudian (aged 61), has been President and Chief
Executive Officer of International Services Limited, a corporate services
operation, since its inception in 1977. In 1969 he established Schroders
(Bermuda) Limited, the principal operating subsidiary in Bermuda of Schroders
plc, the London merchant banking house and acted as Chief Executive Officer
until his retirement in 1994, having been elected a director in 1983, and
President in 1991. His address is 22 Church Street, Hamilton, Bermuda.
*WILLIAM LANGLEY, South African (aged 54), is President of the Adviser and
has been a member of the general management of Old Mutual since 1981. His
address is 61 Front Street, Hamilton, Bermuda.
KENNETH RIGBY WILLIAMS, British (aged 60), was executive Chairman of
Westgate Overseas Limited, an international investment company, from 1986 to his
retirement in 1994. He holds non-executive directorships with Charles Baynes
plc, a company engaged in distribution and engineering, John Lusty plc, a food
distribution company, and Hudaco Industries Limited, a South African distributor
of industrial consumable goods, and was a director of South African Breweries
Limited from 1973 to 1994. His address is 15 Lime Tree Walk, Virginia Park,
Virginia Water, Surrey, United Kingdom.
ADVISER
Old Mutual Asset Managers (Bermuda) Limited (the "Adviser"), a wholly-owned
subsidiary of Old Mutual, is the investment adviser to the Master Trust and the
Global Fund. The Adviser was organized in 1995 as a Bermuda company for the
purpose of advising the Master Trust and the Global Fund. The Adviser's address
is 61 Front Street, Hamilton, Bermuda.
William Langley, President of the Adviser, has been responsible for the day
to day management of the Master Trust's assets since the Master Trust commenced
operations in November 1995. He joined Old Mutual in 1963, and since 1985 has
been involved in the development of Old Mutual's international businesses. Prior
to 1985 he was a senior portfolio manager, and his responsibilities included the
Old Mutual Main Fund.
17
<PAGE>
Roddy Sparks, the current manager of the equity portion of the Old Mutual
Main Fund, has been responsible for providing in depth research on South African
companies to the Adviser since the Master Trust commenced operations in November
1995. He joined Old Mutual in 1986 and has managed the equity portion of the Old
Mutual Main Fund since January 1989. He is based in Cape Town.
Old Mutual provides investment research and information to the Adviser. Old
Mutual's investment division in South Africa employs over 60 investment
professionals, including 21 portfolio managers, 19 research analysts, and 6
economists. Collectively they have considerable experience of the South African
investment market and form one of the largest investment teams in the country.
Old Mutual has an extensive and detailed proprietary economic and investment
database that covers substantially all South African listed companies.
Old Mutual has been a significant investor in the South African equity
market since the early 1960's. In developing its investment philosophy Old
Mutual has focused upon long-term returns and has sought to ignore short-term
fluctuations in the market. In the early 1970's Old Mutual was a pioneer in
developing a risk adjusted dividend discount model for equity valuation that has
since formed the foundation for its long-term fundamental value approach to
investment. At June 30, 1996 Old Mutual had total assets under management of
over U.S.$40 billion.
Because the OMEGA South Africa Fund invests all of its investable assets in
the Master Trust, the OMEGA South Africa Fund does not have a separate
investment adviser.
The Master Trust pays the Adviser a Management Fee of 0.60% per annum of the
Master Trust's daily net assets. The Management Fee accrues daily on an
annualized basis and is paid monthly in arrears. The Adviser is responsible for
compensating Old Mutual for research and information provided to the Adviser.
ADMINISTRATOR
State Street Bank and Trust Company (the "OMEGA Fund Administrator")
provides, either directly or through an affiliate, certain administrative and
fund accounting services (including calculation of the net asset value of the
OMEGA South Africa Fund) to the OMEGA South Africa Fund pursuant to an
administrative services agreement. State Street Cayman Trust Company, Ltd.,
either directly or through an affiliated entity (the "Master Trust
Administrator"), provides certain administrative and fund accounting services to
the Master Trust pursuant to an administrative services agreement.
The Master Trust Administrator receives an annual administration fee from
the Master Trust calculated as a percentage of the Master Trust's average daily
net assets. The percentage ranges from 0.05% to 0.01% per annum according to the
net assets of the Master Trust. If the net assets of the Master Trust total
U.S.$1 billion during a year, the administration fee percentage for that year
would be 0.0375%. In addition, the OMEGA South Africa Fund pays the OMEGA Fund
Administrator an annual administration fee of U.S.$40,000.
TRANSFER AGENT
State Street Bank and Trust Company (the "Transfer Agent") serves as
transfer agent and dividend disbursing agent for the OMEGA South Africa Fund.
The Transfer Agent may delegate certain of its functions to an affiliated
entity. The Transfer Agent receives an annual fee of U.S.$18,000 from the OMEGA
South Africa Fund. The principal business address of the Transfer Agent is:
Transfer Agent Operations, P.O. Box 1978, Boston, Massachusetts 02105. State
Street Cayman Trust Company, Ltd., either directly or through an affiliated
entity, serves as registrar for the Master Trust.
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CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company (the "Custodian") serves as custodian
for the Master Trust's and the OMEGA South Africa Fund's assets. Standard Bank
of South Africa serves as sub-custodian for the Master Trust's South African
registered assets. All assets of the Master Trust and the OMEGA South Africa
Fund will be held in a segregated account in the name of the relevant Fund. The
Custodian receives an annual custody fee of 0.03% of the Master Trust's average
daily net assets. The Custodian is responsible for the fees of the
sub-custodians.
VALUATION OF SHARES
The net asset value per Share is determined on each day on which the New
York Stock Exchange is open for trading (a "Business Day"). This determination
is made by the OMEGA Fund Administrator once each day as of 10:00 a.m. (Eastern
time), being after the close of business of the JSE for that day, by adding the
market value of all securities and other assets of the OMEGA South Africa Fund
(including the value of its interest in the Master Trust), then subtracting the
OMEGA South Africa Fund's liabilities, and then dividing the result by the
number of outstanding Shares. The Master Trust Administrator calculates the net
asset value of the Master Trust as of 10:00 a.m. (Eastern time) on each Business
Day by adding the market value of all securities and other assets of the Master
Trust and then subtracting the Master Trust's liabilities.
The Master Trust generally values JSE listed securities based on the current
JSE ruling price. The ruling price for a JSE listed security on any day is the
last sale price, adjusted upward to any current higher bid price or downward to
any current lower offer price. If the securities did not trade on the JSE on the
date of the valuation, they may be valued on a different basis believed by the
trustees of the Master Trust to reflect their fair value. Values are converted
from S.A. Rand to U.S. dollars using exchange rates prevailing as of the time
the net asset value is to be determined. Trading may take place in securities
held by the Master Trust on days that are not Business Days and on which it will
not be possible to purchase or redeem Shares.
The Fund may, from time to time, revise its procedures relating to the
calculation of net asset value to reflect changes in JSE trading periods and
practices.
OFFERING OF SHARES
OFFERING
The OMEGA South Africa Fund is offering Shares on a continuous basis at a
price equal to their net asset value. A sales charge of up to 0.35% of that
price may be applied by the Placement Agents. The minimum purchase for any
investor is U.S.$5 million (exclusive of sales charge), provided the minimum
purchase may, in particular circumstances, be reduced for certain investors to
not less than U.S.$1 million (exclusive of sales charge).
The OMEGA South Africa Fund has engaged Fleming Martin Inc., Rand
International Securities LLC, and SBC Warburg Inc. to act as Placement Agents
for the Offering. Each of the Placement Agents will be entitled to charge a
sales charge of up to 0.35% of the net asset value of the Shares placed by it.
Old Mutual Fund Holdings may, from its own resources, make additional payments
to the Placement Agents or other parties of 0.25% of the price of Shares sold in
the Offering. The Fund has agreed to indemnify the Placement Agents against
certain liabilities, including liabilities under applicable securities laws.
The OMEGA South Africa Fund will, on receipt thereof, invest the proceeds of
the Offering in the Master Trust, and its interest in the Master Trust will be
increased accordingly. The Non-U.S. Fund will similarly invest the proceeds of
its offering of shares in the Master Trust. The Master Trust will then apply the
proceeds received from the OMEGA South Africa Fund and the Non-U.S. Fund to
redeem a corresponding portion of the interest of Old Mutual Fund Holdings
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in the Master Trust. Old Mutual Fund Holdings will invest the proceeds of these
redemptions in the Global Fund.
The OMEGA South Africa Fund is offering the Shares without registration
under the 1933 Act as a private placement pursuant to Regulation D under the
1933 Act. The OMEGA South Africa Fund is also relying upon appropriate
exemptions from the registration requirements of applicable state securities or
blue sky laws. The Shares are being offered and sold in the U.S. only to
investors that are "accredited investors" as defined in Regulation D.
The Offering may be terminated or modified by the OMEGA South Africa Fund.
In the event that the terms of the Offering are materially modified, the new
terms will be set forth in a supplement to this Memorandum. Investors that
purchase Shares in the Offering will not have any pre-emptive rights with
respect to any further offerings.
SUBSCRIPTION PROCEDURE
Shares may be purchased on any Business Day. Investors that wish to
subscribe for Shares are required to complete the subscription form circulated
by the Placement Agents. Completed subscription forms should be returned to the
relevant Placement Agent, who, on behalf of the investors, will then forward
them to the Transfer Agent. All subscriptions are subject to acceptance by the
OMEGA South Africa Fund.
The office of the Transfer Agent will be open to accept subscription forms
from 12:00 noon to 4:00 p.m. (Eastern time) on every Business Day. Subscription
forms received by 4:00 p.m. (Eastern time) on any Business Day will be processed
based on the net asset value as determined on the next Business Day.
Subscription forms reaching the Transfer Agent after 4:00 p.m. (Eastern time) on
any Business Day will be deemed to have been received at 12:00 noon (Eastern
time) on the next Business Day. Full payment for Shares is due in cash by 3:00
p.m. (Eastern time) on the second Business Day following receipt (or deemed
receipt) of the subscription form by the Transfer Agent. The purchase price for
Shares subscribed for in the Offering will be payable by wire transfer to the
account of the Transfer Agent specified in the subscription form.
EXPENSE REIMBURSEMENT
The OMEGA South Africa Fund will reimburse the Adviser for certain marketing
expenses incurred (or advanced to the Placement Agents or others) by the Adviser
in the placement of Shares, provided the amount of such reimbursements in any
year will not exceed 0.05% of the average daily net assets of the OMEGA South
Africa Fund for such year. This reimbursement is authorized pursuant to a
placement plan maintained by the OMEGA South Africa Fund. The reimbursement will
apply to marketing costs for the Shares, including costs relating to meetings
and communications with potential investors, travel, and printing and
distributing offering materials.
The OMEGA South Africa Fund will provide to its trustees quarterly a written
report of amounts reimbursed pursuant to the placement plan. The trustees of the
OMEGA South Africa Fund will review the continuation of the placement plan on an
annual basis.
REDEMPTIONS
Investors may request redemption of Shares on any Business Day at their net
asset value (as determined as of 10:00 a.m. (Eastern time) on the next Business
Day), subject to a Redemption Fee charged by the OMEGA South Africa Fund of
0.65% of redemption proceeds. Redemption requests should be submitted in writing
to the Transfer Agent on a form available from the OMEGA South Africa Fund or
the Transfer Agent. The office of the Transfer Agent will be open to accept
redemption requests from 12:00 noon to 4:00 p.m. (Eastern time) on every
Business Day. Redemption requests reaching the Transfer Agent after 4:00 p.m.
(Eastern time) on any
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Business Day will be deemed to have been received at 12:00 noon (Eastern time)
on the next Business Day. The Transfer Agent may require evidence of the
authority of persons submitting any redemption request. Redemption proceeds will
be paid in federal funds within seven days following receipt of a redemption
request in proper form.
In order to fund redemptions, the OMEGA South Africa Fund will redeem a
corresponding portion of its interest in the Master Trust. For so long as Old
Mutual Fund Holdings provides the Liquidity Facility, the OMEGA South Africa
Fund will pay to Old Mutual Fund Holdings amounts collected in respect of the
Redemption Fee as compensation for the Liquidity Facility. Should the Liquidity
Facility be terminated, the OMEGA South Africa Fund will pay amounts collected
in respect of the Redemption Fee to the Master Trust.
The Fund believes that the Liquidity Facility substantially reduces the
trading costs of the Fund. The Redemption Fee will not apply to direct or
indirect transfers of Shares from one investor to another.
LIQUIDITY FACILITY AND THE GLOBAL FUND
The Adviser serves as investment adviser to Old Mutual Global Assets Fund
Limited, a mutual fund organized under the laws of Bermuda (the "Global Fund").
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO PURCHASE, ANY SECURITIES OF THE GLOBAL FUND. Old Mutual Fund Holdings
is the sole shareholder of the Global Fund. The Global Fund invests in broadly
diversified portfolios of South African equities and international equity, debt,
and money market securities with the goal of achieving a long-term total return.
The Global Fund may only borrow to a limited extent. The Global Fund is designed
to provide a pool of securities to fund redemptions of Shares and redemptions of
shares of the Non-U.S. Fund.
Old Mutual initially capitalized the Global Fund with approximately U.S.$500
million of South African securities. At March 31, 1997 the net assets of the
Global Fund were in excess of U.S.$649 million. Upon each issuance of Shares (or
shares in the Non-U.S. Fund) the Master Trust will redeem a portion of the
interest of Old Mutual Fund Holdings in the Master Trust, and Old Mutual Fund
Holdings will invest the redemption proceeds in the Global Fund.
Old Mutual Fund Holdings has undertaken to the Master Trust and the OMEGA
South Africa Fund that it will, to the extent required to provide funds for
redeeming Shares, liquidate all or a portion of its interest in the Global Fund
to generate cash, which Old Mutual Fund Holdings will invest in the Master Trust
(the "Liquidity Facility"). Old Mutual Fund Holdings may not terminate the
Liquidity Facility without giving at least 120 days notice to Shareholders,
provided that Old Mutual Fund Holdings may terminate the Liquidity Facility at
any time without prior notice if the Adviser ceases to be investment adviser to
the Master Trust (other than by reason of the voluntary termination of the
investment advisory agreement with the Master Trust by the Adviser). Any
termination of the Liquidity Facility would not affect Shareholder redemption
rights. If the Liquidity Facility is terminated, the Master Trust may fund
redemptions by disposing of its assets. Following termination of the Liquidity
Facility, Old Mutual Fund Holdings would be free to redeem all or part of its
interest in the Master Trust.
For so long as the Liquidity Facility is made available, Old Mutual Fund
Holdings will not withdraw monies from the Global Fund except as required for
the Liquidity Facility and except for dividends paid by the Global Fund. In
addition, for so long as the Liquidity Facility is made available, Old Mutual
Fund Holdings will not withdraw monies from the Master Trust except to withdraw
cash equivalent to amounts invested in the Master Trust by the OMEGA South
Africa Fund (or the Non-U.S. Fund) and except for its proportion of the income
and realized capital profits of the Master Trust.
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It is possible that at some time the value of Old Mutual Fund Holding's
investment in the Global Fund might be insufficient to fund the redemption of
all Shares submitted for redemption.
Additional investments by the OMEGA South Africa Fund in the Master Trust
that are not offset by redemptions of Master Trust interests (either by Old
Mutual Fund Holdings or the Non-U.S. Fund) will be applied to acquire additional
securities in accordance with the Master Trust's investment policies.
Old Mutual established the Global Fund pursuant to the approval of the South
African Reserve Bank for the transfer of the Initial Portfolio out of South
Africa to the Master Trust. Under South African exchange control regulations,
South African residents are not, in general, permitted to transfer cash and
investment assets out of South Africa or to hold non-South African investments.
Since 1995 the Government has embarked on a policy of gradually phasing out
exchange controls. In late 1995 the South African Reserve Bank permitted certain
"asset swaps" in which South African institutions were allowed to exchange a
certain percentage of their South African investments for non-South African
assets. During 1996 the exchange control regulations were further relaxed to
allow certain South African institutional investors to remit abroad during 1996
up to 3% of their net inflow of funds during the 1995 calendar year. This has
recently been renewed in respect of the 1996 calendar year. The March 1997
Budget speech announced a number of further measures that continue the
phasing-out of the remaining controls. The Global Fund is intended as a means of
providing liquidity and assuring that, when Shareholders liquidate their
interests in the Master Trust by redeeming Shares, Old Mutual Fund Holdings will
acquire equivalent interests in the Master Trust.
TAX MATTERS
This discussion is for general information only. Investors should consult
their own tax advisers about the tax consequences of an investment in the OMEGA
South Africa Fund before subscribing for Shares.
CERTAIN U.S. TAX MATTERS
The OMEGA South Africa Fund intends to meet the requirements of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), applicable to regulated
investment companies so that it will not be liable for any federal income or
excise taxes, although the OMEGA South Africa Fund's income may be subject to
non-U.S. taxes. The Master Trust intends to qualify as a "partnership" under the
Code, with the result that the OMEGA South Africa Fund will be required to take
into account its pro rata share of the Master Trust's income, gain, loss,
expense, credit, and other applicable items.
For investors subject to U.S. federal income tax, OMEGA South Africa Fund
dividends and capital gains distributions are subject to federal income tax and
may also be subject to state and local taxes. Generally, distributions from the
OMEGA South Africa Fund's net investment income and short-term capital gains
will be taxed as ordinary income. Distributions of net capital gains (I.E., the
excess of net long-term capital gains over net short-term capital losses) will
be taxed as such regardless of how long Shares have been held. The foregoing
rules apply without regard to whether the dividends and distributions are paid
in cash or reinvested in additional Shares.
Any OMEGA South Africa Fund dividend that is declared in October, November,
or December of any calendar year, that is payable to shareholders of record in
such a month, and that is paid the following January will be treated as if
received by the shareholders on December 31 of the year in which the dividend is
declared. The OMEGA South Africa Fund will notify shareholders regarding the
federal tax status of its distributions after the end of each calendar year.
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Any OMEGA South Africa Fund distribution will have the effect of reducing
the per Share net asset value of Shares by the amount of the distribution.
Shareholders purchasing Shares shortly before the record date of any
distribution may thus pay the full price for the Shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of Shares
by a Shareholder that holds such Shares as a capital asset will be treated as
long-term capital gain or loss if the Shares have been held for more than twelve
months and otherwise as a short-term capital gain or loss. However, any loss
realized upon a disposition of Shares held for six months or less will be
treated as a long-term capital loss to the extent of any distributions of net
capital gain made with respect to those Shares. Any loss realized upon a
disposition of Shares may also be disallowed under rules relating to wash sales.
The Fund's transactions in certain forward currency contracts will be
subject to special tax rules that may affect the amount, timing, and character
of Fund income. For example, certain positions held for the Fund on the last
business day of each taxable year will be marked to market (I.E., treated as if
closed out) on that day, and any gain or loss associated with the positions will
be treated as 60% long-term and 40% short-term capital gain or loss. Certain
positions held for the Fund that substantially diminish its risk of loss with
respect to other positions in its portfolio may constitute "straddles," and may
be subject to special tax rules that would cause deferral of Fund losses,
adjustments in the holding periods of Fund securities, and conversions of
short-term into long-term capital losses. Certain tax elections exist for
straddles that may alter the effects of these rules.
Foreign exchange gains and losses realized by the Fund or marked to market
will generally be treated as ordinary income and losses. Use of foreign
currencies for non-hedging purposes may be limited in order to avoid a tax on
the Fund.
Certain uses of foreign currency and foreign currency forward contracts and
investment by the OMEGA South Africa Fund in certain "passive foreign investment
companies" may be limited, or a tax election may be made, if available, in order
to enable the OMEGA South Africa Fund to preserve its qualification as a
regulated investment company and to avoid imposition of a tax on the OMEGA South
Africa Fund.
While, as discussed under "South African Taxation" below, there are
currently no South African taxes that would apply to the earnings of the Fund,
in the future the Fund may pay South African taxes on its investment income. The
OMEGA South Africa Fund may also pay taxes in countries other than the United
States and South Africa. The OMEGA South Africa Fund expects to be able to elect
to "pass through" to Shareholders non-U.S. income taxes paid. If the OMEGA South
Africa Fund so elects, Shareholders will be required to treat their pro rata
portion of the non-U.S. income taxes paid by the OMEGA South Africa Fund as part
of the amounts distributed to them by the OMEGA South Africa Fund and thus
includable in their gross income for federal income tax purposes. Shareholders
who itemize deductions would then be allowed to claim a deduction or credit (but
not both) on their federal income tax returns for such amounts, subject to
certain limitations. Shareholders who do not itemize deductions would (subject
to such limitations) be able to claim a credit but not a deduction. No deduction
for such amounts will be permitted to individuals in computing their alternative
minimum tax liability. If the OMEGA South Africa Fund does not qualify or elect
to "pass through" to Shareholders non-U.S. income taxes paid by it, Shareholders
will not be able to claim any deduction or credit for any part of the non-U.S.
taxes paid by the OMEGA South Africa Fund.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at a rate of 30%. The OMEGA South
Africa Fund intends to withhold tax payments at the rate of 30% on taxable
dividends and other payments to Non-U.S. Persons that are subject to such
withholding, unless a lower rate is permitted under an applicable treaty. Any
amounts
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overwithheld may be recovered by such persons by filing a claim for refund with
the Internal Revenue Service within the time period appropriate to such claims.
Distributions received from the OMEGA South Africa Fund by Non-U.S. Persons also
may be subject to tax under the laws of their own jurisdiction. The OMEGA South
Africa Fund is also required in certain circumstances to apply backup
withholding of 31% of taxable dividends and redemption proceeds paid to any
Shareholder (including a Non-U.S. Person) who does not furnish to the OMEGA
South Africa Fund certain information and certifications or who is otherwise
subject to backup withholding. Backup withholding will not, however, be applied
to payments that have been subject to 30% withholding.
SOUTH AFRICAN TAXATION
INCOME TAX. The Master Trust will be treated as a trust for South African
tax purposes with the result that income passing through the Master Trust will
retain its nature in investors' hands. South African income tax is source based
and therefore only income derived from a South African or deemed South African
source would be taxable. Dividends are exempt from tax. The withholding tax on
dividends paid to non-residents was abolished during 1995. Interest from a
source within or deemed within South Africa accruing to non-residents or
companies and other associations which are managed and controlled outside South
Africa is also exempt from tax.
Gains realized by the Master Trust on the disposal of South African
securities would be taxable if they are of a revenue nature from a business of
trading in securities. The investment policy of the Master Trust should result
in the underlying securities being held as capital investments (gains in respect
of which would not be regarded as revenue profit).
CAPITAL GAINS TAX. South Africa has no capital gains tax and therefore
capital gains (as opposed to share-dealing gains) on the sale of shares are not
taxable.
STAMP DUTY AND MARKETABLE SECURITIES TAX ("MST"). Stamp duty is not payable
with respect to transactions effected through a brokerage firm, which are
subject to MST. Prior to April 1, 1996, the applicable rate of stamp duty/MST
payable by the transferee on the transfer of securities was 1%. The Government
has progressively reduced this rate to the current level of 0.25% as at April 1,
1997. In addition, with effect from July 1, 1997 the Government will delete the
arbitrage exemption in respect of stamp duties and the MST exemption in relation
to the purchase of shares by persons who are not ordinarily resident in South
Africa. Thus, from July 1, 1997, the applicable rate of stamp duty/MST payable
by the transferee on all transfers of securities will be 0.25%.
SECONDARY TAX ON COMPANIES ("STC"). To promote reinvestment of profits, a
system of STC payable by South African companies in respect of net dividends
distributed, was introduced during 1993. The level of dividends payable to the
Master Trust would therefore be influenced by STC. The current rate of STC is
12.5%. For dividends declared prior to March 13, 1996 the STC rate was 25%.
BERMUDA TAXATION
There is no Bermuda income, corporation, or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty, or inheritance tax payable
by the OMEGA South Africa Fund, the Master Trust, or the Shareholders, other
than Shareholders ordinarily resident in Bermuda.
ERISA MATTERS
Shares of the OMEGA South Africa Fund are available for purchase by
fiduciaries acting on behalf of employee benefit plans subject to ERISA (an
"ERISA Plan"), which otherwise meet all applicable investor criteria. See
"OFFERING OF SHARES" above. In considering an investment in the OMEGA South
Africa Fund, a fiduciary acting on behalf of an ERISA Plan should
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consider in the context of the Plan's particular circumstances whether the
investment will be consistent with its responsibilities and the special
constraints imposed by ERISA and the Code.
Because the Fund is an investment company registered under the 1940 Act,
under applicable Department of Labor regulations regarding the identification of
"plan assets" for purposes of ERISA and the prohibited transaction provisions of
the Code, the investment in the Fund by an ERISA Plan will include the Shares
acquired but will not, solely by reason of the acquisition of such Shares,
include any of the underlying assets of the Fund.
The foregoing discussion is merely a summary of certain issues any fiduciary
acting on behalf of an ERISA Plan should evaluate when considering an investment
in Shares of the OMEGA South Africa Fund.
GENERAL INFORMATION
ORGANIZATION
The OMEGA South Africa Fund is a Massachusetts business trust that was
organized in September 1995 and registered on November 8, 1995 as a
non-diversified open-end management investment company under the 1940 Act. The
Master Trust is a trust that was organized in September 1995 under the laws of
Massachusetts and registered on November 9, 1995 as a non-diversified open-end
management investment company under the 1940 Act. The declaration of trust of
the Master Trust provides that the OMEGA South Africa Fund and any other
entities investing in the Master Trust are each liable for all obligations of
the Master Trust. However, it is not expected that the liabilities of the Master
Trust would ever exceed its assets.
Each of the OMEGA South Africa Fund and the Master Trust is a
non-diversified investment company, which means that it is not limited by the
1940 Act in the proportion of its assets that may be invested in the securities
of a single issuer. Each of the OMEGA South Africa Fund and the Master Trust
intends, however, to comply with diversification requirements imposed on
regulated investment companies by the Code. Under these requirements not more
than 25% of the Master Trust's total assets will be invested in securities of
any one issuer, and at least 50% of the total assets of the Master Trust will be
represented by cash, securities of other investment companies, and other
securities not exceeding with respect to any issuer 5% of the assets of the
Master Trust or 10% of the outstanding securities of any issuer.
INVESTMENT STRUCTURE
Rather than directly acquire and manage its own portfolio of securities, the
OMEGA South Africa Fund invests all of its investable assets in the Master
Trust, which has the same investment objective as the OMEGA South Africa Fund.
The Non-U.S. Fund also holds a beneficial interest in the Master Trust, and
other investment vehicles, if any, may acquire interests in the Master Trust
upon the same terms and conditions as the OMEGA South Africa Fund. The Non-U.S.
Fund and other investment vehicles that invest in the Master Trust may have
different operating expenses and sales charges than the OMEGA South Africa Fund.
In the event the Master Trust, by reason of a change in its investment
objective or otherwise, ceased to be a suitable investment for the OMEGA South
Africa Fund, the OMEGA South Africa Fund would withdraw its investment from the
Master Trust. In such a case the OMEGA South Africa Fund would have to consider
other means of achieving its investment objective, including engaging its own
investment adviser or investing its assets in another commingled fund with an
appropriate investment objective.
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TRANSFERS OF SHARES
The Offering has not been registered under the 1933 Act, and the Shares will
therefore be "restricted securities". The OMEGA South Africa Fund may require as
a condition of any transfer of Shares receipt of an opinion of counsel, in form
and substance satisfactory to the OMEGA South Africa Fund, to the effect that a
proposed transfer may be made without registration under the 1933 Act or
applicable state securities laws. The Transfer Agent maintains a register for
Shareholders.
VOTING AND OTHER RIGHTS
Each Share gives the Shareholder one vote in elections for trustees of the
OMEGA South Africa Fund and other matters submitted to Shareholders for vote.
All Shares have equal voting rights. The OMEGA South Africa Fund may issue an
unlimited number of shares and may divide Shares into series and classes.
The OMEGA South Africa Fund's activities are supervised by its board of
trustees. As a Massachusetts business trust, the OMEGA South Africa Fund is not
required to hold annual Shareholder meetings. Shareholders will be entitled to
vote on the election of the trustees of the OMEGA South Africa Fund and certain
important matters, including (i) certain amendments to the declaration of trust
of the OMEGA South Africa Fund, and (ii) changes in the investment objective and
the fundamental investment restrictions of the OMEGA South Africa Fund. Trustees
of the OMEGA South Africa Fund may be removed by a vote of the Shareholders
holding two-thirds of outstanding Shares. Each Share is entitled to participate
equally in dividends and other distributions and the proceeds of any liquidation
of the OMEGA South Africa Fund.
The Master Trust's activities are supervised by its board of trustees.
Holders of the beneficial interest in the Master Trust, including the OMEGA
South Africa Fund, will be entitled to vote on the election of the trustees of
the Master Trust and certain important matters, including (i) certain amendments
to the declaration of trust of the Master Trust, (ii) changes in the investment
objective and the fundamental investment restrictions of the Master Trust, (iii)
material amendments to the investment advisory agreement between the Master
Trust and the Adviser, or the adoption of a new investment advisory agreement,
and (iv) continuation of the Master Trust upon the withdrawal of a holder of its
beneficial interest. The trustees of the Master Trust may be removed by a vote
of the holders of two-thirds of the outstanding beneficial interests in the
Master Trust.
If the Master Trust seeks the vote of the OMEGA South Africa Fund on any
matter (other than a vote to continue the Master Trust upon the withdrawal of
another investor in the Master Trust, in which circumstances the trustees of the
OMEGA South Africa Fund may vote to continue the Master Trust), the OMEGA South
Africa Fund shall submit the matter to a vote of the Shareholders and shall
exercise its Master Trust voting rights proportionately as instructed by the
Shareholders that participate in the vote. It is possible that a majority of the
investors in the Master Trust (as of the date of this Private Placement
Memorandum, Old Mutual Fund Holdings) will exercise their Master Trust voting
rights in a manner contrary to the vote of the Shareholders. The OMEGA South
Africa Fund will be entitled to participate in distributions and the proceeds of
any liquidation of the Master Trust in proportion to its interest in the Master
Trust.
PURCHASE RIGHT
In the event that either the OMEGA South Africa Fund or the Master Trust
votes to dissolve, Old Mutual will be entitled to acquire all of the outstanding
Shares at a price equal to their net asset value. No Redemption Fee will apply
in this case.
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SECURITIES TRANSACTIONS
The primary consideration in placing the Fund's securities transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible.
CERTAIN CONFLICTS OF INTEREST
The Old Mutual Group is an important participant in the South African
securities markets. At March 31, 1997 the Old Mutual Group's JSE holdings
totaled S.A. Rand 122 billion, equal to approximately 10% of total JSE market
capitalization. At March 31, 1997 the Old Mutual Group held 5% or more of the
listed securities in 42% of the JSE traded companies, which companies
collectively represented 63% of the JSE market capitalization. As a result of
these holdings, the Old Mutual Group has a substantial interest in many of the
companies that were included in the Initial Portfolio. The Fund has adopted the
following restrictions designed to address conflicts of interest arising from
the Old Mutual Group's position in the South African securities markets:
(i) The Fund will acquire securities of companies in which the Old
Mutual Group holds 5% or more of the equity interest ("OM Affiliated
Companies") only (A) from unaffiliated brokers in open market transactions,
(B) in transactions effected pursuant to and in compliance with Rule 17a-7
under the 1940 Act and the procedures adopted by the Master Trust pursuant
to Rule 17a-7, or (C) if certain other conditions are met, including a
requirement that the purchase transaction be effected at not more than the
independent current market price of the security as defined in Rule 17a-7.
This restriction shall not apply to (A) transactions approved by order of
the Securities and Exchange Commission, (B) the acquisition of the Initial
Portfolio, and (C) dividends consisting of securities, rights issued in a
rights offering to existing shareholders, and securities received upon
exercise of such rights. This restriction will not apply to the OMEGA South
Africa Fund's investment in the Master Trust.
(ii) The Fund will not participate in any effort to replace the
management of any issuer, or take legal or management control of any issuer,
provided this restriction will not prohibit the Fund from (A) accepting a
tender or takeover offer made generally to holders of a particular security
or (B) voting its securities, or granting a proxy to vote its securities, in
any proxy contest that is not, directly or indirectly, organized by a member
of the Old Mutual Group. This restriction will not apply to the OMEGA South
Africa Fund's investment in the Master Trust.
(iii) The Fund will not engage in any purchases of securities of OM
Affiliated Companies, or defer its sales of such securities, for the purpose
of supporting the price thereof.
(iv) Fund purchases and sales of the securities of OM Affiliated
Companies, as well as purchases or sales of the same securities by other
members of the Old Mutual Group at similar times, will be reviewed by (A)
the Old Mutual Surveillance Team on a regular basis and (B) the Fund
trustees on at least a quarterly basis. Old Mutual will provide the Fund
trustees with such information as they may require for purposes of this
review.
(v) The Fund will not purchase securities of any issuer in which the
Old Mutual Group owns in the aggregate in excess of 50% of the outstanding
equity interest or where the acquisition would result in the Old Mutual
Group owning in the aggregate in excess of 50% of the outstanding equity
interest, provided this restriction (A) will not apply to the OMEGA South
Africa Fund's investment in the Master Trust and (B) will not prohibit the
Fund from electing to receive dividends consisting of securities, or
exercising rights issued in a rights offering, upon the same terms generally
available to other investors. The acquisition of the Initial Portfolio was
not subject to this limitation. The Fund may, therefore, hold
27
<PAGE>
securities of certain issuers in which the Old Mutual Group owns in excess
of 50% of the outstanding equity interest.
The Fund may from time to time apply to the Securities and Exchange
Commission for an exemptive order under Section 17 of the 1940 Act with respect
to certain purchases of securities from issuers in which the Old Mutual Group
owns 5% or more of the equity interest. As at the date of this Private Placement
Memorandum one such application has been approved and another is pending.
Old Mutual and companies in the Old Mutual Group act as investment manager
and adviser to a number of funds, customers, and proprietary accounts (including
the Old Mutual Main Fund). The Adviser acts as investment adviser to the Master
Trust, and to the Global Fund which holds investments in South African equities.
The South African equity investments of the Master Trust, the Global Fund,
and the Old Mutual Main Fund will ordinarily be managed pursuant to
substantially similar investment objectives and policies. However, the
composition of their respective portfolios, and the purchase and sale
transactions entered into on behalf of the Master Trust, the Global Fund, and
the Old Mutual Main Fund will not be identical.
Old Mutual will use its best efforts to assure that the Master Trust has the
opportunity to participate in potential investments which fall within its
investment objective and policies such that the allocation of those investments
as between the Master Trust and the other funds, customers, and proprietary
accounts managed or advised by Old Mutual or one of its wholly-owned
subsidiaries is made on a fair and equitable basis.
EXPENSES
The OMEGA South Africa Fund and the Master Trust are responsible for the
ongoing expenses of conducting their affairs, including (i) investment advisory,
administration, custody, and transfer agency fees and expenses, (ii) legal,
audit, and accounting fees and expenses, (iii) costs of reports to and other
communications with investors, (iv) costs of preparing and filing tax returns
and reports and other governmental filings, (v) fees and expenses of trustees,
(vi) printing, copying, travel, and communication costs, and (vii) costs of
registering or qualifying Fund securities under the securities laws of various
jurisdictions. The OMEGA South Africa Fund and the Master Trust are amortizing
certain organizational and offering expenses over a period of five years from
inception.
Each of the OMEGA South Africa Fund and the Master Trust has adopted a
placement plan pursuant to Rule 12b-1 under the 1940 Act, and each of these
plans provides for the OMEGA South Africa Fund or the Master Trust, as the case
may be, to reimburse marketing expenses and pay placement fees, provided such
reimbursements and fees for any year do not exceed 0.05% of average daily net
assets of the OMEGA South Africa Fund or the Master Trust for such year.
The Adviser will reduce or rebate a portion of the Management Fee as
necessary so that ordinary operating expenses of the OMEGA South Africa Fund,
including its share of the Management Fee and the amortization of certain
organizational and offering expenses, will not exceed 1.00% per annum of its
daily net assets. This limitation does not apply to (i) extraordinary expenses
(such as the cost of litigation), (ii) the placement fee and the amount payable
to Old Mutual Fund Holdings in connection with the initial placement of Shares,
(iii) sales charges on Shares, (iv) brokerage expenses, or (v) the Redemption
Fee. The Adviser may not terminate its undertaking to so reduce or rebate a
portion of the Management Fee without giving at least 120 days notice to
Shareholders, provided the Adviser may terminate this undertaking at any time
without prior notice if the Adviser ceases to be investment adviser to the
Master Trust.
28
<PAGE>
ADDITIONAL INFORMATION
The most recent annual or semi-annual report of the Fund is distributed
with, and forms part of, this Memorandum. Requests for more recent annual or
semi-annual reports should be directed to the Placement Agents.
The registration statements under the 1940 Act of the OMEGA South Africa
Fund and the Master Trust contain more detailed information about the Fund. A
copy of the registration statement of each of the OMEGA South Africa Fund and
the Master Trust will be provided to potential investors upon request. The
registration statement of each of the OMEGA South Africa Fund and the Master
Trust can be inspected without charge at the office of the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies may be obtained therefrom at prescribed rates. The Commission
also maintains a Web site that contains the registration statement of each of
the OMEGA South Africa Fund and the Master Trust, as well as other information,
at http:\\www.sec.gov.
The Fund will provide to a prospective investor upon request such additional
information concerning the Fund and its proposed investments as the Fund
possesses or can obtain without unreasonable effort or expense. Requests for
additional information should be directed to one of the Placement Agents.
29
<PAGE>
GLOSSARY
ADVISER means Old Mutual Asset Managers (Bermuda) Limited, the investment
adviser to the Master Trust.
ANC means the African National Congress.
BUSINESS DAY means each day on which the New York Stock Exchange is open for
trading.
CODE means the Internal Revenue Code of 1986, as amended.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ERISA PLAN means an employee benefit plan subject to ERISA.
FUND means the OMEGA South Africa Fund and the Master Trust except as otherwise
indicated.
GLOBAL FUND means Old Mutual Global Assets Fund Limited, a mutual fund organized
under the laws of Bermuda.
GOVERNMENT means the South African Government of National Unity.
IFP means the Inkatha Freedom Party.
INITIAL PORTFOLIO means a portfolio of South African securities transferred from
the Old Mutual Main Fund to the Master Trust shortly before the launch of the
OMEGA South Africa Fund.
JSE means The Johannesburg Stock Exchange.
LIQUIDITY FACILITY means the undertaking of Old Mutual Fund Holdings to apply
the assets of the Global Fund to make such additional investments in the Master
Trust as may be required from time to time in order to provide funds for
redeeming Shares or shares of the Non-U.S. Fund.
MANAGEMENT FEE means the management fee payable to the Adviser of 0.60% per
annum of the Master Trust's daily net assets.
MASTER TRUST means Old Mutual South Africa Equity Trust, a Massachusetts trust.
MASTER TRUST ADMINISTRATOR means State Street Cayman Trust Company, Ltd., as
administrator of the Master Trust.
1940 ACT means the Investment Company Act of 1940, as amended.
1933 ACT means the Securities Act of 1933, as amended.
NON-U.S. FUND means Old Mutual South Africa Growth Assets Fund Limited ("Old
Mutual SAGA Fund"), a mutual fund organized under the laws of Bermuda.
OM AFFILIATED COMPANIES means companies in which the Old Mutual Group holds 5%
or more of the equity interests.
OFFERING means the offering of Shares on the terms and conditions of this
Memorandum.
OLD MUTUAL means the South African Mutual Life Assurance Society, a mutual
assurance society organized under the laws of South Africa.
OLD MUTUAL FUND HOLDINGS means Old Mutual Fund Holdings (Bermuda) Limited, a
Bermuda company that is an indirect wholly-owned subsidiary of Old Mutual.
OLD MUTUAL GROUP means Old Mutual, its wholly-owned subsidiaries, and investment
vehicles managed by Old Mutual or its wholly-owned subsidiaries, collectively.
OLD MUTUAL MAIN FUND means Old Mutual's principal investment fund.
OMEGA FUND ADMINISTRATOR means State Street Bank and Trust Company, as
administrator of the OMEGA South Africa Fund.
30
<PAGE>
OMEGA SOUTH AFRICA FUND means Old Mutual Equity Growth Assets South Africa Fund,
a Massachusetts business trust.
PLACEMENT AGENTS means Fleming Martin Inc., Rand International Securities LLC,
and SBC Warburg Inc. as the placement agents for the Offering.
REDEMPTION FEE means a redemption fee charged by the OMEGA South Africa Fund of
0.65% of redemption proceeds.
S.A. RAND means South African rand, the currency of South Africa.
SHAREHOLDERS means the registered holders of Shares.
SHARES means the shares of beneficial interest of the OMEGA South Africa Fund.
TRANSFER AGENT means State Street Bank and Trust Company, as transfer agent for
the OMEGA South Africa Fund.
31
<PAGE>
OMEGA SOUTH AFRICA FUND
INVESTMENT ADVISER
Old Mutual Asset Managers (Bermuda) Limited
61 Front Street, Hamilton Bermuda
PLACEMENT AGENTS
Fleming Martin Inc.
320 Park Avenue
New York, NY 10022
Rand International Securities LLC
780 3rd Avenue
New York, NY 10017
SBC Warburg Inc.
277 Park Avenue, New York, NY 10172
ADMINISTRATOR
FOR THE OMEGA SOUTH AFRICA FUND:
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
FOR THE MASTER TRUST:
State Street Cayman Trust Company, Ltd.
P.O. Box 2508GT
Elizabeth Square, George Town
Grand Cayman, Cayman Islands
TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 1978, Boston, MA 02105
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
FOR THE OMEGA SOUTH AFRICA FUND:
KPMG Peat Marwick LLP
One Boston Place, Boston, MA 02108
FOR THE MASTER TRUST:
KPMG Peat Marwick
Vallis Building, Hamilton HM 11, Bermuda
LEGAL COUNSEL
IN THE UNITED STATES:
Bingham, Dana & Gould LLP
150 Federal Street, Boston, MA 02110
IN THE UNITED KINGDOM:
Norton Rose
Kempson House, Camomile Street
London EC3A 7AN
IN BERMUDA:
Conyers, Dill & Pearman
Clarendon House, Church Street
Hamilton, Bermuda
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of the Offering................................................... 3
Investment Objective and Policies......................................... 8
South Africa.............................................................. 10
Investment Considerations................................................. 13
Management and Administration............................................. 17
Valuation of Shares....................................................... 19
Offering of Shares........................................................ 19
Redemptions............................................................... 20
Liquidity Facility and the Global Fund.................................... 21
Tax Matters............................................................... 22
ERISA Matters............................................................. 24
General Information....................................................... 25
Additional Information.................................................... 29
Glossary.................................................................. 30
</TABLE>
<PAGE>
Part B
Item 10. Cover Page.
Not applicable
Item 11. Table of Contents.
Page
----
General Information and History . . . . . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . . . . . B-1
Management of the Fund . . . . . . . . . . . . . . . . . . . B-12
Control Persons and Principal Holders of Securities . . . . . B-14
Investment Advisory and Other Services . . . . . . . . . . . B-15
Brokerage Allocation and Other Practices . . . . . . . . . . B-22
Capital Stock and Other Securities .. . . . . . . . . . . . . B-23
Purchase, Redemption and Pricing of Securities . . . . . . . . B-26
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Calculation of Performance Data . . . . . . . . . . . . . . . B-32
Financial Statements . . . . . . . . . . . . . . . . . . . . . B-33
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objective and Policies.
Part A contains additional information about the investment objective and
policies of Old Mutual Equity Growth Assets South Africa Fund (the "OMEGA South
Africa Fund"). Rather than directly acquire and manage its own portfolio of
securities, the OMEGA South Africa Fund invests all of its investable assets in
Old Mutual South Africa Equity Trust (the "Master Trust"), a Massachusetts trust
with its principal place of business in Bermuda that has the same investment
objective as the OMEGA South Africa Fund. All references in this Part B to the
"Fund" apply to both the OMEGA South Africa Fund and the Master Trust, except as
otherwise indicated. This Part B should be read in conjunction with Part A.
The investment objective of the Fund is long-term total return in excess of
that of The Johannesburg Stock Exchange ("JSE") Actuaries All Share Index from
investment in equity securities of South African issuers. Of course, there can
be no assurance that the Fund will achieve its investment objective.
<PAGE>
Part A contains a discussion of the various types of securities in which
the Fund may invest and the risks involved in such investments. The following
supplements the information contained in Part A concerning the investment
objective, policies and techniques of the Fund.
The OMEGA South Africa Fund seeks to achieve its investment objective by
investing xall of its investable assets in the Master Trust. The Master Trust
seeks to achieve its investment objective by investing in equity securities of
South African issuers. Under normal circumstances, at least 95% of the Master
Trust's total assets will be invested in equity securities of South African
issuers that are listed on a securities exchange. The Master Trust may invest
up to 5% of its total assets in securities that are, at the time of the
investment, not listed on a securities exchange (although such investments will
generally be limited to securities that are expected to be listed on an exchange
within a reasonable period of time).
In managing the Master Trust's assets, Old Mutual Asset Managers (Bermuda)
Limited, the adviser to the Master Trust (the "Adviser"), will not speculate for
short-term gain but will focus on securities that, in the Adviser's opinion, are
likely to show long-term improvements in profits and cash flow. Less weight
will be accorded to short-term and cyclical factors. This approach is designed
to result in strong dividend growth and capital appreciation. Historically,
South African issuers have retained a high proportion of earnings and, if this
policy continues, it is likely that any long-term total return would largely be
in the form of capital appreciation.
For purposes of the Master Trust's investment policies, a South African
issuer is an issuer that meets one of the following tests: (i) its principal
offices or operations are located in South Africa; or (ii) it derives at least
50% of its revenues from operations or investments in South Africa. Equity
securities are defined as common stock, securities convertible into common stock
and securities that participate in profits in a similar manner to common stock.
Equity securities may be purchased in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts, Global Depositary Receipts, or other
similar securities representing equity securities.
The investment objective of the OMEGA South Africa Fund may not be changed
materially except by a majority vote of shareholders of the OMEGA South Africa
Fund ("Shareholders").
The Master Trust has undertaken to the OMEGA South Africa Fund and to Old
Mutual South Africa Growth Assets Fund Limited, a Bermuda mutual fund that also
invests all of its investable assets in the Master Trust (the "Non-U.S. Fund"),
that it will not make any material change to its investment objective or to its
investment policies described in the Private Placement Memorandum included in
Part A under "INVESTMENT OBJECTIVE AND POLICIES -- Investment Policies" except
in unforeseen circumstances and with the approval of a majority vote of the
Shareholders and a majority vote of shareholders of the Non-U.S. Fund.
<PAGE>
Except as otherwise indicated, the investment policy and restrictions of
the OMEGA South Africa Fund and the investment restrictions of the Master Trust
may be changed without Shareholder approval and without the approval of holders
of interests in the Master Trust.
The percentage limitations set forth above, as well as those described
elsewhere in this Part B and in the Fund's registration statement under the
Investment Company Act of 1940, as amended (the "1940 Act"), are measured and
applied only at the time an investment is made or another relevant action is
taken by the Fund.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements collateralized by securities
in which the Fund may otherwise invest. Repurchase agreements are agreements by
which the Fund purchases a security and simultaneously commits to resell that
security to the seller at an agreed-upon date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security. Under
the 1940 Act, repurchase agreements may be considered to be loans by the buyer.
The Fund's risk is limited to the ability of the seller to pay the agreed-upon
amount on the delivery date. If the seller defaults, the underlying security
constitutes collateral for the seller's obligation to pay, although the Fund may
incur certain costs in liquidating this collateral and in certain cases may not
be permitted to liquidate this collateral. All repurchase agreements entered
into by the Fund are fully collateralized, with such collateral being marked to
market daily.
CURRENCY EXCHANGE TRANSACTIONS
Because the Fund may buy and sell securities denominated in South African
Rand ("S.A. Rand") and other currencies other than the U.S. dollar, and receive
interest, dividends and sale proceeds in currencies other than the U.S. dollar,
the Fund may enter into currency exchange transactions to convert U.S. currency
to non-U.S. currency and non-U.S. currency to U.S. currency, as well as convert
one non-U.S. currency to another non-U.S. currency. The Fund either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the currency exchange markets, or uses forward contracts to purchase or sell
non-U.S. currencies. The Fund may also enter into currency hedging transactions
in an attempt to protect the value of its assets as measured in U.S. dollars
from unfavorable changes in currency exchange rates and control regulations.
(Although the Fund's assets are valued daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of non-U.S. currencies into U.S. dollars
on a daily basis.) The Fund does not currently intend to speculate in currency
exchange rates or forward contracts.
<PAGE>
The Fund may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
currency exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
A forward contract generally has no deposit requirement, and no fees or
commissions are charged at any stage for trades.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a non-U.S. currency, it may desire to "lock in" the U.S. dollar
price of the security. By entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars, of the amount of non-U.S. currency
involved in the underlying security transaction, the Fund will be able to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
While the Fund does not intend to engage in currency hedging, it reserves
the right to do so. For example, when the Adviser believes that the S.A. Rand
may suffer a substantial decline against the U.S. dollar, the Fund may enter
into a forward contract to sell, for a fixed amount of U.S. dollars, the amount
of S.A. Rand approximating the value of some or all of the Fund's securities
denominated in S.A. Rand. The precise matching of the forward contract amounts
and the value of the securities involved is not generally possible since the
future value of such securities in non-U.S. currencies changes as a consequence
of market movements in the value of those securities between the date the
forward contract is entered into and the date it matures. The projection of a
short-term hedging strategy is highly uncertain. The Fund does not enter into
such forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts obligates the Fund to deliver an amount of non-
U.S. currency in excess of the value of the Fund's securities or other assets
denominated in that currency.
<PAGE>
The Fund generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, the Fund will
either sell the security and make delivery of the non-U.S. currency, or retain
the security and terminate its contractual obligation to deliver the non-U.S.
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
non-U.S. currency. If the Fund retains the security and engages in an
offsetting transaction, the Fund will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices.
If the Fund engages in an offsetting transaction, it may subsequently enter into
a new forward contract to sell the non-U.S. currency. Should forward prices
decline during the period between the date the Fund enters into a forward
contract for the sale of the non-U.S. currency and the date it enters into an
offsetting contract for the purchase of such currency, the Fund will realize a
gain to the extent the selling price of the currency exceeds the purchase price
of the currency. Should forward prices increase, the Fund will suffer a loss to
the extent that the purchase price of the currency exceeds the selling price of
the currency.
It is impossible to forecast with precision the market value of the Fund's
securities at the expiration of a forward contract. Accordingly, it may be
necessary for the Fund to purchase additional non-U.S. currency on the spot
market if the market value of the security is less than the amount of non-U.S.
currency the Fund is obligated to deliver and if a decision is made to sell the
security and make delivery of such currency. Conversely, it may be necessary to
sell on the spot market some of the non-U.S. currency received upon the sale of
the security if its market value exceeds the amount of such currency the Fund is
obligated to deliver.
The Fund may also purchase put options on S.A. Rand and other non-U.S.
currencies in order to protect against currency rate fluctuations. If the Fund
purchases a put option on a non-U.S. currency and the value of the U.S. currency
declines, the Fund will have the right to sell the non-U.S. currency for a fixed
amount in U.S. dollars and will thereby offset, in whole or in part, the adverse
effect on the Fund which otherwise would have resulted. Conversely, where a rise
in the U.S. dollar value of another currency is projected, and where the Fund
anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to the Fund from
purchases of non-U.S. currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, the Fund could
sustain losses on transactions in non-U.S. currency options which would require
it to forgo a portion or all of the benefits of advantageous changes in such
rates.
The Fund may write options on S.A. Rand and other non-U.S. currencies for
hedging purposes or otherwise to achieve its investment objectives. For
example, where the Fund anticipates a decline in the value of the U.S. dollar
value of a South African security due to adverse fluctuations in exchange rates
it could, instead of purchasing a put option, write a call option on S.A. Rand.
If the expected decline occurs, the option will most likely not be exercised,
and the diminution in value of the security held by the Fund will be offset by
the amount of the premium received.
<PAGE>
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a South African security to be acquired
because of an increase in the U.S. dollar value of the S.A. Rand the Fund could
write a put option on the S.A. Rand which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. However, the writing of a currency option
will constitute only a partial hedge up to the amount of the premium, and only
if rates move in the expected direction. If this does not occur, the option may
be exercised and the Fund would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium.
Through the writing of options on currencies, the Fund also may be required to
forgo all or a portion of the benefits which might otherwise have been obtained
from favorable movements in exchange rates.
Put and call options on S.A. Rand written by the Fund will be covered by
segregation of cash, short-term money market instruments or high quality debt
securities in an account with the custodian in an amount sufficient to discharge
the Fund's obligations with respect to the option, by acquisition of the non-
U.S. currency or of a right to acquire such currency (in the case of a call
option) or the acquisition of a right to dispose of the currency (in the case of
a put option), or in such other manner as may be in accordance with the
requirements of any exchange on which, or the counterparty with which, the
option is traded and applicable laws and regulations.
The Fund's dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, the Fund is not required to enter into
such transactions and does not do so unless deemed appropriate by the Adviser.
These methods of protecting the value of the Fund's securities against a decline
in the value of a currency do not eliminate fluctuations in the underlying
prices of the securities. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
they also tend to limit any potential gain which might result should the value
of such currency increase.
The Fund has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of the Fund's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, the Fund expects always to have cash, cash equivalents
or high quality debt securities available sufficient to cover any commitments
under these contracts or to limit any potential risk.
<PAGE>
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to generate
income, the Fund may lend its securities to broker-dealers and other
institutional borrowers. Loans of securities would be secured continuously by
collateral in cash, cash equivalents, or U.S. Treasury obligations maintained on
a current basis at an amount at least equal to the market value of the
securities loaned. The cash collateral would be invested in high quality short-
term instruments. Either party has the right to terminate a loan at any time on
customary industry settlement notice (which will not usually exceed three
business days). During the existence of a loan, the Fund would continue to
receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned and with respect to cash collateral would also receive
compensation based on investment of the collateral (subject to a rebate payable
to the borrower). Where the borrower provides the Fund with collateral
consisting of U.S. Treasury obligations, the borrower is also obligated to pay
the Fund a fee for use of the borrowed securities. The Fund would not, however,
have the right to vote any securities having voting rights during the existence
of the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of their
consent on a material matter affecting the investment. As with other extensions
of credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower fail financially. However, the loans would be
made only to entities deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration which can be earned currently
from loans of this type justifies the attendant risk. In addition, the Fund
could suffer loss if the borrower terminates the loan and the Fund is forced to
liquidate investments purchased with the cash collateral in order to return the
cash collateral to the buyer. It is not intended that the value of the
securities loaned by the Fund would exceed 33 1/3% of the value of its net
assets.
WHEN-ISSUED SECURITIES
The Fund may purchase securities on a "when-issued" or on a "forward
delivery" basis. It is expected that, under normal circumstances, the Fund
would take delivery of such securities. When the Fund commits to purchase a
security on a "when-issued" or on a "forward delivery" basis, it sets up
procedures consistent with SEC policies. Since those policies currently require
that an amount of the Fund's assets equal to the amount of the purchase be held
aside or segregated to be used to pay for the commitment, the Fund will always
have cash, cash equivalents or high quality debt securities sufficient to cover
any commitments or to limit any potential risk. However, even though the Fund
does not intend to make such purchases for speculative purposes and intends to
adhere to the provisions of SEC policies, purchases of securities on such bases
may involve more risk than other types of purchases. For example, the Fund may
have to sell assets which have been set aside in order to meet redemptions.
Also, if the Adviser determines it is advisable as a matter of investment
strategy to sell the "when-issued" or "forward delivery" securities, the Fund
would be required to meet its obligations from the then available cash flow or
the sale of securities, or, although it would not normally expect to do so, from
the sale of the "when-issued" or "forward delivery" securities themselves (which
may have a value greater or less than the Fund's payment obligation).
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
Each of the OMEGA South Africa Fund and the Master Trust has adopted the
following fundamental restrictions, which may not be changed without approval by
holders of a majority of the outstanding voting securities of the OMEGA South
Africa Fund or the Master Trust, which as used in this Part B means the vote of
the lesser of (i) 67% or more of the outstanding voting securities of the OMEGA
South Africa Fund or the Master Trust present at a meeting at which the holders
of more than 50% of the outstanding voting securities of the OMEGA South Africa
Fund or the Master Trust are present or represented by proxy, or (ii) more than
50% of the outstanding voting securities of the OMEGA South
<PAGE>
Africa Fund or the Master Trust. The term "voting securities" as used in this
paragraph has the same meaning as in the 1940 Act. The fundamental restrictions
are that:
<PAGE>
(i) Each of the OMEGA South Africa Fund and the Master Trust may not borrow
money, except that as a temporary measure for extraordinary or emergency
purposes it may borrow from banks and enter into reverse repurchase agreements
in an amount not to exceed 33 1/3% of the current value of its net assets,
including the amount borrowed (and each of the OMEGA South Africa Fund and the
Master Trust may not purchase any securities at any time at which borrowings
exceed 5% of its total assets, taken at market value). It is intended that the
each of the OMEGA South Africa Fund and the Master Trust will borrow money only
from banks and only to accommodate requests for the repurchase of shares or
interests while effecting an orderly liquidation of portfolio securities.
(ii) Each of the OMEGA South Africa Fund and the Master Trust may not make
short sales of securities or purchase securities on margin, except that each of
the OMEGA South Africa Fund and the Master Trust may purchase and sell various
types of futures contracts and may obtain short term credits as necessary for
the clearance of security transactions.
(iii) Each of the OMEGA South Africa Fund and the Master Trust may not
underwrite securities issued by other persons, except that the OMEGA South
Africa Fund may invest all of its investable assets in the Master Trust and
except to the extent that it may be considered an underwriter within the meaning
of the Securities Act of 1933, as amended (the "1933 Act"), in the disposition
of securities that are considered restricted under the 1933 Act.
(iv) Each of the OMEGA South Africa Fund and the Master Trust may not make
loans to other persons except (a) through the lending of its portfolio
securities, but not in excess of 33 1/3% of its net assets, (b) through the use
of fixed time deposits or repurchase agreements or the purchase of short-term
obligations or (c) by purchasing all or a portion of an issue of debt
securities; for the purposes of this paragraph (iv) the purchase of short-term
commercial paper or a portion of an issue of debt securities which are part of
an issue to the public shall not be considered the making of a loan.
(v) Each of the OMEGA South Africa Fund and the Master Trust may not
purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts in the ordinary
course of business, except that (a) each of the OMEGA South Africa Fund and the
Master Trust may purchase and sell mortgage-related securities and may hold and
sell real estate acquired as a result of the ownership of securities by it and
(b) each of the OMEGA South Africa Fund and the Master Trust may engage in
currency hedging and invest in derivative securities to the extent provided in
Parts A and B of this Registration Statement.
(vi) Each of the OMEGA South Africa Fund and the Master Trust may not issue
any senior security (as that term is defined in the 1940 Act) if such issuance
is specifically prohibited by the 1940 Act or the rules and regulations
promulgated thereunder, except as appropriate to evidence a debt incurred
without violating fundamental investment restriction (i) above.
(vii) Each of the OMEGA South Africa Fund and the Master Trust may not
invest 25% or more of its assets in securities of issuers in any one industry
(other than securities or obligations issued or guaranteed by the United States
government or any agency or instrumentality thereof and other than the OMEGA
South Africa Fund's investment in the Master Trust).
(viii) The Master Trust may not invest more than 5% of its net asset value
in units in collective investment schemes (as defined in section 75 of the UK
Financial Services Act 1986) and no investment shall be made by the Master Trust
in a collective investment scheme unless it is one in which a UK authorized unit
trust or UK open-ended investment company may invest.
<PAGE>
FEDERAL AND STATE RESTRICTIONS
In order to comply with certain statutes and policies each of the OMEGA
South Africa Fund and the Master Trust will as a matter of operating policy
ensure that:
(i) It does not purchase securities issued by any investment company
registered under the 1940 Act, except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation; provided,
however, that (a) each of the OMEGA South Africa Fund and the Master Trust will
not purchase the securities of any registered investment company if such
purchase at the time thereof would cause more than 10% of the total assets of
the OMEGA South Africa Fund and the Master Trust (taken at the greater of cost
or market value) to be invested in the securities of such issuers or would cause
more than 3% of the outstanding voting securities of any such issuer to be held
by the OMEGA South Africa Fund and the Master Trust and (b) the restrictions in
this paragraph (i) do not apply to the OMEGA South Africa Fund's investment in
the Master Trust.
(ii) It does not invest more than 15% of its net assets in securities that
are not readily marketable or which are subject to legal or contractual
restrictions on resale, including debt securities for which there is no
established market and fixed time deposits and repurchase agreements maturing in
more than seven days, except that all of the investable assets of the OMEGA
South Africa Fund may be invested in the Master Trust.
(iii) At least 50% of its total assets are represented by cash, securities
of other investment companies, and other securities not exceeding with respect
to any issuer 5% of the assets of the OMEGA South Africa Fund and the Master
Trust or 10% of the outstanding securities of such issuer, except that all of
the investable assets of the OMEGA South Africa Fund may be invested in the
Master Trust.
(iv) Not more than 25% of its assets will be invested in securities of any
one issuer, except that all of the investable assets of the OMEGA South Africa
Fund may be invested in the Master Trust.
These restrictions may be changed by the Trustees of the OMEGA South Africa
Fund or the Master Trust without the approval of Shareholders or holders of
beneficial interest in the Master Trust in response to changes in applicable
statutes and policies.
IRISH STOCK EXCHANGE RESTRICTIONS
The Master Trust has adopted investment restrictions in compliance with the
rules of the Irish Stock Exchange and has undertaken to the Non-U.S. Fund and
the OMEGA South Africa Fund not to change these restrictions for so long as the
shares of the Non-U.S. Fund are listed on the Irish Stock Exchange. These
restrictions are that:
(i) no more than 20% of the gross assets of the Master Trust may be lent to
or invested in the securities of any one issuer;
<PAGE>
(ii) the Master Trust will not take legal or management control of
investments in its portfolio;
(iii) not more than 10% of the gross assets of the Master Trust will be
invested in physical commodities;
(iv) not more than 10% of the gross assets of the Master Trust will be
invested in real estate;
(v) the Master Trust will not engage in any property development activity;
(vi) the Master Trust will adhere to the principle of diversification in
relation to any derivative investments;
(vii) the Master Trust will not make any investment which would expose it to
unlimited liability, including participation in an unlimited partnership;
(viii) the Master Trust will only enter into underwriting or sub-underwriting
contracts to a limited extent and incidental to the investment activities of the
Master Trust; and
(ix) the Master Trust will not have a net exposure to a single financing
counterparty that exceeds 20% of its gross assets.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in Part A is adhered to at the time an
investment is made or assets are so utilized, a later change in percentage
resulting from changes in the value of the securities will not be considered a
violation of the restriction.
PORTFOLIO TURNOVER
The Master Trust, in which the OMEGA South Africa Fund invests, will sell
securities whenever the Adviser believes that an issuer's long-term potential to
increase its cash flow and dividends has been reduced or if cash is needed to
invest in issuers which have better long-term growth potential, without regard
to the length of time the securities have been held. The Adviser does not
intend to pursue short-term trading opportunities. The turnover rate of the
Master Trust is not expected to exceed 25% annually. Specific decisions to
purchase or sell securities for the Master Trust are made by a portfolio manager
who is an employee of the Adviser and who is appointed and supervised by its
senior officers. The portfolio manager may serve other clients of the Adviser
in a similar capacity.
<PAGE>
Item 14. Management of the Fund.
The Trustees and officers of the OMEGA South Africa Fund and the Master
Trust and their principal occupations during the past five years are set forth
below. Their titles may have varied during that period. Asterisks indicate
that those Trustees and officers are "interested persons" (as defined in the
1940 Act) of the OMEGA South Africa Fund and the Master Trust.
TRUSTEES
*MICHAEL JOHN LEVETT, South African (aged 58), serves as President of the
OMEGA South Africa Fund and the Master Trust and as Chairman of the Board of
Directors of the Non-U.S. Fund. He is also Chairman of the Board of Directors
of Old Mutual Global Assets Fund Limited (the "Global Fund"). Mr. Levett is the
Chairman and Group Chief Executive of South African Mutual Life Assurance
Society ("Old Mutual"), having been Chief Executive since 1985. He has held,
and continues to hold, a number of non-executive directorships, including Barlow
Limited, an industrial company, Nedcor Limited, a bank holding company, SASOL
Limited, a chemicals company, and South African Breweries Limited. His address
is Mutualpark, Jan Smuts Drive, Pinelands, South Africa.
WILLIAM LESTER BOYAN, American (aged 60), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Non-U.S. Fund.
Mr. Boyan has been a director of John Hancock Mutual Life Insurance Company
since 1983 and was appointed as President and Chief Operations Officer in 1992.
His address is John Hancock Place, 200 Clarendon Street, Boston, Massachusetts.
THOMAS HASKINS DAVIS, Bermudian (aged 49), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Non-U.S. Fund.
Mr. Davis is President and Chief Executive Officer of Winchester Global Trust
Company Limited. He was President of Mid-Ocean Trust Company Limited from 1994
to 1995 and was Manager Corporate Trust at Bank of Bermuda from 1979 to 1993.
His address is Williams House, 20 Reid Street, Hamilton, Bermuda.
<PAGE>
MICHEL JOHN DREW, Bermudian (aged 61), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Non-U.S. Fund.
Mr. Drew has been President and Chief Executive Officer of International
Services Limited, a corporate services operation, since its inception in 1977.
In 1969 he was instrumental in establishing Schroders (Bermuda) Limited, the
principal operating subsidiary in Bermuda of Schroders plc, the London merchant
banking house, and acted as Chief Executive Officer until his retirement in
1994, having been elected a director in 1983 and President in 1991. His address
is c/o International Services Limited, 22 Church Street, Hamilton, Bermuda.
*WILLIAM LANGLEY, South African (aged 54), serves as Treasurer and as a
trustee of the OMEGA South Africa Fund and the Master Trust, as Deputy Chairman
and as a director of the Non-U.S. Fund, and as a director of the Global Fund.
Mr. Langley also is the President and a director of the Adviser. Mr. Langley
has been a member of the general management of Old Mutual since 1981. His
address is P.O. Box HM3085, Hamilton HMNX, Bermuda.
KENNETH RIGBY WILLIAMS, British (aged 61), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Non-U.S. Fund.
Mr. Williams was executive Chairman of Westgate Overseas Limited, an
international investment company, from 1986 to his retirement in 1994. He holds
non-executive directorships with Charles Baynes plc, a company engaged in
distribution and engineering, John Lusty plc, a food distribution company, and
Hudaco Industries Limited, a South African distributor of industrial consumable
goods, and was a director of South African Breweries Limited from 1973 to 1994.
His address is 15 Lime Tree Walk, Virginia Park, Virginia Water, Surrey GU 25
4SW, United Kingdom.
OFFICERS
*MICHAEL JOHN LEVETT serves as President of the OMEGA South Africa Fund and
the Master Trust.
*WILLIAM LANGLEY serves as Treasurer of the OMEGA South Africa Fund and the
Master Trust.
*MELANIE JANE SAUNDERS, British (aged 41), serves as Secretary of the OMEGA
South Africa Fund, the Non-U.S. Fund and the Master Trust. She is also the
Secretary of the Global Fund and the Adviser. Prior to joining the Adviser, Ms.
Saunders was an Officer at The Bank of Bermuda Limited. Her address is 61 Front
Street, Hamilton, Bermuda.
The Trustees of the OMEGA South Africa Fund received the following
remuneration from the Fund during the period from July 1, 1996 to June 30, 1997:
<PAGE>
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT ESTIMATED FROM REGISTRANT
COMPENSATION BENEFITS ACCRUED ANNUAL AND FUND
NAME OF PERSON, FROM AS PART OF FUND BENEFITS UPON COMPLEX PAID
POSITION(1) REGISTRANT EXPENSES RETIREMENT TO TRUSTEES
- --------------- ------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
MICHAEL JOHN LEVETT None None None None
TRUSTEE
WILLIAM FRANCOIS DE LA HARPE BECK $4,583 None None $27,500
TRUSTEE(2)
WILLIAM LESTER BOYAN $5,000 None None $30,000
TRUSTEE
THOMAS HASKINS DAVIS $5,000 None None $20,000
TRUSTEE
MICHEL JOHN DREW $5,000 None None $25,000
TRUSTEE
WILLIAM LANGLEY None None None None
TRUSTEE
KENNETH RIGBY WILLIAMS $5,000 None None $30,000
TRUSTEE
</TABLE>
(1) Each of the above-named Trustees serves as a Trustee of the OMEGA South
Africa Fund and the Master Trust and as a Director of the Non-U.S. Fund.
(2) Mr. Beck served as a Trustee until May 31, 1997.
The declaration of trust of each of the OMEGA South Africa Fund and the
Master Trust provides that it will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their offices with the OMEGA South Africa Fund or the
Master Trust, unless, as to liability to the OMEGA South Africa Fund or the
Master Trust or its investors, it is finally adjudicated that they engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in their offices, or unless with respect to any matter it is
finally adjudicated that they did not act in good faith in the reasonable belief
that their actions were in the best interests of the OMEGA South Africa Fund or
the Master Trust. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent legal counsel, that such
officers or Trustees have not engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.
Item 15. Control Persons and Principal Holders of Securities.
<PAGE>
As of September 22, 1997, Virginia Retirement, Illinois Teachers
Retirement, International Equity Partners, the Art Institute of Chicago and Old
Mutual Investment Advisers owned 34.2%, 45.3%, 13.8%, 5.5% and 1.2%,
respectively, of the outstanding shares of the OMEGA South Africa Fund.
On November 3, 1995 Old Mutual transferred to the Master Trust a portfolio
of South African securities having a market value of approximately U.S.$1
billion. In addition, Old Mutual made a cash capital contribution to the Master
Trust of U.S.$4.75 million. As consideration for the portfolio of South African
securities and the capital contribution, the Master Trust issued substantially
all of its beneficial interest to Old Mutual Fund Holdings (Bermuda) Limited
("Old Mutual Fund Holdings"), a company organized under the laws of Bermuda that
is a wholly-owned subsidiary of Old Mutual. At the closing of the initial
offering (the "Initial Offering") of the shares of beneficial interest
("Shares") of the OMEGA South Africa Fund (the "Initial Closing"), which was
held on November 10, 1995, the OMEGA South Africa Fund invested the proceeds of
the Initial Offering in the Master Trust and was issued a proportionate
beneficial interest in the Master Trust. The Master Trust applied the proceeds
to redeem a corresponding portion of the interest of Old Mutual Fund Holdings in
the Master Trust. Since December 31, 1995, the OMEGA South Africa Fund has
offered Shares on a continuous basis. As of September 22, 1997, Old Mutual Fund
Holdings owned 91.90% of the beneficial interest in the Master Trust and the
OMEGA South Africa Fund owned 0.82% of the beneficial interest in the Master
Trust. The address of Old Mutual Fund Holdings is 61 Front Street, Hamilton,
Bermuda.
At the Initial Closing the Master Trust also issued a portion of its
beneficial interest to the Non-U.S. Fund. Upon completion of the Initial
Closing, the Non-U.S. Fund owned 2.8% of the beneficial interest in the Master
Trust. Since December 31, 1995 the Non-U.S. Fund has offered its shares on a
continuous basis. As of September 22, 1997, the Non-U.S. Fund owned 7.28% of
the beneficial interest in the Master Trust. The address of the Non-U.S. Fund
is 61 Front Street, Hamilton, Bermuda.
As a result of the interests of Old Mutual Fund Holdings and the Non-U.S.
Fund in the Master Trust, the OMEGA South Africa Fund and the Shareholders may
be unable to amend the declaration of trust of the Master Trust, or cause the
Master Trust to take or omit various actions, without the consent of Old Mutual
Fund Holdings and/or the Non-U.S. Fund. The Master Trust has undertaken to the
OMEGA South Africa Fund and to the Non-U.S. Fund that it will not make any
material change to its investment objective or to its investment policies
described in the Private Placement Memorandum included in Part A under
"INVESTMENT OBJECTIVE AND POLICIES -- Investment Policies" except in unforeseen
circumstances and with the approval of a majority vote of the Shareholders and a
majority vote of shareholders of the Non-U.S. Fund.
In addition, the Master Trust has undertaken to the OMEGA South Africa Fund
and the Non-U.S. Fund not to change the restrictions described in Item 13 under
"Investment Restrictions -- Irish Stock Exchange Restrictions" for so long as
the shares of the Non-U.S. Fund are listed on the Irish Stock Exchange. As a
result of this undertaking, the OMEGA South Africa Fund and the Shareholders may
be unable to change those restrictions even if the OMEGA South Africa Fund holds
a majority of the beneficial interest in the Master Trust.
<PAGE>
Old Mutual Investment Advisers, Inc., a subsidiary of Old Mutual, has
invested U.S.$100,000 in the OMEGA South Africa Fund and has been issued 1,000
Shares representing its interest in the OMEGA South Africa Fund. Trustees and
officers as a group currently own less than one percent of the outstanding
Shares.
Item 16. Investment Advisory and Other Services.
Adviser.
Old Mutual Asset Managers (Bermuda) Limited, a wholly-owned indirect
subsidiary of Old Mutual, is the investment adviser to the Master Trust and
manages the Master Trust's assets pursuant to an investment advisory agreement
(the "Advisory Agreement"). The OMEGA South Africa Fund does not have an
investment adviser, because it invests all of its investable assets in the
Master Trust. The Adviser was organized in 1995 as a Bermuda company for the
purpose of advising the Master Trust and the Global Fund. The Adviser's address
is 61 Front Street, Hamilton, Bermuda.
William Langley, the Treasurer and a trustee of the OMEGA South Africa Fund
and the Master Trust, is the Chairman and President and a director of the
Adviser and is a member of the general management of Old Mutual. Kevin James
Carter is the Deputy Chairman and a director of the Adviser and is a member of
the general management of Old Mutual. Melanie Jane Saunders, the Secretary of
the OMEGA South Africa Fund and the Master Trust, is the Secretary of the
Adviser.
The Adviser manages the Master Trust's securities and makes investment
decisions for the Master Trust subject to the organizational documents of the
Master Trust, the 1940 Act, the rules of the Irish Stock Exchange, and such
policies as the Board of Trustees may, with notice to the Adviser, establish.
The Adviser furnishes at its own expense all services, facilities and personnel
necessary or convenient in connection with managing the Master Trust's
investments and effecting securities transactions for the Master Trust. The
Advisory Agreement will continue as long as such continuance is specifically
approved at least annually by the Board of Trustees of the Master Trust or by a
vote of a majority of the outstanding voting securities of the Master Trust,
and, in either case, by vote of a majority of the Trustees who are not
interested persons of the Master Trust or the Adviser, at a meeting called for
the purpose of voting on the Advisory Agreement.
<PAGE>
The Advisory Agreement provides that the Adviser may render services to
others. The Advisory Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Master Trust when
authorized either by a vote of a majority of the outstanding voting securities
of the Master Trust or by a vote of a majority of the Board of Trustees of the
Master Trust, or by the Adviser on not more than 60 days' nor less than 30 days'
written notice, and will automatically terminate in the event of its assignment.
The Advisory Agreement provides that neither the Adviser nor its personnel shall
be liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of security
transactions for the Master Trust, except for willful misfeasance, bad faith or
gross negligence in the performance of its or their duties or reckless disregard
of its or their obligations and duties under the Advisory Agreement.
The Adviser has access to and benefits from investment research and
information generated and used by Old Mutual. The Adviser is responsible for
compensating Old Mutual for research and information provided to the Adviser.
The Master Trust pays the Adviser a management fee of 0.60% per annum of
the Master Trust's daily net assets (the "Management Fee"). The Management Fee
accrues daily on an annualized basis and is paid monthly in arrears.
For the periods from November 3, 1995 (commencement of operations of the
Master Trust) to June 30, 1996 and from July 1, 1996 to June 30, 1997 the fees
payable to the Adviser under the Advisory Agreement were U.S.$4,337,443 (of
which amount U.S.$142,651 was voluntarily waived) and U.S.$5,803,304 (of which
amount U.S. $135,019 was voluntarily waived), respectively.
The Adviser will reduce or rebate a portion of the Management Fee as
necessary so that ordinary operating expenses of the OMEGA South Africa Fund,
including its share of the Management Fee and the amortization of certain
organizational and offering expenses, will not exceed 1.00% per annum of the its
daily net assets. This limitation does not apply to (i) extraordinary expenses
(such as the cost of litigation), (ii) the placement fee and the amount payable
to Old Mutual Fund Holdings in connection with the Initial Offering, (iii) sales
charges on Shares, (iv) brokerage expenses, or (v) the redemption fee charged by
the OMEGA South Africa Fund of 0.65% of redemption proceeds. The Adviser may
not terminate its undertaking to so reduce or rebate a portion of the Management
Fee without giving at least 120 days notice to investors, provided the Adviser
may terminate this undertaking at any time without prior notice if the Adviser
ceases to be investment adviser to the Master Trust.
Administrators.
Pursuant to separate administrative services agreements (each, an
"Administrative Services Agreement"), State Street Bank and Trust Company (the
"OMEGA Fund Administrator") and State Street Cayman Trust Company, Ltd. (the
"Master Trust Administrator"), either directly or through an indirect wholly-
owned subsidiary or an affiliated entity, provide certain administrative,
transfer agency and fund accounting services to the OMEGA South Africa Fund and
the Master Trust, respectively.
<PAGE>
Pursuant to the respective Administrative Services Agreements, the OMEGA
Fund Administrator and the Master Trust Administrator serve as accounting agent,
registrar, transfer agent and dividend disbursing agent for each of the OMEGA
South Africa Fund and the Master Trust, and provide general administrative
services including overseeing the publication of net asset value and the
maintenance of certain books and records, preparing the U.S. federal, state and
local income tax returns, expense budgets and financial information for semi-
annual and annual reports, proxy statements and other communications, preparing
periodic financial reports and reports relating to the business and affairs of
the OMEGA South Africa Fund and the Master Trust, reporting to the Board of
Trustees of the OMEGA South Africa Fund and the Master Trust regarding the
performance of the custodian and independent public accountants, overseeing and
reviewing calculations of fees paid to the Adviser and the custodian, helping to
establish accounting policies, reviewing implementation of any dividend
reinvestment programs, responding to investor inquiries, preparing materials for
board meetings and making presentations where appropriate.
Either party to the Administrative Services Agreement with the OMEGA South
Africa Fund may, in its discretion, terminate such Agreement for any reason by
giving the other party at least 60 days prior written notice of termination.
The Administrative Services Agreement with the OMEGA South Africa Fund also
provides that the OMEGA Fund Administrator shall not be liable for any loss,
liability, claim or expense suffered or incurred by the OMEGA South Africa Fund
unless caused by its own fraud, willful default, gross negligence or willful
misconduct or that of its agents or employees.
The Administrative Services Agreement with the Master Trust remains in
effect until it is terminated and may be terminated without penalty by either
party on not less than 60 days' written notice. The Administrative Services
Agreement with the Master Trust also provides that the Master Trust
Administrator shall not be liable for any loss, liability, claim or expense
suffered or incurred by the Master Trust unless caused by its own fraud, willful
default, gross negligence or willful misconduct or that of its agents or
employees.
The liability of each of the OMEGA Fund Administrator and the Master Trust
Administrator under its respective Administrative Services Agreement shall be
limited to U.S.$5 million for liabilities and losses arising in connection with
certain functions relating to tax and financial reporting, securities law
compliance and recordkeeping. This limitation on liability includes, but is not
limited to, any liability relating to qualification of the OMEGA South Africa
Fund or the Master Trust as a regulated investment company in the U.S. or any
liability relating to the OMEGA South Africa Fund's or the Master Trust's
compliance with any applicable tax or securities statute, regulation or ruling
of any jurisdiction.
The Master Trust Administrator receives an annual administration fee from
the Master Trust calculated as a percentage of the Master Trust's average daily
assets. The percentage will range from 0.05% to 0.01% per annum according to
the assets of the Master Trust, as follows:
First U.S.$500 million 0.05%
Next U.S.$500 million 0.025%
Over U.S.$1 billion 0.01%
If the assets of the Master Trust total U.S.$1 billion during a year, the
administration fee percentage for that year will be 0.0375%. The OMEGA South
Africa Fund pays the OMEGA Fund Administrator an annual administration fee of
U.S.$40,000.
<PAGE>
For the periods from November 10, 1995 (commencement of operations of the
OMEGA South Africa Fund) to June 30, 1996 and from July 1, 1996 to June 30,
1997, the fees paid to the OMEGA Fund Administrator under the Administrative
Services Agreement with the OMEGA South Africa Fund were U.S.$25,246 and
U.S.$40,000, respectively. For the periods from November 3, 1995 (commencement
of operations of the Master Trust) to June 30, 1996 and from July 1, 1996 to
June 30, 1997, the fees paid to the Master Trust Administrator under the
Administrative Services Agreement with the Master Trust were U.S.$252,158 and
U.S.$374,991, respectively.
The Master Trust Administrator is a wholly-owned subsidiary of State Street
Bank and Trust Company.
Placing Agents.
The OMEGA South Africa Fund has engaged Fleming Martin Inc., Rand
International Securities LLC and SBC Warburg Inc. (collectively, the "Placing
Agents") to act as placement agents to offer and sell Shares (the "Offering") on
a best efforts basis pursuant to a placing agreement (the "Placing Agreement")
with the Master Trust, the OMEGA South Africa Fund, the Adviser and Old Mutual
Fund Holdings. The engagement of the Placing Agents is non-exclusive, and the
OMEGA South Africa Fund may from time to time, subject to the 1940 Act and after
reasonable prior consultation with the existing Placing Agents, appoint one or
more additional placing agents. The obligations of the OMEGA South Africa Fund
and the Master Trust under the Placing Agreement continue in effect for a period
beyond one year from the date thereof only so long as such continuance is
approved at least annually as required under the 1940 Act. The Placing
Agreement may be terminated without penalty by a majority of the members of the
Board of Trustees of the Master Trust or the OMEGA South Africa Fund who are not
interested persons of the Master Trust or the OMEGA South Africa Fund,
respectively, and have no direct or indirect financial interest in the operation
of the respective placement plans adopted by the Master Trust or the OMEGA South
Africa Fund or in any agreements related to either such plan, or by the vote of
a majority of the outstanding voting securities of the Master Trust or the OMEGA
South Africa Fund, on not less than 60 days' written notice to each other party
to the Placing Agreement. The Placing Agreement will automatically terminate as
to any Placing Agent in the event of its assignment, as defined in the 1940 Act,
by such Placing Agent.
A sales charge of up to 0.35% of the net asset value of each Share sold to
a subscriber ("Subscriber") may be applied by the Placing Agents. The sales
charge will be paid by the Subscriber. Old Mutual Fund Holdings may make
additional payments to the Placing Agents or other parties equal to 0.25% of the
price of Shares sold in the Offering. Each of the OMEGA South Africa Fund and
the Master Trust has agreed to indemnify the Placing Agents against certain
liabilities, including liabilities under applicable securities laws.
The Master Trust and the OMEGA South Africa Fund have each adopted a
placement plan in accordance with Rule 12b-1 under the 1940 Act (each, a
"Placement Plan"). The Placement Plan adopted by the Master Trust provides for
the payment of certain fees and amounts in connection with the placement of
Shares. Furthermore, the Master Trust Placement Plan provides that the Master
Trust may reimburse the Adviser, or another party, for certain marketing
expenses incurred (or advanced) in the placement of shares of the OMEGA South
Africa Fund and the Non-U.S. Fund, provided the amount of such reimbursements in
any year will not exceed 0.05% of the average daily net assets of the Master
Trust for such year. Under the Placement Plan, the Master Trust may pay
additional fees in connection with the placement of shares of the OMEGA South
Africa Fund and the Non-U.S. Fund as determined by the Trustees, provided such
fees for any year shall not, together with any reimbursement of expenses under
the next preceding sentence for such year, exceed 0.05% of the average daily net
assets of the Master Trust for such year.
<PAGE>
The Placement Plan for the OMEGA South Africa Fund provides for (i) the
reimbursement of the Adviser or other persons for certain marketing expenses
incurred or advanced to others provided the amount of such reimbursements in any
year will not exceed 0.05% of the average daily net assets of the OMEGA South
Africa Fund for such year, and (ii) the payment of fees by the OMEGA South
Africa Fund in connection with the placement of Shares, in an amount for any
year that, when added to any reimbursements of marketing expenses by the OMEGA
South Africa Fund for such year, will not exceed 0.05% of the average daily net
assets of the OMEGA South Africa Fund for such year.
Each Placement Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trustees of the
Master Trust or the OMEGA South Africa Fund, as appropriate, and a majority of
the Trustees who are not "interested persons" of the Master Trust or of the
OMEGA South Africa Fund, as the case may be, and who have no direct or indirect
financial interest in the operation of the Placement Plan or in any agreement
related to such Plan (for purposes of this paragraph "Non-Interested Trustees").
Each Placement Plan requires that the Treasurer of the Master Trust or of the
OMEGA South Africa Fund, as appropriate, provide to the Master Trust's or the
OMEGA South Africa Fund's Board of Trustees, and the Board of Trustees review,
at least quarterly, a written report of the amounts expended (and the purposes
therefor) under the Placement Plan and any related agreement. Each Placement
Plan further provides that the selection and nomination of the Non-Interested
Trustees is committed to the discretion of the disinterested Trustees (as
defined in the 1940 Act) then in office. Each Placement Plan may be terminated
at any time by a vote of a majority of the Non-Interested Trustees or by a vote
of a majority of the outstanding voting securities of the Master Trust or of the
OMEGA South Africa Fund, as appropriate. Each Placement Plan may not be amended
to increase materially the amount of the Master Trust's or of the OMEGA South
Africa Fund's permitted expenditures thereunder without the approval of a
majority of the outstanding voting securities of the Master Trust or of the
OMEGA South Africa Fund and may not be materially amended in any case without a
vote of a majority of both the Trustees and Non-Interested Trustees of the
Master Trust or the OMEGA South Africa Fund, as the case may be. Each of the
Master Trust and the OMEGA South Africa Fund will preserve copies of its
Placement Plan and any agreements or reports made pursuant to its Placement Plan
for a period of not less than six years from the date of the Plan, and for the
first two years such agreements and reports will be maintained in an easily
accessible place. For the period from November 3, 1995 (commencement of
operations of the Master Trust) to June 30, 1996 U.S.$2,594,688 in payments and
for the period July 1, 1996 to June 30, 1997 no payments were made under the
Master Trust's Placement Plan. For the periods from November 10, 1995
(commencement of operations of the OMEGA South Africa Fund) to June 30, 1996 and
from July 1, 1996 to June 30, 1997 U.S.$2,970 and U.S.$3,824, respectively in
payments were made under the OMEGA South Africa Fund's Placement Plan.
Custodian.
<PAGE>
The OMEGA South Africa Fund and the Master Trust have each entered into
separate custodian contracts with State Street Bank and Trust Company (the
"Custodian") pursuant to which the Custodian acts as custodian for the OMEGA
South Africa Fund and for the Master Trust. The principal business address of
the Custodian is 225 Franklin Street, Boston, MA 02110.
The Custodian has entered into subcustodian agreements (each a
"Subcustodian Agreement") with Standard Bank of South Africa Limited and with
State Street London Limited (each a "Subcustodian"), pursuant to which Standard
Bank of South Africa Limited and State Street London Limited provide custodial
services in South Africa and the United Kingdom, respectively, for assets of the
Master Trust. As of September 22, 1997, Old Mutual held 20.47% of the
outstanding voting securities of Standard Bank of South Africa Limited. State
Street London Limited is a wholly-owned subsidiary of State Street Bank and
Trust Company. The Trustees of the Master Trust have approved and adopted each
Subcustodian Agreement and have found that maintaining the Master Trust's assets
in South Africa and the United Kingdom and with each Subcustodian is in the best
interests of the Master Trust on behalf of its investors. Each Subcustodian
will be paid, by the Custodian, such compensation pursuant to each Subcustodian
Agreement as may be mutually agreed upon from time to time.
Independent Accountants.
KPMG Peat Marwick LLP are the independent public accountants for the OMEGA
South Africa Fund. The address of KPMG Peat Marwick LLP is 99 High Street,
Boston, Massachusetts 02110. KPMG Peat Marwick, Vallis Building, Hamilton HM 11
Bermuda, are the independent public accountants for the Master Trust.
Item 17. Brokerage Allocation and Other Practices.
The primary consideration in placing the Fund's securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of the Master Trust and other clients
of the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees may be available to the Adviser on the tender of
the Master Trust's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Master Trust by the
Adviser. At present no other recapture arrangements are in effect.
<PAGE>
Under the Advisory Agreement, in connection with the selection of brokers
or dealers and the placing of orders for the purchase and sale of securities,
the Adviser is directed to seek for the Master Trust in its best judgment,
prompt execution in an effective manner at the most favorable price. Subject to
this requirement of seeking the most favorable price, securities may be bought
from or sold to broker-dealers who have furnished statistical, research and
other information or services to the Adviser or the Master Trust, subject to any
applicable laws, rules and regulations. The Adviser will adhere to the
restrictions adopted by the Fund which are designed to address the substantial
position of Old Mutual and its wholly-owned subsidiaries in the South African
securities markets.
The Management Fee will not be reduced as a consequence of the Adviser's
receipt of brokerage and research services. While such services are not
expected to reduce the expenses of the Adviser, the Adviser would, through the
use of the services, avoid the additional expenses which would be incurred if it
should attempt to develop comparable information through its own staff.
In certain instances there may be securities that are suitable as an
investment for the Master Trust as well as for one or more of the Adviser's
other clients. Investment decisions for the Master Trust and for the Adviser's
other clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could adversely affect
the price of or the size of the position obtainable for the security for the
Master Trust. When purchases or sales of the same security for the Master Trust
and for other portfolios managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales. Similar considerations
apply with respect to investment advisory services provided by Old Mutual and
other affiliates of the Adviser to their respective clients. For the periods
from November 3, 1995 (commencement of operations of the Master Trust) to June
30, 1996 and from July 1, 1996 to June 30, 1997, the Master Trust paid brokerage
commissions of approximately U.S.$117,778 and U.S.$334,733, respectively.
Item 18. Capital Stock and Other Securities.
Under the declaration of trust of the OMEGA South Africa Fund, the Trustees
of the OMEGA South Africa Fund are authorized to issue an unlimited number of
transferable Shares and may divide or combine such interests into a greater or
lesser number and may classify or reclassify any unissued Shares into one or
more series or classes of Shares. The Offering has not been registered under
the 1933 Act, and Shares will therefore be "restricted securities." The OMEGA
South Africa Fund may require as a condition of any transfer of shares receipt
of an opinion of counsel, in form and substance satisfactory to the OMEGA South
Africa Fund, to the effect that a proposed transfer may be effected without
registration under the 1933 Act or applicable state securities laws.
<PAGE>
Each whole Share is entitled to one vote as to any matter on which it is
entitled to vote. Shareholders do not have cumulative voting rights, and
Shareholders owning more than 50% of the outstanding Shares may elect all of the
Trustees of the OMEGA South Africa Fund if they choose to do so and in such
event the other Shareholders would not be able to elect any Trustee. As a
Massachusetts business trust, the OMEGA South Africa Fund is not required to
hold, and has no present intention of holding, annual meetings of Shareholders
but the OMEGA South Africa Fund will hold special meetings of Shareholders when
in the judgment of the Trustees it is necessary or desirable to submit matters
for a Shareholder vote.
The OMEGA South Africa Fund's activities are supervised by a Board of
Trustees. Shareholders will be entitled to vote on the election of the Trustees
of the OMEGA South Africa Fund and certain important matters, including (i)
certain amendments to the declaration of trust of the OMEGA South Africa Fund
and (ii) changes in the investment objective and fundamental investment
restrictions of the OMEGA South Africa Fund. Trustees of the OMEGA South Africa
Fund may be removed by a vote of Shareholders holding two-thirds of outstanding
Shares. Each Share is entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation of the Fund. Shares have no
preference, pre-emptive, appraisal, conversion or exchange rights except as the
Trustees may determine. Shares, when issued, are fully paid and non-assessable.
In the event that either the OMEGA South Africa Fund or the Master Trust
votes to dissolve, Old Mutual will be entitled to acquire all, but not less than
all, of the Shares at a price equal to their aggregate net asset value. No
redemption fee will apply in this case. The Trustees shall promptly notify each
Shareholder of any exercise of Old Mutual's right of purchase and request that
Shareholders submit any certificates representing Shares to the Transfer Agent,
duly endorsed in blank, on or before the date established for the purchase (the
"Purchase Date"). In such case any certificate representing Shares that is not
submitted to the Transfer Agent shall, from and after the Purchase Date,
represent only the right to receive the price for the Shares. In the event Old
Mutual notifies the Trustees that it is exercising its right of purchase, the
OMEGA South Africa Fund shall not without the prior written consent of Old
Mutual, at any time, (a) merge, consolidate, or reorganize, (b) make any
transfer of its property outside of the ordinary course, (c) make any in-kind
distributions of its property, or (d) amend the declaration of trust of the
OMEGA South Africa Fund. No merger, consolidation, sale of assets or
reorganization that terminates, materially modifies, or materially reduces the
practical effect or benefit of Old Mutual's right to purchase the Shares shall
be effected without the prior written consent in each instance of Old Mutual.
The OMEGA South Africa Fund may enter into a merger or consolidation, or
sell all or substantially all of its assets, if approved by the vote of the
holders of two-thirds of the outstanding Shares of all series of the OMEGA South
Africa Fund voting as a single class, or of the affected series of the OMEGA
South Africa Fund, as the case may be, or by an instrument in writing without a
meeting, consented to by the vote of the holders of two-thirds of the
outstanding Shares of all series of the OMEGA South Africa Fund voting as a
single class, or of the affected series of the OMEGA South Africa Fund, as the
case may be; provided, however, that if such merger, consolidation, or transfer
is recommended by the Trustees of the OMEGA South Africa Fund, the "vote of a
majority of the outstanding voting securities" of the OMEGA South Africa Fund,
as defined in the 1940 Act ("Majority Shareholder Vote") shall be sufficient
authorization; and any such merger, consolidation, or sale shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The OMEGA South Africa Fund may be terminated
(i) by the Trustees with written notice to Shareholders or (ii) by a Majority
Shareholder Vote.
<PAGE>
The OMEGA South Africa Fund is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
business trust may, under certain circumstances, be held personally liable as
partners for its obligations and liabilities. However, the declaration of trust
of the OMEGA South Africa Fund contains an express disclaimer of Shareholder
liability for acts or obligations of the OMEGA South Africa Fund and provides
for indemnification and reimbursement of expenses by the OMEGA South Africa Fund
for any Shareholder held personally liable for the obligations of the OMEGA
South Africa Fund. The declaration of trust of the OMEGA South Africa Fund also
provides that the OMEGA South Africa Fund may maintain appropriate insurance
(e.g., fidelity bonding and errors and omissions insurance) for the protection
of the OMEGA South Africa Fund, its Shareholders, Trustees, officers, employees,
independent contractors and agents covering possible tort and other liabilities.
Thus, the risk of a Shareholder incurring financial loss on account of
Shareholder liability is limited to circumstances in which both inadequate
insurance existed and the OMEGA South Africa Fund itself was unable to meet its
obligations.
The declaration of trust of the OMEGA South Africa Fund further provides
that obligations of the OMEGA South Africa Fund are not binding upon the
Trustees individually and that the Trustees will not be liable for any action or
failure to act, but nothing in the declaration of trust protects a Trustee
against any liability to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his or her office.
The Master Trust is organized as a trust under the laws of the Commonwealth
of Massachusetts. The Master Trust's declaration of trust provides that
investors in the Master Trust (including the OMEGA South Africa Fund and the
Non-U.S. Fund) are each jointly and severally liable for the liabilities and
obligations of the Master Trust. However, the risk of the OMEGA South Africa
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Master Trust
itself was unable to meet its obligations. Accordingly, the Trustees of the
OMEGA South Africa Fund believe that neither the OMEGA South Africa Fund nor its
Shareholders will be held liable for obligations of the Master Trust in excess
of the amount of their investments in, respectively, the Master Trust or the
OMEGA South Africa Fund.
The beneficial interest in the Master Trust consists of non-transferable
interests. Each investor in the Master Trust ("Investor") may add to or reduce
its investment in the Master Trust on each day the New York Stock Exchange is
open for trading ("Business Day").
<PAGE>
Upon the determination of the net asset value of the Master Trust at 10:00 a.m.
(Eastern time) on each Business Day, the balance of the Investor's book capital
account (the "Book Capital Account Balance") shall then be adjusted as follows:
(a) the excess, if any, of the net asset value as determined on such Business
Day (adjusted to eliminate the effect of any capital contributions or
distributions described in clauses (c) or (d) below) over the net asset value as
last determined shall be allocated among the Investors in accordance with the
amounts of their respective Book Capital Account Balances, and the amount so
allocated shall be added to the Book Capital Account Balance of each Investor;
(b) the excess, if any, of the net asset value as last determined over the net
asset value as determined on such Business Day (adjusted to eliminate the effect
of any capital contributions or distributions described in clauses (c) or (d)
below) shall be allocated among the Investors in accordance with the amounts of
their respective Book Capital Account Balances, and the amounts so allocated
shall be subtracted from the respective Book Capital Account Balance of each
Investor; (c) the Book Capital Account Balance of each Investor shall be
increased to reflect any capital contributions, to the extent such Investor's
Book Capital Account Balance has not previously been increased to reflect the
same; and (d) the Book Capital Account Balance of each Investor shall be
decreased to reflect the amount of money or the fair market value of property
other than money (net of liabilities secured by such property that the Investor
is considered to assume or take subject to) distributed (or deemed distributed)
to such Investor by the Master Trust in respect of the decrease or redemption of
such Investor's Interest (or in connection with a termination of the Master
Trust), to the extent such Investor's Book Capital Account Balance has not
previously been decreased to reflect the same. The Book Capital Account Balance
of each Investor as determined above shall be the Book Capital Account Balance
of that Investor until the next calculation of that Investor's Book Capital
Account Balance.
If the Master Trust seeks the vote of the OMEGA South Africa Fund on any
matter (other than a vote to continue the Master Trust upon the withdrawal of
another investor in the Master Trust, in which circumstances the Trustees of the
OMEGA South Africa Fund may vote to continue the Master Trust), the OMEGA South
Africa Fund shall submit the matter to a vote of its Shareholders and shall
exercise its Master Trust voting rights proportionately as instructed by the
Shareholders that participate in the vote. It is possible that a majority of
the investors in the Master Trust (which may comprise Old Mutual Fund Holdings)
will exercise their Master Trust voting rights in a manner contrary to the vote
of the OMEGA South Africa Fund's Shareholders.
Item 19. Purchase, Redemption and Pricing of Securities.
The net asset value per Share is determined each Business Day. As of the
date of this Part B, the New York Stock Exchange is open for trading every
weekday except for the following holidays (or the days on which they are
observed): New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. This
determination of net asset value is made by the OMEGA Fund Administrator once
each day as of 10:00 a.m. (Eastern time), being after the close of business of
the JSE for that day, by adding the market value of all securities and other
assets of the OMEGA South Africa Fund (including the value of its interest in
the Master Trust), then subtracting the OMEGA South Africa Fund's liabilities,
and then dividing the result by the number of outstanding Shares. The Master
Trust Administrator calculates the net asset value of the Master Trust as of
10:00 a.m. (Eastern time) on each Business Day. The net asset value of the
Master Trust at any given time and from time to time shall be the difference of
(a) the total assets then held by the Master Trust, minus (b) the face amount of
all Master Trust debts and obligations.
The Master Trust generally values JSE listed securities based on the
current JSE ruling price. The ruling price for a JSE listed security on any day
is the last sale price, adjusted upward to any current higher bid price or
downward to any current lower offer price. If the securities did not trade on
the JSE on the date of the valuation, they may be valued on a different basis
believed by the Trustees of the Master Trust to reflect their fair value. Values
are converted from S.A. Rand to U.S. dollars using exchange rates prevailing as
of the time the net asset value is to be determined. Trading may take place in
securities held by the Master Trust on days that are not Business Days and on
which it will not be possible to purchase or redeem Shares.
The Fund may, from time to time, revise its procedures relating to the
calculation of net asset value to reflect changes in JSE trading periods and
practices.
<PAGE>
Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the New
York Stock Exchange and may also take place on days on which the New York Stock
Exchange is closed. If events materially affecting the value of non-U.S.
securities occur between the time when the exchange on which they are traded
closes and the time when the OMEGA South Africa Fund's net asset value is
calculated, such securities will be valued at fair value in accordance with
procedures established by and under the general supervision of the Board of
Trustees of the OMEGA South Africa Fund.
Investors may request redemption of Shares on any Business Day at their net
asset value (as determined as of 10:00 a.m. (Eastern time) on the next Business
Day), subject to a redemption fee charged by the OMEGA South Africa Fund of
0.65% of redemption proceeds. A redemption is treated as a sale of the Shares
redeemed and could result in taxable gain or loss to the Shareholder making the
redemption.
Subject to compliance with applicable regulations, the OMEGA South Africa
Fund and the Master Trust have each reserved the right to pay the redemption
price of Shares or beneficial interests in the Master Trust, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the Shares or
beneficial interests being sold. If a holder of Shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
The Trustees of the OMEGA South Africa Fund have the power at any time to
redeem Shares in the OMEGA South Africa Fund of any Shareholder at a redemption
price determined in accordance with the provisions of the declaration of trust
of the OMEGA South Africa Fund if at such time the aggregate net asset value of
the Shares (or the number of Shares) owned by such Shareholder is less than a
minimum amount (or number of Shares), if any, as determined from time to time by
the Trustees. However, the Trustees have not established any such minimum
amount (or number of shares), and no action to establish a minimum amount (or
number of shares) has been taken by the Trustees.
<PAGE>
Each of the OMEGA South Africa Fund and the Master Trust may declare a
suspension of the right of redemption or postpone the date of payment of
redemption proceeds for the whole or any part of any period (a) during which the
New York Stock Exchange is closed other than customary week-end and holiday
closings, (b) during which trading on the New York Stock Exchange is restricted,
(c) during which an emergency exists as a result of which disposal by the OMEGA
South Africa Fund or the Master Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the OMEGA South
Africa Fund or the Master Trust fairly to determine the value of its net assets,
or (d) during which the SEC for the protection of Shareholders by order permits
the suspension of the right of redemption or postponement of the date of payment
of the redemption proceeds; provided that applicable rules and regulations of
the SEC shall govern as to whether the conditions prescribed in (b), (c), or (d)
exist. Such suspension shall take effect at such time as the OMEGA South Africa
Fund or the Master Trust shall specify but not later than the close of business
on the Business Day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment of the redemption proceeds
until the OMEGA South Africa Fund or the Master Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event on
the first day on which the New York Stock Exchange shall have reopened or the
period specified in (b) or (c) shall have expired (as to which, in the absence
of an official ruling by the SEC, the determination of the OMEGA South Africa
Fund or the Master Trust shall be conclusive). In the case of a suspension of
the right of redemption, an investor may either withdraw his request for
redemption or receive payment based on the net asset value upon the termination
of the suspension.
The OMEGA South Africa Fund is offering Shares on a continuous basis at a
price equal to their net asset value. A sales charge of up to 0.35% of that
price may be applied by the Placing Agents. The minimum purchase for any
investor is U.S.$5 million (exclusive of sales charge), provided the minimum
purchase may, in particular circumstances, be reduced for certain investors to
not less than U.S.$1 million (exclusive of sales charge).
The OMEGA South Africa Fund is offering the Shares without registration
under the 1933 Act as a private placement pursuant to Regulation D under the
1933 Act. The OMEGA South Africa Fund is also relying upon appropriate
exemptions from the registration requirements of applicable state securities or
blue sky laws. The Shares are being offered and sold in the U.S. only to
investors that are "accredited investors" as defined in Regulation D.
The Offering may be terminated or modified by the OMEGA South Africa Fund.
In the event that the terms of the Offering are materially modified, the new
terms will be set forth in a supplement to the Private Placement Memorandum
relating to the Fund. Investors that purchase Shares in the Offering will not
have any pre-emptive rights with respect to any further offerings.
Item 20. Tax Status.
The OMEGA South Africa Fund has elected to be treated and intends to
qualify each year as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), by meeting all
applicable requirements of Subchapter M, including requirements as to the nature
of the OMEGA South Africa Fund's gross income, the amount of OMEGA South Africa
Fund distributions, and the composition and holding period of the OMEGA South
Africa Fund's portfolio assets. Provided all such requirements are met, no U.S.
federal income or excise taxes will be required to be paid by the OMEGA South
Africa Fund, although non-U.S. source income earned by the OMEGA South Africa
Fund may be subject to non-U.S. taxes. If the OMEGA South Africa Fund should
fail to qualify as a "regulated investment company" for any year, the OMEGA
South Africa Fund would incur a regular corporate federal income tax upon its
taxable income, and distributions by the OMEGA South Africa Fund would generally
be taxable as ordinary income to Shareholders. The Master Trust intends to
qualify as a "partnership" under the Code, with the result that the OMEGA South
Africa Fund will be required to take into account its pro rata share of the
Master Trust's income, gain, loss, expense, credit, and other applicable items.
<PAGE>
Dividends and capital gains distributions from the OMEGA South Africa Fund
are subject to federal income tax and may also be subject to state and local
taxes. Generally, distributions from the OMEGA South Africa Fund's net
investment income and short-term capital gains will be taxed as ordinary income.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses) will be taxed as long-term capital
gains regardless of how long Shares have been held. The foregoing rules apply
without regard to whether the dividends and distributions are paid in cash or
reinvested in additional Shares.
Any OMEGA South Africa Fund dividend that is declared in October, November
or December of any calendar year, that is payable to Shareholders of record in
such a month and that is paid the following January will be treated as if
received by the Shareholders on December 31 of the year in which the dividend is
declared. The OMEGA South Africa Fund will notify Shareholders regarding the
federal tax status of its distributions after the end of each calendar year.
Any OMEGA South Africa Fund distribution will have the effect of reducing
the per Share net asset value of the OMEGA South Africa Fund by the amount of
the distribution. Shareholders purchasing Shares shortly before the record date
of any distribution may thus pay the full price for the Shares and then
effectively receive a portion of the purchase price back as a taxable
distribution.
In general, any gain or loss realized upon a taxable disposition of Shares
by a Shareholder of the OMEGA South Africa Fund that holds such Shares as a
capital asset will be treated as long-term capital gain or loss if the Shares
have been held for more than twelve months and otherwise as a short-term capital
gain or loss. However, any loss realized upon a disposition of Shares in the
OMEGA South Africa Fund held for six months or less will be treated as long-term
capital loss to the extent of any distributions of net capital gain made with
respect to those Shares. Any loss realized upon a disposition of Shares may
also be disallowed under rules relating to wash sales.
The OMEGA South Africa Fund's transactions in forward currency contracts
will be subject to special tax rules that may affect the amount, timing, and
character of OMEGA South Africa Fund income. For example, certain positions
held for the OMEGA South Africa Fund on the last business day of each taxable
year will be marked to market (i.e., treated as if closed out) on that day, and
any gain or loss associated with the positions will be treated as 60% long-term
and 40% short-term capital gain or loss. Certain positions held for the OMEGA
South Africa Fund that substantially diminish its risk of loss with respect to
other positions in its portfolio may constitute "straddles," and may be subject
to special tax rules that would cause deferral of Fund losses, adjustments in
the holding periods of OMEGA South Africa Fund securities, and conversion of
short-term into long-term capital losses. Certain tax elections exist for
straddles that may alter the effects of these rules.
Foreign exchange gains and losses realized by the OMEGA South Africa Fund
or marked to market will generally be treated as ordinary income and losses. Use
of foreign currencies for non-hedging purposes may be limited in order to avoid
a tax on the OMEGA South Africa Fund.
<PAGE>
Certain uses of foreign currency and foreign currency forward contracts and
investment by the OMEGA South Africa Fund in certain "passive foreign investment
companies" may be limited, or a tax election may be made, if available, in order
to enable the OMEGA South Africa Fund to preserve its qualification as a
regulated investment Company and to avoid imposition of a tax on the OMEGA South
Africa Fund.
Investment income received by the OMEGA South Africa Fund from non-U.S.
sources may be subject to non-U.S. taxes. There are currently no South African
taxes that would apply to the earnings of the OMEGA South Africa Fund, although
in the future the Master Trust may be required to pay South African taxes on its
investment income. The OMEGA South Africa Fund may also pay taxes in countries
other than the United States and South Africa. The United States has entered
into tax treaties with many foreign countries that may entitle the OMEGA South
Africa Fund to a reduced rate of tax or an exemption from tax on income from
non-U.S. securities; the OMEGA South Africa Fund intends to qualify for treaty
reduced rates where available. At present, there is no tax treaty in effect
between the United States and South Africa. It is not possible to determine the
OMEGA South Africa Fund's effective rate of foreign tax in advance since the
amount of the OMEGA South Africa Fund's assets to be invested within various
countries is not known.
The OMEGA South Africa Fund expects to be able to elect to "pass through"
to its Shareholders non-U.S. income taxes paid. If the OMEGA South Africa Fund
so elects, Shareholders will be required to treat their pro rata portion of the
non-U.S. income taxes paid by the Master Trust as part of the amounts
distributed to them by the OMEGA South Africa Fund and thus includable in their
gross income for federal income tax purposes. Shareholders who itemize
deductions would then be allowed to claim a deduction or credit (but not both)
on their federal income tax returns for such amounts, subject to certain
limitations. Shareholders who do not itemize deductions would (subject to such
limitations) be able to claim a credit but not a deduction. No deduction for
such amounts will be permitted to individuals in computing their alternative
minimum tax liability. If the OMEGA South Africa Fund does not qualify or elect
to "pass through" to its Shareholders non-U.S. income taxes paid by the Master
Trust, Shareholders will not be able to claim any deduction or credit for any
part of the non-U.S. taxes paid by the Master Trust.
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at a rate of 30%. The OMEGA South
Africa Fund intends to withhold tax payments at a rate of 30% on taxable
dividends and other payments to Non-U.S. Persons that are subject to such
withholding, unless a lower rate is permitted under an applicable treaty. Any
amounts overwithheld may be recovered by such persons by filing a claim for
refund with the U.S. Internal Revenue Service within the time period appropriate
to such claims. Distributions received from the OMEGA South Africa Fund by Non-
U.S. Persons also may be subject to tax under the laws of their own
jurisdictions. The OMEGA South Africa Fund is also required in certain
circumstances to apply backup withholding at a rate of 31% on taxable dividends
and redemption proceeds paid to any Shareholder (including a Non-U.S. Person)
who does not furnish to the OMEGA South Africa Fund certain information and
certifications or who is otherwise subject to backup withholding. Backup
withholding will not, however, be applied to payments that have been subject to
30% withholding.
<PAGE>
Item 21. Underwriters.
Not applicable.
Item 22. Calculation of Performance Data.
A total rate of return quotation for the OMEGA South Africa Fund is
calculated for any period by (a) dividing (i) the sum of the net asset value per
Share on the last day of the period and the net asset value per Share on the
last day of the period of Shares purchasable with dividends and capital gains
distributions declared during such period with respect to a Share held at the
beginning of such period and with respect to Shares purchased with such
dividends and capital gains distributions, by (ii) the net asset value (or
offering price) per Share on the first day of such period, and (b) subtracting 1
from the result. Any annualized total rate of return quotation is calculated by
(x) adding 1 to the period total rate of return quotation calculated above, (y)
raising such sum to a power which is equal to 365 divided by the number of days
in such period, and (z) subtracting 1 from the result. Total rates of return
may also be calculated on Shares at various sales charge levels or at net asset
value. Any performance data which is based on a reduced sales charge or net
asset value per Share would be reduced if the maximum sales charge were taken
into account.
Any current yield quotation for the OMEGA South Africa Fund consists of an
annualized historical yield, carried at least to the nearest hundredth of one
percent, based on a 30 calendar day or one month period and is calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the OMEGA South Africa Fund's net investment income earned during the period by
the product of the average daily number of Shares outstanding during the period
that were entitled to receive dividends and the net asset value (or offering
price) per Share on the last day of the period, (b) subtracting 1 from the
result, and (c) multiplying the result by 2.
Item 23. Financial Statements.
The financial statements contained in the Annual Report of the OMEGA South
Africa Fund for the year ended June 30, 1997, as filed with the Securities and
Exchange Commission, via the EDGAR system, on September 2, 1997 (Accession
Number 0000912057-97-029644), are incorporated by reference into this Part B.
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Financial Statements Included in Part A: Not applicable.
Financial Statements Included in Part B:
Registrant:
Statement of Assets and Liabilities at June 30, 1997*
Statement of Operations for the year ended June 30, 1997*
Statement of Changes in Net Assets for the period from
November 10, 1995 (commencement of operations) to June 30, 1996 and
for the year ended June 30, 1997*
Financial Highlights for the period from November 10, 1995
(commencement of operations) to
June 30, 1996 and for the year ended June 30, 1997*
Notes to Financial Statements*
Old Mutual South Africa Equity Trust:
Schedule of Investments - June 30, 1997*
Statement of Assets and Liabilities at June 30, 1997*
Statement of Operations for the year ended June 30, 1997*
Statement of Changes in Net Assets for the period from November 3,
1995 (commencement of operations) to June 30, 1996 and for the year
ended June 30, 1997*
Financial Highlights for the period from November 3, 1995
(commencement of operations) to
June 30, 1996 and for the year ended June 30, 1997*
Notes to Financial Statements*
* Financial information is incorporated by reference to the
Registrant's Annual Report for the fiscal year ended June 30, 1997 (Accession
Number 0000912057-97-029644)
(b) Exhibits:
*1(a) Declaration of Trust of the Registrant
***1(b) Amendment to the Declaration of Trust of the Registrant
1(c) Second Amendment to the Declaration of Trust of the Registrant
*2 By-Laws of Registrant
*5 Investment Advisory Agreement between Old Mutual South Africa Equity
Trust (the "Master Trust") and Old Mutual Asset Managers (Bermuda) Limited (the
"Adviser")
*6(a) Placing Agreement among SBC Warburg Inc., the Master Trust, the
Registrant, South African Mutual Life Assurance Society ("Old Mutual"), the
Adviser and Old Mutual Fund Holdings (Bermuda) Limited ("Old Mutual Fund
Holdings")
**6(b) Placing Agreement among Fleming Martin Inc., Rand International
Securities, SBC Warburg Inc., the Master Trust, the Registrant, the Adviser and
Old Mutual Fund Holdings
***6(c) Placing Agreement among Fleming Martin Inc., Rand International
Securities LLC, SBC Warburg Inc., the Master Trust, the Registrant, the Adviser
and Old Mutual Fund Holdings
<PAGE>
*8(a) Custodian Agreement between the Registrant and State Street Bank and
Trust Company (the "Custodian")
*8(b) Subcustodian Agreement between the Custodian and Standard Bank of
South Africa Limited
*8(c) Subcustodian Agreement between the Custodian and State Street London
Limited
*9(a) Administrative Services Agreement between the Registrant and State
Street Bank and Trust Company
*9(b) Structuring Agreement among the Master Trust, the Registrant, Old
Mutual South Africa Growth Assets Fund Limited (the "Non-U.S. Fund") and
International Finance Corporation
*9(c) Subscription and Portfolio Transfer Agreement among Old Mutual, Old
Mutual Fund Holdings, the Adviser, the Master Trust, the Registrant, the Non-
U.S. Fund and Old Mutual Global Assets Fund Limited
*9(d) Irish Stock Exchange Undertaking among the Master Trust, the
Registrant and the Non-U.S. Fund
*9(e) Form of letter from Old Mutual Investment Advisers, Inc. with respect
to seed capital
*9(f) Form of Agreement among the Registrant, the Master Trust, the Non-
U.S. Fund and the Adviser as to the allocation of insurance coverage
**9(g) Form of Agreement regarding termination of an agreement by Old Mutual
Fund Holdings to pay a servicing fee to S.G. Warburg & Co. Inc.
***9(h) Letter confirming final settlement of Structuring Agreement payments
owing to International Finance Corporation
9(i) Amended and Restated Agreement Relating to Insurance
9(j) Securities Lending Agreement
11(a) Consent of Independent Auditors - KPMG Peat Marwick LLP
11(b) Consent of Independent Auditors - KPMG Peat Marwick
*15 Placement Plan of the Registrant
27 Financial Data Schedule
*Incorporated herein by reference to the Registrant's Registration Statement
on Form N-1A (File No. 811-9136) as filed with the Securities and Exchange
Commission on November 8, 1995.
**Incorporated herein by reference to Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 811-9136) as filed with the
Securities and Exchange Commission on May 2, 1996.
***Incorporated herein by reference to Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A (File No. 811-9136) as filed with the
Securities and Exchange Commission on September 27, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
The response to Item 15 in Part B to this Registration Statement is
incorporated herein by reference.
Item 26. Number of Holders of Securities.
Number of Record Holders
Title of Class As of September 26, 1997
-------------- ------------------------
Shares of Beneficial Interest 5
<PAGE>
Item 17. Indemnification
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, incorporated herein by reference and (b) Section 8 of the Placing
Agreement among the Registrant, Fleming Martin Inc., Rand International
Securities LLC, SBC Warburg Inc. and certain other parties, incorporated herein
by reference.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
Old Mutual Asset Managers (Bermuda) Limited (the "Adviser"), a company
organized under the laws of Bermuda, serves as the investment adviser to the
Master Trust and to Old Mutual Global Assets Fund Limited, a mutual fund
organized under the laws of Bermuda. The directors and officers of the Adviser
and their affiliations are listed below.
Name: Kevin James Carter
Position: Director and Deputy Chairman of the Adviser and Director of Old Mutual
Asset Managers Holdings (Bermuda) Limited ("OMAM Holdings")
Director, Old Mutual Global Assets Fund Limited (61 Front Street,
Hamilton, Bermuda)
Director, Old Mutual Investment Advisers, Inc. (1 Exeter Plaza, 699
Boylston Street, Boston, Massachusetts)
Managing Director, Old Mutual Portfolio Managers Ltd. (Providence
House, 2 Bartley Way, Hook, Basingstoke, Hampshire, United Kingdom)
Director, Old Mutual International Asset Managers Services Ltd.
(Fairbairn House, Rohais, St. Peter Port, Guernsey)
Director, Salvation Army Trustee Company (101 Queen Victoria Street,
London EC2V, United Kingdom)
Director, Old Mutual Asset Managers (Botswana) (Pty) Ltd. (c/o
Deloitte & Touche, Barclays House, Khama Crescent, Gaborone, Botswana)
Director, Old Mutual Asset Managers (Pty) Limited (Mutualpark, Jan
Smuts Drive, Pinelands, South Africa)
Director, Old Mutual International Asset Managers (Guernsey) Limited
(Fairbairn House, Rohais, St. Peter Port, Guernsey)
Director and Chairman, Old Mutual International Asset Managers
(Bermuda) Limited (61 Front Street, Hamilton, Bermuda)
<PAGE>
Director, Old Mutual South Africa Trust plc (23 Cathedral Yard,
Exeter, United Kingdom)
Director, Argenta European Hedge Fund plc (2nd Floor, IFSC House,
International Financial Services Centre, Custom House Docks, Dublin,
Ireland)
Director, Old Mutual Asset Managers (UK) Ltd. (Providence House, 2
Bartley Way, Hook, Basingstoke, Hampshire, United Kingdom)
Director, Old Mutual Fund Holdings (Bermuda) Limited (61 Front Street,
Hamilton, Bermuda)
Name: Garth Griffin
Position: Director of the Adviser and Director and Deputy Chairman of OMAM
Holdings
Director, Barlow Limited (Barlow Park, Katherine Street, Sandton,
South Africa)
Managing Director, Fairbairn Investment Company Limited (Providence
House, 2 Bartley Way, Hook, Hampshire, United Kingdom)
Director, Fairbairn Investment Holdings SA (Pty) Limited (Mutualpark,
Jan Smuts Drive, Pinelands, South Africa)
Managing Director, Old Mutual Asset Managers (Pty) Limited
(Mutualpark, Jan Smuts Drive, Pinelands, South Africa)
Director, Old Mutual Bermuda Holdings (SA) Limited (Mutualpark, Jan
Smuts Drive, Pinelands, South Africa)
Director, Old Mutual Financial Services Botswana (Pty) Limited (c/o
Deloitte & Touche, Barclays House, Khama Crescent, Gaborone,
Botswana)
Chairman, Old Mutual Group (UK) Limited (Providence House, 2 Bartley
Way, Hook, Basingstoke, Hampshire, United Kingdom)
Director, Old Mutual Asset Managers (Namibia) (Pty) Limited (Bank
Windhoek Bldg., 262 Independence Ave., Windhoek, Namibia)
Director, Old Mutual Investment Advisors, Inc. (One Exeter Plaza, 699
Boylston Street, Boston, MA, United States)
Chairman, Old Mutual Life Assurance Company Limited (Providence
House, 2 Bartley Way, Hook, Basingstoke, Hampshire, United Kingdom)
Chairman, OMLA Holdings Limited (Providence House, 2 Bartley Way,
Hook, Basingstoke, Hampshire, United Kingdom)
Managing Director and Member, South African Mutual Life Assurance
Society (Mutualpark, Jan Smuts Drive, Pinelands, South Africa)
Director, South African Mutual Life Assurance Society Pension Fund
(Mutualpark, Jan Smuts Drive, Pinelands, South Africa)
Chairman, Fairbairn Ireland Limited (50 Dawson Street, Dublin,
Ireland)
<PAGE>
Director, Old Mutual Fund Holdings (Bermuda) Limited (61 Front Street,
Hamilton, Bermuda)
Chairman, Old Mutual International Financial Services Limited
(Fairbairn House, Rohais, St. Peter Port, Guernsey)
Chairman, Old Mutual International (Guernsey) Limited (Fairbairn
House, Rohais, St. Peter Port, Guernsey)
Director and Deputy Chairman, Old Mutual Group Limited (61 Front
Street, Hamilton, Bermuda)
Director and Chairman, Old Mutual International Asset Managers
(Bahamas) Limited (Euro Canadian Centre, Marlborough Street, Nassau,
Bahamas)
Director, Old Mutual Global Assets Fund Limited (61 Front Street,
Hamilton, Bermuda)
Director and Chairman, Old Mutual International Limited (61 Front
Street, Hamilton, Bermuda)
Director and Deputy Chairman, Old Mutual International Holdings
Limited (61 Front Street, Hamilton, Bermuda)
Director and Chairman, Old Mutual International Business Services
Limited (61 Front Street, Hamilton, Bermuda)
Director and Chairman, Old Mutual International Developments Limited
(61 Front Street, Hamilton, Bermuda)
Director, Fairbairn Holdings Limited (P.O. Box 119, Commerce House,
St. Peter Port, Guernsey)
Chairman, Fairbairn International S.A. (35 rue Glesener, 10-11
Luxembourg)
Chairman, Fairbairn Marketing Services Limited (P.O. Box 119, Commerce
House, St. Peter Port, Guernsey)
Chairman, Merriman Services Limited (P.O. Box 119, Commerce House, St.
Peter Port, Guernsey)
Chairman, Old Mutual Asset Managers (Botswana) (Pty) Ltd. (c/o
Deloitte & Touche, Barclays House, Khama Crescent, Gaborone, Botswana)
Director, Old Mutual Group Achievements Limited (Mutualpark, Jan Smuts
Drive, Pinelands, South Africa)
Chairman, Old Mutual International (Isle of Man) Ltd. (Victory House,
Prospect Hill, Douglas, Isle of Man)
Chairman, Old Mutual International Marketing Services Ltd. (Providence
House, 2 Bartley Way, Hook, Basingstoke, Hampshire, United Kingdom)
Director, Old Mutual Investment Services Ltd. (Mutualpark, Jan Smuts
Drive, Pinelands, South Africa)
<PAGE>
Director, Old Mutual Unit Trust Managers Limited (Mutualpark, Jan
Smuts Drive, Pinelands, South Africa)
Director, Omiopt (No. 2) Limited (Mutualpark, Jan Smuts Drive,
Pinelands, South Africa)
Chairman, Old Mutual International (Ireland) Limited (50 Dawson
Street, Dublin, Ireland)
Name: William Langley
Position: Chairman, President and Director of the Adviser and Director of OMAM
Holdings
Treasurer and Trustee of the Registrant and the Master Trust
Deputy Chairman and Director of Old Mutual South Africa Growth Assets
Fund Limited (61 Front Street, Hamilton, Bermuda)
Director and Treasurer, Old Mutual Global Assets Fund Limited (61
Front Street, Hamilton, Bermuda)
Director, Old Mutual Investment Advisers, Inc. (1 Exeter Plaza, 699
Boylston Street, Boston, Massachusetts)
Director and Deputy Chairman, Old Mutual International Asset Managers
(Bermuda) Limited (61 Front Street, Hamilton, Bermuda)
Director, Old Mutual International Asset Managers (Guernsey) Limited
(Fairbairn House, Rohais, St. Peter Port, Guernsey)
Director, OMIAM Services Limited (Fairbairn House, Rohais, St. Peter
Port, Guernsey)
Director and Treasurer, Old Mutual Fund Holdings (Bermuda) Limited (61
Front Street, Hamilton, Bermuda)
Assistant General Manager, Old Mutual (Mutualpark, Jan Smuts Drive,
Pinelands, South Africa)
Alternate Director, Old Mutual Group Limited (61 Front Street,
Hamilton, Bermuda)
Alternate Director, Old Mutual International Limited (61 Front Street,
Hamilton, Bermuda)
Alternate Director, Old Mutual International Holdings Limited (61
Front Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Business Services Limited
(61 Front Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Developments Limited (61
Front Street, Hamilton, Bermuda)
Name: Susan Elizabeth Rouse
Position: Vice President and Alternate Director of the Adviser
Alternate Director of OMAM Holdings
<PAGE>
Alternate Director, Old Mutual Global Assets Fund Limited (61 Front
Street, Hamilton, Bermuda)
Alternate Director, Old Mutual Fund Holdings (Bermuda) Limited (61
Front Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Asset Managers (Bermuda)
Limited (61 Front Street, Hamilton, Bermuda)
Alternate Director, Old Mutual Group Limited (61 Front Street,
Hamilton, Bermuda)
Alternate Director, Old Mutual International Limited (61 Front Street,
Hamilton, Bermuda)
Alternate Director, Old Mutual International Holdings Limited (61
Front Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Business Services Limited
(61 Front Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Developments Limited (61
Front Street, Hamilton, Bermuda)
Director and Chairman of the Board, Millstream Ltd. (Euro Canadian
Centre, Marlborough Street, Nassau, Bahamas)
Name: Melanie Jane Saunders
Position: Secretary of the Adviser and of OMAM Holdings
Secretary of the Registrant and the Master Trust
Secretary of Old Mutual South Africa Growth Assets Fund Limited (61
Front Street, Hamilton, Bermuda)
Secretary, Old Mutual Global Assets Fund Limited (61 Front Street,
Hamilton, Bermuda)
Secretary, Old Mutual Fund Holdings (Bermuda) Limited (61 Front
Street, Hamilton, Bermuda)
Secretary, Old Mutual Group Limited (61 Front Street, Hamilton,
Bermuda)
Secretary, Old Mutual International Asset Managers (Bermuda) Limited
(61 Front Street, Hamilton, Bermuda)
Secretary, Old Mutual International Asset Managers (Bahamas) Limited
(Euro Canadian Centre, Marlborough Street, Nassau, Bahamas)
Secretary, Millstream Ltd. (Euro Canadian Centre, Marlborough Street,
Nassau, Bahamas)
Secretary, Old Mutual International Limited (61 Front Street,
Hamilton, Bermuda)
Secretary, Old Mutual International Holdings Limited (61 Front Street,
Hamilton, Bermuda)
<PAGE>
Secretary, Old Mutual International Business Services Limited (61
Front Street, Hamilton, Bermuda)
Secretary, Old Mutual International Developments Limited (61 Front
Street, Hamilton, Bermuda)
Item 29. Principal Underwriters.
(a) SBC Warburg Dillon Read Inc. (formerly SBC Warburg Inc.), Rand
International Securities LLC and Fleming Martin Inc., each a placement agent of
the Registrant, do not act as underwriter/placement agent, depositor or
investment adviser for any registered investment company (other than the
Registrant).
(b) The information required by this Item 29 with respect to each director
and officer of SBC Warburg Inc. and Fleming Martin Inc. is incorporated by
reference to Schedule A of Form BD filed by SBC Warburg Inc. and Fleming Martin
Inc. pursuant to the Securities and Exchange Act of 1934 (File No. 8-36859 for
SBC Warburg Inc. and File No. 8-46232 for Fleming Martin Inc.). The information
required by this Item 29 with respect to each director and officer of Rand
International Securities LLC is incorporated by reference to Schedule A of Form
BD filed by Rand International Securities LLC pursuant to the Securities and
Exchange Act of 1934 (File No. 8-48591).
(c) Compensation received by each placing agent from the Registrant during
the period from July 1, 1996 to June 30, 1997:
<TABLE>
<CAPTION>
Net Placing Compensation
Name of Discounts and on Redemption Brokerage Other
Placing Agent Commissions and Repurchase Commissions Compensation
- ------------------- --------------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Fleming Martin Inc. U.S. $___ ___ $146,472 ___
Rand International
Securities LLC ___ ___ ___ ___
SBC Warburg Inc. U.S. $17,641.61 ___ ___ ___
</TABLE>
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
<PAGE>
Name Address
---------- -------------
State Street Bank and Trust Company State Street Bank and Trust Company
1776 Heritage Drive
Quincy, Massachusetts 02171
Old Mutual Asset Managers (Bermuda) 61 Front Street
Limited Hamilton, Bermuda
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in Hamilton, Bermuda on the 26th day of September, 1997.
OLD MUTUAL EQUITY GROWTH ASSETS SOUTH AFRICA FUND
By: William Langley
William Langley
Treasurer of Old Mutual Equity Growth Assets South Africa
Fund
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, Old
Mutual South Africa Equity Trust has duly caused this Amendment to the
Registration Statement on Form N-1A of Old Mutual Equity Growth Assets South
Africa Fund to be signed in Hamilton, Bermuda on the 26th day of September,
1997.
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
By: William Langley
William Langley
Treasurer of Old Mutual South Africa Equity Trust
<PAGE>
EXHIBIT INDEX
1(c) Second Amendment to the Declaration of Trust of the Registrant
9(i) Amended and Restated Agreement Relating to Insurance
9(j) Securities Lending Agreement
11(a) Consent of Independent Auditors - KPMG Peat Marwick LLP
11(b) Consent of Independent Auditors - KPMG Peat Marwick
27 Financial Data Schedule
<PAGE>
Exhibit 1(c)
OLD MUTUAL EQUITY GROWTH ASSETS SOUTH AFRICA FUND
Second Amendment to the Declaration of Trust
The undersigned, being a majority of the Trustees of Old Mutual Equity
Growth Assets South Africa Fund (the "TRUST"), a Massachusetts business trust,
acting pursuant to Section 11.7 of the Declaration of Trust, dated September 1,
1995 (the "DECLARATION"), of the Trust, as amended by the First amendment to the
Declaration of Trust dated as of May 27, 1996, hereby amend the said Declaration
as follows:
1. AMENDMENT. Section 11.7 of Article XI of the Declaration be, and it
hereby is, amended in its entirety to read as follows*:
SECTION 11.7. PRINCIPAL OFFICE AND REGISTERED AGENT. The name of
the registered agent of the Trust is Melanie J. Saunders, 61
Front Street, Hamilton, Bermuda. The principal office of the
Trust is 61 Front Street, Hamilton, Bermuda. The Trustees may,
without the approval of Holders, change the registered agent of
the Trust and the principal office of the Trust.
2. CONFIRMATION OF DECLARATION. The Declaration as amended hereby is
confirmed and reaffirmed in every particular.
3. PROTECTION OF TRUSTEES. This amendment to the Declaration is not made
by the Trustees of the Trust individually, but as Trustees under the
Declaration, and the obligations under this amendment to the Declaration are not
binding upon any of the Trustees or shareholders of the Trust individually, but
bind only the trust estate.
IN WITNESS WHEREOF, the undersigned have executed this amendment to the
Declaration in Hamilton, Bermuda as of the fifth day of May, 1997
William Francois de la Harpe Beck
as Trustee and not individually
The Little House
3 Nahoon Avenue
Constantia 7800, South Africa
* Because a Trustee of the Trust, William L. Boyan (John Hancock Mutual Life
Company Limited, John Hancock Place, 200 Clarendon Street, Boston, Massachusetts
02116), is a resident of the Commonwealth of Massachusetts, the Declaration does
not name a resident agent in the Commonwealth.
<PAGE>
William L. Boyan William L. Boyan
as Trustee and not individually
John Hancock Mutual Life Company Limited
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02116
U.S.A.
Thomas Haskins Davis
as Trustee and not individually
Winchester Global Trust Company Limited
Williams House
20 Reid Street
Hamilton, Bermuda
Michel John Drew
as Trustee and not individually
International Services Limited
22 Church Street Hamilton HM 11, Bermuda
William Langley
as Trustee and not individually
Old Mutual Asset Managers (Bermuda) Limited
61 Front Street, Hamilton, Bermuda
Michael John Levett
as Trustee and not individually
South African Mutual Life Assurance Society
Mutualpark, Jan Smuts Drive, Pinelands, South Africa
Kenneth Rigby Williams
as Trustee and not individually
15 Lime Tree Walk Virginia Water Surrey, United Kingdom
<PAGE>
Exhibit 9(i)
AMENDED AND RESTATED
AGREEMENT RELATING TO INSURANCE
THIS AMENDED AND RESTATED AGREEMENT RELATING TO INSURANCE made as of
October __, 1996 (this "AGREEMENT") by and among OLD MUTUAL SOUTH AFRICA EQUITY
TRUST, a Massachusetts trust (the "MASTER TRUST"), OLD MUTUAL EQUITY GROWTH
ASSETS SOUTH AFRICA FUND, a Massachusetts business trust (the "OMEGA FUND"), OLD
MUTUAL SOUTH AFRICA GROWTH ASSETS FUND LIMITED, a Bermuda mutual fund (the "SAGA
FUND"), and OLD MUTUAL ASSET MANAGERS (BERMUDA) LIMITED, a Bermuda company (the
"ADVISER");
W I T N E S S E T H:
WHEREAS, the Master Trust invests in a portfolio consisting primarily of
South African securities;
WHEREAS, each of the OMEGA Fund and the SAGA Fund invests substantially all
of its investable assets in the Master Trust;
WHEREAS, the Adviser acts as investment adviser to the Master Trust and
may, from time to time hereafter, act in the same capacity with respect to other
clients, including other investment companies;
WHEREAS, all the parties hereto are named insureds under an errors and
omissions liability policy (as it may be amended and/or restated from time to
time, collectively the "E&O POLICY") issued by Gulf Insurance Company, or such
other insurers as from time to time may provide the E&O Policy (the "E&O
INSURER");
WHEREAS, the Master Trust, the OMEGA Fund, and the SAGA Fund (collectively,
the "FUNDS" or the "FUND PARTIES") are named insureds under a fidelity bond (as
it may be amended and/or restated from time to time, collectively the "BOND",
and collectively with the E&O Policy, the "POLICY") issued by Gulf Insurance
Company, or such other insurers as from time to time may provide the Bond
(together with the E&O Insurer as appropriate, the "INSURER");
WHEREAS, the parties entered into that certain Agreement Relating to
Insurance dated as of November 10, 1995 (the "Original Agreement") establishing
(a) the criteria by which the premium for the Policy shall be
<PAGE>
allocated among the parties and (b) the criteria by which claims in excess of
the applicable coverage limits of the Policy shall be allocated among the
parties; and
WHEREAS, the parties desire to amend and restate the Original Agreement as
set forth herein below:
NOW, THEREFORE, the parties do hereby amend and restate the Original
Agreement as follows:
1. ALLOCATION OF PREMIUMS.
(a) One half of the annual premium for each policy year with respect to
the E&O Policy shall be borne by the Adviser and the other half of such annual
premium shall be borne by the Master Trust.
(b) The Master Trust shall pay the annual premium for each policy year
with respect to the Bond.
(c) Promptly after the determination of the annual Policy premium for each
policy year, the Adviser shall prepare a schedule (the "ALLOCATION SCHEDULE")
setting forth in reasonable detail the proposed allocation of the premium for
such year in accordance with this Section 1. The Adviser shall promptly provide
the Allocation Schedule to the administrator of each of the Funds for review.
If within ninety (90) days of provision of the Allocation Schedule to the
administrator of each of the Funds, none of the Funds has objected to the
Allocation Schedule, the allocation of the premium set forth therein shall,
absent manifest error, be conclusive and binding among the parties.
2. ALLOCATION OF COVERAGE.
(a) The Adviser shall not with respect to any policy year collect
insurance payments under the E&O Policy (whether in respect of related or
unrelated claims) totaling more than fifty percent (50%) of the policy limit for
such policy year of the E&O Policy.
(b) In the event that the claims of loss of two or more insureds under the
E&O Policy are so related that the Insurer is entitled to assert that the claims
must be aggregated with the result that the claims exceed the applicable
coverage limits for such claims, or in the event that at any time the claims of
two or more insureds under the E&O Policy for any other reason exceed the
applicable coverage limits for such claims, the following rules for
-2-
<PAGE>
determining, as among such insureds, the priority of satisfaction of the claims
under the E&O Policy shall apply:
(i) All claims of the Adviser which have been duly proved and established
under the E&O Policy shall be satisfied in full subject to the limit
under Section 2(a). All claims of the Funds which have been duly
proved and established under the E&O Policy shall be satisfied in full
subject (as to not more than fifty percent (50%) of the policy limit
for the current policy year) to any established or pending claims of
the Adviser, provided that, if any such pending claim is subsequently
disallowed, any claims of the Funds subject to such pending claim
shall, if permitted under the terms of the E&O Policy, thereupon be
reinstated.
(ii) If the claims of the Funds which have been duly proved and established
under the E&O Policy exceed the coverage of the E&O Policy available
to the Funds, the insurance proceeds shall be applied to those claims,
subject to any requirements of the 1940 Act or other applicable laws
or regulations, proportionately according to the respective net asset
value of each of the Fund Parties having such claims at the end of the
calendar year next preceding the calendar year in which the action to
which such claims relate (or, if there was more than one such action,
the first thereof) was commenced.
(c) In no case shall any Fund with respect to any policy year collect
payments under the Bond (whether in respect of related or unrelated claims)
totaling more than the greater of (i) its ratable share of the coverage under
the Bond determined proportionately according to the respective net asset value
of each of the Fund Parties as of the end of the calendar year next preceding
the year in which the loss took place, and (ii) the minimum coverage required by
paragraph (d)(i) of Rule 17g-1 under the 1940 Act (or if such Fund is not
registered under the 1940 Act, the minimum coverage that would be required were
such Fund so registered). In the event that the claims of loss of two or more
Funds under the Bond are so related that the Insurer is entitled to assert that
the claims must be aggregated with the result that the claims exceed the
applicable coverage limits for such claims, or in the event that at any time the
claims of two or more Funds under the Bond for any other reason exceed the
applicable coverage limits for such claims, the following rules for determining,
as among such insureds, the priority of satisfaction of the claims under the
Bond shall apply:
-3-
<PAGE>
(i) FIRST, to each Fund such that it receives an amount at least equal to
the amount that it would have received had it maintained a separate
fidelity bond with the minimum coverage required by paragraph (d)(1)
of Rule 17g-1 under the 1940 Act (or, if such Fund is not registered
under the 1940 Act, the amount that would be required were such Fund
so registered); and
(ii) SECOND, subject to any requirements of the 1940 Act or other
applicable laws or regulations, on a ratable basis according to the
respective net asset value of each of the Fund Parties having such
claims as of the end of the calendar year next preceding the year in
which the loss took place.
3. RENEWAL AND TERMINATION.
(a) The Adviser shall at least thirty (30) days prior to the end of each
policy year of each of the E&O Policy and the Bond make a proposal to the Funds
regarding insurance arrangements for the next policy year with respect thereto
(including the coverage amount, the quoted premium, and the proposed Insurer).
(b) Any party to this Agreement that is party to either the E&O Policy or
the Bond may cease to participate in the E&O Policy or the Bond, as the case may
be, and accordingly cease to be bound by the terms of this Agreement with
respect thereto, with effect from the end of any policy year applicable to the
E&O Policy or the Bond, as the case may be, on the giving of written notice to
each other party to this Agreement not less than fifteen (15) days prior to the
end of such policy year. Such notice shall have no effect with respect to the
allocation of premiums or coverage payable under or in respect of insurance in
force prior to the end of such policy year.
4. PRIOR AGREEMENTS. This Agreement hereby supersedes all prior or
contemporaneous agreements among the parties hereto (or any two or more of them)
(which other agreements may include other parties) relating to the subject
matter hereof.
5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
6. AMENDMENTS. This Agreement may be amended or modified with the prior
written consent of the parties hereto.
-4-
<PAGE>
7. HEADINGS. The section references in this Agreement are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.
8. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original and all of which shall constitute one and the same
instrument. In proving this Agreement it shall not be necessary to submit more
than one counterpart executed by each party hereto.
9. PROTECTION OF TRUSTEES.
(a) This Agreement is executed by the Trustees of the Master Trust not
individually, but as Trustees under the Declaration of Trust of the Master Trust
dated as of September 1, 1995, and the obligations of this Agreement are not
binding upon any of such Trustees individually.
(b) This Agreement is executed by the Trustees of the OMEGA Fund not
individually, but as Trustees under the Declaration of Trust of the OMEGA Fund
dated as of September 1, 1995, and the obligations of this Agreement are not
binding upon any of such Trustees or on the shareholders of the OMEGA Fund
individually, but bind only the trust estate of the OMEGA Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument by their officers hereunto duly authorized all
as of the day and year first above written.
OLD MUTUAL SOUTH AFRICA
EQUITY TRUST
By: Michael John Levett
---------------------------------
Michael John Levett
Chairman of the Board of Trustees
-5-
<PAGE>
OLD MUTUAL EQUITY GROWTH ASSETS
SOUTH AFRICA FUND
By: Michael John Levett
---------------------------------
Michael John Levett
Chairman of the Board of Trustees
OLD MUTUAL SOUTH AFRICA GROWTH
ASSETS FUND LIMITED
By: Michael John Levett
---------------------------------
Michael John Levett
Chairman of the Board of Directors
OLD MUTUAL ASSET MANAGERS
(BERMUDA) LIMITED
By: William Langley
---------------------------------
William Langley
President
-6-
<PAGE>
SECURITIES LENDING AUTHORIZATION AGREEMENT
Between
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
1. APPOINTMENT OF STATE STREET. . . . . . . . . . . . . . . . . . . 1
2. SECURITIES TO BE LOANED. . . . . . . . . . . . . . . . . . . . . 1
3. BORROWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. SECURITIES LOAN AGREEMENTS . . . . . . . . . . . . . . . . . . . 3
5. LOANS OF AVAILABLE SECURITIES. . . . . . . . . . . . . . . . . . 3
6. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 5
7. DISTRIBUTIONS ON AND VOTING RIGHTS WITH RESPECT TO
LOANED SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 7
8. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. COMPENSATION FOR THE CLIENT AND STATE STREET . . . . . . . . . . 10
10. FEE DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. RECORDKEEPING AND REPORTS. . . . . . . . . . . . . . . . . . . . 11
12. STANDARD OF CARE . . . . . . . . . . . . . . . . . . . . . . . . 11
13. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 12
14. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
15. CONTINUING AGREEMENT; TERMINATION; REMEDIES. . . . . . . . . . . 14
16. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
18. SECURITIES INVESTORS PROTECTION ACT. . . . . . . . . . . . . . . 15
19. MODIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 16
20. PROTECTION OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . 16
21. AUTHORITY OF STATE STREET. . . . . . . . . . . . . . . . . . . . 16
22. CUSTODY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT 1.1
<PAGE>
EXHIBIT 3.1
EXHIBIT 4.1
EXHIBIT 4.2
EXHIBIT 8.1
EXHIBIT 8.2
EXHIBIT 9
<PAGE>
SECURITIES LENDING AUTHORIZATION AGREEMENT
Agreement dated the 6th day of September, 1996 between OLD MUTUAL SOUTH
AFRICA EQUITY TRUST, a Massachusetts trust and investment company registered
under the Investment Company Act of 1940, as amended (the "Client"), and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("State Street"),
setting forth the terms and conditions under which State Street is authorized to
act on behalf of the Client with respect to the lending of certain securities of
the Client held by State Street under a Custodian Contract dated October 23,
1995 (the "Custodian Contract").
Certain capitalized terms used in this Agreement are defined in Section 14.
The Client and State Street, as the parties hereto, hereby agree as
follows:
1. APPOINTMENT OF STATE STREET. The Client hereby authorizes State Street
as its agent to lend Available Securities to Borrowers in accordance with the
terms of this Agreement. Subject to the terms of this Agreement, State Street
shall have the responsibility and authority to do or cause to be done all acts
State Street shall reasonably determine to be desirable, necessary, or
appropriate to implement and administer this securities lending program. State
Street shall use all reasonable efforts to arrange loans of Available Securities
on behalf of the Client in accordance with and subject to the terms of this
Agreement, provided State Street shall: (i) not arrange any loans if as a result
thereof securities loaned by the Client would exceed 33 1/3% of the value of its
net assets; and (ii) terminate existing loans in the applicable amount in order
that securities on loan at any time do not exceed 33 1/3% of the value of
Client's net assets.
EXHIBIT 1.1 specifies the maximum percentage of the Client's holdings of
any particular security that may be lent in the aggregate to any and all
Borrowers at any time, provided that at no time shall more than 75% of the
Client's holding of any particular security be lent. EXHIBIT 1.1 may be amended
from time to time by the Client upon advance written notice to State Street with
respect to new loans. State Street shall observe the limitations set forth in
EXHIBIT 1.1, and if necessary, terminate loans in accordance with the terms
hereof to comply with such limits.
Client agrees that State Street is acting as a fully disclosed agent and
not as principal in connection with the securities lending program. State
Street may take action as agent of the Client on an undisclosed or a disclosed
basis.
<PAGE>
2. SECURITIES TO BE LOANED. State Street acts pursuant to the Custodian
Contract as custodian of the securities owned by the Client. All of the
Client's securities held by State Street as custodian shall, subject to EXHIBIT
1.1, be subject to this securities lending program, except those securities
which the Client or the Investment Manager specifically identifies in notices to
State Street as not being Available Securities, and those securities which the
Investment Manager advises State Street have been, or are to be, sold or
otherwise disposed of for the Client. Without limiting State Street's duty not
to make Loans of securities so identified by the Client or the Investment
Manager, State Street shall have no authority or responsibility for determining
whether any of the Client's securities should be identified by the Investment
Manager as not being Available Securities.
3. BORROWERS. The Available Securities may be loaned to and only to
Borrowers selected by State Street from among the Borrowers listed on the
Schedule of Borrowers, attached hereto as EXHIBIT 3.1, which Schedule of
Borrowers shall unless otherwise agreed in writing include only Borrowers
resident in the United Kingdom for tax purposes. Subject as mentioned above,
State Street may from time to time amend the Schedule of Borrowers with at least
fifteen days prior notice to the Client, provided no such amendment shall become
effective if the Client or the Investment Manager objects thereto within such
notice period. In no case shall State Street make or maintain loans of
Available Securities representing at any time more than 10% of the market value
of the Client's portfolio to any one Borrower.
State Street hereby represents and warrants that its London office is an
approved United Kingdom collecting agent as defined in the Income Tax
(Manufactured Overseas Dividends) Regulations 1993 (SI 1993/2004).
State Street shall maintain books and records to facilitate the withholding
of United Kingdom tax at the rate (if any) required under United Kingdom law.
State Street shall take such reasonable steps, to the extent permissible
under applicable law, as are necessary to enable all manufactured payments to be
made under the lending program to be paid without deduction of United Kingdom
tax, provided that the Client shall comply with all reasonable requests of State
Street for information and/or assistance in this regard.
In the event that securities lending activity is undertaken through its
London office, State Street becomes subject to additional regulation in the UK,
and the parties acknowledge that:
i. State Street shall make available to Client established
<PAGE>
procedures in accordance with the requirements of the Securities and
Futures Authority for the effective consideration of complaints concerning
State Street's activities carried on in the UK.
ii. Where a liability in one currency is to be matched by an asset in a
different currency, or where an investment transaction relates to an
investment denominated in a currency other than sterling, a movement of
exchange rates may have a separate effect, favorable or unfavorable, on the
gain or loss which would otherwise be experienced on the investment.
iii. State Street or an affiliate may have an interest that is material to the
investment or transaction concerned and, except as expressly provided in
this Agreement, neither State Street nor any such affiliate shall be
obliged to disclose such interest or account to Client for any profits or
benefits made or derived by it or any of its associates from any such
transaction.
iv. Any assets which State Street holds in the form of money shall be held
pursuant to the Custodian Contract but shall not be treated by State Street
as Clients' Money as defined by The Financial Services (Client Money)
Regulations 1991 of the United Kingdom as amended (the "Clients' Money
Regulations") and will not be held in accordance with the Clients' Money
Regulations or such other regulations as shall amend or replace the
Clients' Money Regulations from time to time.
4. SECURITIES LOAN AGREEMENTS. The Client authorizes State Street to
enter into one or more Securities Loan Agreements, consistent with the terms
hereof and substantially in the form of the Lending Agreement attached hereto as
EXHIBIT 4.1, including an Appendix thereto for loans of South African Securities
in the form of EXHIBIT 4.2 hereto. State Street shall not, without prior
consent of Client, enter into any Securities Loan Agreement (or any waiver or
modification of any existing Securities Loan Agreement) that shall adversely
affect Client's rights hereunder or under that Securities Loan Agreement in
any material manner. Subject to the foregoing, each Securities Loan Agreement
shall have such terms and conditions as State Street may negotiate with the
Borrower, however certain terms of individual loans, including rebate fees to be
paid to the Borrower for the use of Cash Collateral, shall be negotiated at the
time a loan is made. Except as expressly authorized in writing by Client from
time to time (other than as set forth in Section 8.4(a) of the Securities Loan
Agreement in EXHIBIT 4.1 hereto), State Street shall make no representations or
warranties on behalf of the Client to any Borrower in any Securities Loan
Agreement or otherwise without proper authority hereunder.
<PAGE>
5. LOANS OF AVAILABLE SECURITIES. State Street shall be
responsible for determining whether any Loan of Available Securities shall be
made, and, subject to Section 4, for negotiating and establishing the terms of
each such Loan. State Street shall have the authority to terminate any Loan in
its discretion, at any time and without prior notice to the Client.
The Client acknowledges that State Street administers securities lending
programs for other clients of State Street. State Street will allocate
securities lending opportunities among
its clients, using reasonable and equitable methods established by State Street
from time to time. State Street does not represent or warrant that any amount
or percentage of the Client's Available Securities will in fact be loaned to
Borrowers. Client agrees that it shall have no claim against State Street and
State Street shall have no liability arising from, based on, or relating to,
loans made for other clients, or loan opportunities refused hereunder, whether
or not State Street has made fewer or more loans for any other client, and
whether or not any loan for another client, or the opportunity refused, could
have resulted in loans made under this Agreement.
State Street shall terminate any Loan in accordance with the applicable
Securities Loan Agreement as soon as practicable after:
(i) receipt by State Street of a notice from the Borrower terminating
the Loan in accordance with the Securities Loan Agreement;
(ii) receipt by State Street of a notice from the Client or the
Investment Manager: (a) to the effect that the Securities subject to the Loan
are no longer Available Securities; or (b) of an amendment to EXHIBIT 1.1
reducing the maximum percentage of the Client's holdings of any particular
security that may be lent to a percentage that is less than the current
percentage on loan to any and all Borrowers at that time; and
(iii) receipt by State Street of a notice from the Client or the
Investment Manager to the effect that the Borrower is no longer to be included
in EXHIBIT 3.1.
State Street will perform from time to time, or will cause a third party
(which may be an affiliate of State Street) to perform, a credit analysis and
set trading limits deemed appropriate by State Street with respect to Borrowers
and shall report to the Client with respect to such credit analyses and trading
limits upon request (subject to State Street's obligations to maintain the
confidentiality of non-public information). As part of this credit analysis
State Street shall continuously monitor publicly available information with
respect to such Borrowers, and shall report to the Client any publicly
<PAGE>
available material adverse change with respect to a Borrower upon request.
The Client also acknowledges that, under the applicable Securities Loan
Agreements, Borrowers will not be required to return Loaned Securities
immediately upon receipt of notice from State Street terminating the applicable
Loan, but instead will be required to return such Loaned Securities within such
period of time following such notice as is specified in the applicable
Securities Loan Agreement. Upon receiving a notice from the Client or the
Investment Manager that Available Securities which have been loaned to a
Borrower should no longer be considered Available Securities (whether because of
the sale of such securities or otherwise) or that a Loan should otherwise be
terminated, State Street shall notify promptly thereafter the Borrower which has
borrowed such securities that the Loan of such securities is terminated and that
such securities are to be returned within the time specified by the applicable
Securities Loan Agreement. State Street shall in a timely manner give all
demands and notices required to be given by or on behalf of the Client under the
Securities Loan Agreement. If (a) any event occurs with respect to any Borrower
that would, upon notice from State Street, become a default under the applicable
Securities Loan Agreement and (b) the Client instructs State Street to give such
notice, State Street shall forthwith comply with such instruction.
State Street agrees with the Client that neither it nor any person acting
as custodian of the Client's assets will accept the delivery of any instrument
of transfer of Equivalent Securities or Collateral (as defined in each case in
the applicable Securities Loan Agreement) from a Borrower unless that instrument
is duly stamped in accordance with all applicable laws. Except as the Client
may otherwise instruct, State Street may accept Equivalent Securities (as
defined in the applicable Securities Loan Agreement) that are registered on a
Register of Members maintained in either the United Kingdom or South Africa.
6. INDEMNIFICATION.
(a) If following the occurrence of an Event of Default by a Borrower
with respect to a Loan (within the meaning of the applicable Securities Loan
Agreement) some or all of the Loaned Securities under such Loan are not returned
by the Borrower as required by the applicable Securities Loan Agreement, State
Street shall indemnify the Client against the failure of the Borrower as
follows. State Street shall acquire and hold for the account of the Client a
number of Replacement Securities equal to the number of such unreturned Loaned
Securities. Such Replacement Securities shall be purchased by applying the
proceeds of the Collateral with respect to such Loan to the
<PAGE>
purchase of such Replacement Securities. Subject to Client's obligations to
assume market and investment losses with respect to the investment of Cash
Collateral, if and to the extent that such proceeds are insufficient or the
Collateral is unavailable, the purchase of such Replacement Securities shall be
made at State Street's expense.
(b) If and to the extent that State Street is unable after diligent
efforts for a period of 30 days to purchase Replacement Securities or if at any
time prior to the end of such 30 day period the Client instructs State Street to
make a cash settlement of its obligation to procure Replacement Securities, and,
in either case, the Collateral continues to be successfully marked to market
against the unreturned Loaned Securities as required by the applicable
Securities Loan Agreement, State Street shall forthwith credit to the Client's
account an amount equal to the Market Value of the unreturned Loaned Securities
for which Replacement Securities are not so purchased as of the Business Day on
which the credit is made. If State Street is unable after diligent efforts to
purchase Replacement Securities and the Borrower has failed (and such failure is
continuing) to deliver to State Street additional collateral for the unreturned
Loaned Securities as required by the applicable Securities Loan Agreement, State
Street shall credit to the Client's account the greater of the Market Value of
the unreturned Loaned Securities for which Replacement Securities are not so
purchased determined as of (i) the last day the Collateral continues to be
successfully marked to market against the unreturned Loaned Securities; or (ii)
the next Business Day following the day referred to in (i) above.
(c) In addition to making the purchases or credits required by
Section 6 (a) and (b) hereof, State Street shall credit to the Client's account
the value of all distributions on the Loaned Securities (not otherwise credited
to the Client's account with State Street), the record dates for which occur
before the date that State Street purchases Replacement Securities pursuant to
Section 6 (a) or credits the Client's account pursuant to Section 6 (b).
(d) Any credits required under Section 6 (b) and (c) hereof shall be
made by application of the proceeds of the Collateral (if any) that remain after
the purchase of Replacement Securities pursuant to Section 6 (a). If and to the
extent that the Collateral is unavailable or the value of the proceeds of the
remaining Collateral is less than the value of the sum of the credits required
to be made under Paragraphs (b) and (c), such credits shall be made at State
Street's expense.
(e) If after application of Section 6 (a) through (d) hereof,
additional Collateral remains or any previously unavailable Collateral becomes
available or any additional
<PAGE>
amounts owed by the Borrower with respect to such Loan are received from the
Borrower, State Street shall apply the proceeds of such Collateral or such
additional amounts first to reimburse itself for any amounts expended by State
Street pursuant to Section 6 (a) through (d) above, and then to credit to the
Client's account all other amounts owed by the Borrower to Client with respect
to such Loan under the applicable Securities Loan Agreement.
(f) In the event that State Street is required to make any payment
and/or incur any loss or expense under this Section, State Street shall, to the
extent of such payment, loss, or expense, be subrogated to, and succeed to, all
of the rights of the Client against the Borrower under the applicable Securities
Loan Agreement.
(g) The provisions of this Section shall not apply to losses
attributable to war, riot, revolution, moratoria, embargoes, or similar acts of
government or other similar extreme and unusual circumstances beyond the
reasonable control or apprehension of State Street. State Street's obligations
shall not be affected by (i) any invalidity or non-perfection of any lien in any
Collateral, (ii) any change in corporate existence, structure, or ownership of
any Borrower, (iii) any bankruptcy, reorganization or similar proceeding
affecting any Borrower, or (iv) any invalidity or unenforceability relating to
the applicable Securities Loan Agreement with the Borrower. However, if at any
time any Collateral, Loaned Securities, Replacement Securities, credits, or
payments must be restored, delivered or paid in connection with the bankruptcy,
insolvency, or reorganization of a Borrower or otherwise, State Street's
obligations with respect to such Collateral, Loaned Securities, Replacement
Securities, credits, or payments shall be reinstated as though due and
outstanding at such time.
7. DISTRIBUTIONS ON AND VOTING RIGHTS WITH RESPECT TO LOANED SECURITIES.
The Client represents and warrants that it is the beneficial owner of (or
exercises complete investment discretion over) all Available Securities free and
clear of all liens, claims, security interests and encumbrances and that it is
entitled to receive all distributions made by the issuer with respect to
Available Securities. Except as provided in the next sentence, all interest,
dividends, and other distributions paid with respect to Loaned Securities shall
be credited to the Client's account pursuant to the Custodian Contract on the
date such amounts are delivered by the Borrower to State Street. Any non-cash
distribution on Loaned Securities which is in the nature of a stock split or a
stock dividend shall be added to the Loan (and shall be considered to constitute
Loaned Securities) as of the date the Borrower becomes entitled to such non-cash
distribution and such non-cash distribution is paid by the issuer; PROVIDED
that the Client (or Investment Manager) may, by giving State Street ten (l0)
Business Days' notice prior to the
<PAGE>
date of such non-cash distribution, direct State Street to request that the
Borrower deliver such non-cash distribution to State Street, pursuant to the
applicable Securities Loan Agreement, in which case State Street shall credit
such non-cash distribution to the Client's account pursuant to the Custodian
Contract on the date it is delivered to State Street.
The Client acknowledges that it will not be entitled to participate in any
dividend reinvestment program or to vote with respect to securities that are on
loan on the applicable record date for such securities.
The Client also acknowledges that any payments of distributions from
Borrower to Client are in substitution for the interest or dividend accrued or
paid in respect of Loaned Securities and that the tax treatment of such payment
may differ from the tax treatment of such interest or dividend. State Street
shall use its best efforts to minimize any resulting liability for tax.
If an installment, call or rights issue becomes payable on or in respect of
any Loaned Securities or if an issuer makes available the opportunity to elect
to receive a dividend in either cash or securities, State Street shall use all
reasonable endeavors to ensure that any timely instructions which are given in
accordance with the Custodian Contract from the Client or the Investment Manager
are complied with, but State Street shall not be required to make any payment
unless the Client has first placed it in funds to make such payment.
8. COLLATERAL. The Client authorizes State Street to receive and to hold,
on the Client's behalf, Collateral from Borrowers to secure the obligations of
Borrowers with respect to any loan of securities made on behalf of the Client
pursuant to the Securities Loan Agreements. Prior to the delivery of the Loaned
Securities to the Borrower under any Loan, State Street shall receive from the
Borrower Collateral having an initial Market Value of not less than 105% of the
Market Value of the Loaned Securities in any of the following forms as may be
approved from time to time by the Board of Trustees of the Client: (i) U.S.
dollar federal funds or New York Clearing House funds ("Cash Collateral"), (ii)
book entry Treasury securities (as defined in Subpart O of Treasury Department
Circular No. 300, 31 C.F.R. 306) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality, or
establishment of the United States government that is AAA rated by Standard &
Poor's Corporation or Aaa rated by Moody's Investors Service, (iii) a clean,
unconditional, and irrevocable letter of credit in favor of State Street as
custodian for the Client, issued by a bank named in EXHIBIT 8.1 hereto, as such
Exhibit may from time to time be modified by the Client with notice to State
Street, or (iv) such other Collateral as may be permitted under the 1940 Act.
<PAGE>
Pursuant to the terms of the applicable Securities Loan Agreement, State
Street shall, in accordance with State Street's reasonable and customary
practices and prevailing industry practices, mark each Loaned Security and its
Collateral to their Market Value each Business Day based upon the Market Value
of the Collateral and the Loaned Security at the close of business on the
preceding Business Day employing the most recently available pricing
information, and ensure that each applicable Securities Loan Agreement shall
require each Borrower to deliver additional Collateral to State Street in the
event that at the close of business on any Business Day the Market Value of the
Collateral delivered by such Borrower with respect to all Loans between such
Borrower and Client shall be less than 105% of the Market Value of the Loaned
Securities.
The Collateral shall be returned to Borrower at the termination of the Loan
upon the return of the Loaned Securities by Borrower to State Street in
accordance with the applicable Securities Loan Agreement.
State Street shall invest Cash Collateral in investments of the types
specified on EXHIBIT 8.2, subject to any directions, including any limitations
established by the Client in notices addressed to State Street and shall
exercise reasonable care, skill, diligence and prudence in the investment of
Cash Collateral. Subject to the foregoing limits and standard of care, State
Street does not assume any market or investment risk of loss with respect to the
investment of Cash Collateral and, subject as aforesaid, if, at any time during
the term of any Loan, the value of the Cash Collateral so invested is
insufficient to return the full amount of the Collateral or pay any and all
other amounts (exclusive of any rebate fee) due to such Borrower pursuant to the
Securities Loan Agreement, Client shall be solely responsible for such
shortfall and hereby agrees to pay an amount equal to such shortfall to State
Street. State Street shall be entitled to charge Client's accounts for any such
shortfall. Notwithstanding the foregoing, State Street and Client shall each be
responsible for their pro rata share (based on EXHIBIT 9) of the amount by which
any rebate fee due the Borrower exceeds the investment return on Cash
Collateral.
In no case will State Street accept as Collateral any security in respect
of which the Borrower may pursuant to the applicable Securities Loan Agreement
be entitled to exercise, or instruct State Street or the Client as to the
exercise of, any voting rights.
State Street shall accept substitutions of Collateral in accordance with
the applicable Securities Loan Agreement and shall hold such substitutions for
the account of the Client,
<PAGE>
provided that, unless other Collateral has been mutually agreed in writing by
the Client and State Street, no other Collateral shall be substituted for Cash
Collateral.
9. COMPENSATION FOR THE CLIENT AND STATE STREET. Investments of Cash
Collateral may, subject to Section 8, include without limitation investments in
obligations or other securities of State Street or of any State Street affiliate
and investments in any short-term investment fund, mutual fund, securities
lending trust or other collective investment fund with respect to which State
Street and/or its affiliates provide investment management or advisory, trust,
custody, transfer agency, shareholder servicing and/or other services for which
they are compensated.
The Client acknowledges that interests in such mutual funds, securities
lending trusts and other collective investment funds, to which State Street
and/or one or more of its affiliates provide services are not guaranteed or
insured by State Street or any of its affiliates or by the Federal Deposit
Insurance Corporation or any government agency. The Client hereby authorizes
State Street to purchase or sell investments of Cash Collateral to or from other
accounts held by State Street or its affiliates.
The net income generated by any investment made pursuant to this Section
9 shall be allocated among the Borrower, State Street, and the Client, as
follows: (a) a portion of such income shall be paid to the Borrower in
accordance with the applicable Securities Loan Agreement; (b) the balance, if
any, shall be split between State Street as compensation for its services in
connection with this securities lending program and the Client as such income
shall be credited to the Client's account, in accordance with the fee
schedule attached hereto as EXHIBIT 9.
To the extent the sums due the Borrower under the applicable Securities
Loan Agreement are in excess of the income generated from investment of Cash
Collateral, such negative income expense shall be borne by State Street and the
Client in the same ratio as positive income sharing.
To the extent that a Loan is secured by Collateral other than Cash
Collateral, the Borrower shall be required to pay a loan premium, the amount of
which shall be negotiated by State Street. Such loan premium shall be allocated
between State Street and the Client as follows: (a) a portion of such loan
premium shall be paid to State Street as compensation for its services in
connection with this securities lending program, in accordance with EXHIBIT 9
hereto; and (b) the remainder of such loan premium shall be credited to the
Client's account.
<PAGE>
Client acknowledges that in the event that Client's participation in
securities lending generates income for the Client, State Street may be required
to withhold tax or may claim such tax from the Client as is appropriate in
accordance with applicable law. State Street shall comply with all reasonable
requests made by the Client in order to minimize any such liability to tax.
The Client shall reimburse State Street for (i) S.W.I.F.T. international
telecommunication charges associated with the movement of securities in
connection with the securities lending activity contemplated by this Agreement;
and (ii) any and all funds advanced by State Street on behalf of the Client with
respect to the Client's obligation to return Cash Collateral to the Borrower and
to pay any fees due to the Borrower, all as provided in Section 8 hereof or as
otherwise authorized by the Client.
10. FEE DISCLOSURE. The fees associated with the investment of Cash
Collateral in funds maintained or advised by State Street are disclosed on
EXHIBIT 9 hereto. Such fees may be modified from time to time by State Street
upon thirty days' prior notice to Client. An annual report with respect to such
funds is available to the Client, at no expense, upon request.
11. RECORDKEEPING AND REPORTS. State Street will establish and maintain
such records as are reasonably necessary to account for Loans that are made and
the income derived therefrom. On a monthly basis, State Street will provide the
Client with a statement describing the Loans made, and the income derived from
Loans, during the period covered by such statement. Each party to this
Agreement shall comply with the reasonable requests of the other for information
necessary to the requester's performance of its duties in connection with this
securities lending program.
12. STANDARD OF CARE. Subject to the requirements of applicable law, State
Street shall not be liable for any loss or damage, including counsel fees and
court costs, whether or not resulting from their acts or omissions to act
hereunder or otherwise, unless the loss or damage arises out of State Street's
own negligence, willful misfeasance or misconduct in the performance of its
duties hereunder. Except for any liability, loss, or expense arising from or
connected with State Street's own negligence, willful misfeasance or misconduct
in the performance of its duties hereunder or that is to be borne by State
Street pursuant to this Agreement, the Client agrees to reimburse and hold State
Street harmless (a) from and against any liability, loss and expense, including
counsel fees and expenses and court costs, arising in connection with this
Agreement or any Loan including claims of any third parties, including any
Borrower, and (b) from and against all taxes and other
<PAGE>
governmental charges with respect to the Loans to the extent not required to be
borne by the Borrower under the applicable Securities Loan Agreement (other than
taxes applicable to State Street's income, profits and receipts under this
Agreement and the Securities Loan Agreements, which shall be borne solely by
State Street).
Subject to Section 6 hereof, but without limiting the generality of the
above paragraph, Client agrees: (i) that State Street shall not be responsible
for any statements, representations or warranties which any Borrower makes in
connection with any Loans hereunder and upon which State Street reasonably
relies, or for the performance by any Borrower of the terms of a Loan, or any
agreement related thereto; and (ii) that State Street shall be fully protected
in acting in accordance with the oral or written instructions of any person
designated in a notice from the Client or the Investment Manager, as the case
may be, to State Street as a person authorized in connection with this Agreement
to give instructions on behalf of the Client (an "Authorized Person"). (This
Agreement shall be considered such a designation of the person executing the
Agreement on the Client's behalf.) After its receipt of such a notice of
designation, and until its receipt of a notice revoking such designation, State
Street shall be fully protected in relying upon the notices, directions, and
information given by such designee.
State Street, in determining the Market Value of securities, including
without limitation, Collateral, shall value said securities on a basis
consistent with the valuations undertaken in the Administrative Services
Agreement dated October 23, 1995 between the Client and State Street Cayman
Trust Company, Ltd.
13. REPRESENTATIONS AND WARRANTIES. Each party hereto represents and
warrants that (a) it has the power to execute and deliver this Agreement, to
enter into the transactions contemplated hereby, and to perform its obligations
hereunder; (b) it has taken all necessary action to authorize such execution,
delivery, and performance; (c) this Agreement constitutes a legal, valid, and
binding obligation enforceable against it; and (d) the execution, delivery, and
performance by it of this Agreement will at all times comply with all applicable
laws and regulations to which it is subject.
14. DEFINITIONS. For the purposes hereof:
(a) "Available Securities" means the securities of the Client that
are available for Loans pursuant to Section 2.
(b) "Borrower" means any of the entities to which Available
Securities may be loaned under a Securities Loan Agreement as provided in
Section 3.
<PAGE>
(c) "Business Day" means a day on which the New York Stock Exchange
is open for trading.
(d) "Cash Collateral" has the meaning assigned to it in Section 8.
(e) "Collateral" means collateral delivered by a Borrower to secure
its obligations under a Securities Loan Agreement and includes Cash Collateral.
(f) "Custodian" means State Street in its capacity as custodian of
the Client pursuant to the Custodian Contract, and any successors to State
Street in its capacity under such Contract.
(g) "Investment Manager," means Old Mutual Asset Managers (Bermuda)
Ltd. or its successor as investment adviser of Client.
(h) "Loan" means a loan of Available Securities to a Borrower.
(i) "Loaned Security" shall mean any "security" which is delivered as
a Loan under a Securities Loan Agreement; provided that, if any new or different
security shall be exchanged for any Loaned Security by recapitalization, merger,
consolidation, or other corporate action, such new or different security shall,
effective upon such exchange, be deemed to become a Loaned Security in
substitution for the former Loaned Security for which such exchange was made.
(j) "Replacement Securities" shall mean with respect to any Loaned
Securities, securities of the same issuer, class and denomination as the Loaned
Securities.
(k) "Market Value" of a security means the market value of such
security in accordance with Section 12 hereof.
(l) "Securities Loan Agreement" means the agreement between a
Borrower and State Street (on behalf of the Client) that governs Loans to such
Borrower, as described in Section 4.
15. CONTINUING AGREEMENT; TERMINATION; REMEDIES. It is the intention of
the parties hereto that this Agreement shall constitute a continuing agreement
in every respect and shall apply to each and every Loan, whether now existing or
hereafter made. The Client and State Street may each at any time terminate this
Agreement upon five (5) Business Days' written notice to the other to that
effect. Without limiting the generality of the foregoing, the Client may
terminate this Agreement in the event KPMG Peat Marwick identifies any material
tax issues concerning the Agreement or the transactions contemplated hereby.
The only effects of any termination under this Section 15 will be that
<PAGE>
(a) following such termination, no further Loans shall be made hereunder by
State Street on behalf of the Client, and (b) State Street shall forthwith upon
termination of this Agreement, terminate any and all outstanding Loans. The
provisions hereof shall continue in full force and effect in all other respects
until all Loans have been terminated and all obligations satisfied as herein
provided. State Street hereby waives any right to set-off amounts owed
hereunder against amounts it holds for the benefit of the Master Trust under the
Custodian Contract.
16. NOTICES. Except as otherwise specifically provided herein, notices
under this Agreement shall be in writing. A notice shall be sufficient if
delivered to the party entitled to receive such notices at the following
addresses:
If to Client:
Old Mutual South Africa Equity Trust
C/O Old Mutual Asset Managers (Bermuda) Ltd.
61 Front Street
Hamilton, Bermuda
If to State Street:
State Street Bank and Trust Company
Global Securities Lending Division
Two International Place, Floor 31
Boston, Massachusetts 02110
or to such other addresses as either party may furnish the other party by
written notice under this section.
17. MISCELLANEOUS. This Agreement supersedes any other agreement between
the parties or any representations made by one party to the other, whether oral
or in writing, concerning loans of securities by State Street on behalf of the
Client, provided, however, this Agreement does not supersede (and is instead
subject to) that certain letter agreement dated the date hereof between State
Street and the Client with respect to acceptable forms of Collateral. This
Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, representatives, successors, and assigns. This Agreement
shall be governed and construed in accordance with the laws of the Commonwealth
of Massachusetts. Client hereby irrevocably submits to the jurisdiction of any
Massachusetts state or federal court sitting in The Commonwealth of
Massachusetts in any action or proceeding arising out of or related to this
Agreement, hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such Massachusetts state or Federal
court except that this provision shall not preclude any party from removing
<PAGE>
any action to federal court. Client hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. Client also irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing of copies of such process to Client at its address specified in Section
16 hereof. Client agrees that a final judgement in any such action or
proceeding, all appeals having been taken or the time period for such appeals
having expired, shall be conclusive and may be enforced in other jurisdictions
by suit on the judgement or in any other manner provided by law. The provisions
of this Agreement are severable and the invalidity or unenforceability of any
provision hereof shall not affect any other provision of this Agreement. If in
the construction of this Agreement any court should deem any provision to be
invalid because of scope or duration, then such court shall forthwith reduce
such scope or duration to that which is appropriate and enforce this Agreement
in its modified scope or duration.
18. SECURITIES INVESTORS PROTECTION ACT OF 1970 NOTICE. CLIENT IS HEREBY
ADVISED AND ACKNOWLEDGES THAT THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT THE CLIENT WITH RESPECT TO THE LOAN OF
SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO STATE
STREET AS AGENT FOR THE CLIENT MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION OF
A BORROWER'S OBLIGATION IN THE EVENT THE BORROWER FAILS TO RETURN THE LOANED
SECURITIES. STATE STREET HEREBY ACKNOWLEDGES THAT THE PROVISIONS OF THE
SECURITIES INVESTOR PROTECTION ACT OF 1970 SHALL NOT INTERFERE WITH ITS
OBLIGATIONS HEREUNDER, INCLUDING ITS OBLIGATIONS UNDER SECTION 6.
19. MODIFICATION. This Agreement shall not be modified, except by an
instrument in writing signed by the party against whom enforcement is sought.
20. PROTECTION OF TRUSTEES. This Agreement is executed and made by the
trustees of the Master Trust and not individually, but as trustees under the
Declaration of Trust dated as of September 1, 1995, and the obligations of this
Agreement are not binding upon any of such trustees individually.
21. AUTHORITY OF STATE STREET Except as otherwise expressly provided
herein and subject to the provisions of Section 12, all authority and discretion
conferred upon State Street pursuant to this Agreement or any Securities Loan
Agreement shall (a) be subject to the particular limitations on the conduct of
State Street set forth in this Agreement, and (b) be exercised on a basis
consistent with State Street's common law agency duties.
<PAGE>
22. CUSTODY AGREEMENT. Nothing in this Agreement shall limit the
obligations of State Street, in its capacity as custodian for the Client
pursuant to the Custodian Contract with respect to any assets held by State
Street under this Agreement for the account of the Client, including any
Collateral.
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
By:________________________________
Name:______________________________
Title: ____________________________
STATE STREET BANK AND TRUST COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT 3.1
This Exhibit is attached to and made part of the Securities Lending
Authorization Agreement, dated the 6th day of September, 1996 between OLD MUTUAL
SOUTH AFRICA EQUITY TRUST ("Client") and STATE STREET BANK AND TRUST COMPANY
("State Street").
SECURITIES LENDING BY THE MASTER TRUST
1. Barclays Cater Allen LTD.
2. Bankers Trust International LTD
3. Lazard Money Broking Limited
4. Merrill Lynch International
5. Morgan Stanley & Co. International Limited
6. Natwest Securities Limited
7. Nomura International PLC
8. Salomon Brothers International Limited
<PAGE>
EXHIBIT 8.1
This Exhibit is attached to and made part of the Securities Lending
Authorization Agreement, dated the 6th day of September, 1996 between OLD MUTUAL
SOUTH AFRICA EQUITY TRUST ("Client") and STATE STREET BANK AND TRUST COMPANY
("State Street").
Banks Approved for Letters of Credit:
None
<PAGE>
EXHIBIT 8.2
This Exhibit is attached to and made part of the Securities Lending
Authorization Agreement, dated the 6th day of September, 1996 between OLD MUTUAL
SOUTH AFRICA EQUITY TRUST ("Client") and STATE STREET BANK AND TRUST COMPANY
("State Street").
Investment Guidelines:
As State Street and the Client may agree to from time to time.
<PAGE>
EXHIBIT 9
This Exhibit is attached to and made part of the Securities Lending
Authorization Agreement, dated the 6th day of September, 1996 between OLD MUTUAL
SOUTH AFRICA EQUITY TRUST ("Client") and STATE STREET BANK AND TRUST COMPANY
("State Street").
SCHEDULE OF FEES
1. Subject to Paragraph 2 below, all proceeds collected by State Street on
investment of Cash Collateral or any fee income shall be allocated as provided
Section 9 and in accordance with the following percentages:
- - Seventy percent (70%) payable to the Client, and
- - Thirty percent (30%) payable to State Street.
2. All payments to be allocated under Paragraph 1 above shall be made after
deduction of: (i) the fees associated with the investment of Cash Collateral,
any S.W.I.F.T. international telecommunication charges and any and all funds
advanced by State Street on behalf of Client, all as described in Sections 9 and
10 hereof; and (ii) such amounts payable to the Borrower under the terms of the
applicable Securities Lending Agreement.
3. Investment Management Fees
To be agreed to by State Street and the Client in writing.
<PAGE>
EXHIBIT 11(a)
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
Old Mutual Equity Growth Assets South Africa Fund:
We consent to the use of our report, dated July 25, 1997, incorporated herein by
reference and to the reference to our firm under the heading "Independent
Accountants" in Part B of the registration statement.
KPMG Peat Marwick LLP
Boston, Massachusetts
September 26, 1997
<PAGE>
EXHIBIT 11(b)
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
Old Mutual South Africa Equity Trust:
We consent to the use of our report, dated July 25, 1997, incorporated herein by
reference and to the reference to our firm under the heading "Independent
Accountants" in Part B of the registration statement.
KPMG Peat Marwick
Chartered Accountants
Hamilton, Bermuda
September 25, 1997
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<PAGE>
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