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As filed with the Securities and Exchange Commission on September 29, 1997 File
No. 811-7417
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 SOUTH AFRICA EQUITY TRUST (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
EXPLANATORY NOTE
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Beneficial interests in the Registrant are not registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests 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 generally may be made only by investment companies, common or
commingled trust funds or similar organizations or 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 beneficial interests in the Registrant.
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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. 3
Item 7. Purchase of Securities Being Offered. 3
Item 8. Redemption or Repurchase. 4
Item 9. Pending Legal Proceedings. 5
Item 10. Cover Page. 42
Item 11. Table of Contents. 42
Item 12. General Information and History. 43
Item 13. Investment Objective and Policies. 44
Item 14. Management of the Master Trust. 52
Item 15. Control Persons and Principal Holders of Securities. 57
Item 16. Investment Advisory and Other Services. 57
Item 17. Brokerage Allocation and Other Practices. 62
Item 18. Capital Stock and Other Securities. 64
Item 19. Purchase, Redemption and Pricing of Securities. 65
Item 20. Tax Status. 67
Item 21. Underwriters. 69
Item 22. Calculation of Performance Data. 69
Item 23. Financial Statements. 69
Item 24. Financial Statements and Exhibits. 69
Item 25. Persons Controlled by or under Common Control with Registrant. 73
Item 26. Number of Holders of Securities. 80
Item 27. Indemnification. 81
Item 28. Business and Other Connections of Investment Adviser. 81
Item 29. Principal Underwriters. 91
Item 30. Location of Accounts and Records. 92
Item 31. Management Services. 94
Item 32. Undertakings. 94
EXHIBITS
Exhibit 6(e) and (c) Section 11 of the Placing Agreement between the Registrant,
Fleming Martin Inc., Rand International Securities LLC, SBC Warburg Inc., the
SAGA Fund, the Adviser and Old Mutual Fund Holdings
91
Exhibit 1(b)
96
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Exhibit 6(e)
110
Exhibit 6(f)
123
FULL CONTENTS
Item 4. General Description of Registrant. 2
Item 5. Management of the Fund. 2
Item 6. Capital Stock and Other Securities. 3
Item 7. Purchase of Securities Being Offered. 3
Item 8. Redemption or Repurchase. 4
Item 9. Pending Legal Proceedings. 5
Item 10. Cover Page. 42
Item 11. Table of Contents. 42
Item 12. General Information and History. 43
Item 13. Investment Objective and Policies. 44
Item 14. Management of the Master Trust. 52
Item 15. Control Persons and Principal Holders of Securities. 57
Item 16. Investment Advisory and Other Services. 57
Item 17. Brokerage Allocation and Other Practices. 62
Item 18. Capital Stock and Other Securities. 64
Item 19. Purchase, Redemption and Pricing of Securities. 65
Item 20. Tax Status. 67
Item 21. Underwriters. 69
Item 22. Calculation of Performance Data. 69
Item 23. Financial Statements. 69
Item 24. Financial Statements and Exhibits. 69
Item 25. Persons Controlled by or under Common Control with Registrant. 73
Item 26. Number of Holders of Securities. 80
Item 27. Indemnification. 81
Exhibit 6(e) and (c) Section 11 of the Placing Agreement between the 81
Item 28. Business and Other Connections of Investment Adviser. 81
Item 29. Principal Underwriters. 91
Item 30. Location of Accounts and Records. 92
Item 31. Management Services. 94
Item 32. Undertakings. 94
EXHIBIT INDEX 95
Exhibit 1(b) 95
William Francois de la Harpe Beck 96
William L. Boyan 96
Thomas Haskins Davis 96
William Langley 96
Michael John Levett 97
Exhibit 2(b) 97
Exhibit 6(e) 97
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By: William Langley 111
By: Alric Wiggill 111
By: Kevin Jacobs 111
By: Bruce Watts 111
Exhibit 6(f) 112
DATED 1ST AUGUST 1996 113
Assets Fund Limited dated o 1996 (the "AGREEMENT") 123
EXHIBIT 9(h) 124
EXHIBIT 11 126
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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
for Old Mutual Equity Growth Assets South Africa Fund (the "OMEGA South Africa
Fund"), which is attached hereto.
Item 5. Management of the Fund.
See "Management and Administration," "Offering of Shares - Expense
Reimbursement" and "General Information" in the Private Placement Memorandum for
the OMEGA South Africa Fund, attached hereto.
State Street Cayman Trust Company, Ltd. (the "Transfer Agent") serves as
transfer agent and dividend disbursing agent for Old Mutual South Africa Equity
Trust (the "Master Trust"). The Transfer Agent may delegate certain of its
functions to an affiliated entity. There is no additional fee charged for
transfer agency services for the Master Trust. The principal business address
of the Transfer Agent is P.O. Box 2508GT, Elizabethan Square, George Town, Grand
Cayman, Cayman Islands.
Item 6. Capital Stock and Other Securities.
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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"). 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 proportion to 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
proportion to 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.
Questions from Investors should be sent to the Master Trust's
administrator, State Street Cayman Trust Company, Ltd., P.O. Box 2508GT,
Elizabethan Square, George Town, Grand Cayman, Cayman Islands.
Subject to an Investor's right to make withdrawals as provided below under
"Item 8. Redemption or Repurchase," the Master Trust does not make distributions
to its Investors.
The Master Trust has determined that it is properly treated as a
partnership for U.S. federal and state income tax purposes. Accordingly, the
Master Trust is not subject to any U.S. federal or state income taxes, but each
Investor in the Master Trust must take into account its share of the Master
Trust's ordinary income and capital gains in determining its income tax
liability. The determination of such
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share is made in accordance with the governing instruments of the Master Trust
and the U.S. Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
The Master Trust intends to conduct its activities so that it will not be
deemed to be engaged in the conduct of a U.S. trade or business for U.S. federal
income tax purposes. Therefore, it is not anticipated that an Investor in the
Master Trust, other than an Investor which would be deemed a "U.S. person" for
U.S. federal income tax purposes, will be subject to U.S. federal income
taxation (other than a 30% withholding tax on dividends and certain interest
income) solely by reason of its investment in the Master Trust. There can be no
assurance that the U.S. Internal Revenue Service may not challenge the above
conclusions or take other positions that, if successful, might result in the
payment of U.S. federal income taxes by Investors in the Master Trust.
See "Summary of the Offering - Portfolio," "Valuation of Shares," "Tax
Matters," "General Information" and "Additional Information" in the Private
Placement Memorandum for the OMEGA South Africa Fund attached hereto.
Item 7. Purchase of Securities Being Offered.
Interests in the Master Trust are issued solely in private placement
transactions which do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933 (the "1933 Act"). Investments in the
Master Trust generally may only be made by investment companies, common or
commingled trust funds or similar organizations or 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 "security" within the meaning of the 1933
Act.
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An investment in the Master Trust is made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Master Trust. There is no minimum initial or subsequent
investment in the Master Trust.
The Master Trust reserves the right to cease accepting investments at any
time or to reject any investment order.
See "Valuation of Shares," "Offering of Shares" and "General Information"
in the Private Placement Memorandum attached hereto.
Item 8. Redemption or Repurchase.
An Investor in the Master Trust may withdraw all or any portion of its
investment at any time after a withdrawal request in proper form is received by
the Master Trust from the Investor. The proceeds of a withdrawal will be paid
by the Master Trust in federal funds normally on the Business Day the withdrawal
is effected, but in any event within seven days. Investments in the Master
Trust may not be transferred. If so authorized by the Trustees with respect to
all or certain Interests, the Master Trust may at any time and from time to
time, charge fees for effecting any decrease or redemption, at such rates as the
Trustees may establish. However, the Trustees have not at this time established
or authorized any such fees.
The Master Trust may declare a suspension of the right to decrease or
redeem Interests or postpone the date of payment of the proceeds of a decrease
or redemption of an Interest 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 Master Trust of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Master Trust fairly to determine the
value of its net assets, or (d) during which the Securities and Exchange
Commission (the "Commission") for the protection of Investors by order permits
the suspension of the right of decrease or redemption or postponement of the
date of payment of the proceeds; provided that applicable rules and regulations
of the Commission shall govern as to whether the conditions prescribed in (b),
(c), or (d) exist. Such suspension shall take effect at such time as 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 to decrease or redeem Interests or payment of the proceeds of a decrease
or redemption of an Interest until 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
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official ruling by the Commission, the determination of the Master Trust shall
be conclusive). In the case of a suspension of the right to decrease or redeem
Interests, an Investor may either withdraw his request to decrease or redeem
Interests or receive payment based on the net asset value upon the termination
of the suspension.
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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.
2
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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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4
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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
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
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".
</TABLE>
7
<PAGE>
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
<PAGE>
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.
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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.
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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.
25
<PAGE>
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.
26
<PAGE>
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 Master Trust...................................... B-11
Control Persons and Principal Holders of Securities................. B-14
Investment Advisory and Other Services.............................. B-15
Brokerage Allocation and Other Practices............................ B-21
Capital Stock and Other Securities.................................. B-22
Purchase, Redemption and Pricing of Securities...................... B-24
Tax Status.......................................................... B-26
Underwriters........................................................ B-29
Calculation of Performance Data..................................... B-29
Financial Statements................................................ B-29
Item 12. General Information and History.
Not applicable.
<PAGE>
Item 13. Investment Objective and Policies.
Part A contains additional information about the investment objective and
policies of Old Mutual South Africa Equity Trust (the "Master Trust"), a
Massachusetts trust. This Part B should be read in conjunction with Part A.
The investment objective of the Master Trust 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 Master Trust will achieve its investment
objective.
Part A contains a discussion of the various types of securities in which
the Master Trust 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 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
<PAGE>
Depositary Receipts, Global Depositary Receipts, or other similar securities
representing equity securities.
<PAGE>
Old Mutual Equity Growth Assets South Africa Fund (the "OMEGA South Africa
Fund"), a registered investment company organized as a Massachusetts business
trust, and Old Mutual South Africa Growth Assets Fund Limited (the "Non-U.S.
Fund"), a Bermuda mutual fund whose shares are listed on the Irish Stock
Exchange, each invest all of their investable assets in the Master Trust. 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 of the OMEGA South Africa Fund and a majority vote of
shareholders of the Non-U.S. Fund.
Except as otherwise indicated, the investment policy and restrictions of
the Master Trust may be changed without the approval of holders of beneficial
interests ("Interests") in the Master Trust ("Investors").
The percentage limitations set forth above, as well as those described
elsewhere in this Part B are measured and applied only at the time an investment
is made or another relevant action is taken by the Master Trust.
REPURCHASE AGREEMENTS
The Master Trust may invest in repurchase agreements collateralized by
securities in which the Master Trust may otherwise invest. Repurchase agreements
are agreements by which the Master Trust 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 Investment Company Act of 1940, as amended (the
"1940 Act"), repurchase agreements may be considered to be loans by the buyer.
The Master Trust'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
Master Trust 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 Master Trust are fully collateralized, with such
collateral being marked to market daily.
CURRENCY EXCHANGE TRANSACTIONS
Because the Master Trust may buy and sell securities denominated in South
<PAGE>
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 Master Trust 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 Master Trust 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 Master Trust 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 Master Trust's assets are
valued daily in terms of U.S. dollars, the Master Trust does not intend to
convert its holdings of non-U.S. currencies into U.S. dollars on a daily basis.)
The Master Trust does not currently intend to speculate in currency exchange
rates or forward contracts.
<PAGE>
The Master Trust 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 Master
Trust 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 Master Trust 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 Master Trust 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 Master Trust 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 Master
Trust 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
Master Trust'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 Master Trust does not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts obligates the
Master Trust to deliver an amount of non-U.S. currency in excess of the value of
the Master Trust's securities or other assets denominated in that currency.
<PAGE>
The Master Trust generally would not enter into a forward contract with a
term greater than one year. At the maturity of a forward contract, the Master
Trust 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 Master Trust retains the security and engages in
an offsetting transaction, the Master Trust will incur a gain or a loss (as
described below) to the extent that there has been movement in forward contract
prices. If the Master Trust 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 Master
Trust 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 Master Trust 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 Master Trust 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 Master
Trust's securities at the expiration of a forward contract. Accordingly, it may
be necessary for the Master Trust 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 Master Trust 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 Master Trust is obligated to deliver.
The Master Trust 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 Master Trust purchases a put option on a non-U.S. currency and the value of
the U.S. currency declines, the Master Trust 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 Master Trust which otherwise would
have resulted. Conversely, where a rise in the U.S. dollar value of another
currency is projected, and where the Master Trust anticipates investing in
securities traded in such currency, the Master Trust 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 Master
Trust 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
Master Trust could sustain losses on transactions in non-U.S. currency options
which would require it
<PAGE>
to forgo a portion or all of the benefits of advantageous changes in such rates.
The Master Trust 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 Master Trust 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 Master Trust 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 Master
Trust could write a put option on the S.A. Rand which, if rates move in the
manner projected, will expire unexercised and allow the Master Trust 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 Master Trust 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
Master Trust 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 Master Trust 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 Master Trust'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 Master Trust's dealings in non-U.S. currency contracts are limited to
the transactions described above. Of course, the Master Trust 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 Master Trust'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 Master Trust 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 Master Trust's
assets equal to the amount of the purchase be held aside or segregated to be
used to pay for the commitment, the Master Trust 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.
LENDING OF SECURITIES
<PAGE>
Consistent with applicable regulatory requirements and in order to generate
income, the Master Trust 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 Master Trust 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 Master Trust with
collateral consisting of U.S. Treasury obligations, the borrower is also
obligated to pay the Master Trust a fee for use of the borrowed securities. The
Master Trust 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 Master Trust could suffer loss if the
borrower terminates the loan and the Master Trust 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 Master Trust would exceed 33 1/3% of the value of its net assets.
WHEN-ISSUED SECURITIES
The Master Trust may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, under normal circumstances, the
Master Trust would take delivery of such securities. When the Master Trust
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 Master Trust's assets equal to the
amount of the purchase be held aside or segregated to be used to pay for the
commitment, the Master Trust 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 Master Trust 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 Master Trust may have to sell
assets which have been set aside in
<PAGE>
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 Master Trust 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
Master Trust's payment obligation).
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
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 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 Master Trust present at a meeting at which the holders of more than 50% of
the outstanding voting securities of the Master Trust are present or represented
by proxy, or (ii) more than 50% of the outstanding voting securities of 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:
(i) 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 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
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.
<PAGE>
(ii) The Master Trust may not make short sales of securities or purchase
securities on margin, except that 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) The Master Trust may not underwrite securities issued by other
persons, 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) 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) 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) 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) 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) 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) 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).
(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 and the Master Trust
will as a matter of operating policy ensure that:
<PAGE>
(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 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 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 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.
(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 Master Trust or 10% of the outstanding
securities of such issuer.
(iv) Not more than 25% of its assets will be invested in securities of any
one issuer.
These restrictions may be changed by the Trustees of the Master Trust
without the approval of 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;
(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;
<PAGE>
(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;
<PAGE>
(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 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.
Item 14. Management of the Master Trust.
The Trustees and officers of 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 Master
Trust.
TRUSTEES
<PAGE>
*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.
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.
<PAGE>
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, and Hudaco Industries Limited, a South African
distributor of industrial consumable goods, John Lusty plc, a food distribution
company, 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
GU25 4SW, United Kingdom.
OFFICERS
*MICHAEL JOHN LEVETT serves as President of the Master Trust.
*WILLIAM LANGLEY serves as Treasurer of the Master Trust.
*MELANIE J. 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.
<PAGE>
The Trustees of the Master Trust received the following remuneration
from the Trust during the period from July 1, 1996 to June 30, 1997:
<TABLE>
<CAPTION>
NAME OF PERSON AGGREGATE PENSION OR ESTIMATED TOTAL
POSITION (1) COMPENSATION RETIREMENT ANNUAL COMPENSATION
FROM BENEFITS BENEFITS FROM REGISTRANT
REGISTRANT ACCRUED AS UPON AND FUND
PART OF TRUST RETIREMENT COMPLEX PAID TO
EXPENSES TRUSTEES
<S> <C> <C> <C> <C>
MICHAEL JOHN
LEVETT
TRUSTEE None None None None
WILLIAM FRANCOIS
DE LA HARPE BECK
TRUSTEE (2) $18,333 None None $27,500
WILLIAM LESTER BOYAN
TRUSTEE $20,000 None None $30,000
THOMAS HASKINS DAVIS
TRUSTEE $10,000 None None $20,000
MICHEL JOHN DREW
TRUSTEE $15,000 None None $25,000
WILLIAM LANGLEY
TRUSTEE None None None None
KENNETH RIGBY WILLIAMS
TRUSTEE 20,000 None None $30,000
</TABLE>
(1) Each of the above-named Trustees serves as a Trustee of the Master Trust
and the OMEGA South Africa Fund 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 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 Master Trust, unless, as to liability to 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 Master Trust. In the case of
settlement, such indemnification will not be provided unless it has
<PAGE>
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.
On November 3, 1995 South African Mutual Life Assurance Society ("Old
Mutual") transferred to the Master Trust a portfolio of South African securities
(the "Portfolio") from Old Mutual's main proprietary investment portfolio. At
the time it was transferred to the Master Trust, the Portfolio had a market
value of approximately U.S.$1 billion and comprised holdings in 60 South African
issuers. In addition, on November 3, 1995 Old Mutual made a capital
contribution of U.S.$4.75 million to the Master Trust.
As consideration for the transfer of the Portfolio and the capital
contribution of Old Mutual, 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 (the "Initial Closing")
of the initial offering of the shares of beneficial interest of the OMEGA South
Africa Fund (the "OMEGA Initial Offering") and of the initial offering of the
shares of the Non-U.S. Fund (the "Non-U.S. Initial Offering"), which was held on
November 10, 1995, each of the OMEGA South Africa Fund and the Non-U.S. Fund
invested the proceeds of its respective Initial Offering in the Master Trust and
was issued a proportionate beneficial interest in the Master Trust. The Master
Trust applied the proceeds of the OMEGA Initial Offering and the Non-U.S.
Initial Offering to redeem a corresponding portion of the interest of Old Mutual
Fund Holdings in the Master Trust. Shares of beneficial interest of the OMEGA
South Africa Fund and shares of the Non-U.S. Fund have been offered on a
continuous basis since December 31, 1995. As of September 22, 1997, Old Mutual
Fund Holdings owned 91.90% of the beneficial interest in the Master Trust. The
address of Old Mutual Fund Holdings is 61 Front Street, Hamilton, Bermuda. As
of September 22, 1997, the OMEGA South Africa Fund and the Non-U.S. Fund owned
0.82% and 7.28%, respectively, of the beneficial interest in the Master Trust.
The address of the OMEGA South Africa Fund and the Non-U.S. Fund is 61 Front
Street, Hamilton, Bermuda.
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.
The Trustees and officers as a group currently own less than one percent of
the outstanding beneficial interests in the Master Trust.
<PAGE>
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 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. Old Mutual provides
investment research and information to the Adviser.
<PAGE>
William Langley, the Treasurer and a Trustee of 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 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 of the Master Trust 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.
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 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) 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.
<PAGE>
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.
<PAGE>
The Adviser will reduce or rebate a portion of the Management Fee as
necessary so that ordinary operating expenses of each of the OMEGA South Africa
Fund and the Non-U.S. Fund, including their respective shares of the Management
Fee and the amortization of certain organizational or offering expenses, will
not exceed 1.00% per annum of the OMEGA South Africa Fund's and the Non-U.S.
Fund's, respectively, 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 Bermuda in connection with the Initial
Offering, (iii) sales charges on shares of the OMEGA South Africa Fund and the
Non-U.S. Fund, (iv) brokerage expenses, or (v) the redemption fee charged by the
OMEGA South Africa Fund and the Non-U.S. 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 in
the OMEGA South Africa Fund and the Non-U.S. Fund, 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 an administrative services agreement (the "Administrative
Services Agreement"), State Street Cayman Trust Company, Ltd. (the "Master Trust
Administrator"), either directly or through an indirect wholly-owned subsidiary
or an affiliated entity, provides certain administrative, transfer agency and
fund accounting services to the Master Trust.
Pursuant to the Administrative Services Agreement, the Master Trust
Administrator serves as accounting agent, registrar, transfer agent and dividend
disbursing agent for the Master Trust, and provides 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 Master Trust, reporting to the Board of Trustees of 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.
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.
<PAGE>
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 Master Trust Administrator's liability under the
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 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%
<PAGE>
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%.
For the periods from November 3, 1995 (commencement of operations) 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 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.
Placement Agent.
The Master Trust has not engaged any placement agent for purposes of
offering beneficial interests in the Master Trust for sale. The OMEGA South
Africa Fund has engaged Fleming Martin Inc., Rand International Securities LLC
and SBC Warburg Inc. (collectively, the "OMEGA Placement Agents") to act as
placement agents to offer and sell shares of the OMEGA South Africa Fund (the
"OMEGA Offering") on a best efforts basis pursuant to a placing agreement (the
"OMEGA Placing Agreement") with the Master Trust, the OMEGA South Africa Fund,
the Adviser and Old Mutual Fund Holdings.
The engagement of the OMEGA Placement 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 OMEGA Placement Agents, appoint
one or more additional placing agents. The obligations of the OMEGA South
Africa Fund and the Master Trust under the OMEGA 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
OMEGA 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 OMEGA Placing Agreement. The OMEGA Placing Agreement
will automatically terminate as to any OMEGA Placement Agent in the event of its
assignment, as defined in the 1940 Act, by such OMEGA Placement Agent.
<PAGE>
Pursuant to a placing agreement (the "Non-U.S. Placing Agreement") between
the Master Trust, the Non-U.S. Fund, the Adviser, Old Mutual Fund Holdings, and
the following placement agents: Fleming Martin Limited, Rand International
Securities LLC and Swiss Bank Corporation, through its division SBC Warburg
(collectively, the "Non-U.S. Placement Agents"), the Non-U.S. Placement Agents
have agreed to use their reasonable endeavors to procure placees for shares of
the Non-U.S. Fund (the "Non-U.S. Offering"), but the Non-U.S. Placement Agents
are not themselves under any obligation to subscribe for any shares. The
engagement of the Non-U.S. Placement Agents is non-exclusive, and the Non-U.S.
Fund may from time to time in its sole discretion but after reasonable prior
consultation with the existing Non-U.S. Placement Agents, appoint one or more
additional placing agents. The obligations of the Master Trust under the
Non-U.S. 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. In certain circumstances, the Non-U.S.
Placement Agents are entitled to terminate the Non-U.S. Placing Agreement,
including where there has been a material breach of certain of the
representations and warranties contained in Non-U.S. Placing Agreement. The
Non-U.S. Fund may terminate the Non-U.S. Placing Agreement as to any Non-U.S.
Placement Agent by immediate written notice to each party to the Non-U.S.
Placing Agreement in the event that such Non-U.S. Placement Agent shall be in
material breach of the Non-U.S. Placing Agreement and such breach is specified
in the notice.
A sales charge of up to 0.35% of the net asset value of each share of the
OMEGA South Africa Fund sold to a subscriber for shares in the OMEGA South
Africa Fund ("Subscriber") may be applied by the OMEGA Placement Agents. Old
Mutual Fund Holdings may make additional payments to the OMEGA Placement Agents
or other parties equal to 0.25% of the price of shares of the OMEGA South Africa
Fund sold in the OMEGA Offering. Each Non-U.S. Placement Agent will be entitled
to a corresponding fee with respect to shares of the Non-U.S. Fund sold in the
Non-U.S. Offering. Each of the OMEGA South Africa Fund and the Non-U.S. Fund
have agreed to indemnify its respective Placement Agents and the Master Trust
has agreed to indemnify the OMEGA and the Non-U.S. Placement Agents against
certain liabilities, including liabilities under applicable securities laws.
The Master Trust has adopted a placement plan in accordance with Rule 12b-1
under the 1940 Act (the "Placement Plan"). The Placement Plan provides for the
payment of certain fees and amounts in connection with the placement of shares.
Furthermore, the 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
<PAGE>
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 continues in effect if such continuance is specifically
approved at least annually by a vote of a majority of the Trustees of the Master
Trust and a majority of the Trustees who are not "interested persons" of the
Master Trust, 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"). The Placement Plan
requires that the Treasurer of the Master Trust provide to the Master Trust'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. The 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. The 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. The Placement Plan may not
be amended to increase materially the amount of the Master Trust's permitted
expenditures thereunder without the approval of a majority of the outstanding
voting securities of the Master Trust 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. The Master Trust will preserve copies of the
Placement Plan and any agreements or reports made pursuant to the Placement Plan
for a period of not less than six years from the date of the Placement 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) to June 30, 1996 there were U.S.$2,594,688 in payments made under
the Placement Plan. For the period from July 1, 1996 to June 30, 1997 no
payments were made under the Placement Plan.
Custodian.
The Master Trust has entered into a custodian contract with State Street
Bank and Trust Company (the "Custodian") pursuant to which the Custodian acts as
custodian 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 24, 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
<PAGE>
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, Vallis Building, Hamilton HM 11 Bermuda, are the
independent public accountants for the Master Trust, providing audit services,
and assistance and consultation with respect to the preparation of filings with
the SEC.
Item 17. Brokerage Allocation and Other Practices.
<PAGE>
The primary consideration in placing the Master Trust'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.
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 Master Trust 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,
<PAGE>
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) 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.
<PAGE>
The beneficial interest in the Master Trust consists of non-transferable
Interests. Interests may be issued only to (a) any U.S. regulated investment
company, segregated asset account, non-U.S. investment company, common trust
fund, group trust, or other investment arrangement other than an individual, S
corporation, partnership or grantor trust beneficially owned by an individual, S
corporation or partnership, and/or (b) Old Mutual and any wholly-owned direct or
indirect subsidiary of Old Mutual, as may be approved by the
Trustees, for cash or other consideration acceptable to the Trustees, subject to
the requirements of the 1940 Act. The value of an Interest shall be equal to
the balance of the Investor's book capital account (the "Book Capital Account
Balance"). The number of Interests authorized under the declaration of trust of
the Master Trust is unlimited. The offering of Interests has not been
registered under the 1933 Act.
On each matter submitted to a vote of Investors, each Investor shall be
entitled to a vote proportionate to its Interest in the Master Trust as recorded
on the books of the Master Trust. If the Master Trust is divided into series,
each series shall vote as a separate class except (i) when required by the 1940
Act or the declaration of trust of the Master Trust to be voted in the
aggregate, (ii) in the election and removal of Trustees, (iii) for certain
amendments to the declaration of trust of the Master Trust, and (iv) when the
Trustees have determined that a matter affects the interests of Investors of all
series or classes of Interests and that the Interests shall vote as one class on
the matter. On each matter submitted to a vote of Investors, each Investor may
apportion its vote with respect to a proposal in the same proportion as its own
shareholders voted with respect to that proposal. As a Massachusetts trust, the
Master Trust is not required to hold, and has no present intention of holding,
annual meetings of Investors but the Master Trust will hold special meetings of
Investors when in the judgment of the Trustees it is necessary or desirable to
submit matters for a Investor vote.
The Master Trust's activities are supervised by a Board of Trustees.
Investors 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 and (ii) changes in the investment
objective and fundamental investment restrictions of the Master Trust. Trustees
of the Master Trust may be removed by a vote of Investors holding at least
two-thirds of outstanding Interests.
The Master Trust 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 Interests of all series of the Master Trust voting
as a single class, or of the affected series of the Master Trust, 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 Interests of all series of
the Master Trust voting as a single class, or of the affected series of the
Master Trust, as the case may be; provided, however,
<PAGE>
that if such merger, consolidation, or transfer is recommended by the Trustees,
the "vote of a majority of the outstanding voting securities" of the Master
Trust, as defined in the 1940 Act ("Majority Interests 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 Master Trust may be
terminated by a Majority Interests Vote, by the Trustees, or upon the bankruptcy
or dissolution of an Investor unless the remaining Investors, by Majority
Interests Vote, agree to continue the Master Trust. Any series of the Master
Trust may be terminated by a Majority Interests Vote of that series, by the
Trustees, or upon the bankruptcy or dissolution of an Investor of that series
unless the remaining Investors, by Majority Interests Vote of the series, agree
to continue the series.
<PAGE>
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 (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 an Investor 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.
The declaration of trust of the Master Trust further provides that
obligations of the Master Trust 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.
Each Investor in the Master Trust may add to or withdraw from its
investment in the Master Trust on each Business Day, as defined in Item 19.
Item 19. Purchase, Redemption and Pricing of Securities.
The Master Trust is offering the Interests without registration under the
1933 Act as a private placement pursuant to Regulation D under the 1933 Act.
The Master Trust is also relying upon appropriate exemptions from the
registration requirements of applicable state securities or blue sky laws. The
Interests are being offered and sold in the U.S. only to investment companies,
common or commingled trust funds or similar organizations or entities which are
"accredited investors" as defined in Regulation D. This Registration Statement
does not constitute an offer to sell, or the solicitation of an offer to buy,
any "security " within the meaning of the 1933 Act.
The net asset value of the Master Trust is determined each day on which the
New York Stock Exchange is open for trading ("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 Master Trust Administrator once each day as of 10:00 a.m.
(Eastern time), being after the close of business of the JSE for that day. The
net asset value of the Master Trust at any given time and from time to time
shall mean the difference of (a) the total assets then held by the Master Trust
including all cash and cash equivalents, stocks, bonds, and other debt
instruments (including accrued interest and original issue discount thereon),
mutual fund interests, stock options, open futures positions, other securities,
and declared dividends on equity securities
<PAGE>
after the record date for payment thereof, minus (b) the face amount of all
Master Trust debts and obligations.
<PAGE>
Upon the determination of the net asset value of the Master Trust on each
Business Day, the Book Capital Account Balance of each investor in the Master
Trust ("Investor") 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 proportion to 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 proportion to 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. The
percentage interest of each Investor in the Master Trust at any time for
purposes of voting and otherwise shall be the quotient of (i) the Book Capital
Account Balance of that Investor at that time divided by (ii) the sum of the
Book Capital Account Balances of all Investors at that time.
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 of the OMEGA South
Africa Fund or the Non-U.S. Fund.
The Master Trust may, from time to time, revise its procedures relating to
the calculation of net asset value to reflect changes in JSE trading periods and
<PAGE>
practices.
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 Master Trust'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
Master Trust.
Subject to compliance with applicable regulations, the Master Trust has
reserved the right to pay the redemption price of Interests, 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 Interests being
sold. If a holder of Interests received a distribution in kind, such holder
could incur brokerage or other charges in converting the securities to cash.
The Trustees shall have the power (but no obligation) at any time to redeem
all (but not less than all) the Interest in the Master Trust of any Investor at
a redemption price determined in accordance with the provisions of the
declaration of trust of the Master Trust if at such time the aggregate Book
Capital Account Balance of such Investor is less than a minimum amount, if any,
as determined from time to time by the Trustees. However, the Trustees have not
established any such minimum amount, and no action to establish a minimum amount
has been taken by the Trustees.
<PAGE>
The Master Trust may declare a suspension of the right to decrease or
redeem Interests or postpone the date of payment of the proceeds of a decrease
or redemption of an Interest 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 Master Trust of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Master Trust fairly to determine the
value of its net assets, or (d) during which the SEC for the protection of
Investors by order permits the suspension of the right of decrease or redemption
or postponement of the date of payment of the 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 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 to decrease or redeem Interests or payment of the
proceeds of a decrease or redemption of an Interest until 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 Master
Trust shall be conclusive). In the case of a suspension of the right to
decrease or redeem Interests, an Investor may either withdraw his request to
decrease or redeem Interests or receive payment based on the net asset value
upon the termination of the suspension.
Item 20. Tax Status.
The Master Trust is organized as a Massachusetts trust. The Master Trust
has determined that it is properly treated as a partnership for U.S. federal and
Massachusetts income tax purposes. Accordingly, under those tax laws, the
Master Trust is not subject to any income tax, but each Investor in the Master
Trust must take into account its share of the Master Trust's ordinary income,
capital gains, expenses, losses, credits, and other items in determining its
income tax liability. The determination of such share is made in accordance
with the governing instruments of the Master Trust and the U.S. Internal Revenue
Code of 1986, as amended (the "Code"), and regulations promulgated thereunder.
The Master Trust's taxable year ends June 30. Although, as described
above, the Master Trust is not subject to U.S. federal income tax, it files
appropriate U.S. federal income tax returns.
The Master Trust believes that, in the case of an Investor in the Master
Trust that seeks to qualify as a regulated investment company ("RIC") under the
Code, the Investor should be treated for U.S. federal income tax purposes as an
owner of an
<PAGE>
undivided interest in the assets and operations of the Master Trust, and
accordingly should be deemed to own a proportionate interest in each of the
assets of the Master Trust and should be entitled to treat as earned by it the
portion of the Master Trust's gross income attributable to that interest. The
Master Trust also believes that each such Investor should be deemed to hold its
proportionate interest of the Master Trust's assets for the period the Master
Trust has held the assets or for the period the Investor has been a partner in
the Master Trust, whichever is shorter. Each Investor should consult its tax
advisers regarding whether, in light of its particular tax status and any
special tax rules applicable to it, this approach applies to its investment in
the Master Trust, or whether the Investor's investment in the Master Trust
should be treated as an interest in a separate entity rather than a direct
interest in Master Trust assets.
In order to enable an Investor that is otherwise eligible to qualify as a
RIC under the Code to so qualify, the Master Trust intends that it will satisfy
the requirements of Subchapter M of the Code with respect to the nature of the
Master Trust's gross income and the composition (diversification) and holding
period of the Master Trust's assets as if those requirements were directly
applicable to the Master Trust and to allocate and permit withdrawals of its net
investment income and any net realized capital gains in a manner that will
enable an Investor that is a RIC to comply with the qualification requirements
imposed by Subchapter M of the Code.
<PAGE>
The Master Trust will allocate at least annually among its Investors each
Investor's distributive share of the Master Trust's net investment income, net
realized capital gains, and any other items of income, gain, loss deduction, or
credit in a manner intended to comply with the Code and applicable U.S. Treasury
regulations.
To the extent the cash proceeds of any withdrawal or distribution exceed an
Investor's adjusted tax basis in its partnership interest in the Master Trust,
the Investor will generally realize gain for U.S. federal income tax purposes.
If, upon a complete withdrawal (i.e., a redemption of its entire interest in the
Master Trust), the Investor's adjusted tax basis in its partnership interest in
the Master Trust exceeds the proceeds of the withdrawal, the Investor will
generally realize a loss for federal income tax purposes. An Investor's
adjusted tax basis in its partnership interest in the Master Trust will
generally be the aggregate price paid therefor, increased by the amounts of its
distributive shares of items of realized net income and gain (including income,
if any, exempt from U.S. Federal income tax), and reduced, but not below zero,
by the amounts of its distributive shares of items of net loss and the amounts
of any distributions received by the Investor.
The Master Trust may be subject to foreign taxes with respect to income on
certain securities of non-U.S. issuers. These taxes may be reduced or
eliminated under the terms of an applicable U.S. income tax treaty if and to the
extent such treaty is available. There is no income tax treaty presently in
effect between the U.S. and South Africa. Foreign exchange gains and losses
realized by the Master Trust will generally be treated as ordinary income and
losses for federal income tax purposes. Certain uses of foreign currency and
foreign currency forward contracts and investment by the Master Trust in certain
"passive foreign investment companies" may be limited, or a tax election may be
made, if available, in order to enable an Investor that is a RIC to preserve its
qualification as a RIC and to avoid imposition of a tax on such an Investor.
The Master Trust's transactions in forward currency contracts will be
subject to special tax rules that may affect the amount, timing, and character
of Master Trust income. For example, certain positions held for the Master
Trust 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 Master Trust 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 Master Trust losses, adjustments in the holding periods of Master
Trust 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.
<PAGE>
There are certain tax issues which will be relevant to only certain
Investors, specifically, Investors which are segregated asset accounts and
Investors who contribute assets other than cash to the Master Trust. It is
intended that such segregated asset accounts will be able to satisfy
diversification requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met. Such
Investors are advised to consult their own tax advisers as to the tax
consequences of an investment in the Master Trust.
<PAGE>
The Master Trust intends to conduct its activities so that it will not be
deemed to be engaged in the conduct of a U.S. trade or business for U.S. federal
income tax purposes. Therefore, it is not anticipated that an Investor in the
Master Trust, other than an Investor which would be deemed a "U.S. person" for
U.S. federal income tax purposes, will be subject to U.S. federal income
taxation (other than a 30% withholding tax on dividends and certain interest
income) solely by reason of its investment in the Master Trust. There can be no
assurance that the U.S. Internal Revenue Service may not challenge the above
conclusions or take other positions that, if successful, might result in the
payment of U.S. federal income taxes by Investors in the Master Trust.
The above discussion does not address the special tax rules applicable to
certain classes of Investors, such as tax-exempt entities, insurance companies,
and financial institutions, or the state, local, or non-U.S. tax laws that may
be applicable to certain Investors. Investors should consult their own tax
advisers with respect to the special tax rules that may apply in their
particular situations, as well as the state, local, or foreign tax consequences
to them of investing in the Master Trust.
Item 21. Underwriters.
Not applicable.
Item 22. Calculation of Performance Data.
Not applicable.
Item 23. Financial Statements.
The financial statements for the Master Trust, 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:
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*
<PAGE>
[FN] * Financial information is incorporated by reference to the OMEGA South
Africa Fund'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(a) By-Laws of Registrant
***2(b) Amendment to the By-Laws of the Registrant
*5 Investment Advisory Agreement between the Registrant and Old Mutual
Asset Managers (Bermuda) Limited (the Adviser)
*6(a) Placing Agreement among SBC Warburg Inc., the Registrant, Old Mutual
Equity Growth Assets South Africa Fund (the OMEGA Fund), 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 SBC Warburg Inc., the Registrant, Old Mutual
South Africa Growth Assets Fund Limited (the SAGA Fund), Old Mutual,
the Adviser and Old Mutual Fund Holdings
**6(c) Placing Agreement among Fleming Martin Inc., Rand International
Securities, SBC Warburg Inc., the Registrant, the OMEGA Fund, the
Adviser and Old Mutual Fund Holdings
**6(d) Placing Agreement among Fleming Martin Inc., Rand International
Securities, SBC Warburg Inc., the Registrant, the SAGA Fund, the
Adviser and Old Mutual Fund Holdings
***6(e) Placing Agreement among Fleming Martin Inc., Rand International
Securities LLC, SBC Warburg Inc., the Registrant, the OMEGA Fund, the
Adviser and Old Mutual Fund Holdings
***6(f) Placing Agreement among Fleming Martin Inc., Rand International
Securities LLC, SBC Warburg Inc., the Registrant, the SAGA Fund, the
Adviser and Old Mutual Fund Holdings
*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 Cayman Trust Company, Ltd.
*9(b) Structuring Agreement among the Registrant, the OMEGA Fund, the SAGA
Fund and International Finance Corporation
*9(c) Subscription and Portfolio Transfer Agreement among Old Mutual, Old
Mutual Fund Holdings, the Adviser, the Registrant, the OMEGA Fund, the
SAGA Fund and Old Mutual Global Assets Fund Limited
*9(d) Irish Stock Exchange Undertaking among the Registrant, the OMEGA Fund
and the SAGA Fund
*9(e) Form of letter from Old Mutual Fund Holdings with respect to seed
capital
*9(f) Form of Agreement among the Registrant, the OMEGA Fund, the SAGA Fund
and the Adviser as to the allocation of insurance coverage
<PAGE>
**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 Consent of Independent Auditors
*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. 811-7417) as filed with the Securities and Exchange
Commission on November 9, 1995.
** Incorporated herein by reference to the Registrant's Amendment No. 1 to its
Registration Statement on Form N-1A (File No. 811-7417) as filed with the
Securities and Exchange Commission on May 2, 1996.
*** Incorporated herein by reference to the Registrant's Amendment No. 2 to its
Registration Statement on Form N-1A (File No. 811-7417) as filed with the
Securities and Exchange Commission on September 27, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
The Registrant has no subsidiaries. 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, a wholly-owned subsidiary of Old Mutual.
The following information is provided as to certain principal subsidiaries of
Old Mutual, which are under common control with the Registrant.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COUNTRY
OF
NAME OF SUBSIDIARY COMPANY PARENT COMPANY OWNED INCORPORATION NATURE OF BUSINESS
- -----------------------------------------------------------------------------------------------------------------------------------
JSE LISTED SUBSIDIARY COMPANIES
<S> <C> <C> <C> <C>
Mutual & Federal Insurance Company, Ltd. Old Mutual 47.86 SOUTH AFRICA Short-term Insurance
Safmarine & Rennies Holdings Ltd. Old Mutual 54.99 SOUTH AFRICA Holding company
Anglo-Transvaal Collieries Ltd. Old Mutual 56.76 SOUTH AFRICA Investment holding Co.
Nedcor Bank Limited Old Mutual 52.07 SOUTH AFRICA Banking
UNLISTED SUBSIDIARY COMPANIES
Ashtree Investments Limited Old Mutual 100 SOUTH AFRICA Investment holding co.
Capital Securities Limited Old Mutual 100 SOUTH AFRICA Investment holding co.
Durban Hotels Limited Old Mutual 100 SOUTH AFRICA Operation of hotels
Highlight Investments (Pty) Limited Old Mutual 100 SOUTH AFRICA Investment holding co.
Mutual & Federal Investments Limited Old Mutual 100 SOUTH AFRICA Investment holding co.
Old Mutual Actuaries & Consultants (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment advisory co.
Rodina Investments (Pty) Limited Old Mutual 100 SOUTH AFRICA Investment holding co.
Fairbairn Investment Holdings SA (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment holding co.
Old Mutual Asset Managers (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Portfolio management co.
Old Mutual Health Benefits Administrators (Pty) Old Mutual 100 SOUTH AFRICA Admin. health benefit man.
Ltd.
Old Mutual Health Insurance Limited Old Mutual 100 SOUTH AFRICA Short-term health insurer
Old Mutual Syfrets Trust Ltd. Old Mutual 100 SOUTH AFRICA Administration of Estates
Old Mutual Bermuda Holdings (SA) Ltd. Old Mutual 100 SOUTH AFRICA Holding company
South African Mutual Unit Trust Management Old Mutual 100 SOUTH AFRICA Unit Trust management co.
Company Ltd.
OMGES Services (Pty) Limited Old Mutual 100 SOUTH AFRICA Administrative services
Pioneer International (South Africa)(Pty) Ltd. Pioneer
International
Limited 100 SOUTH AFRICA Administrative services
Old Mutual Bermuda Holdings (S.A) Limited Old Mutual 100 SOUTH AFRICA Holding company
Pioneer International (South Africa)(Pty) Ltd. Pioneer
International Ltd. 100 SOUTH AFRICA Provision of
administrative services
Old Mutual Health Insurance Limited (external) Old Mutual 100 NAMIBIA Short-term health insurer
Old Mutual Asset Managers (Namibia) (Pty) Ltd. Old Mutual Asset
Managers Holdings
(Bermuda) Ltd. 100 NAMIBIA Portfolio management co.
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
Old Mutual Medical Administrators (Pty) Ltd. Old Mutual 100 NAMIBIA Admin. health benefit man.
Old Mutual Unit Trust Management Company Namibia Ltd. Old Mutual 100 NAMIBIA Unit Trust management co.
Old Mutual Investment Corporation (Pvt) Ltd. Old Mutual 100 ZIMBABWE Investment holding co.
Old Mutual Property Investment Corporation Old Mutual 100 ZIMBABWE Property holding
(Pvt) Ltd.
City Centre Properties (Pvt) Ltd. Old Mutual Property 92.5 ZIMBABWE Property holding
Investment Corporation
(Pvt) Ltd.
Cyvern Properties (Pvt) Ltd. Old Mutual Property 100 ZIMBABWE Property holding
Investment Corporation
(Pvt) Ltd.
R.M. Insurance Company (Pvt) Ltd. Old Mutual Property 60 ZIMBABWE Short-term Insurance
Investment Corporation
(Pvt) Ltd.
Rentogre Investments (Pvt) Ltd. Old Mutual Property 100 ZIMBABWE Property holding
Investment Corporation
(Pvt) Ltd.
Rutima Properties (Pvt) Ltd. Old Mutual Property 100 ZIMBABWE Property holding
Investment Corporation
(Pvt) Ltd.
Old Mutual Asset Managers (UK) Old Mutual Group 100 UNITED KINGDOM Asset Managing Co.
Ltd.
OMLA Holdings Ltd. Old Mutual Group 100 UNITED KINGDOM Investment holding co.
Old Mutual Fund Managers Ltd. Old Mutual Group 100 UNITED KINGDOM Manages authorized Unit
Trusts
Fairbairn Investment Company Ltd. Fairbairn Inv. Holdings 100 UNITED KINGDOM Investment holding company
(SA) (Pty) Ltd.
Old Mutual Group (UK) Ltd. Fairbairn Investment 100 UNITED KINGDOM Investment holding company
Company Ltd.
Old Mutual Portfolio Managers Ltd. Fairbairn Investment 100 UNITED KINGDOM Investment services
Company Ltd.
Old Mutual Life Assurance Company Ltd. Old Mutual Life Assurance 100 UNITED KINGDOM Life assurance
Holdings Ltd.
Roseland Properties Ltd. Old Mutual Life Assurance 100 UNITED KINGDOM Property investment
Holdings Ltd.
PCAP Ltd. Old Mutual Life Assurance 100 UNITED KINGDOM Investment company
Holdings Ltd.
Providence Capitol Mortgage Services Ltd. Old Mutual Group (UK) Ltd. 100 UNITED KINGDOM Loans on residential
proprties
<PAGE>
Collingwood (UK) Ltd. Collingwood Group Ltd. 100 UNITED KINGDOM Provision of administrative
services
Old Mutual International Marketing Services Ltd. Old Mutual International 100 UNITED KINGDOM Provision of marketing
(Guernsey) Ltd. services
Fairbairn International S.A. Old Mutual 100 LUXEMBOURG Holding company
Fairbairn Ireland Ltd. Old Mutual 100 IRELAND Holding company
Old Mutual International (Ireland) Ltd. Fairbairn Ireland Limited 100 IRELAND Long-term life assurer
Old Mutual International Fund Managers Ltd. Fairbairn Ireland Limited 100 IRELAND Manages authorized Unit
Trusts
Fairbairn Actuaries and Consultants Ltd. Old Mutual 100 GUERNSEY Provider of Consulting
Services
Fairbairn Holdings Ltd. Old Mutual 100 GUERNSEY Holding company
OMIAM Services Ltd. Old Mutual 100 GUERNSEY Service co. to Group
OMIAM Properties Ltd. Old Mutual Group 100 GUERNSEY Property Co.
Old Mutual International Asset Managers Old Mutual Group 100 GUERNSEY Asset managing company
(Guernsey) Ltd.
Old Mutual International Financial Services Ltd. Fairbairn International 100 GUERNSEY Holding company
SA
Old Mutual International (Guernsey) Ltd. Old Mutual International 100 GUERNSEY Life assurance
Financial Services Ltd.
Solomon Information Services Ltd. Old Mutual International 100 GUERNSEY Administrative services
Financial Services Ltd.
L & S Properties Ltd. Old Mutual International 100 GUERNSEY Property holding company
(Guernsey) Ltd.
Naftiaux Holdings Ltd. Old Mutual International 100 GUERNSEY Property holding company
(Guernsey) Ltd.
Providence Capitol Fund Managers Int. Ltd. Old Mutual International 100 GUERNSEY Management of unit trusts
(Guernsey) Ltd.
Fairbairn Reads Trust Company Ltd. Old Mutual International 50.1 GUERNSEY Trust and company formation
Financial Services Ltd.
Fairbairn Reads Trust Directors Ltd. Fairbairn Reads Trust 100 GUERNSEY Acts as director of
Company Ltd. companies
<PAGE>
Fairbairn Reads Trust Company Secretarial Ltd. Fairbairn Reads Trust 100 GUERNSEY Company secretaries
Company Ltd.
Spectrum Nominees Ltd. Fairbairn Reads Trust 100 GUERNSEY Provision of nominee
Company Ltd. services
Finexco International Ltd. Old Mutual International 100 GUERNSEY Holding company
Financial Services Ltd.
Collingwood Group Ltd. Old Mutual International 99.99 GUERNSEY Holding company
Financial Services Ltd.
Fairbairn Marketing Services Ltd. Fairbairn International 100 GUERNSEY International consultancy
SA and marketing
Fairbairn Properties Ltd. Fairbairn International 100 GUERNSEY Property holding company
SA
Merriman Services Ltd. Fairbairn International 100 GUERNSEY International consultancy
SA and marketing
Pioneer International ltd. Old Mutual International 100 GUERNSEY Holding company
Financial Services Ltd.
Old Mutual Holdings Ltd. Fairbairn Hold. Ltd. 100 KENYA Holding company
Old Mutual Life Assurance Company Ltd. Old Mutual Holdings Ltd. 60.9 KENYA Insurance company
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
Millstream Ltd. Old Mutual Group 100 BAHAMAS Investment Co.
Old Mutual International Asset Managers Old Mutual Group 100 BAHAMAS Asset managing co.
(Bahamas) Ltd.
Poplar Services Inc. Old Mutual International (Guernsey) Ltd. 100 BAHAMAS Trading in European hedge
funds
Fairbairn Managed Futures Ltd. Old Mutual International (Guernsey) Ltd. 100 BAHAMAS Trading in managed futures
Rohais Managed Futures (Holding) Fairbairn Guarenteed Futures (Bermuda) 100 BAHAMAS Holding zero coupon stocks
(Bahamas) Ltd. Ltd.
Rohais Series Five Futures Trading Rohais Managed Futures (Holding) 100 BAHAMAS Dealing in currency futures
(Bahamas) Ltd. (Bahamas) Ltd.
Rohais Series Six Futures Trading Rohais Managed Futures (Holding) 100 BAHAMAS Futures trading
(Bahamas) Ltd. (Bahamas) Ltd.
Old Mutual International Asset Managers Old Mutual Group 100 BERMUDA Asset managing co.
(Bermuda) Ltd.
Old Mutual Fund Holdings (Bermuda) Ltd. Old Mutual Group 100 BERMUDA Holding Co. for Global
Asset Fund
Old Mutual Asset Managers (Bermuda) Ltd. Old Mutual 100 BERMUDA Investment manager
Old Mutual Global Assets Fund Ltd. Old Mutual Group 100 BERMUDA Asset managing co.
Fairbairn Guaranteed Futures (Bermuda) Old Mutual International (Guernsey) Ltd. 100 BERMUDA Holding zero coupon stocks
Ltd.
Fairbairn Futures Trading (Bermuda) Ltd. Fairbairn Guaranteed Futures (Bermuda) 100 BERMUDA Dealing in non US futures
Ltd.
Fairbairn US Futures Trading (Bermuda) Fairbairn Futures Trading (Bermuda) Ltd. 100 BERMUDA Dealing in US futures
Ltd.
Fairbairn Futures Trading (1992) Fairbairn Guaranteed Futures (Bermuda) 100 BERMUDA Dealing in non US futures
(Bermuda) Ltd. Ltd.
Fairbairn US Futures Trading (1992) Fairbairn Futures Trading (1992) (Bermuda) 100 BERMUDA Dealing in US futures
(Bermuda) Ltd. Ltd.
Old Mutual Group Limited Old Mutual 100 BERMUDA Holding Co.
Old Mutual Asset Managers (Holdings)
Bermuda Limited Old Mutual Group 100 BERMUDA Holding Co.
Old Mutual International Holdings
Limited Old Mutual Group 100 BERMUDA Holding Co.
Old Mutual International Developments
Limited Old Mutual Group 100 BERMUDA Holding Co.
Old Mutual International Limited Old Mutual Group 100 BERMUDA Operating Co.
<PAGE>
Old Mutual International Business
Services Limited Old Mutual Group 100 BERMUDA Operating Co.
Old Mutual Investment Advisers, Inc. Old Mutual Group 100 USA Investment Adviser
Finexco Hellas Company Ltd. Finexco Administrative Services (FAS) BV 100 GREECE Provision of administrative
services
Finexco Europe SA Finexco Administrative Services (FAS) BV 100 BELGIUM Provision of administrative
services
Finexco (HK) Ltd. Finexco Administrative Services (FAS) BV 100 HONG KONG Provision of administrative
services
Collingwood Investment Ltd. Collingwood Group Ltd. 100 HONG KONG Provision of administrative
services
Finexco (M) SDN BHD Finexco Administrative Services (FAS) BV 100 MALAYSIA Provision of administrative
services
Finexco Financial Expatriate Consultancy Finexco Administrative Services (FAS) BV 100 NETHERLANDS Administrative services
BV
Finexco Administrative Services (FAS) BV Finexco International ltd. 100 NETHERLANDS Administrative services
Finexco Financial Services (Cyprus) Ltd. Finexco Administrative Services (FAS) BV 100 CYPRUS Administrative services
Pioneer Financial Consultants Ltd. Pioneer International Ltd. 100 ISRAEL Provision of administrative
services
Pioneer Global Funds (92) Ltd. Pioneer International Ltd. 100 ISRAEL Provision of administrative
services
Pioneer Trust Fund Management (1993) Pioneer International Ltd. 100 ISRAEL Unit trust management
Ltd.
Collingwood Investment (Middle East) Collingwood Group Ltd. 100 GRAND TURK Provision of administrative
Ltd. services
Old Mutual Financial Services Botswana Fairbairn Holdings Ltd. 100 BOTSWANA Provision of financial
(Pty) Ltd. services
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 26. Number of Holders of Securities.
<PAGE>
Number of Record Holders
Title of Class As of September 22, 1997
-------------- -------------------------
Beneficial Interests 3
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, incorporated herein by reference; (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 and (c) Section 11 of the Placing Agreement between the Registrant,
Fleming Martin Limited, Rand International Securities LLC, Swiss Bank
Corporation 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
Registrant 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.
<PAGE>
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)
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)
<PAGE>
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)
<PAGE>
Chairman, Fairbairn Ireland Limited (50 Dawson Street, Dublin, Ireland)
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)
<PAGE>
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)
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 Director of OMAM
Holdings
Treasurer and Trustee of the Registrant and the OMEGA South Africa Fund.
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
<PAGE>
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 and Alternate
Director of OMAM Holdings
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)
<PAGE>
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 OMEGA South Africa Fund
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,
<PAGE>
Hamilton, Bermuda)
Secretary, Old Mutual International Holdings Limited (61 Front Street,
Hamilton, Bermuda)
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) Not applicable.
<PAGE>
(b) Not applicable.
(c) Not applicable.
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:
Name Address
---- -------
State Street Bank and Trust Company State Street Bank and Trust
Company
1776 Heritage Drive
Quincy, Massachusetts 02171
State Street Cayman Trust Company, Ltd. P.O. Box 2508 GT
Elizabethan Square,
George Town
Grand Cayman
Cayman Islands
Old Mutual Asset Managers (Bermuda) Limited 61 Front Street
Hamilton, Bermuda
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
<PAGE>
(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 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 Consent of Independent Auditors
27 Financial Data Schedule
<PAGE>
Exhibit 1(c)
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
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
William Francois de la Harpe Beck as Trustee and not individually
The Little House 3 Nahoon Avenue Constantia 7800, South Africa
<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
Thomas Haskins Davis as Trustee and not individually
Winchester Global Trust Company Limited
Williams House
20 Reid Street
Hamilton, Bermuda
Michel John Drew
Michel John Drew as Trustee and not individually
International Services Limited 22 Church Street Hamilton HM 11,
Bermuda
William Langley
William Langley as Trustee and not individually
Old Mutual Asset Managers (Bermuda) Limited
61 Front Street
Hamilton, Bermuda
Michael John Levett
Michael John Levett as Trustee and not individually
South African Mutual Life Assurance Society
Mutualpark, Jan Smuts Drive
Pinelands, South Africa
Kenneth Rigby Williams
Kenneth Rigby Williams as Trustee and not individually
<PAGE>
15 Lime Tree Walk
Virginia Park, Virginia Water.
Surrey GU25 4SW, United Kingdom
* 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>
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
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0001003162
<NAME> OLD MUTUAL SOUTH AFRICA EQUITY TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 1,016,303
<INVESTMENTS-AT-VALUE> 1,049,717
<RECEIVABLES> 7,151
<ASSETS-OTHER> 22,110
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,078,978
<PAYABLE-FOR-SECURITIES> 1,566
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 706
<TOTAL-LIABILITIES> 2,272
<SENIOR-EQUITY> 0
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<NET-ASSETS> 1,076,706
<DIVIDEND-INCOME> 22,603
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<OTHER-INCOME> 18
<EXPENSES-NET> (7,416)
<NET-INVESTMENT-INCOME> 17,624
<REALIZED-GAINS-CURRENT> 1,648
<APPREC-INCREASE-CURRENT> 72,856
<NET-CHANGE-FROM-OPS> 92,129
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 63,862
<NUMBER-OF-SHARES-REDEEMED> 68,138
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 87,854
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 7,416
<AVERAGE-NET-ASSETS> 967,450
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
