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OLD MUTUAL SOUTH AFRICA EQUITY TRUST POS AMI
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As filed with the Securities and Exchange Commission on October 30, 1998
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. 4
OLD MUTUAL SOUTH AFRICA EQUITY TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN
CHARTER)
22 CHURCH STREET HAMILTON 11, BERMUDA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(441) 296-1201
[**MELANIE J. SAUNDERS
22 CHURCH STREET, HAMILTON 11, BERMUDA**]
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO: ROGER P. JOSEPH, BINGHAM DANA LLP,
150 FEDERAL STREET, BOSTON, MA 02110
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TABLE OF CONTENTS
Document Sections
Item 4. General Description of Registrant.
Item 5. Management of the Fund.
Item 6. Capital Stock and Other Securities.
Item 7. Purchase of Securities Being Offered.
Item 8. Redemption or Repurchase.
Item 9. Pending Legal Proceedings.
Item 10. Cover Page.
Item 11. Table of Contents.
Item 12. General Information and History.
Item 13. Investment Objective and Policies.
Item 14. Management of the Master Trust.
Item 15. Control Persons and Principal Holders of Securities.
Item 16. Investment Advisory and Other Services.
Item 17. Brokerage Allocation and Other Practices.
Item 18. Capital Stock and Other Securities.
Item 19. Purchase, Redemption and Pricing of Securities.
Item 20. Tax Status.
Item 21. Underwriters.
Item 22. Calculation of Performance Data.
Item 23. Financial Statements.
Item 24. Financial Statements and Exhibits.
Item 25. Persons Controlled by or under Common Control with Registrant.
Item 26. Number of Holders of Securities.
Item 27. Indemnification.
Item 28. Business and Other Connections of Investment Adviser.
Item 29. Principal Underwriters.
Item 30. Location of Accounts and Records.
Item 31. Management Services.
Item 32. Undertakings.
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Exhibits
Exhibit 1(d)
Exhibit 8(d)
Exhibit 9(k)
Exhibit 9(l)
Exhibit 9(m)
Exhibit 9(n)
Exhibit 11
Exhibit 27
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Full Contents
Item 4. General Description of Registrant.
Item 5. Management of the Fund.
Item 6. Capital Stock and Other Securities.
Item 7. Purchase of Securities Being Offered.
Item 8. Redemption or Repurchase.
Item 9. Pending Legal Proceedings.
Item 10. Cover Page.
Item 11. Table of Contents.
Item 12. General Information and History.
Item 13. Investment Objective and Policies.
Item 14. Management of the Master Trust.
Item 15. Control Persons and Principal Holders of Securities.
Item 16. Investment Advisory and Other Services.
Item 17. Brokerage Allocation and Other Practices.
Item 18. Capital Stock and Other Securities.
Item 19. Purchase, Redemption and Pricing of Securities.
Item 20. Tax Status.
Item 21. Underwriters.
Item 22. Calculation of Performance Data.
Item 23. Financial Statements.
Item 24. Financial Statements and Exhibits.
Item 25. Persons Controlled by or under Common Control with Registrant.
Item 26. Number of Holders of Securities.
Item 27. Indemnification.
Item 28. Business and Other Connections of Investment Adviser.
Item 29. Principal Underwriters.
Item 30. Location of Accounts and Records.
Item 31. Management Services.
Item 32. Undertakings.
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EXHIBIT INDEX
EXHIBIT 1(d)
EXHIBIT 8(d)
EXHIBIT 9(k)
EXHIBIT 9(l)
EXHIBIT 9(m)
EXHIBIT 9(n)
EXHIBIT 11
EXHIBIT 27
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EXPLANATORY NOTE
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.
At a meeting held on August 17, 1998 the Board of Trustees of the
Registrant voted to make an application to the Securities and Exchange
Commission for an order declaring that the Registrant has ceased to be an
investment company under the Investment Company Act of 1940, as amended. The
application was submitted on September 29, 1998 after the liquidation of Old
Mutual Equity Growth Assets South Africa Fund (the "OMEGA South Africa Fund"),
which had previously invested all of its investable assets in the Registrant
(see below).
At a meeting held on August 17, 1998 the Board of Trustees of the OMEGA
South Africa Fund voted to liquidate the OMEGA South Africa Fund with effect
from September 30, 1998, or such earlier date as may be approved on behalf of
the OMEGA South Africa Fund As of September 23, 1998 all shares of the OMEGA
South Africa Fund had been redeemed for cash and the OMEGA South Africa Fund
redeemed its entire interest in the Registrant. Subsequent to the liquidation
of the OMEGA South Africa Fund on September 23, 1998, an application was made on
September 29, 1998 to the Securities and Exchange Commission on Form N-8F for an
order declaring that the OMEGA South Africa Fund has ceased to be an investment
company under the Investment Company Act of 1940, as amended.
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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.
The Old Mutual South Africa Equity Trust (the "Master Trust") is a
Massachusetts business 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 Investment Company Act of 1940
(the "1940 Act"). For more information regarding the Master Trust, see
"Investment Objective and Policies," "South Africa," "Risk Factors" and "General
Information" in the Placement Memorandum for Old Mutual South Africa Growth
Assets Fund Limited (the "Old Mutual SAGA Fund"), which is attached hereto.
At a meeting held on August 17, 1998 the Board of Trustees of the Master
Trust voted to make an application to the Securities and Exchange Commission for
an order declaring that the Master Trust has ceased to be an investment company
under the Investment Company Act of 1940, as amended. The application was
submitted on September 29, 1998 after the liquidation of Old Mutual Equity
Growth Assets South Africa Fund (the "OMEGA South Africa Fund"), which had
previously invested all of its investable assets in the Master Trust (see
below).
At a meeting held on August 17, 1998 the Board of Trustees of the OMEGA
South Africa Fund voted to liquidate the OMEGA South Africa Fund with effect
from September 30, 1998, or such earlier date as may be approved on behalf of
the OMEGA South Africa Fund. As of September 23, 1998 all shares of the OMEGA
South Africa Fund had been redeemed for cash and the OMEGA South Africa Fund had
redeemed its entire interest in the Master Trust. Subsequent to the liquidation
of the OMEGA South Africa Fund on September 23, 1998, an application was made on
September 29, 1998 to the Securities and Exchange Commission on Form N-8F for an
order declaring that the OMEGA South Africa Fund has ceased to be an investment
company under the Investment Company Act of 1940, as amended.
Item 5. Management of the Fund.
See "Management and Administration" and "General Information" in
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the Placement Memorandum for the Old Mutual SAGA Fund, attached hereto.
State Street Cayman Trust Company, Ltd. (the "Transfer Agent") serves as
transfer agent and dividend disbursing agent for 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
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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 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 - Initial Portfolio," "Valuation of Shares,"
"Tax Matters," "General Information" and "Additional Information" in the
Placement Memorandum for the Old Mutual SAGA Fund attached hereto. See also the
U.S. Supplement to the Placement Memorandum of the Old Mutual SAGA 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 Placement Memorandum attached hereto. See also the U.S. Supplement to the
Placement Memorandum of the Old Mutual SAGA Fund 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
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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
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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PLACEMENT MEMORANDUM
OLD MUTUAL SAGA FUND
(OLD MUTUAL SOUTH AFRICA GROWTH ASSETS FUND LIMITED)
OFFERING OF SHARES
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 Placement Memorandum.
The Shares are listed on the Official List of the Irish Stock Exchange. The
Directors do not expect that an active market will develop in the Shares on the
Irish Stock Exchange.
The Placement Agents are acting for the Old Mutual SAGA Fund in connection
with the Offering and are not advising any other person or treating any other
person as a customer in relation to the Offering and will not be responsible to
any such person for providing the protections afforded to their customers.
This 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 authorised or to or from any person to whom it
is unlawful to make an offer or solicitation. This Placement Memorandum has been
prepared solely for use in connection with the Offering.
The Placement Agents have not independently verified any of the information
contained in this 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 authorised to give any information or make any representation not
contained in this Placement Memorandum in connection with the Offering and, if
given or made, such information or representation must not be relied on as
having been authorised by the Fund or the Placement Agents. The delivery of this
Placement Memorandum at any time does not imply that information in this
Placement Memorandum is correct as of any time subsequent to the date of this
Placement Memorandum.
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<S> <C> <C>
[LOGO] [LOGO] [LOGO]
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PLACEMENT AGENTS
1st June, 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 31st March, 1998 and by approximately 20%
for the subsequent twelve months to 31st March, 1999. Assuming constant
share prices and projected earnings growth, the price earnings multiple of
the JSE Actuaries All Share Index, which at 31st March, 1997 was 15.2
times, would fall to 12.8 times at 31st March, 1998 and to 10.7 times at
31st March, 1999.*
OLD MUTUAL
- Old Mutual, the parent company of the Fund's Manager, 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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<CAPTION>
Size: Approximately U.S.$1 billion as at 31st March, 1997. Investors
can therefore establish significant holdings.
<S> <C>
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.
</TABLE>
THE ABOVE INVESTMENT HIGHLIGHTS ARE QUALIFIED IN THEIR ENTIRETY BY THE
INFORMATION SET FORTH ELSEWHERE IN THIS PLACEMENT MEMORANDUM (THIS
"MEMORANDUM"). INVESTORS SHOULD CAREFULLY REVIEW THIS MEMORANDUM BEFORE
INVESTING.
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* 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 Ltd,
one of the Placement Agents.
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OLD MUTUAL
SOUTH AFRICA GROWTH ASSETS
FUND LIMITED
SUMMARY OF THE OFFERING
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE INFORMATION SET FORTH
ELSEWHERE IN THIS PLACEMENT MEMORANDUM (THIS "MEMORANDUM"). INVESTORS SHOULD
CAREFULLY REVIEW THIS MEMORANDUM BEFORE INVESTING.
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<S> <C>
FUND.............................. Old Mutual South Africa Growth Assets Fund Limited (the
"Old Mutual SAGA Fund") is an open-end investment
company 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 the 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 Old Mutual SAGA 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
Old Mutual SAGA Fund. The Master Trust has registered as
an investment company under the United States Investment
Company Act of 1940, as amended.
ALL REFERENCES IN THIS MEMORANDUM TO THE "FUND" APPLY TO
BOTH THE OLD MUTUAL SAGA FUND AND THE MASTER TRUST,
EXCEPT AS OTHERWISE INDICATED.
INVESTMENT MANAGER................ Old Mutual Asset Managers (Bermuda) Limited (the
"Manager") is the investment manager to the Master
Trust. The Manager 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 30th June, 1996 Old Mutual had total assets
under management of over U.S.$40 billion. The Old Mutual
SAGA Fund does not have a separate investment manager,
because it invests all of its investable assets in the
Master Trust.
The Master Trust pays the Manager a management fee of
0.60% per annum of the Master Trust's daily net assets
(the "Management Fee"). The Management Fee accrues
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<S> <C>
daily on an annualised basis and is paid monthly in
arrears. See "MANAGEMENT AND ADMINISTRATION -- Manager".
INITIAL PORTFOLIO................. Shortly before the launch of the Old Mutual SAGA Fund,
Old Mutual transferred to the Master Trust a portfolio
of South African securities (the "Initial 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 Old Mutual SAGA 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 organised
under the laws of Bermuda that invests in a portfolio of
South African and international securities (the "Global
Fund"). Old Mutual initially capitalised the Global Fund
with approximately U.S.$500 million of South African
securities. As at 31st March, 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. (United States 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".
</TABLE>
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<TABLE>
<S> <C>
OFFERING AND SUBSCRIPTION
PROCEDURE......................... The Old Mutual SAGA Fund is offering Shares on a
continuous basis at a price equal to their net asset
value. A sales charge of 0.35% of that price may be
applied by the Placement Agents. Investors that wish to
subscribe for Shares are required to complete a
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. (United
States Eastern time) on every Business Day. Subscription
forms received by 4:00 p.m. (United States 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. (United States Eastern time) on any Business
Day will be deemed to have been received at 12:00 noon
(United States Eastern time) on the next Business Day.
Full payment for Shares is due in cash by 3:00 p.m.
(United States Eastern time) on the second Business Day
following the 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. See "OFFERING OF SHARES".
PLACEMENT ARRANGEMENTS............ The Old Mutual SAGA Fund has engaged Fleming Martin Ltd,
Rand International Securities LLC and SBC Warburg, a
division of Swiss Bank Corporation, to act as the
placement agents for the Offering (the "Placement
Agents"). Each of the Placement Agents will be entitled
to apply a sales charge of 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. (United States Eastern time) on every Business
Day. Redemption requests reaching the Transfer Agent
after 4:00 p.m. (United States Eastern time) on any
Business Day will be deemed to have been received at
12:00 noon (United States Eastern time) on the next
Business Day.
In order to fund redemptions, the Old Mutual SAGA 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
</TABLE>
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<TABLE>
<S> <C>
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 Manager serves as investment manager 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
Old Mutual SAGA Fund of 0.65% of redemption proceeds
(the "Redemption Fee"). For so long as Old Mutual Fund
Holdings provides the Liquidity Facility, the Old Mutual
SAGA Fund will pay to Old Mutual Fund Holdings amounts
collected in respect of the Redemption Fee as
compensation for the Liquidity Facility.
The Directors believe that the Liquidity Facility
substantially reduces the trading costs of the Fund. See
"REDEMPTIONS" and "LIQUIDITY FACILITY AND THE GLOBAL
FUND".
LISTING AND TRANSFER OF SHARES.... The Shares are listed on the Official List of the Irish
Stock Exchange. The Directors do not expect that an
active secondary market will develop in the Shares on
the Irish Stock Exchange. No application has been made
for the Shares to be listed on any other stock exchange.
One or more selling agents, 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 "ADDITIONAL INFORMATION
-- Constitution of the Old Mutual SAGA Fund -- Transfer
of Shares".
DIVIDENDS......................... Dividend income from the Old Mutual SAGA 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 annually on or about the last day of
August. Dividends may be automatically reinvested at the
written election of the investor, provided that the Old
Mutual SAGA Fund reserves the right to suspend or
terminate this reinvestment privilege.
U.S. FUND......................... OMEGA South Africa Fund, a Massachusetts business trust
(the "U.S. Fund"), also invests in the Master Trust.
Shares of the U.S. Fund are offered in the United States
and only to investors that are "accredited investors" as
defined in Regulation D under the United States
Securities Act of 1933, as amended (the "1933 Act"). The
operating expenses, distribution policies and sales
charges of the Old Mutual SAGA Fund and the U.S. Fund
may not be the same.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
MANDATORY REDEMPTION RIGHT........ In the event that steps are taken for the dissolution of
the Master Trust or for the liquidation of the Old
Mutual SAGA Fund, Old Mutual may require the mandatory
redemption of all Shares at a price equal to net asset
value. No Redemption Fee would be charged in such
circumstances. See "REDEMPTIONS".
MANAGEMENT AND ADMINISTRATION..... The Old Mutual SAGA Fund is supervised by its directors
(the "Directors"). The Master Trust is supervised by a
board of trustees. Each of the Directors currently also
sits on the board of trustees of the Master Trust. State
Street Cayman Trust Company, Ltd., an indirect
wholly-owned subsidiary of State Street Bank and Trust
Company, 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 Old Mutual SAGA Fund and the Master Trust.
Standard Bank of South Africa serves as sub-custodian
for the Master Trust's South African registered assets.
TRANSFER AGENT.................... State Street Cayman Trust Company, Ltd. serves as
transfer agent for the Old Mutual SAGA Fund (the
"Transfer Agent").
VOTING RIGHTS..................... Shareholders are entitled to vote on matters reserved to
them under the terms of the Bye-laws of the Old Mutual
SAGA Fund and under the laws of Bermuda, including the
election of Directors and changes to the Bye-laws. The
Directors will seek instructions from Shareholders as to
the exercise of voting rights in the Master Trust and
will generally exercise those votes proportionately as
instructed by Shareholders. The voting rights in the
Master Trust held by the Old Mutual SAGA Fund will
entitle it to vote on the election of the trustees of
the Master Trust and on certain important matters,
including (i) certain amendments to the declaration of
trust of the Master Trust, (ii) changes in the
investment objective and fundamental investment
restrictions of the Master Trust and (iii) material
amendments to the investment advisory agreement between
the Master Trust and the Manager, or the adoption of a
new investment advisory agreement.
REPORTS TO SHAREHOLDERS........... The Old Mutual SAGA Fund will furnish to Shareholders
audited annual financial statements for its financial
years ending 30th June and unaudited semi-annual
financial statements for the six month periods to 31st
December.
EXPENSES.......................... The Old Mutual SAGA Fund and the Master Trust are
responsible for the ongoing expenses of conducting their
affairs. The Manager will, if necessary, reduce or
rebate a portion of the Management Fee so that ordinary
operating expenses of the Old Mutual SAGA Fund,
including its share of the Management Fee and the
amortisation of certain organisational expenses, will
not exceed 1.00% per annum of its daily net assets
(although it is currently
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
expected that annual operating expenses will be less
than 1.00% of daily net assets). See "GENERAL
INFORMATION -- Expenses".
RISK FACTORS...................... 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 "RISK FACTORS".
</TABLE>
8
<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 Old Mutual SAGA 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 Manager will not speculate for
short-term gain but will focus on securities that, in the Manager'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 the 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 which 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 Master
Trust 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 will
not prohibit the Master Trust 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 Master Trust 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 Master Trust 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 Master Trust from (i) accepting a tender or
9
<PAGE>
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, organised by a member of the Old Mutual
Group.
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
Manager 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 Manager 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 --
Investment Restrictions".
GENERAL
The investment objective of the Old Mutual SAGA Fund described under
"Investment Objective" above and its investment policy described under
"Investment Policies" above may not be changed materially except in unforeseen
circumstances and with the approval of a majority vote of Shareholders.
The Master Trust has undertaken to the Old Mutual SAGA Fund and the U.S.
Fund (under the Investment Restrictions Undertaking described under "ADDITIONAL
INFORMATION -- Material Contracts") 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" above except in
unforeseen circumstances and with the approval of a majority vote of the
Shareholders and a majority vote of shareholders of the U.S. Fund.
The investment restrictions described under "Certain Restrictions" above and
under "GENERAL INFORMATION -- Investment Restrictions -- Regulatory Restrictions
- -- United States" below may be changed without Shareholder approval.
10
<PAGE>
The percentage limitations set forth above, as well as those described
elsewhere in this Memorandum, 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 Manager, exciting growth potential no longer constrained by
international sanctions. The Manager believes that South Africa combines the
potential of a developing economy with the infrastructure and corporate culture
more typical of an advanced industrialised 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 10th December, 1996. Although generally smooth, the
transition to democratic rule has been accompanied by localised 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
Manager, the relatively smooth political transition, the official end of
sanctions, and the gradual normalisation 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 overvaluation of the S.A. Rand, increasing pessimism
regarding 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
11
<PAGE>
projected small current account deficit. The Manager does not expect a large or
sustained net outflow of capital during 1997 given the expected healthier
current account, some progress on privatisation 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 Manager believes
a large net inflow of capital is also unlikely because substantial privatisation
proceeds might be offset by further exchange control relaxation.
Despite the interruption caused by the currency depreciation, the Manager
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 Manager 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 labour
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 Manager
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 Manager 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 Ltd, 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 Manager believes that there are particular features that could enhance
the performance of the South African economy in the longer term.
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 Manager believes that the removal of trade barriers,
together with South Africa's full participation in the Marrakesh Agreement on
world trade, is leading to considerable changes in the economy, offering
attractive opportunities for domestic and foreign investors. South African
exporters are benefitting from new trade flows.
PUBLIC SECTOR INVESTMENT. Given the underdeveloped state of large parts of
South Africa and its rapid population growth, the Manager expects that the
Government will continue to make
12
<PAGE>
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 Manager 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 favourable
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 Manager does not expect a large or
sustained net outflow of capital this year (based on a healthier current
account, some progress on privatisation and tighter fiscal policy). However, the
Manager believes a large inflow of capital is also unlikely because substantial
privatisation proceeds might be offset by exchange control relaxation.
A SOPHISTICATED BUSINESS ENVIRONMENT. South Africa's corporate environment
is, in the opinion of the Manager, generally characterised by large, well
organised 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, diamond and other strategic minerals.
ECONOMIC MANAGEMENT
The Manager believes that the economic policies of the Government are
broadly market-oriented and that the maintenance of macro-economic stability
will assume a high priority. Evidence of this is to be found in the abolition of
the financial rand system, South Africa's signing of the Marrakesh 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 14th June, 1996 and in the Budget for the 1997/1998 fiscal year released on
12th March, 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 Manager
expects the annual rate of inflation to move substantially lower over the next
twelve months.
Furthermore, South Africa's relations with the International Monetary Fund
and the World Bank have been normalised, and the Manager expects that this will
have a stabilising effect upon economic management.
THE JOHANNESBURG STOCK EXCHANGE
The aggregate market capitalisation of South African equity securities
listed on the JSE was S.A. Rand 1,211 billion (U.S.$274 billion) as at 31st
March, 1997. The actual float available for public trading is significantly
smaller than the aggregate market capitalisation because of the large number of
long-term holdings by listed holding companies in listed subsidiaries and
13
<PAGE>
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
capitalisation) has been low, being 11.9% in the year ended 31st March, 1997.
Although as at 31st March, 1997 there were 618 listed companies on the JSE,
market capitalisation and trading is concentrated in a relatively small number
of companies. As at that date the 15 largest companies by market capitalisation
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 31st March, 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 market 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 Investible Index as of 31st March, 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 and the FTSE Actuaries All Share Index over the periods listed below to
31st March, 1997.
<TABLE>
<CAPTION>
PERIODS TO 31ST MARCH, 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%
FTSE Actuaries All Share Index..................................................... 14.1% 11.1% 7.9%
</TABLE>
- ---------------
* Figures converted to U.S. dollars using the Financial S.A. Rand exchange rate
where applicable.
RISK FACTORS
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 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.
14
<PAGE>
The ANC, which comprises the majority party in the Government, has in the
past espoused a socialist economic programme, including nationalisation 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 privatisation is official ANC and Government policy.
In the macro-economic strategy document released by the Ministry of Finance on
14th June, 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 characterised 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
recognise 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
programmes.
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 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
15
<PAGE>
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 Government's policy is to
develop a more even distribution of wealth among the population. While the
Manager 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 Marrakesh 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 realised 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; the 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 capitalisation 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. or U.K.
companies.
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%.
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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. or U.K. companies. There is less publicly available
information about South African companies than about U.S. or U.K. companies.
South African companies are not subject to the same degree of regulation as are
U.S. or U.K. 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.
MANDATORY REDEMPTION RIGHT
Potential investors are referred to the section headed "REDEMPTIONS" below.
MANAGEMENT AND ADMINISTRATION
DIRECTORS AND TRUSTEES
The Old Mutual SAGA Fund is supervised by the Directors. The Master Trust is
supervised by a board of trustees. A majority of the Directors and of the
trustees of the Master Trust are not affiliated with the Manager or Old Mutual.
The current Directors of the Old Mutual SAGA Fund and trustees of the Master
Trust are the same and are listed below:
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 the Chairman of the board of Directors of the Old Mutual SAGA Fund and the
board of trustees of 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.
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.
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.
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
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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.
WILLIAM LANGLEY, South African (aged 54), is President of the Manager and
has been a member of the general management of Old Mutual since 1981.
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.
Each of the Directors has as their address Old Mutual SAGA Fund, 61 Front
Street, Hamilton HM 11, Bermuda.
MANAGER
Old Mutual Asset Managers (Bermuda) Limited (the "Manager"), a wholly-owned
subsidiary of Old Mutual, is the investment manager to the Master Trust and the
Global Fund. The Manager was organised in 1995 as a Bermuda company for the
purpose of managing the Master Trust and the Global Fund. The Manager's address
is 61 Front Street, Hamilton, Bermuda.
William Langley, President of the Manager, 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 senior portfolio manager and his responsibilities included the
Old Mutual Main Fund.
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 Manager 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 Manager. 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 30th June, 1996 Old Mutual had total assets under management of
over U.S.$40 billion.
Because the Old Mutual SAGA Fund invests all of its investable assets in the
Master Trust, the Old Mutual SAGA Fund does not have a separate investment
manager.
The Master Trust pays the Manager a Management Fee of 0.60% per annum of the
Master Trust's daily net assets. The Management Fee accrues daily on an
annualised basis and is paid monthly in arrears. The Manager is responsible for
compensating Old Mutual for research and information provided to the Manager.
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ADMINISTRATOR
State Street Cayman Trust Company, Ltd. (the "Administrator") provides,
either directly or through an affiliate, certain administrative and fund
accounting services (including calculation of the net asset value of the Master
Trust and the Old Mutual SAGA Fund) to the Master Trust and the Old Mutual SAGA
Fund pursuant to administrative services agreements. The Administrator is an
indirect wholly-owned subsidiary of State Street Bank and Trust Company.
The 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 Old Mutual SAGA Fund pays the Administrator an annual
administration fee of U.S.$40,000.
TRANSFER AGENT
State Street Cayman Trust Company, Ltd. (the "Transfer Agent") serves as
transfer agent and dividend disbursing agent for the Old Mutual SAGA Fund. The
Transfer Agent may delegate certain of its functions to an affiliated entity.
The Transfer Agent receives an annual fee of U.S.$30,000 from the Old Mutual
SAGA Fund. The register of members is maintained at the registered office of the
Old Mutual SAGA Fund at 61 Front Street, Hamilton HM 11, Bermuda. The Transfer
Agent serves as registrar for the Master Trust.
CUSTODIAN AND SUB-CUSTODIAN
State Street Bank and Trust Company (the "Custodian") serves as custodian
for the Master Trust's and the Old Mutual SAGA 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 Old Mutual SAGA 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 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 Administrator once each day as of 10:00 a.m. (United States
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 Old Mutual
SAGA Fund (including the value of its interest in the Master Trust), then
subtracting the Old Mutual SAGA Fund's liabilities and then dividing the result
by the number of outstanding Shares. The Administrator calculates the net asset
value of the Master Trust as of 10:00 a.m. (United States 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.
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OFFERING OF SHARES
OFFERING
The Old Mutual SAGA Fund is offering Shares on a continuous basis at a price
equal to their net asset value. A sales charge of 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 Old Mutual SAGA Fund has engaged Fleming Martin Ltd, Rand International
Securities LLC and SBC Warburg, a division of Swiss Bank Corporation, to act as
Placement Agents for the Offering. Each of the Placement Agents will be entitled
to apply a sales charge of 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 Old Mutual SAGA 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 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 Old Mutual SAGA Fund and the U.S. Fund to redeem a
corresponding portion of the interest of Old Mutual Fund Holdings in the Master
Trust. Old Mutual Fund Holdings will invest the proceeds of those redemptions in
the Global Fund.
The Offering may be terminated or modified by the Old Mutual SAGA 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 Old
Mutual SAGA Fund.
The office of the Transfer Agent will be open to accept subscription forms
from 12:00 noon to 4:00 p.m. (United States Eastern time) on every Business Day.
Subscription forms received by 4:00 p.m. (United States 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. (United States Eastern time) on any Business Day will be deemed to have
been received at 12:00 noon (United States Eastern time) on the next Business
Day. Full payment for Shares is due in cash by 3:00 p.m. (United States Eastern
time) on the second Business Day following the 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.
REDEMPTIONS
Investors may request redemption of Shares on any Business Day at their net
asset value (as determined as of 10:00 a.m. (United States Eastern time) on the
next Business Day), subject to a Redemption Fee charged by the Old Mutual SAGA
Fund of 0.65% of redemption proceeds. Redemption requests should be submitted in
writing to the Transfer Agent on a form available from the Old Mutual SAGA 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. (United States Eastern time)
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on every Business Day. Redemption requests reaching the Transfer Agent after
4:00 p.m. (United States Eastern time) on any Business Day will be deemed to
have been received at 12:00 noon (United States 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
U.S. dollars within seven days following receipt of a redemption request in
proper form. Redeemed Shares are not cancelled and may be reissued.
In order to fund redemptions, the Old Mutual SAGA 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 Old Mutual SAGA 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 Old Mutual SAGA Fund will pay amounts collected in
respect of the Redemption Fee to the Master Trust.
The Directors believe 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.
In the event that the trustees or holders of beneficial interest in the
Master Trust vote to dissolve the Master Trust, or steps are taken for the
liquidation of the Old Mutual SAGA Fund, Old Mutual may require the mandatory
redemption of all Shares at a price equal to net asset value. No Redemption Fee
would be charged in such circumstances. Shares may be compulsorily redeemed in
certain other circumstances also described under "ADDITIONAL INFORMATION --
Constitution of the Old Mutual SAGA Fund -- Restrictions on Shareholders and
Mandatory Redemption".
The right of redemption may be suspended in certain circumstances as
described under "ADDITIONAL INFORMATION -- Calculation of Net Asset Value".
LIQUIDITY FACILITY AND THE GLOBAL FUND
The Manager serves as investment manager to Old Mutual Global Assets Fund
Limited, a mutual fund organised 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 in the U.S. Fund.
Old Mutual initially capitalised the Global Fund with approximately U.S.$500
million of South African securities. As at 31st March, 1997 the net assets of
the Global Fund were in excess of U.S.$649 million. Upon each issue of Shares
(or shares in the 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 Old
Mutual SAGA 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 Manager ceases to be investment manager to
the Master Trust (other than by reason of the voluntary termination of the
investment advisory agreement with the Master Trust by the Manager). Any
termination of the Liquidity Facility would not affect Shareholder redemption
rights. If the Liquidity Facility is terminated or if there are insufficient
funds available to finance the Liquidity Facility, the Master Trust may fund
redemptions by disposing of its assets. Following
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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 Old Mutual SAGA
Fund (or the U.S. Fund) and except for its proportion of the income and realised
capital profits of the Master Trust.
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 Old Mutual SAGA Fund in the Master Trust that
are not offset by redemptions of Master Trust interests (either by Old Mutual
Fund Holdings or the 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 ensuring 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 Old
Mutual SAGA Fund before subscribing for Shares.
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 the hands of the Old Mutual SAGA Fund. 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 are also exempt from tax.
Gains realised 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).
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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 1st April, 1996 the applicable rate of stamp duty/MST
payable by the transferee on the transfer of equities was 1%. The Government has
progressively reduced this rate to the current level of 0.25% as at 1st April,
1997. In addition, with effect from 1st July, 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 1st July, 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%. The Old Mutual SAGA Fund is regarded as a company for South African tax
purposes. This could result in its distributions, net of dividends received,
being subject to STC. Since the Fund will be substantially invested in dividend
bearing securities, any amount subject to STC should be minimal. For dividends
declared prior to 13th March, 1996 the STC rate was 25%.
BERMUDA TAXATION
At the date of this Memorandum, 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 Old Mutual SAGA Fund or the Master Trust
or by the Shareholders, other than Shareholders ordinarily resident in Bermuda.
The Old Mutual SAGA Fund is not subject to stamp duty on the issue, transfer or
redemption of its Shares.
The Old Mutual SAGA Fund has received from the Minister of Finance of
Bermuda under the Exempted Undertakings Tax Protection Act 1966 an assurance
that, in the event of there being enacted in Bermuda any legislation imposing
tax computed on profits or income, or computed on any capital assets, gain or
appreciation or any tax in the nature of estate duty or inheritance tax, such
tax shall not until 28th March, 2016 be applicable to the Old Mutual SAGA Fund
or to any of its operations, or to the shares, debentures or other obligations
of the Old Mutual SAGA Fund except in so far as such tax applies to persons
ordinarily resident in Bermuda and holding such shares, debentures or other
obligations of the Old Mutual SAGA Fund or any land leased or let to the Old
Mutual SAGA Fund.
As an exempted company, the Old Mutual SAGA Fund is liable to pay in Bermuda
a registration fee based upon its authorised share capital and the premium on
its issued Shares at a rate not exceeding U.S.$25,000 per annum.
UNITED KINGDOM TAXATION
The Directors intend to conduct the affairs of the Old Mutual SAGA Fund in
such a manner as will result in it not being resident in the United Kingdom for
taxation purposes. Accordingly, the Old Mutual SAGA Fund should not be subject
to United Kingdom income tax or corporation tax (other than on any United
Kingdom source income).
The Old Mutual SAGA Fund will be an "offshore fund" for the purposes of the
United Kingdom offshore funds legislation contained in Chapter V Part XVII
Income and Corporation Taxes Act 1988 ("ICTA 1988"). Under this legislation,
persons who are resident or ordinarily resident in the United Kingdom for
taxation purposes may be liable to income tax (or corporation tax on income) in
respect of any gain arising on the disposal or redemption of shares in an
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offshore fund. This charge will not apply if the Old Mutual SAGA Fund is
certified by the Inland Revenue as a "distributing fund" throughout the period
during which the Shares have been held.
It is intended that the Old Mutual SAGA Fund will conduct its affairs so as
to enable it to be certified as a "distributing fund" throughout its life, and
application for such certification will be made to the Inland Revenue annually.
Where such certification has been obtained, Shareholders who are resident or
ordinarily resident in the United Kingdom for tax purposes (other than persons
who are dealing in the Shares, who are subject to different rules) may, unless
otherwise exempt from tax, be liable for capital gains tax (or corporation tax
on chargeable gains) in respect of any gain realised on disposal or redemption
of the Shares.
United Kingdom resident Shareholders may also be liable for United Kingdom
income tax or corporation tax on dividends received including any which are
reinvested in the Old Mutual SAGA Fund.
Investors should be aware that if (as is currently the case) more than 50%
of the share capital of the Old Mutual SAGA Fund is held by persons who are
resident or ordinarily resident in the United Kingdom, the Old Mutual SAGA Fund
will be a "controlled foreign company" for the purpose of Chapter IV Part XVII
ICTA 1988 and, accordingly, any United Kingdom resident company which, either
alone or together with connected or associated persons, holds 10% or more of the
share capital of the Old Mutual SAGA Fund may be assessed to corporation tax in
respect of the profits of the Old Mutual SAGA Fund which are attributable to
such investor's interest in the Old Mutual SAGA Fund. Such an assessment may not
be raised, however, if the Old Mutual SAGA Fund pursues an "acceptable
distribution policy", which broadly requires the Old Mutual SAGA Fund to
distribute annually 90% of its "net chargeable profits" as calculated for United
Kingdom tax purposes. Whilst it is likely that the Old Mutual SAGA Fund will
satisfy the "acceptable distribution" test, United Kingdom resident persons
holding 10% or more of the capital of the Old Mutual SAGA Fund (directly or
indirectly) should take their own specific professional taxation advice.
The attention of individuals ordinarily resident in the United Kingdom is
drawn to Chapter III Part XVII ICTA 1988 which may in certain circumstances
render them liable to United Kingdom income tax in respect of the undistributed
income of the Old Mutual SAGA Fund.
The above contains comments of a general nature only and is based on current
United Kingdom legislation and Inland Revenue practice. It relates only to
certain limited aspects of the taxation position of investors who are resident
or ordinarily resident in the United Kingdom for taxation purposes. Any investor
who is in any doubt as to his United Kingdom tax position is strongly
recommended to consult his professional advisor.
UNITED STATES TAXATION
The Old Mutual SAGA Fund is not intended for United States investors. United
States investors who invest in the Old Mutual SAGA Fund, directly or indirectly,
may suffer adverse United States tax consequences.
GENERAL INFORMATION
ORGANISATION OF THE MASTER TRUST
The Master Trust is a trust organised under the laws of Massachusetts. The
declaration of trust of the Master Trust provides that the Old Mutual SAGA 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.
The Master Trust is registered as an investment company under the United
States Investment Company Act of 1940, as amended (the "1940 Act"). The
registration statement of the
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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 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. The Master Trust, however, intends to comply
with the diversification requirements imposed on regulated investment companies
by the United States Internal Revenue Code of 1986, as amended. See "Investment
Restrictions" below.
INVESTMENT STRUCTURE
Rather than directly acquire and manage its own portfolio of securities, the
Old Mutual SAGA Fund invests all of its investable assets in the Master Trust,
which has the same investment objective as the Old Mutual SAGA Fund. The 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 Old Mutual SAGA Fund. The U.S. Fund and other investment
vehicles that invest in the Master Trust may have different operating expenses
and sales charges than the Old Mutual SAGA Fund.
VOTING AND OTHER RIGHTS IN THE MASTER TRUST
If the Master Trust seeks the vote of the Old Mutual SAGA 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 Directors may vote to
continue), the Directors will seek the instructions of Shareholders as to the
exercise of voting rights in the Master Trust and will exercise those votes
proportionately as instructed by the Shareholders that participate in the vote
(unless, in the opinion of the Directors, to do so would be contrary to the
interests of the Old Mutual SAGA Fund). It is possible that a majority of the
investors in the Master Trust (as of the date of this Placement Memorandum, Old
Mutual Fund Holdings) will exercise their Master Trust voting rights in a manner
contrary to the vote of the Shareholders.
The Old Mutual SAGA Fund will be entitled to vote (in proportion to its
beneficial interest in the Master Trust) 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 of the Master Trust and the fundamental investment restrictions
described under "Investment Restrictions" below (but without affecting the
undertakings given by the Master Trust under the Investment Restrictions
Undertaking described under "ADDITIONAL INFORMATION -- Material Contracts") and
(iii) material amendments to the investment advisory agreement between the
Master Trust and the Manager or the adoption of a new investment advisory
agreement. 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. The Old Mutual SAGA 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.
CERTIFICATES
The Transfer Agent maintains a share register for Shareholders. Share
certificates are not issued unless specifically requested by Shareholders.
SECURITIES TRANSACTIONS
The primary consideration in placing the Fund's securities transactions with
brokers for execution is to obtain and maintain the availability of execution at
the most favourable prices and in the most effective manner possible.
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CONFLICTS OF INTEREST
The Old Mutual Group is an important participant in the South African
securities markets. At 31st March, 1997 the Old Mutual Group's JSE holdings
totalled S.A. Rand 122 billion, equal to approximately 10% of total JSE market
capitalisation. At 31st March, 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 capitalisation. 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 following
restrictions have been adopted and are designed to address conflicts of interest
arising from the Old Mutual Group's position in the South African securities
markets:
(i) The Master Trust 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,
or (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 United States 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.
(ii) The Master Trust 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 Master Trust 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, organised by a member of the Old Mutual Group.
(iii) The Master Trust 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) Purchases and sales of the securities of OM Affiliated Companies
by the Master Trust, 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 trustees
of the Master Trust and the Directors on at least a quarterly basis. Old
Mutual will provide the trustees of the Master Trust and the Directors with
such information as they may require for the purposes of this review.
(v) The Master Trust 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 will not prohibit the Master
Trust 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 Master Trust may therefore, hold
securities of certain issuers in which the Old Mutual Group owns in excess
of 50% of the outstanding equity interest.
The Master Trust may from time to time apply to the U.S. 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 Placement
Memorandum one such application has been approved and another is pending.
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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 Manager acts as investment manager 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 ensure 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.
The Directors will endeavour to ensure that any conflict of interest which
does arise is resolved fairly.
INVESTMENT RESTRICTIONS
The Master Trust has adopted investment restrictions in addition to those
referred to under "INVESTMENT OBJECTIVE AND POLICIES -- Certain Restrictions".
Certain of these restrictions are termed "fundamental restrictions" in
accordance with the 1940 Act and are described under the heading "Fundamental
Restrictions" below.
In addition, the Master Trust has adopted certain investment restrictions in
compliance with United States statutes and policies and with the rules of the
Irish Stock Exchange. These restrictions are described under the heading
"Regulatory Restrictions" below.
(A) FUNDAMENTAL RESTRICTIONS
The Master Trust has adopted fundamental restrictions in accordance with the
1940 Act.
These fundamental restrictions may not be changed with respect to the Master
Trust without the approval of the lesser of (a) the holders of 67% or more of
the outstanding beneficial interests in the Master Trust present at a meeting at
which the holders of more than 50% of the outstanding beneficial interests in
the Master Trust are present or represented by proxy or (b) the holders of more
than 50% of the outstanding beneficial interests in the Master Trust. The
fundamental investment 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.
(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 future 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 the Master Trust may be considered an
underwriter within the meaning of
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the 1933 Act in the disposition of securities that are considered restricted
under the 1933 Act (being, generally, securities which are not available for
sale to the public).
(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 the Master Trust's 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 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 the Master Trust.
(vi) The Master Trust may not issue any senior security (as that term
is defined in the 1940 Act being, generally, a debt security or any other
security which has prior rights in respect of distributions or dividends) 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).
(B) REGULATORY RESTRICTIONS
UNITED STATES
In order to comply with certain United States statutes and policies, the
Master Trust will as a matter of operating policy ensure that:
(i) the Master Trust 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 U.S. 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) the Master Trust does not invest more than 15% of the net assets
of the Master Trust 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 the total assets of the Master Trust 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; and
(iv) not more than 25% of the Master Trust's assets will be invested in
securities of any one issuer.
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These restrictions may be changed by the trustees of the Master Trust
without the approval of the holders of its beneficial interest in response to
changes in United States statutes and policies.
IRISH STOCK EXCHANGE
The Master Trust has adopted investment restrictions in compliance with the
rules of the Irish Stock Exchange and has undertaken (under the terms of the
Investment Restrictions Undertaking described in "ADDITIONAL INFORMATION --
Material Contracts") to the Old Mutual SAGA Fund and the U.S. Fund not to change
these restrictions for so long as the Shares 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;
(iv) not more than 10% of the gross assets of the Master Trust will be
invested in real estate;
(v) the Master Trust will not engage in any property development
activity;
(vi) the Master Trust will adhere to the principle of diversification
in relation to any derivative investments;
(vii) the Master Trust will not make any investment which would expose
it to unlimited liability, including participation in an unlimited
partnership;
(viii) the Master Trust will only enter into underwriting or
sub-underwriting contracts to a limited extent and incidental to the
investment activities of the Master Trust; and
(ix) the Master Trust will not have a net exposure to a single
financing counterparty that exceeds 20% of its gross assets.
If a percentage restriction on investment or utilisation of assets or in an
investment policy set forth above or referred to in this Memorandum is adhered
to at the time an investment is made or assets are so utilised, a later change
in percentage resulting from changes in the value of the securities held will
not be considered a violation of the restriction.
EXPENSES
The Old Mutual SAGA Fund and the Master Trust are responsible for the
ongoing expenses of conducting their affairs, including (i) investment
management, 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 the
Directors and the trustees of the Master Trust, (vi) printing, copying, travel
and communication costs, (vii) costs of registering or qualifying Shares under
the securities laws of various jurisdictions and (viii) listing fees of the
Irish Stock Exchange.
The Master Trust has adopted a placement plan pursuant to Rule 12b-1 under
the 1940 Act, and the plan provides for the Master Trust to reimburse marketing
expenses and pay placement fees, provided such reimbursements and fees for any
year do not exceed 0.05% of the average daily net assets of the Master Trust for
such year.
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The Manager will reduce or rebate a portion of the Management Fee as
necessary so that ordinary operating expenses of the Old Mutual SAGA Fund,
including its share of the Management Fee and the amortisation of certain
organisational 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 Manager 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 Manager may terminate this undertaking at any time
without prior notice if the Manager ceases to be investment manager to the
Master Trust. It is currently expected that annual operating expenses will be
less than 1.00% of daily net assets.
DISTRIBUTIONS
Dividend income from the Old Mutual SAGA Fund is not expected to be a
significant portion of the long-term total return. Substantially all of the Old
Mutual SAGA Fund's share of the net income of the Master Trust will be
distributed to Shareholders annually on or about the last day of August. The
Directors will not make distributions out of realised or unrealised capital
gains. Dividends may be automatically reinvested at the written election of the
investor provided the Old Mutual SAGA Fund reserves the right to suspend or
terminate this reinvestment privilege.
GENERAL
The most recent annual or semi-annual report of the Fund is distributed
with, and forms part of, this Memorandum. Requests for subsequent annual or
semi-annual reports should be directed to the Placement Agents.
ADDITIONAL INFORMATION
1. INCORPORATION AND OFFICE OF THE OLD MUTUAL SAGA FUND
(i) The Old Mutual SAGA Fund was incorporated and registered in Bermuda on
7th September, 1995 with registered number EC21101 and with limited liability
under the Bermuda Companies Act 1981 (the "Act"). The Old Mutual SAGA Fund
operates under the Act and the regulations made under the Act.
(ii) The Old Mutual SAGA Fund's registered office is at 61 Front Street,
Hamilton HM 11, Bermuda. The Old Mutual SAGA Fund does not have nor has it had
since incorporation any employees and it neither owns nor occupies any premises.
The Old Mutual SAGA Fund has no place of business in Ireland.
2. APPROVALS AND FILINGS IN BERMUDA
(i) The Old Mutual SAGA Fund has been classified as non-resident of the
Bermuda Exchange Control area by the Bermuda Monetary Authority. The issue,
redemption and transfer of Shares to, by and between persons regarded as
non-resident in Bermuda for exchange control purposes may be effected without
specific consent under the Exchange Control Act 1972 of Bermuda and regulations
made thereunder. Issues and transfers involving any person regarded as resident
in Bermuda for exchange control purposes require specific prior authorisation
under that Act.
(ii) Permission under the Exchange Control Act 1972 (and regulations
thereunder) has been obtained from the Bermuda Monetary Authority for the issue
of up to 40,000,000 Shares. Approvals or permissions received from the Bermuda
Monetary Authority do not constitute a guarantee by the Bermuda Monetary
Authority as to the performance of the scheme or
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creditworthiness of the Old Mutual SAGA Fund. Furthermore, in giving such
approvals or permissions, the Bermuda Monetary Authority shall not be liable for
the performance or default of the scheme or for the correctness of any opinions
or statements expressed.
(iii) The Old Mutual SAGA Fund, by virtue of being non-resident of Bermuda
for exchange control purposes, is free to acquire, hold and sell any foreign
currency and securities without restriction.
(iv) A copy of this Memorandum has been delivered to the Registrar of
Companies in Bermuda for filing pursuant to the Act. In accepting this
Memorandum for filing, the Registrar of Companies in Bermuda accepts no
responsibility for the financial soundness of any proposal or for the
correctness of any of the statements made or opinions expressed with regard to
them.
3. SHARE CAPITAL
(i) The Old Mutual SAGA Fund was incorporated with an authorised share
capital of U.S.$12,000 divided into 12,000 manager's shares of U.S.$1 each, all
of which were allotted and issued to Old Mutual Fund Holdings. On 7th September,
1995 the authorised share capital of the Old Mutual SAGA Fund was increased to
U.S.$40,000,000 by the creation of an additional 39,988,000 shares of U.S.$1
each.
(ii) The issued share capital of the Old Mutual SAGA Fund (other than the
manager's shares) is fully paid as to its nominal value.
(iii) No share or loan capital of the Old Mutual SAGA Fund is under option
or agreed, conditionally or unconditionally, to be put under option.
(iv) There are no provisions of Bermuda law which confer pre-emption rights
on existing Shareholders on the allotment of equity securities for cash by the
Old Mutual SAGA Fund. Within any class of shares in the Old Mutual SAGA Fund,
all shares of that class will enjoy equal rights.
4. DIRECTORS' AND OTHER INTERESTS IN THE OLD MUTUAL SAGA FUND
(i) None of the Directors has a service contract with the Old Mutual SAGA
Fund, and no such contract is proposed.
(ii) No loan or guarantee has been granted or provided by the Old Mutual
SAGA Fund to or for the benefit of any Director.
(iii) Messrs. Michael J. Levett and William Langley are Directors and are
directors of the Manager and of Old Mutual Fund Holdings. The Manager and Old
Mutual Fund Holdings are wholly-owned subsidiaries of Old Mutual. The directors
of the Manager and of Old Mutual Fund Holdings are Messrs. Kevin J. Carter, John
C. R. Collis, Garth Griffin, William Langley, Michael J. Levett and Gerhard S.
van Niekerk. The Manager will receive fees as mentioned under the heading
"MANAGEMENT" above. Old Mutual Fund Holdings will receive the Redemption Fee.
Mr. Michael J. Levett is a director of certain of the companies in which the
Master Trust has invested.
(iv) Old Mutual has a shareholding of approximately 20% in Standard Bank of
South Africa which acts as sub-custodian in relation to the Master Trust's South
African registered assets.
(v) Save as disclosed in this paragraph 4, none of the Directors nor any
member of their respective families has or has had any interest in any
transaction or transactions which are or were unusual in their nature or
conditions or significant to the business of the Old Mutual SAGA Fund and which
were effected by the Old Mutual SAGA Fund since its incorporation.
(vi) It is estimated that the aggregate amount payable to the Directors by
the Old Mutual SAGA Fund for the financial period ending on 30th June, 1997
under the arrangements in force
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at the date of this Memorandum will not exceed U.S.$25,000. It is estimated that
the aggregate amount payable to the Directors, in their capacities as trustees
of the Master Trust, by the Master Trust for that financial period under the
arrangements in force at the date of this Memorandum will not exceed
U.S.$85,000.
5. CONSTITUTION OF THE OLD MUTUAL SAGA FUND
The Memorandum of Association and Bye-laws of the Old Mutual SAGA Fund
comprise its constitution. The Old Mutual SAGA Fund's principal object, as set
out in clause 6 of its Memorandum of Association, is to carry on the business of
a mutual fund within the meaning of section 156A of the Act. The following is a
summary of certain of the provisions of the Bye-laws:
(i) VARIATION OF SHARE CAPITAL AND RIGHTS
Subject to the provisions of the Act, Shareholders may by resolution
increase, alter or reduce the share capital of the Old Mutual SAGA Fund.
All or any of the special rights for the time being attached to any class of
share for the time being issued may (unless otherwise provided by the terms of
issue of the shares of that class) be altered or abrogated with the sanction of
a resolution passed by a majority of three-fourths at a separate meeting of the
holders of such shares on the register at the date on which notice of such
separate meeting was given.
The rights attached to any class of shares shall not (unless otherwise
expressly provided by the conditions of issue of such shares) be deemed to be
varied by the creation, allotment or issue of further shares ranking pari passu
therewith or subsequent thereto.
(ii) RIGHTS ATTACHING TO THE SHARES
WINDING UP
In the event of a winding up or dissolution of the Old Mutual SAGA Fund,
whether voluntary or involuntary, the Shareholders will be entitled to share pro
rata in the surplus assets of the Old Mutual SAGA Fund.
VOTING RIGHTS
At any general meeting on a show of hands every holder of Shares who, being
an individual, is present in person or, being a corporation, is present by a
duly authorised representative shall have one vote. On a poll every such holder
present as aforesaid or by proxy shall have one vote for every Share held.
To be passed, resolutions of the Old Mutual SAGA Fund in general meeting
will require a simple majority of the votes cast by the Shareholders voting in
person or by proxy at the meeting at which the resolution is proposed.
A simple majority of the Shareholders present in person or by proxy and
(being entitled to vote) voting in general meeting is required in order to
rescind, alter or amend a Bye-law or make a new Bye-law. Further, no Bye-law
shall be rescinded, altered or amended and no new Bye-law shall be made unless
the same shall have been proposed at a meeting of the Directors.
DIVIDENDS
The holders of Shares will be entitled to such dividends as the Directors
may from time to time declare.
MANAGER'S SHARES
The 12,000 manager's shares in the Old Mutual SAGA Fund do not carry any
voting rights or any right to participate in any dividends and on a winding-up
entitle holders of manager's shares to receive nominal value.
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(iii) TRANSFER OF SHARES
Any Shareholder may transfer all or any of his Shares by instrument in
writing in a usual common form or in any other form which the Directors may
approve. The transferor shall be deemed to remain the holder of such Shares
until the name of the transferee is entered in the register in respect thereof.
An instrument of transfer need not be signed by or on behalf of the transferee.
No transfer of Shares may be made if (a) as a result of such transfer either
the transferor or the transferee of such Shares would hold less than such
minimum number of Shares as the Directors may from time to time specify and
notify to Shareholders (no such minimum has currently been set) or (b) such
transfer would in the opinion of Directors result in a breach of restrictions
imposed by the Directors as referred to in paragraph (v) below.
The Directors may decline to recognise any instrument of transfer, unless
the instrument of transfer is deposited at the office of the Old Mutual SAGA
Fund or such other place as the Directors may appoint, accompanied by the
certificate, if any, for the Shares to which it relates, and such other evidence
as the Directors may reasonably require to show the right of the transferor to
make the transfer.
The registration of transfers may be suspended at such times and for such
periods as the Directors may from time to time determine provided always that
such registration shall not be suspended for more than thirty days in any year.
(iv) DIRECTORS
The remuneration of the Directors shall be determined by the Board of
Directors. The Directors may also be paid all travelling, hotel and other
expenses properly incurred by them in attending meetings of the Directors or in
connection with the business of the Old Mutual SAGA Fund. Any Director who
devotes special attention to the business of the Old Mutual SAGA Fund may be
paid such extra remuneration as the Directors may determine.
A Director may hold any other office or place of profit under the Old Mutual
SAGA Fund (other than the office of auditor) in conjunction with his office of
Director, or may act in a professional capacity to the Old Mutual SAGA Fund on
such terms as the Directors may determine. No Director shall be disqualified by
his office from contracting with the Old Mutual SAGA Fund in any capacity, nor
shall any such contract or arrangement entered into by the Old Mutual SAGA Fund
in which any Director is in any way interested be liable to be avoided, nor
shall any Director so contracting or being so interested be liable to account to
the Old Mutual SAGA Fund for any profit realised by any such contract or
arrangement by reason of such Director holding that office but the nature of his
interest must be declared by him at the meeting of the Directors at which the
question of entering into the contract or arrangement is first taken into
consideration, or if the Director was not at the date of that meeting interested
in the proposed contract or arrangement, then at the next meeting of the
Directors held after he becomes so interested, and in a case where the Director
becomes interested in a contract or arrangement after it is made then at the
first meeting of the Directors held after he becomes so interested.
A Director shall not vote in respect of any contract or arrangement or any
other proposal whatsoever in which he has any material interest (otherwise than
by virtue of his interests in shares or debentures or other securities of or
otherwise in or through the Old Mutual SAGA Fund) unless the nature of his
interest is declared at the first opportunity at a meeting of the Directors or
by writing to the Directors and no other Director objects to the interested
Director voting on such arrangement. A Director shall not be counted in the
quorum at a meeting in relation to any resolution on which he is debarred from
voting.
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There is no provision in the Bye-laws requiring a Director to retire by
reason of any age limit and no share qualification for Directors.
All the Directors for the time being shall retire at the annual general
meeting in every year and shall be eligible for re-election.
(v) RESTRICTIONS ON SHAREHOLDERS AND MANDATORY REDEMPTION
The Directors have power to impose such restrictions, including a
restriction on transfer, as they may think necessary for the purpose of ensuring
that no Shares are acquired or held by any person or persons in breach of the
laws or requirements of any country or governmental authority or in
circumstances (whether directly or indirectly affecting such person or persons
and whether taken alone or in conjunction with any other persons, connected or
not, or any other circumstances appearing to the Directors to be relevant)
which, in the opinion of the Directors, might result in the Old Mutual SAGA Fund
incurring any liability to taxation or suffering any other pecuniary, regulatory
or material administrative disadvantage which the Old Mutual SAGA Fund might not
otherwise have incurred or suffered (including, without limitation, any
requirement that the Old Mutual SAGA Fund register Shares under the 1933 Act or
register as an investment company under the 1940 Act) (a "non-qualified
person"). The Directors may require any Shareholder and any person seeking to
purchase Shares or to whom a transfer is proposed to be made, to provide such
information as may be requested for the purpose of determining whether the
Shareholder or any such other person is a non-qualified person.
If it comes to the notice of the Directors that any Shares are held by any
non-qualified person the Directors may give notice to such person requiring the
redemption or transfer of such Shares in accordance with the provisions of the
Bye-laws. A person who becomes aware that he is holding or owning Shares in
breach of any such restrictions is required either to deliver to the Old Mutual
SAGA Fund a written request for redemption of his Shares in accordance with the
Bye-laws or to transfer the same to a person who is not and would not thereby be
a non-qualified person.
In the event that:
(a) the trustees, investors or other controlling persons of the Master
Trust vote to terminate or dissolve the Master Trust; or
(b) any petition is presented, any meeting convened, any resolution
proposed or other step taken for the purpose of winding up the Old Mutual
SAGA Fund or for the appointment of an administrator, receiver or similar
officer of the Old Mutual SAGA Fund,
any holder of a manager's share may, within 30 days of it becoming aware of such
event, serve notice (a "Redemption Notice") on the Old Mutual SAGA Fund
specifying a redemption date not less than 5 nor more than 30 days after the
date of the Redemption Notice (the "Redemption Date"). Each holder of Shares
(other than, for the avoidance of doubt, a holder of manager's shares) shall be
deemed to have given an irrevocable request in writing pursuant to the Bye-laws
at the start of the Redemption Date for the redemption of all Shares held by
such holder whereupon they shall individually be bound forthwith to deliver to
the Old Mutual SAGA Fund or its duly authorised agent the certificates, if any,
for such Shares.
(vi) BORROWING AND CHARGING POWERS
The Directors may exercise the Old Mutual SAGA Fund's powers to borrow and
to charge its assets.
(vii) DURATION
The Old Mutual SAGA Fund has an indefinite duration.
(viii) INDEMNITY
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Each Director, secretary or other officer of the Old Mutual SAGA Fund shall
be indemnified by the Old Mutual SAGA Fund against, and it shall be the duty of
the Directors out of the funds of the Old Mutual SAGA Fund to pay, all costs,
losses and expenses which any such Director or officer may incur or become
liable for by reason of any contract entered into, or act or thing done by him
as such Director or officer, or in any way in the discharge of his duties, and
the amount for which such indemnity is provided shall immediately attach as a
lien on the property of the Old Mutual SAGA Fund, and have priority as between
the Shareholders over all other claims except as respects any such Director or
officer where any such cost, loss or expense shall happen through his own wilful
neglect, wilful default, fraud or dishonesty.
6. CALCULATION OF NET ASSET VALUE
The Master Trust is a registered investment company under the 1940 Act. As a
result, the days on which its net asset value must be determined and on which it
must be open for redemptions, and the circumstances in which it may suspend the
right to redeem, are prescribed by the provisions of the 1940 Act. The Directors
have determined to conform, to the extent appropriate, the Old Mutual SAGA
Fund's procedures as regards redemption of Shares and net asset value
calculation to these provisions.
The Bye-laws of the Old Mutual SAGA Fund provide that the net asset value
per Share of the Old Mutual SAGA Fund is to be determined as of 10:00 a.m.
United States Eastern Time on each day on which the New York Stock Exchange is
open for trading and will be calculated by adding the market value of all
securities and other assets of the Old Mutual SAGA Fund (including the value of
its interest in the Master Trust), then subtracting the Old Mutual SAGA Fund's
liabilities and then dividing the result by the number of outstanding Shares.
The net asset value per Share is notified to the Irish Stock Exchange without
delay.
The value of the assets of the Old Mutual SAGA Fund is determined in
accordance with, INTER ALIA, the following provisions:
(i) the value of any cash on hand or on deposit, bills, demand notes,
accounts receivable, prepaid expenses, cash dividends and interest declared
or accrued and not yet received shall be deemed to be the full amount
thereof unless the Directors shall have determined that any such deposit,
bill, demand note or account receivable is not worth the full amount thereof
in which event the value thereof shall be deemed to be such value as the
Directors shall deem to be the reasonable value thereof;
(ii) in the case of interests in the Master Trust all valuations shall
be based upon the net asset value of the Master Trust as advised by the
administrative agent of the Master Trust provided always that the Directors
may, in their absolute discretion, permit some other method of valuation to
be used if they consider that such valuation better reflects the fair
valuation;
(iii) any value (whether of a security or cash) otherwise than in U.S.
dollars shall be converted into U.S. dollars at the rate (whether official
or otherwise) which the Directors shall in their absolute discretion deem
appropriate to the circumstances having regard, INTER ALIA, to any premium
or discount which they consider may be relevant and to costs of exchange.
The Directors may suspend the determination of net asset value per Share for
the whole or part of any period:
(i) during which the New York Stock Exchange is closed other than
customary week-end and holiday closings;
(ii) during which trading on the New York Stock Exchange is restricted;
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<PAGE>
(iii) during which an emergency exists as a result of which disposal by
the Old Mutual SAGA Fund or the Master Trust of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Old
Mutual SAGA Fund or the Master Trust fairly to determine the value of its
net assets;
(iv) during which the Master Trust has suspended the determination of
its net asset value.
Such suspension shall take effect at such time as the Directors shall
declare but not later than the close of business on the business day next
following the declaration, and thereafter there shall be no determination of net
asset value per Share until the Directors shall declare the suspension at an
end, except that the suspension shall terminate in any event on the first
business day on which the New York Stock Exchange shall have reopened or the
period specified in (ii), (iii) or (iv) shall have expired (as to which the
determination of the Directors shall be conclusive).
No Shares shall be redeemed during any period when the determination of net
asset value per Share is suspended. Shareholders submitting redemption requests
during a period of suspension will (if the request is not withdrawn) receive
payment based on the net asset value on the termination of the suspension. Any
suspension will be notified to the Irish Stock Exchange without delay.
7. MATERIAL CONTRACTS
The following contracts, not being contracts entered into in the ordinary
course of business, have been entered into by the Old Mutual SAGA Fund since its
incorporation or by the Master Trust since its establishment and are, or may be,
material:
(i) An agreement dated 27th October, 1995 between the Master Trust (1),
the Old Mutual SAGA Fund (2), Old Mutual (3), the Manager (4), Old Mutual
Fund Holdings (5) and SBC Warburg (6) under which SBC Warburg agreed to use
its reasonable endeavours to procure placees for up to 20,000,000 Shares
under the initial offering of Shares which closed on 10th November, 1995
("Initial Offering").
(ii) An agreement dated 27th October, 1995 between the Master Trust
(1), the U.S. Fund (2), Old Mutual (3), the Manager (4), Old Mutual Fund
Holdings (5) and S.G. Warburg & Co. Inc. ("SG Warburg") (6) under which SG
Warburg agreed (as exclusive agent of the U.S. Fund) to use its best efforts
to solicit offers to purchase up to 10,000,000 shares of the U.S. Fund in a
U.S. private placement as part of the Initial Offering.
(iii) An agreement dated 23rd October, 1995 between the Master Trust
(1), the U.S. Fund (2), the Old Mutual SAGA Fund (3) and the International
Finance Corporation ("IFC") (4) under which the IFC agreed to provide
general consultation and advisory services to the Funds, including advice on
the operational fee charging structure for the Funds.
(iv) An agreement (the "Portfolio Transfer and Subscription Agreement")
dated 23rd October, 1995 between Old Mutual (1), Old Mutual Fund Holdings
(2), the Manager (3), the Master Trust (4), the U.S. Fund (5), the Old
Mutual SAGA Fund (6) and the Global Fund (7) under which, inter alia, Old
Mutual agreed to transfer the Initial Portfolio to the Master Trust.
(v) An agreement (the "Advisory Agreement") dated 23rd October, 1995
between the Manager (1) and the Master Trust (2) under which the Manager has
agreed to manage the Master Trust's securities and make investment decisions
for the Master Trust. The Manager will furnish at its own expense all
services, facilities and personnel necessary or convenient in
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connection with managing the Master Trust's investments and effecting
securities transactions for the Master Trust. The Advisory Agreement
continues in effect until 23rd October, 1997 and thereafter 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 a majority of
the trustees who are not parties to the Advisory Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on
the Advisory Agreement.
The Advisory Agreement provides that the Manager 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
authorised 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 Manager on not more than 60 days nor
less than 30 days written notice, and will automatically terminate in the
event of its assignment (as defined in the 1940 Act). The Advisory Agreement
provides that neither the Manager 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 wilful misfeasance, bad faith
or gross negligence or reckless disregard of its or their obligations and
duties under the Advisory Agreement.
(vi) An agreement (the "SAGA Custodian Agreement") dated 23rd October,
1995 between the Old Mutual SAGA Fund (1) and State Street Bank and Trust
Company ("State Street") (2) under which State Street has agreed to act as
custodian of the assets of the Old Mutual SAGA Fund. The SAGA Custodian
Agreement may be terminated by the Old Mutual SAGA Fund on 30 days notice
and by State Street on 120 days notice.
(vii) An agreement (the "Master Trust Custodian Agreement") dated 23rd
October, 1995 between the Master Trust (1) and State Street (2) under which
State Street has agreed to act as custodian of the assets of the Master
Trust. State Street will receive remuneration under the Master Trust
Custodian Agreement of 0.03% of the Master Trust's average daily net assets.
The Custodian Agreement may be terminated by the Master Trust on 30 days
notice and by State Street on 120 days notice.
(viii) An agreement (the "SAGA Administrative Services Agreement")
dated 23rd October, 1995 between the Old Mutual SAGA Fund (1) and State
Street Cayman Trust Company, Ltd. ("State Street Cayman") (2) under which
State Street Cayman has agreed to perform certain accounting and record
keeping duties for the Old Mutual SAGA Fund (including calculation of net
asset value) and to act as transfer agent, dividend disbursing agent and
agent in connection with certain other activities of the Old Mutual SAGA
Fund. State Street Cayman will receive remuneration under the SAGA
Administrative Services Agreement of U.S.$70,000 per annum. The SAGA
Administrative Services Agreement is terminable by State Street Cayman on
120 days notice and by the Old Mutual SAGA Fund on 60 days notice.
(ix) An agreement (the "Master Trust Administrative Services
Agreement") dated 23rd October, 1995 between the Master Trust (1) and State
Street Cayman (2) under which State Street Cayman has agreed to provide
certain administrative services to the Master Trust (including calculation
of net asset value) and to act as registrar and disbursing agent for the
Master Trust. State Street Cayman will receive remuneration under the Master
Trust Administrative Services Agreement of 0.05% per annum in respect of the
first U.S.$500 million of the Master Trust's assets, of 0.025% per annum in
respect of the next U.S.$500 million of such assets and of 0.01% per annum
in respect of the remainder of such assets. The Master Trust Administrative
Services Agreement is terminable by State Street Cayman on 120 days notice
and by the Master Trust on 60 days notice.
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<PAGE>
(x) An agreement (the "Investment Restrictions Undertaking") dated 23rd
October, 1995 between the Master Trust (1), the U.S. Fund (2) and the Old
Mutual SAGA Fund (3) under which the Master Trust has given the undertakings
referred to under "INVESTMENT OBJECTIVE AND POLICIES -- General" and under
"GENERAL INFORMATION -- Investment Restrictions" above.
(xi) An agreement dated 21st December, 1995 between the Master Trust
(1), the Old Mutual SAGA Fund (2), the Manager (3), Old Mutual Fund Holdings
(4), SBC Warburg (5), Fleming Martin Ltd (6) and Rand International
Securities (7) under which the Placement Agents agreed to use their
reasonable endeavours to procure subscribers for Shares under the second
offering of Shares which terminated on 30th June, 1996 ("Second Offering").
(xii) An agreement dated 21st December, 1995 between the Master Trust
(1), the U.S. Fund (2), the Manager (3), Old Mutual Fund Holdings (4),
S.G.Warburg & Co. Inc. (5), Fleming Martin Inc. (6) and Rand International
Securities (7) providing for the placement of shares of the U.S. Fund in a
U.S. private placement as part of the Second Offering.
(xiii) An agreement (the "Placing Agreement") dated 1st August, 1996
between the Master Trust (1), the Old Mutual SAGA Fund (2), the Manager (3),
Old Mutual Fund Holdings (4), SBC Warburg (5), Fleming Martin Ltd (6) and
Rand International Securities LLC (7) under which the Placement Agents agree
to use their reasonable endeavours to procure subscribers for Shares under
the Offering.
Under the Placing Agreement:
(a) the Placement Agents will be entitled to apply a sales charge of
0.35% of the subscription amount of the Shares placed by them in the
Offering;
(b) the Fund will pay the agreed out-of-pocket expenses incurred by the
Placement Agents in connection with the Offering (plus any applicable value
added tax).
The Placing Agreement contains provisions, INTER ALIA, under which the
Master Trust severally and the Old Mutual SAGA Fund and the Manager jointly
and severally agree to indemnify the Placement Agents against liabilities
incurred by them in connection with acting as placement agent except where
those liabilities arise by reason of the negligence, fraud or wilful default
of the Placement Agents and give representations and warranties to the
Placement Agents relating to the accuracy of the statements of fact and
opinion contained in this Memorandum.
(xiv) An agreement (the "U.S. Placing Agreement") dated 1st August,
1996 between the Master Trust (1), the U.S. Fund (2), the Manager (3), Old
Mutual Fund Holdings (4), SBC Warburg Inc. (5), Fleming Martin Inc. (6) and
Rand International Securities LLC (7) under which SBC Warburg Inc., Fleming
Martin Inc. and Rand International Securities LLC (each a U.S. Placement
Agent" and together the "U.S. Placement Agents") agree (as agents of the
U.S. Fund) to use their best efforts to solicit offers to purchase shares of
the U.S. Fund in a U.S. private placement (the "U.S. Private Placement").
Under the U.S. Placing Agreement:
(a) the U.S. Placement Agents will each be entitled to apply a sales
charge of up to 0.35% of the subscription amount of shares in the U.S. Fund
placed by them;
(b) the Manager will pay (and may be reimbursed by the U.S. Fund) the
agreed out-of-pocket expenses incurred by the U.S. Placement Agents in
connection with the U.S. Private Placement.
The U.S. Placing Agreement contains provisions, INTER ALIA, under which
the Master Trust, the U.S. Fund and the Manager severally agree to indemnify
the U.S. Placement
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<PAGE>
Agents against liabilities incurred by them in connection with acting as
placement agent for the U.S. Fund except where those liabilities arise out
of or are based upon an untrue statement or alleged untrue statement or
omission made in the private placement memorandum for the U.S. Fund in
reliance upon written information furnished by the U.S. Placement Agents and
give representations and warranties to the U.S. Placement Agents relating to
the accuracy of the statements of fact and opinion contained in the private
placement memorandum for the U.S. Fund.
8. SELLING RESTRICTIONS
This document 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 authorised or to or from any person to whom it is unlawful
to make such offer or solicitation. In particular:
(i) UNITED STATES: The Shares have not been and will not be registered
under the United States Securities Act of 1933, as amended (the "1933 Act"),
or the securities laws of any state or political sub-division of the United
States and may not be offered, sold, transferred or delivered, directly or
indirectly, in the United States or to, or for the account or benefit of, US
Persons (as defined in Regulation S under the 1933 Act) except in certain
transactions exempt from the registration requirements of the 1933 Act and
such state or other securities laws. The Old Mutual SAGA Fund is not and
will not be registered under the 1940 Act. The Bye-laws of the Old Mutual
SAGA Fund contain provisions designed to prevent the holding of Shares by US
Persons under circumstances that would cause the Old Mutual SAGA Fund to
violate United States law, and permit the Old Mutual SAGA Fund to redeem or
require the transfer of Shares purchased or beneficially owned by US Persons
as the Directors believe to be necessary or appropriate to ensure compliance
with U.S. law -- see paragraph 5(v) above. Terms used in this paragraph have
for the purposes of this Memorandum the meanings given to them by Regulation
S under the 1933 Act.
(ii) UNITED KINGDOM: The Old Mutual SAGA Fund is categorised as an
unregulated collective investment scheme for the purposes of the Financial
Services Act 1986 (the "FSA") and as such its promotion in the UK by
authorised persons is restricted. Accordingly, this Memorandum may be
distributed only to those persons who are authorised to carry on investment
business in the United Kingdom or to such other persons who may lawfully
receive it in accordance with the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991 and to those persons to whom this
Memorandum and any other documents issued in connection with the Shares may
be lawfully issued in the United Kingdom without the contents of the
Memorandum or those documents being approved by an authorised person in
accordance with Section 57 of the FSA.
(iii) IRELAND: It is not the present intention of the Directors to
advertise or market the Shares in Ireland and no such marketing will take
place in future without the prior approval in writing of the Central Bank of
Ireland.
9. GENERAL
(i) Neither the Master Trust nor the Old Mutual SAGA Fund has, since
formation or incorporation, been engaged in any legal or arbitration proceedings
and no legal or arbitration proceedings are pending or threatened against the
Master Trust or the Old Mutual SAGA Fund.
(ii) KPMG Peat Marwick of Vallis Building, Hamilton HM 11, Bermuda have
been the only auditors of the Old Mutual SAGA Fund since its incorporation. KPMG
Peat Marwick have given and have not withdrawn their written consent to the
issue of this Memorandum and the references to themselves in the form and
context in which they are included.
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(iii) The financial year end of the Old Mutual SAGA Fund is 30th June in
each year. Shareholders will be sent copies of the audited accounts prior to the
annual general meeting in each year and within 6 months of the year end. The
unaudited semi-annual financial statement of the Old Mutual SAGA Fund will be
made available within 4 months of the period to which they relate.
(iv) Notices convening each annual general meeting will be sent to
Shareholders together with the annual accounts and reports not later than
twenty-one days before the date fixed for the meeting.
10. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection at the
registered office of the Old Mutual SAGA Fund at 61 Front Street, Hamilton HM
11, Bermuda and at the offices of NCB Stockbrokers Limited, 3 George's Dock,
International Financial Services Centre, Dublin 1, Ireland during normal
business hours on any weekday (Saturdays, Sundays and public holidays excepted):
(i) the Memorandum of Association and Bye-laws of the Old Mutual SAGA
Fund;
(ii) the material contracts referred to in paragraph 7 above;
(iii) the Companies Act 1981 (as amended) of Bermuda;
(iv) the written consent of KPMG Peat Marwick referred to above;
(v) the Declaration of Trust and By-Laws of the Master Trust; and
(vi) the most recent audited financial statements of the Old Mutual
SAGA Fund.
40
<PAGE>
GLOSSARY
ADMINISTRATOR means State Street Cayman Trust Company, Ltd., as administrator of
the Fund.
ANC means the African National Congress.
BUSINESS DAY means each day on which the New York Stock Exchange is open for
trading.
DIRECTORS means the directors of the Old Mutual SAGA Fund.
FUND means the Old Mutual SAGA Fund and the Master Trust except as otherwise
indicated.
GOVERNMENT means the South African Government of National Unity.
IFP means the Inkatha Freedom Party.
GLOBAL FUND means Old Mutual Global Assets Fund Limited, a mutual fund organised
under the laws of Bermuda.
INITIAL PORTFOLIO means the portfolio of South African securities transferred
from the Old Mutual Main Fund to the Master Trust shortly before the launch of
the Old Mutual SAGA Fund.
IRISH STOCK EXCHANGE means The Irish Stock Exchange Limited.
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.
MANAGEMENT FEE means the management fee payable to the Manager of 0.60% per
annum of the Master Trust's daily net assets.
MANAGER means Old Mutual Asset Managers (Bermuda) Limited, the investment
manager to the Master Trust.
MASTER TRUST means Old Mutual South Africa Equity Trust, a Massachusetts trust.
OFFERING means the offering of Shares on the terms and conditions of this
Memorandum.
OLD MUTUAL SAGA FUND means Old Mutual South Africa Growth Assets Fund Limited.
OM AFFILIATED COMPANIES means companies in which the Old Mutual Group holds 5%
or more of the equity interests.
OLD MUTUAL means the South African Mutual Life Assurance Society, a mutual
assurance society organised under the laws of South Africa.
OLD MUTUAL FUND HOLDINGS means Old Mutual Fund Holdings (Bermuda) Limited, a
Bermuda company that is a wholly-owned subsidiary of Old Mutual.
OLD MUTUAL GROUP means Old Mutual and 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.
PLACEMENT AGENTS means Fleming Martin Ltd, Rand International Securities LLC and
SBC Warburg, a division of Swiss Bank Corporation, as the placement agents for
the Offering.
REDEMPTION FEE means a redemption fee charged by the Old Mutual SAGA Fund of
0.65% of redemption proceeds.
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S.A. RAND means South African rand, the currency of South Africa.
SHAREHOLDERS means the registered holders of Shares.
SHARES means the shares of U.S.$1 nominal value each in the Old Mutual SAGA
Fund.
TRANSFER AGENT means State Street Cayman Trust Company, Ltd., as transfer agent
for the Fund.
U.S. FUND means Old Mutual Equity Growth Assets South Africa Fund, a
Massachusetts business trust.
1940 ACT means the United States Investment Company Act of 1940, as amended.
1933 ACT means the United States Securities Act of 1933, as amended.
42
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OLD MUTUAL SAGA FUND
INVESTMENT MANAGER
Old Mutual Asset Managers (Bermuda) Limited
61 Front Street, Hamilton HM 11, Bermuda
PLACEMENT AGENTS
Fleming Martin Ltd
25 Copthall Avenue
London EC2R 7DR
Rand International Securities LLC
780 3rd Avenue
New York, NY 10017
SBC Warburg
1 Finsbury Avenue
London EC2M 2PP
ADMINISTRATOR
State Street Cayman Trust Company, Ltd.
P.O. Box 2508GT
Elizabeth Square, George Town
Grand Cayman, Cayman Islands
TRANSFER AGENT
State Street Cayman Trust Company, Ltd.
P.O. Box 2508GT
Elizabeth Square, George Town
Grand Cayman, Cayman Islands
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
FOR THE OLD MUTUAL SAGA FUND
AND THE MASTER TRUST:
KPMG Peat Marwick
Vallis Building, Hamilton HM 11, Bermuda
LEGAL COUNSEL
IN THE UNITED KINGDOM:
Norton Rose
Kempson House, Camomile Street,
London EC3A 7AN
IN THE UNITED STATES:
Bingham, Dana & Gould LLP
150 Federal Street, Boston, MA 02110
IN BERMUDA:
Conyers, Dill & Pearman
Clarendon House, Church Street
Hamilton, Bermuda
SPONSORING BROKER
NCB Stockbrokers Limited
3 George's Dock
International Financial Services Centre
Dublin 1, Ireland
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Summary of the Offering................. 3
Investment Objective and Policies....... 9
South Africa............................ 11
Risk Factors............................ 14
Management and Administration........... 17
Valuation of Shares..................... 19
Offering of Shares...................... 20
Redemptions............................. 20
Liquidity Facility and the Global
Fund................................... 21
Tax Matters............................. 22
General Information..................... 24
Additional Information.................. 30
Glossary................................ 41
</TABLE>
<PAGE>
INVESTOR NAME:____________________
CONFIDENTIAL IDENTIFICATION NO:____________________
UNITED STATES SUPPLEMENT TO
PLACEMENT MEMORANDUM
OLD MUTUAL SOUTH AFRICA
GROWTH ASSETS FUND LIMITED
(an open-end investment company incorporated with limited liability under
the provisions of The Bermuda Companies Act 1981 (as amended),
registered number-EC21101)
INVESTMENT MANAGER:
OLD MUTUAL ASSET MANAGERS (BERMUDA) LIMITED
- --------------------------------------------------------------------------------
Old Mutual South Africa Growth Assets Fund Limited (the "Company") is making a
private placement (the "Placing") of its shares, $1.00 par value (the "Shares")
on the terms and conditions of this United States Supplement (the "Supplement")
and the Placement Memorandum of the Company dated 1 June, 1997 delivered
herewith (the "Memorandum").
This Supplement only addresses matters of particular concern to United States
investors and does not purport to be a complete description of the Company or
the Shares. This Supplement should be read in conjunction with the Memorandum
and the current annual and, if applicable, semi-annual report of the Company.
Shares will be offered and sold in a private placement exempt from the
registration requirements of the Securities Act of 1933, as amended (the "1933
Act"). Shares of the Company may only be purchased by certain "accredited
investors" as that term is defined in Rule 501(a) under the 1933 Act.
17 August, 1998
14
<PAGE>
THE SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE 1933 ACT OR THE
SECURITIES LAWS OF ANY STATE OR OTHER POLITICAL SUBDIVISION OF THE UNITED STATES
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY,
IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, US PERSONS (AS
DEFINED IN REGULATION S UNDER THE 1933 ACT) EXCEPT IN CERTAIN TRANSACTIONS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND SUCH STATE OR
OTHER SECURITIES LAWS.
THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND RESALE. SEE "UNITED
STATES SECURITIES LAW CONSIDERATIONS -- RESTRICTIONS ON TRANSFER." INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF SUCH REGULATORY AUTHORITIES PASSED UPON OR ENDORSED
THE MERITS OF THE PLACING OR THE ACCURACY OR ADEQUACY OF THIS SUPPLEMENT OR THE
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMPANY IS NOT AND WILL NOT BE REGISTERED UNDER THE UNITED STATES INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, AND ACCORDINGLY, IS RESTRICTED IN THE NUMBER OF
BENEFICIAL HOLDERS OF SHARES THAT MAY BE US PERSONS AND IN THE PERCENTAGE OF THE
OUTSTANDING SHARES THAT MAY BE OWNED BY CERTAIN US PERSONS.
THIS SUPPLEMENT AND THE ACCOMPANYING MEMORANDUM DO NOT CONSTITUTE AN OFFER OF
SECURITIES TO ANY PERSON UNLESS SUCH PERSON'S NAME AND AN IDENTIFICATION NUMBER
APPEAR AT THE TOP OF THE FRONT COVER, AND DELIVERY OF THE SUPPLEMENT AND THE
MEMORANDUM TO ANYONE OTHER THAN THE PERSON NAMED ON THE COVER IS UNAUTHORIZED.
THESE SECURITIES INVOLVE A NUMBER OF RISKS. SEE "RISK FACTORS" IN THE
MEMORANDUM.
THIS SUPPLEMENT AND THE MEMORANDUM DO NOT CONTAIN AN
15
<PAGE>
UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY
TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE
MADE, NOT MISLEADING. THEY CONTAIN A FAIR SUMMARY OF THE MATERIAL TERMS OF
DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN AND THEREIN.
This Supplement is confidential and has been prepared for use solely in
connection with the consideration of the purchase of Shares by a limited group
of United States accredited investors in a private placement. Its use for any
other purpose is not authorized and it may not be reproduced, transferred to any
other person, or used for any other purpose without the consent of the Company.
Each prospective investor, by accepting delivery of this Supplement, agrees to
return it and all related documents to the Company in the event such prospective
investor does not purchase any Shares.
No person has been authorized to give any information or to make any
representations other than those contained in this Supplement and the Memorandum
in connection with any offering and sale of Shares, and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Company.
The contents of this Supplement and the Memorandum should not be considered to
be legal or tax advice and each prospective investor should consult with its own
legal counsel and advisers as to all matters concerning an investment in Shares.
The delivery of this Supplement and the Memorandum shall not, under any
circumstances, create any implication that any information contained herein or
therein is correct as of any time subsequent to the respective dates hereof and
thereof.
All capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Memorandum.
16
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OLD MUTUAL SOUTH AFRICA
GROWTH ASSETS FUND LIMITED
UNITED STATES SUPPLEMENT
TO PLACEMENT MEMORANDUM
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
United States Securities Law Considerations 1 - 4
Certain United States Federal Income Tax Considerations 5 - 7
No Sales to ERISA Plans or Qualified Plans 7
Subscription Procedure 7 - 8
Additional Information 8
US Investor Letter
</TABLE>
17
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UNITED STATES SECURITIES LAW CONSIDERATIONS
SECURITIES ACT OF 1933
The Shares have not been, nor will they be, registered under the Securities Act
of 1933, as amended (the "1933 Act"), or registered or qualified under the
securities laws of any state or other political subdivision of the United
States. Except as specified herein, the Shares may not be offered, sold,
transferred, or delivered, directly or indirectly, in the United States or to,
or for the account or benefit of, any US Person (as defined in Regulation S
under the 1933 Act, see "Definition of US Person" below). Notwithstanding the
foregoing, (a) Shares may be offered and sold by the Company to US Persons that
are "accredited investors" within the meaning of Rule 501(a) under the 1933 Act
in reliance upon the exemption from the registration requirements of the 1933
Act provided in Rule 506 under the 1933 Act and (b) once issued, Shares may be
transferred or sold to US Persons, subject to the limitations set forth in
"Restrictions on Transfer" below, in transactions that are exempt from the
registration requirements of the 1933 Act and applicable state and other
securities laws.
INVESTMENT COMPANY ACT OF 1940
The Company has not been, and will not be, registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"). Based on
interpretations of the Investment Company Act by the staff of the Securities and
Exchange Commission, the Company would be required to register under the
Investment Company Act if more than 100 beneficial owners of Shares were US
Persons, calculated in accordance with Section 3(c)(1) of the Investment Company
Act (including the rules relating to beneficial ownership by attribution
pursuant to Section 3(c)(1)(A) of the Investment Company Act). The Company will
not knowingly permit the number of beneficial owners of Shares that are US
Persons to be more than 100, as so calculated.
The Company invests all of its investable assets in the Old Mutual South Africa
Equity Trust (the "Master Trust"). Although the Master Trust is currently
registered under the Investment Company Act, the Board of Trustees of the Master
Trust has voted to apply to terminate the Master Trust's registration under the
Investment Company Act. Once the Master Trust terminates its Investment Company
Act registration, it will no longer be subject to regulation under the
Investment Company Act or the supervision of the U.S. Securities and Exchange
Commission. Among other things, the Master Trust will no longer be subject to:
- - A requirement that no more than 60% of the Trustees of the Master Trust be
affiliated persons of, or otherwise interested in, the Master Trust.
- - Limitations on transactions between the Master Trust and various affiliated
persons, including investments in affiliates of the Manager.
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- - Limitations on purchases of securities in an underwritten offering in which
an affiliated person is an underwriter.
- - Requirements to maintain a current registration statement with the U.S.
Securities and Exchange Commission and file certain periodic reports with such
Commission.
- - Requirements that the Board of Trustees review the Master Trust's advisory
agreement annually.
Upon the de-registration of the Master Trust, the Manager will seek to withdraw
its registration under the U.S. Investment Advisers Act of 1940 with the U.S.
Securities and Exchange Commission. Accordingly, the Manager will no longer be
subject to regulation under that Act. Among other things, the Manager will no
longer be required to maintain a current Form ADV with the U.S. Securities and
Exchange Commission or a code of ethics for its advisory personnel.
RESTRICTIONS ON TRANSFER
The Shares may not be offered, sold, transferred, or delivered, directly or
indirectly, in the United States or to, or for the account of, any US Person
except, with the consent of the Directors, in a transaction exempt from the
registration requirements of the 1933 Act and applicable state and other
securities laws. Any such consent may be granted or withheld in the sole
discretion of the Directors.
US Persons that acquire Shares in the Placing will be required to execute a
special US Investor Letter. See "Subscription Procedure" below. Among other
things, this US Investor Letter provides that the Shares may not be offered,
sold, transferred, or delivered, directly or indirectly, in the United States or
to, or for the account or benefit of, US Persons unless:
a) such offer, sale, transfer or delivery is duly registered under the 1933
Act and any applicable state securities laws, or the transferor provides the
Company with an opinion of counsel, satisfactory in form and substance to the
Company, to the effect that such offer, sale, transfer or delivery is exempt
from the registration requirements of the 1933 Act and any applicable state
securities laws;
b) the transferee provides the Company with an opinion of counsel,
satisfactory in form and substance to the Company, to the effect that the
transferee will, for purposes of determining whether the Company may rely on the
exemption from Investment Company Act registration under Section 3(c)(1) of the
Investment Company Act, be counted as not more than one beneficial owner of the
Shares; and
c) the transferee undertakes to comply with these restrictions in respect of
any further transfers of the Shares.
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<PAGE>
The Company has no obligation to register the Shares under the 1933 Act or any
state securities laws or to assist any investor in effecting any such
registration. As a result, US Persons that invest in Shares may have to bear
the economic risk of an investment in the Shares for an indefinite period of
time. Any certificate or any other document evidencing Shares issued to US
Persons will bear a legend stating that the Shares have not been registered or
qualified under the 1933 Act and any applicable state securities laws and that
the Company is not registered under the Investment Company Act and referring to
the foregoing restrictions on transfer and sale.
No public market in the United States is expected to develop for the Shares.
MANDATORY TRANSFERS
As set forth in paragraph 5(v) under "Additional Information" in the Memorandum,
the Directors have power to impose such restrictions, including a restriction on
transfer, as they may think necessary for the purpose of ensuring that no Shares
are acquired or held by any person or persons in breach of the laws or
requirements of any country or governmental authority or in circumstances
(whether directly or indirectly affecting such person or persons and whether
taken alone or in conjunction with any other persons, connected or not, or any
other circumstances appearing to the Directors to be relevant) which, in the
opinion of the Directors, might result in the Company incurring any liability to
taxation or suffering any other pecuniary, regulatory or material administrative
disadvantage which the Company might not otherwise have incurred or suffered
(including, without limitation, any requirement that the Company register Shares
under the 1933 Act or register as an investment company under the Investment
Company Act) (a "non-qualified person").
The Directors may require any Shareholder and any person seeking to purchase
Shares or to whom a transfer is proposed to be made, to provide such information
as may be requested for the purpose of determining whether the Shareholder or
any such other person is a non-qualified person.
If it comes to the notice of the Directors that any Shares are held by any
non-qualified person, the Directors may give notice to such person requiring the
redemption or transfer of such Shares in accordance with the provisions of the
Bye-Laws of the Company. The Company intends to exercise these rights as
necessary for purposes of compliance with United States laws.
DEFINITION OF US PERSON
In this document US Person has the meaning assigned to it in Regulation S under
the 1933 Act, and includes:
a) any natural person resident in the United States;
20
<PAGE>
b) any partnership or corporation organized or incorporated under the laws of
the United States;
c) any estate of which any executor or administrator is a US Person;
d) any trust of which any trustee is a US Person;
e) any agency or branch of a non-US entity located in the United States;
f) any non-discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a US
Person;
g) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or, if an
individual, resident in the United States; or
h) any partnership or corporation if (i) organized or incorporated under the
laws of any non-US jurisdiction and (ii) formed by a US Person principally for
the purpose of investing in securities not registered under the 1933 Act, unless
it is organized or incorporated, and owned, by accredited investors (as defined
in Rule 501(a) under the 1933 Act).
Notwithstanding the foregoing "US Person" does not include: (a) any
discretionary account or similar account (other than an estate or trust) held
for the benefit or account of a non-US Person by a dealer or other professional
fiduciary organized, incorporated, or, if an individual, resident in the United
States; (b) any estate of which any professional fiduciary acting as executor or
administrator is a US Person if (i) an executor or administrator of the estate
who is not a US Person has sole or shared investment discretion with respect to
the assets of the estate and (ii) the estate is governed by non-US law; (c) any
trust of which any professional fiduciary acting as trustee is a US Person if a
trustee who is not a US Person has sole or shared investment discretion with
respect to the trust assets, and no beneficiary of the trust (and no settler if
the trust is revocable) is a US Person; (d) an employee benefit plan established
and administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country; (e) any agency
or branch of a US Person located outside the United States if (i) the agency or
branch operates for valid business reasons and (ii) the agency or branch is
engaged in the business of insurance or banking and is subject to substantive
insurance or banking regulation, respectively, in the jurisdiction where
located; and (f) the International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the Asian
Development Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar international
organizations, their agencies, affiliates and pension plans.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
21
<PAGE>
THE COMPANY
The Company will be treated as a corporation for US federal income tax purposes.
The Directors intend to conduct the affairs of the Company in such a manner as
will not result in the Company being treated as engaged in a trade or business
in the United States or otherwise being subject to US federal income taxation on
a net income basis on its income and gains. While the Company believes that it
will not be treated as engaged in a trade or business in the United States,
there can be no assurance that the US Internal Revenue Service will not so
contend. If the Company were deemed to be engaged in a trade or business in the
United States, it would be subject to US federal income tax and branch profits
tax on its income that is effectively connected with that trade or business.
INVESTORS
The following is a discussion of certain United States federal income tax
considerations relevant to the purchase, ownership and disposition of Shares by
a Shareholder who is a citizen or resident of the United States, or a
Shareholder that is a corporation, partnership, or other entity created or
organized in or under the laws of the United States, an estate the income of
which is subject to United States federal income taxation regardless of its
source, a trust if a United States court is able to exercise primary supervision
over the administration thereof and if one or more US persons has the authority
to control all substantial decisions thereof or any other person included within
the definition of "United States person" under the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder (a "US
Shareholder"). This discussion, which is based on current tax laws,
regulations, rulings and judicial decisions (all of which are subject to change
at any time, prospectively or retroactively by legislative, judicial or
administrative action), is not intended to be complete and does not take into
account any considerations that may relate to special classes of taxpayers,
including, among others, tax-exempt entities and dealers in securities (or other
persons not holding the Shares as capital assets). The discussion also does not
address any aspects of US taxation other than federal income taxation.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE US
FEDERAL, STATE AND LOCAL AND OTHER TAX CONSEQUENCES OF OWNERSHIP AND DISPOSITION
OF SHARES.
Subject to the discussion regarding "Subpart F" and "passive foreign investment
companies" below, a US Shareholder generally will have to pay federal income
taxes, and may be subject to state or local taxes, on the distributions the US
Shareholder receives from the Company. Dividends will be subject to tax whether
or not the US Shareholder elects to reinvest them pursuant to the dividend
reinvestment plan. Distributions of property will be valued at their fair
market value at the time of distribution. Distributions will be treated as
dividends to the extent that they are paid out of the Company's current or
accumulated earnings and profits. To the extent distributions exceed current
and accumulated earnings
22
<PAGE>
and profits, the excess will be treated first as a non-taxable return of capital
that will reduce a US Shareholder's basis in its Shares, and then distributions
in excess of basis will be treated as capital gain from the sale or exchange of
the Shares.
Dividends will be treated as foreign source dividend income, and will not be
eligible for the dividends received deduction for corporations. The Company may
be subject to taxes levied by non-US jurisdictions on its investment income;
however, except in the limited circumstances noted below, the Company will not
be able to pass through to its US Shareholders any foreign tax credit or
deduction with respect to the taxes paid by the Company to non-US jurisdictions.
A US Shareholder that is a corporation and that holds 10 per cent. or more of
the Company's Shares may be entitled to a foreign tax credit or deduction on a
pro rata basis with respect to some or all of the income taxes paid by the
Company to non-US jurisdictions. Foreign tax credits are subject to certain
limitations, and additional limitations may apply in computing a US
Shareholder's alternative minimum tax.
In general, any gain or loss realized upon a taxable disposition of Shares by a
US Shareholder that holds such Shares as a capital asset will be treated as a
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; a shareholder that is
an individual, estate or trust may be eligible for reduced tax rates on certain
long-term capital gains. Any loss realized upon a disposition of Shares may,
however, be disallowed under the rules relating to wash sales and certain other
rules. A gain on a disposition of Shares will be treated as US source gain
unless the US Shareholder has a tax home in a country other than the United
States. Certain US Shareholders may under certain circumstances be required to
characterize as dividends a portion of any gain realized upon a sale or
disposition of Shares.
It is likely that the Company, and possibly some of the businesses in which the
Company invests, will be "passive foreign investment companies" for the purposes
of the Code. Under the passive foreign investment company rules, US
Shareholders may under certain circumstances be required to pay additional tax
(and interest) in respect of distributions from, and gains attributable to, the
sale or other disposition of stock of passive foreign investment companies.
Alternatively, a US Shareholder may elect (a "qualified electing fund" or "QEF"
election) to be taxed on a current basis with respect to the Company (i.e., as
if the Company had distributed to Shareholders each year all of its taxable
earnings as a dividend). Actual distributions out of amounts so taxed will not
be taxable to the US Shareholder. The QEF election is effective only if certain
required information is made available by the Company. If the level of interest
from potential US Shareholders (either in the Placing or subsequently) is
sufficient, the Company may take steps to comply with the applicable information
requirements so as to permit US Shareholders to make the election, and to
provide each US Shareholder with information needed for the determination of its
pro rata share of
23
<PAGE>
the Company's earnings.
In addition, if Shares of the Company are considered to be "marketable stock"
for purposes of the passive foreign investment company rules, a "mark to market"
election would be available to US Shareholders with respect to their Shares that
would simplify the application to them of the foregoing passive foreign
investment company rules. A US Shareholder making such an election would
include in income (or, subject to certain limitations, treat as a deduction) at
the end of each taxable year following such election the difference between the
fair market value of its Shares and the US Shareholder's adjusted basis in the
Shares. Such income and deductions, along with any gain or (subject to certain
limitations) any loss on the US Shareholder's sale or other disposition of
Shares, would be characterized as ordinary income or loss, and income would be
treated as US source income unless the US Shareholder had a tax home in a
country other than the United States.
Under the "Subpart F" rules of the Code, some or all of the US Shareholders
may under certain circumstances be required to include in taxable income for
US federal income tax purposes as a deemed dividend amounts attributable to
some or all of the earnings of the Company, in advance of the receipt of cash
attributable to those earnings. Such circumstances include cases in which
the applicable US Shareholder owns at least 10 per cent. of the shares of the
Company and all US Shareholders own in the aggregate more than 50 per cent.
of the shares of the Company. Amounts so taken into account under the
"Subpart F" rules may generally be applied by US Shareholders to reduce the
amount required to be taken into account as a dividend upon the receipt of
distributions from the Company. US Shareholders required to include such
amounts will not be subject to the passive foreign investment company rules
described above. A US Shareholder that is a corporation and that is required
to include such amounts in its taxable income may be entitled to a foreign
tax credit on a pro rata basis with respect to some or all of the income
taxes paid by the Company to non-US jurisdictions.
NO SALES TO ERISA PLANS OR QUALIFIED PLANS
Shares may not be purchased using assets of employee benefit plans ("ERISA
Plans") subject to Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or retirement plans covering only self-employed
individuals and individual retirement accounts or otherwise defined as a "plan"
in Section 4975(e)(1) of the Code (collectively "Qualified Plans"). The U.S.
Investor Letter described below requires each investor to represent that it is
not investing the assets of an ERISA Plan or a Qualified Plan. As described
above under "United States Securities Law Considerations -- Mandatory
Transfers," the Directors may give notice to a Shareholder that is, or holds or
is deemed to hold shares for the account of, an ERISA Plan or a Qualified Plan
requiring the redemption or transfer of the Shares held by such person in
accordance with the
24
<PAGE>
provisions of the Bye-Laws of the Company.
25
<PAGE>
SUBSCRIPTION PROCEDURE
The Company reserves the right to accept or reject any subscription for Shares,
in whole or in part, and to modify or terminate the offering at any time.
In order to subscribe for Shares, US investors must complete and execute the
following documents:
a) a subscription form; and
b) the US Investor Letter in the form attached as Exhibit A to this
Supplement.
Investors should carefully review the subscription form and US Investor Letter
before subscribing for Shares. They contain, among other things, a number of
representations and warranties required for purposes of compliance with various
legal requirements. Each investor should consult its own counsel if it has any
questions concerning the representations and warranties in the subscription form
and US Investor Letter.
Completed subscription forms and US Investor Letters should be delivered as
follows:
State Street Cayman Trust Company, Ltd.
Post Office Box 2508GT
Elizabethan Square
George Town
Grand Cayman
Cayman Islands
Telephone: (345) 949 6644
Facsimile: (345) 949 3181
ADDITIONAL INFORMATION
This Supplement, the Memorandum, and the current annual and, if applicable,
semi-annual reports of the Company may not contain all of the information
concerning the Company and the Shares which is available. The Company will make
available to each prospective investor at a reasonable time prior to the
purchase by such prospective investor of Shares the opportunity to ask questions
and receive answers concerning the terms and conditions of the Placing and to
obtain any additional information which the Company possesses or can obtain
without unreasonable effort or expense that is necessary to verify the accuracy
of information contained in this Supplement, the Memorandum, and the current
annual and, if applicable, semi-annual reports of the Company. The Company will
make copies of all applicable documents available to potential investors upon
request. Requests for further information should be directed to Mr. William
Langley, President, Old Mutual Asset Managers (Bermuda) Limited (telephone (441)
296 1201).
26
<PAGE>
US INVESTOR LETTER
TO BE SUBMITTED BY US PERSONS (AS THAT TERM IS DEFINED IN REGULATION S
UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT")), TOGETHER WITH
THE APPLICATION FORM RELATING TO THE PURCHASE OF SHARES.
The Directors
Old Mutual South Africa Growth Assets Fund Limited
P.O. Box HM 3085
Hamilton HM NX, Bermuda
Fax: 441-296-1200
Ladies & Gentlemen:
OLD MUTUAL SOUTH AFRICA
GROWTH ASSETS FUND LIMITED
(THE "COMPANY")
The undersigned (the "Investor") has received a copy of the Placement
Memorandum issued by the Company and dated 1 June, 1997 (the "Memorandum"), the
United States Supplement to the Memorandum dated 17 August, 1998 (the
"Supplement"), and the most recent annual and, if applicable, semi-annual report
of the Company. Delivered to you herewith is a completed subscription form for
Shares on the terms and conditions set forth in the Memorandum and the
Supplement. Capitalized terms used in this letter shall, unless otherwise
indicated, have the meanings assigned to them in the Memorandum and the
Supplement.
1. The Investor represents and warrants to and for the benefit of you,
the Company, the Investment Manager, State Street Bank and Trust Company as
custodian of the assets of the Company, and State Street Cayman Trust Company as
administrator for the Company, as set forth below. If the Investor is a
nominee, the representations below apply as appropriate to the beneficial owner
for which the Investor is purchasing the Shares.
(a) The Investor is an "accredited investor" as defined in Regulation D
under the 1933 Act. The Investor has such knowledge of financial and business
matters that the Investor is capable of evaluating the merits and risks of an
investment in Shares.
(b) The Investor has received and carefully reviewed the Memorandum,
Supplement, the annual and, if applicable, semi-annual reports, and subscription
27
<PAGE>
form. The Company and its agents have made available to the Investor an
opportunity to ask questions and obtain additional information concerning the
Company and the offer of Shares.
(c) The Investor acknowledges that the Shares are subject to restrictions
on transfer and sale, that there is no public market for the Shares to be issued
to the Investor, that no public market for the Shares is expected to develop and
that any certificates representing the Shares issued to the Investor will bear
legends restricting transfer and sale of the Shares.
(d) The Investor is purchasing Shares for investment for the Investor's
own account (or, if the Investor is a nominee, for the account of the beneficial
owner specified below) and not with any present view towards resale or other
distribution.
(e) The Investor will be treated as one beneficial owner of the Shares for
purposes of Section 3(c)(1) of the 1940 Act.
(f) The information set forth on the US Investor Signature Page below with
respect to the Investor is accurate, correct, and complete. Under penalty of
perjury, the Investor certifies (i) that the taxpayer identification number
provided on the US Investor Signature Page below is its correct taxpayer
identification number, and (ii) that it is not subject to backup withholding,
either because it has not been notified that it is subject to backup withholding
as a result of a failure to report all interest or dividends, or the Internal
Revenue Service has notified it that it is no longer subject to backup
withholding under Section 3406(a)(1)(c) of the Code.
(g) The Investor is not, and is not subscribing for Shares for or on
behalf of, (i) an employee benefit plan subject to Title I of ERISA (an "ERISA
Plan"), (ii) a retirement plan covering only self-employed individuals and
individual retirement accounts or otherwise defined as a "plan" in Section
4975(e) of the Code (a "Qualified Plan"), or (iii) any entity deemed to hold the
assets of an ERISA Plan or Qualified Plan.
(h) If the Investor is a registered investment company under the 1940 Act
or a company controlled thereby, as of the date of acquisition of the Shares,
the purchase price thereof will not exceed 5 percent of the value of the
Investor's total assets, and the price of the Shares acquired by the Investor
and the value of the securities issued by all other investment companies (as
defined in the 1940 Act) will not exceed 10 percent of the value of the
Investor's total assets.
2. The Investor shall provide the Company and the Investment Manager with
any additional information which any of them may reasonably request in
connection herewith and authorizes them to disclose such information relating to
this application to such persons as they consider appropriate.
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<PAGE>
3. The Investor shall not offer, sell, transfer or deliver the Shares
directly or indirectly, in the United States or to or for the benefit of, US
Persons, unless:
(a) such offer, sale, transfer or delivery is duly registered under the 1933
Act and any applicable state securities laws or the transferor provides the
Company with an opinion of counsel, satisfactory in form and substance to the
Company to the effect that such offer, sale, transfer or delivery is exempt from
the registration requirements of the 1933 Act and any applicable state
securities laws;
(b) the transferee provides the Company with an opinion of counsel,
satisfactory in form and substance to the Company, to the effect that the
transferee will, for purposes of determining whether the Company may rely on the
exemption from the registration requirements of the 1940 Act under Section
3(c)(1) thereof, not be counted as more than one beneficial owner of the Shares;
and
(c) the transferee undertakes to comply with this Section 3 in respect of any
further transfers of the Shares.
4. This US Investor Letter shall be binding upon the Investor together
with its successors and permitted assigns.
29
<PAGE>
OLD MUTUAL SOUTH AFRICA
GROWTH ASSETS FUND LIMITED
US INVESTOR SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned has executed this US Investor Letter
this ____ day of _________, _____.
INVESTOR:
_________________________________________________________________
Name Typed or Printed
By: _________________________________________________________________
Signature
_________________________________________________________________
Title of Signatory
_________________________________________________________________
Taxpayer Identification Number
If the Investor is a nominee, indicate name of beneficial owner:
__________________________________________________________________
30
<PAGE>
PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
Item 12. General Information and History.
Not applicable.
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<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 Depositary Receipts, Global Depositary Receipts, or other
similar securities representing equity securities.
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<PAGE>
Old Mutual South Africa Growth Assets Fund Limited (the "Old Mutual SAGA
Fund"), a Bermuda mutual fund whose shares are listed on the Irish Stock
Exchange, invests all of its investable assets in the Master Trust. The Master
Trust has undertaken to the Old Mutual SAGA Fund that it will not make any
material change to its investment objective or to its investment policies
described in the 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 shareholders of the
Old Mutual SAGA 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
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
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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.
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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.
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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 to forgo a portion or all of the benefits of advantageous
changes in such
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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.
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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
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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, U.S. Treasury obligations or debt
obligations of certain non-U.S. governments 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 or other governmental 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 order to meet redemptions. Also, if the
Adviser determines it is
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<PAGE>
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.
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(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.
FEDERAL RESTRICTIONS
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In order to comply with certain statutes and policies and the Master Trust
will as a matter of operating policy ensure that:
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(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 Old Mutual SAGA Fund
not to change these restrictions for so long as the shares of the Old Mutual
SAGA 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;
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(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;
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(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
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*MICHAEL JOHN LEVETT, South African (aged 59), serves as President of Old
Mutual Equity Growth Assets South Africa Fund (the "OMEGA South Africa Fund")
and the Master Trust and as Chairman of the Board of Directors of the Old Mutual
SAGA 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 61), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Old Mutual SAGA
Fund. Mr. Boyan has been a director of John Hancock Mutual Life Insurance
Company since 1983 and was President and Chief Operations Officer from 1992
through 1997. In January 1998 Mr. Boyan was appointed Vice Chairman of the
Board of John Hancock Mutual Life Insurance Company. His address is John
Hancock Place, 200 Clarendon Street, Boston, Massachusetts.
THOMAS HASKINS DAVIS, Bermudian (aged 50), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Old Mutual SAGA
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 62), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Old Mutual SAGA
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 55), 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 Old Mutual SAGA 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.
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KENNETH RIGBY WILLIAMS, British (aged 62), serves as a trustee of the OMEGA
South Africa Fund and the Master Trust and as a director of the Old Mutual SAGA
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 42), serves as Secretary of the OMEGA
South Africa Fund, the Old Mutual SAGA 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 22
Church Street, Hamilton, Bermuda.
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The Trustees of the Master Trust received the following remuneration
from the Trust during the period from July 1, 1997 to June 30, 1998:
<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 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 Old Mutual SAGA Fund.
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 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.
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On November 3, 1995 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 Old Mutual SAGA Fund (the "SAGA Initial Offering"), which was held
on November 10, 1995, each of the OMEGA South Africa Fund and the Old Mutual
SAGA 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 SAGA
Initial Offering to redeem a corresponding portion of the interest of Old Mutual
Fund Holdings in the Master Trust. Shares of the Old Mutual SAGA. Fund have
been offered on a continuous basis since December 31, 1995. From December 31,
1995 to August 17, 1998 the OMEGA South Africa Fund offered its shares of
beneficial interest on a continuous basis. As of September 24, 1998, Old Mutual
Fund Holdings owned 89.6% of the beneficial interest in the Master Trust. The
address of Old Mutual Fund Holdings is 22 Church Street, Hamilton, Bermuda. As
of September 23, 1998 all shares of the OMEGA South Africa Fund had been
redeemed for cash and the OMEGA South Africa Fund redeemed its entire interest
in the Master Trust. As of September 24, 1998, the Old Mutual SAGA Fund owned
10.4% of the beneficial interest in the Master Trust. The address of the OMEGA
South Africa Fund and the Old Mutual SAGA Fund is 22 Church Street, Hamilton,
Bermuda.
In addition, the Master Trust has undertaken to the Old Mutual SAGA 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 Old Mutual SAGA 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.
Item 16. Investment Advisory and Other Services.
Adviser.
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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 22 Church Street, Hamilton, Bermuda. Old Mutual provides
investment research and information to the Adviser.
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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 of the Master
Trust) to June 30, 1996; July 1, 1996 to June 30, 1997; and July 1, 1997 to
June 30, 1998, 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),
U.S.$5,803,304 (of which amount U.S.$135,019 was voluntarily waived), and
U.S.$5,805,025 (of which amount U.S.$92,500 was voluntarily waived),
respectively.
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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.
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The Adviser will reduce or rebate a portion of the Management Fee as
necessary so that ordinary operating expenses of the Old Mutual SAGA Fund,
including its share of the Management Fee and the amortization of certain
organizational or offering expenses, will not exceed 1.00% per annum of the Old
Mutual SAGA Fund's 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 Old Mutual SAGA Fund, (iv)
brokerage expenses, or (v) the redemption fee charged by the Old Mutual SAGA
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 Old Mutual SAGA 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.
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
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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:
<TABLE>
<S> <C>
First U.S.$500 million 0.05%
Next U.S.$500 million 0.025%
Over U.S.$1 billion 0.01%
</TABLE>
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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 of the
Master Trust) to June 30, 1996; July 1, 1996 to June 30, 1997; and from July 1,
1997 to June 30, 1998, the fees paid to the Master Trust Administrator under the
Administrative Services Agreement were U.S.$252,158, U.S.$374,991, and
U.S.$377,957, 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.
Prior to September 30, 1998, the OMEGA South Africa Fund engaged Fleming
Martin Inc., Barnard Jacobs Mellet (USA) LLC (formerly Rand International
Securities LLC), and Warburg Dillon Read LLC (formerly 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. From December 31, 1995 to August 17, 1998, the OMEGA South
Africa Fund offered its shares of beneficial interest on a continuous basis. As
of August 17, 1998, the OMEGA South Africa Fund ceased offering its shares of
beneficial interest. Therefore, the OMEGA South Africa Fund Placing Agreement
was terminated with effect from September 30, 1998.
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Pursuant to a placing agreement (the "SAGA Placing Agreement") between the
Master Trust, the Old Mutual SAGA Fund, the Adviser, Old Mutual Fund Holdings,
and the following placement agents: Fleming Martin Limited, Barnard Jacobs
Mellet (USA) LLC (formerly Rand International Securities LLC), and Swiss Bank
Corporation, through its division SBC Warburg (collectively, the "SAGA Placement
Agents"), the SAGA Placement Agents have agreed to use their reasonable
endeavors to procure placees for shares of the Old Mutual SAGA Fund (the "SAGA
Offering"), but the SAGA Placement Agents are not themselves under any
obligation to subscribe for any shares. The engagement of the SAGA Placement
Agents is non-exclusive, and the Old Mutual SAGA Fund may from time to time in
its sole discretion but after reasonable prior consultation with the existing
SAGA Placement Agents, appoint one or more additional placing agents. The
obligations of the Master Trust under the SAGA 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 SAGA Placement Agents are entitled to terminate the
SAGA Placing Agreement, including where there has been a material breach of
certain of the representations and warranties contained in SAGA Placing
Agreement. The Old Mutual SAGA Fund may terminate the SAGA Placing Agreement as
to any SAGA Placement Agent by immediate written notice to each party to the
SAGA Placing Agreement in the event that such SAGA Placement Agent shall be in
material breach of the SAGA 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
Old Mutual SAGA Fund sold to a subscriber for shares in the Old Mutual SAGA Fund
("Subscriber") may be applied by the SAGA Placement Agents. Old Mutual Fund
Holdings may make additional payments to the SAGA Placement Agents or other
parties equal to 0.25% of the price of shares of the Old Mutual SAGA Fund sold
in the SAGA Offering. Prior to September 30, 1998, each OMEGA Placement Agent
was entitled to a corresponding fee with respect to shares of the OMEGA South
Africa Fund sold in the OMEGA Offering. Each of the OMEGA South Africa Fund and
the Old Mutual SAGA Fund have agreed to indemnify its respective Placement
Agents and the Master Trust has agreed to indemnify the OMEGA and the SAGA
Placement Agents against certain liabilities, including liabilities under
applicable securities laws.
The Master Trust adopted a placement plan in accordance with Rule 12b-1
under the 1940 Act (the "Placement Plan"). The Placement Plan for the Master
Trust was terminated with effect from August 31, 1998. The Placement Plan
provided for the payment of certain fees and amounts in connection with the
placement of shares. Furthermore, the Placement Plan provided that the Master
Trust could 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 Old Mutual SAGA Fund, provided the amount of such
reimbursements in any year could not exceed 0.05% of the average daily net
assets
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of the Master Trust for such year. Under the Placement Plan, the Master Trust
could pay additional fees in connection with the placement of shares of the
OMEGA South Africa Fund and the Old Mutual SAGA Fund as determined by the
Trustees, provided such fees for any year could 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.
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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 July 1, 1997 to June 30, 1998 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.
Pursuant to the custodian contract, the Custodian serves as the Master
Trust's Foreign Custody Manager in accordance with Rule 17f-5 under the 1940
Act.
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 October 22, 1998, Old Mutual held 21.53% 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.
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.
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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, particularly when the same security is suitable for
the investment objectives of
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more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could adversely affect the price of or the size of the
position obtainable for the security for the Master Trust. When purchases or
sales of the same security for the Master Trust and for other portfolios managed
by the Adviser occur contemporaneously, the purchase or sale orders may be
aggregated in order to obtain any price advantages available to large volume
purchases or sales. Similar considerations apply with respect to investment
advisory services provided by Old Mutual and other affiliates of the Adviser to
their respective clients. For the periods from November 3, 1995 (commencement
of operations of the Master Trust) to June 30, 1996; from July 1, 1996 to June
30, 1997; and from July 1, 1997 to June 30, 1998, the Master Trust paid
brokerage commissions of approximately U.S.$117,778, U.S.$334,733 and
U.S.$1,476,423, respectively. The recent increase in the brokerage commissions
payable was directly related to the Master Trust portfolio turnover rate
increasing from 9.88% for the fiscal year ended June 30, 1997 to 40.24% for the
fiscal year ended June 30, 1998.
Item 18. Capital Stock and Other Securities.
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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, that if such merger,
consolidation, or transfer is recommended by the Trustees, the "vote of a
majority of the outstanding voting securities" of the
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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.
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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 Old Mutual SAGA 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, Martin Luther King Jr. 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 after the record
date for payment thereof,
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minus (b) the face amount of all Master Trust debts and obligations.
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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 Old Mutual
SAGA 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
practices.
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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.
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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 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
67
<PAGE>
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.
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) 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.
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<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. 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.
There are certain tax issues which will be relevant to only certain
Investors,
69
<PAGE>
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.
70
<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, 1998, as
filed with the Securities and Exchange Commission, via the EDGAR system, on
September 4, 1998 (Accession Number 0001047469-98-033774), are incorporated by
reference into this Part B.
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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, 1998*
Statement of Assets and Liabilities at June 30, 1998*
Statement of Operations for the year ended June 30, 1998*
Statement of Changes in Net Assets for the year ended June 30, 1997
and for the year ended June 30, 1998*
Financial Highlights for the year ended June 30,1997 and for the
year ended June 30, 1998*
Notes to Financial Statements*
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[FN] * Financial information is incorporated by reference to the OMEGA South
Africa Fund's Annual Report for the fiscal year ended June 30, 1998 (Accession
Number 0001047469-98-033774).
(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
1(d) Third 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
8(d) Amendment to Custodian Contract between the Registrant and State
Street Bank and Trust Company
*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
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**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
9(k) First Amendment to Securities Lending Authorization Agreement
9(l) Second Amendment to Securities Lending Authorization Agreement
9(m) Loan Agreement between the Registrant and Robert Fleming & Co.
Limited
9(n) Notice of Redemption of the OMEGA Fund's entire interest in the
Master Trust
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.
**** Incorporated herein by reference to the Registrant's Amendment No. 3 to its
Registration Statement on Form N-1A (File No. 811-7417) as filed with the
Securities and Exchange Commission on September 29, 1997.
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.
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<PAGE>
<TABLE>
<CAPTION>
COUNTRY OF
NAME OF SUBSIDIARY PARENT COMPANY OWNED INCORPORATION NATURE OF BUSINESS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JSE LISTED SUBSIDIARY COMPANIES
Anglo-Transvaal Collieries Ltd. Old Mutual 57.00 SOUTH AFRICA Investment holding company
Barprop Limited Old Mutual 54.00 SOUTH AFRICA Property holding
Nedcor Limited Old Mutual 49.00 SOUTH AFRICA Banking
UNLISTED SUBSIDIARY COMPANIES
Ashtree Investments Limited. Old Mutual 100 SOUTH AFRICA Investment holding company
BPDT Investments (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment holding company
Capital Securities Limited Old Mutual 100 SOUTH AFRICA Investment holding company
Cavendish Square (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Dormant
Durban Hotels Limited Old Mutual 100 SOUTH AFRICA Operation of hotels
Fairbairn Investment Holdings SA (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment holding company
Fairbairn Nominees (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Nominee Company
Highlight Investments (Pty) Limited Old Mutual 100 SOUTH AFRICA Investment holding company
Holdbid Investments (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment holding company
Mutual & Federal Investments Limited Old Mutual 100 SOUTH AFRICA Investment holding company
Okakarara Beleggings (Edms) Bpk Old Mutual 100 SOUTH AFRICA Financial Advisory
Old Mutual Actuaries & Consultants (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment Advisory co.
Old Mutual Asset Managers (SA) (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Portfolio management co.
Old Mutual Bermuda Holdings (SA) (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Holding company
Old Mutual Group Achievements Old Mutual 100 SOUTH AFRICA Investment
Old Mutual Healthcare (SA) (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Health benefit administration
Old Mutual Health Insurance Limited Old Mutual 100 SOUTH AFRICA Short-term health insurance
Old Mutual Investment Services Ltd. Old Mutual 100 SOUTH AFRICA Financial services
Old Mutual Nominees (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Nominee Company
Old Mutual Properties (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Property management
Old Mutual Securities (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Trading in investment secur.
Old Mutual Technology Holdings (Pty) Ltd. Old Mutual 100 SOUTH AFRICA Investment holding company
Old Mutual Trust Ltd. Old Mutual 100 SOUTH AFRICA Administration of estates
Old Mutual Unit Trust Managers Ltd. Old Mutual 100 SOUTH AFRICA Unit Trust management co.
OMIOPT Ltd. Old Mutual 100 SOUTH AFRICA Investment
Pioneer International (South Africa) (Pty) Pioneer 100 SOUTH AFRICA Administrative services
Ltd. International Ltd.
Rodina Investments Limited Old Mutual 100 SOUTH AFRICA Investment holding company
Old Mutual Asset Managers (Namibia) (Pty) Old Mutual Asset 100 NAMIBIA Portfolio management co.
Ltd. Managers Holdings
(Bermuda) Ltd.
Old Mutual Health Insurance Limited Old Mutual 100 NAMIBIA Short-term health insurance
(external)
Old Mutual Holdings (Namibia) (Pty) Limited Fairbairn Holdings 100 NAMIBIA Investment Holding
Ltd.
Old Mutual Life Assurance Company (Namibia) Old Mutual Holdings 100 NAMIBIA Life Assurance
Limited (Namibia) (Pty) Ltd.
Old Mutual Medical Administrators (Pty) Ltd. Old Mutual 100 NAMIBIA Admin. health benefit man.
Old Mutual Unit Trust Management Company Old Mutual 100 NAMIBIA Unit Trust management co.
Namibia Ltd.
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.
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<CAPTION>
<S> <C> <C> <C> <C>
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) Ltd. Old Mutual Asset 100 UNITED KINGDOM Asset Managing company
Managers Holdings
(UK) Ltd.
Old Mutual Asset Managers Holdings (UK) Old Mutual Asset 100 UNITED KINGDOM Investment holding company
Limited Managers Holdings
(Bda) Ltd.
OMLA Holdings Ltd. Old Mutual Group 100 UNITED KINGDOM Investment holding co.
(UK) Ltd.
Old Mutual Fund Managers Ltd. Old Mutual Group 100 UNITED KINGDOM Manages authorized Unit
(UK) Ltd Trusts
Providence Capitol Mortgage Services Ltd. Old Mutual Group 100 UNITED KINGDOM Loans on residential
(UK) Ltd.
Fairbairn Investment Company Ltd. Fairbairn Inv. 100 UNITED KINGDOM Investment holding company
Holdings (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. OMLA Holdings Ltd. 100 UNITED KINGDOM Life assurance
PCAP Ltd. OMLA Holdings Ltd. 100 UNITED KINGDOM Investment company
Roseland Properties Ltd. OMLA Holdings Ltd. 100 UNITED KINGDOM Property investment
Arcade Nominees Limited Old Mutual 100 UNITED KINGDOM Nominee company
Capability Trust Managers Limited Old Mutual 100 UNITED KINGDOM Dormant company
Capel-Cure Myers Capital Management Old Mutual 100 UNITED KINGDOM Holding company
(Holdings) Limited
Capel-Cure Myers Capital Management Limited Old Mutual 100 UNITED KINGDOM Product company
Capel-Cure Myers Corporate Finance Limited Old Mutual 100 UNITED KINGDOM Dormant company
Capel-Cure Myers Financial Services Limited Old Mutual 100 UNITED KINGDOM Product company
Capel-Cure Myers Limited Old Mutual 100 UNITED KINGDOM Dormant company
Capel-Cure Myers Nominees Limited Old Mutual 100 UNITED KINGDOM Nominee company
Capel-Cure Myers Securities Limited Old Mutual 100 UNITED KINGDOM Dormant company
Capel-Cure Myers Unit Trust Management (PEP Old Mutual 100 UNITED KINGDOM Nominee company
Nominees) Limited
Capel-Cure Myers Unit Trust Management Old Mutual 100 UNITED KINGDOM Product company
Limited
CCM Financial Services Limited Old Mutual 100 UNITED KINGDOM Dormant company
Central Capital Acquisitions Limited Old Mutual 100 UNITED KINGDOM Holding company
Churchgate Assurance & Pensions Services Old Mutual 100 UNITED KINGDOM Dormant company
Limited
Churchgate Financial Administration Limited Old Mutual 100 UNITED KINGDOM Dormant company
Fairbairn Fund Managers Limited Old Mutual 100 UNITED KINGDOM Product company
Finexco Personnel Services Limited Old Mutual 100 UNITED KINGDOM Distribution company
Gartside & Trippler Limited Old Mutual 100 UNITED KINGDOM Nominee company
Godfray Derby & Co. Old Mutual 100 UNITED KINGDOM Dormant company
Guilder Money Market Company Limited Old Mutual 100 UNITED KINGDOM Fund
Hanson & Co. (Stockbrokers) Limited Old Mutual 100 UNITED KINGDOM Dormant company
Hillman Catford Board Limited Old Mutual 100 UNITED KINGDOM Dormant company
Linton Nominees Limited Old Mutual 100 UNITED KINGDOM Nominee company
Lyddon Financial Services Limited Old Mutual 100 UNITED KINGDOM Dormant company
Lyddon Limited Old Mutual 100 UNITED KINGDOM Dormant company
Lyddon Unit Trust Management Services Limited Old Mutual 100 UNITED KINGDOM Dormant company
76
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
Margetts & Addenbrooke Limited Old Mutual 100 UNITED KINGDOM Dormant company
Milton Mortimer & Co. Limited Old Mutual 100 UNITED KINGDOM Dormant company
National Investment Group High Technology Old Mutual 100 UNITED KINGDOM Product company
Limited
National Investment Group Limited Old Mutual 100 UNITED KINGDOM Holding company
National Investment Holdings Limited Old Mutual 100 UNITED KINGDOM Holding company
Northern Stockbrokers Limited Old Mutual 100 UNITED KINGDOM Holding company
Old Mutual Fund Managers Ltd. Old Mutual 100 UNITED KINGDOM Product company
Old Mutual International (Isle of Man) Ltd. Old Mutual 100 UNITED KINGDOM Life Assurance
Old Mutual International Financial Services Old Mutual 100 UNITED KINGDOM Distribution co.
(Isle of Man) Limited
Old Mutual International Fund Managers (Isle Old Mutual 100 UNITED KINGDOM Product company
of Man) Ltd.
Old Mutual International Funds Limited Old Mutual 100 UNITED KINGDOM Fund
Old Mutual International Holdings (UK) Old Mutual 100 UNITED KINGDOM Holding company
Limited
Old Mutual International Nominees Limited Old Mutual 100 UNITED KINGDOM Nominee company
Old Mutual International Services Limited Old Mutual 100 UNITED KINGDOM Services company
Old Mutual International Total Income Fund Old Mutual 100 UNITED KINGDOM Fund
Limited
Old Mutual Life Assurance Company Limited Old Mutual 100 UNITED KINGDOM Life Assurance
Old Mutual Service Company (Isle of Man) Old Mutual 100 UNITED KINGDOM Management company
Limited
Providence Capitol Home Loans Limited Old Mutual 100 UNITED KINGDOM Product company
Providence Capitol Trustees Limited Old Mutual 100 UNITED KINGDOM Trustee company
RCLR Financial Services Limited Old Mutual 100 UNITED KINGDOM Dormant company
Richardson Chubb Love Rogers Limited Old Mutual 100 UNITED KINGDOM Dormant company
Richardson Glover and Case Nominees Limited Old Mutual 100 UNITED KINGDOM Nominee company
Ridgefield Management Limited Old Mutual 100 UNITED KINGDOM Dormant company
Ridgefield Unit Trust Administration Limited Old Mutual 100 UNITED KINGDOM Product company
Vanguard Asset Management Limited Old Mutual 100 UNITED KINGDOM Dormant company
Old Mutual International Marketing Services Old Mutual 100 UNITED KINGDOM Provision of marketing
Ltd. International serivces
(Guernsey) Ltd.
Fairbairn International S.A. Old Mutual 100 LUXEMBOURG Holding company
International
Holdings Limited
Fairbairn Ireland Ltd. Old Mutual 100 IRELAND Holding company
International
Holdings Limited
Old Mutual International (Ireland) Ltd. Old Mutual 100 IRELAND Long-term life assurance
International
Holdings Limited
Old Mutual Fund Managers (Ireland) Ltd. Old Mutual 100 IRELAND Manages authorized Unit
International Trusts
Holdings Limited
Fairbairn Actuaries and Consultants Ltd. Fairbairn Holdings 100 GUERNSEY Provider of Consulting
Ltd. Services
Fairbairn Holdings Ltd. Old Mutual Group 100 GUERNSEY Holding company
Ltd.
OMIAM Services Ltd. Old Mutual Asset 100 GUERNSEY Service company to Group
Managers Holdings
(Bda) Limited
OMIAM Properties Ltd. Old Mutual Asset 100 GUERNSEY Property company
Managers Holdings
(Bda) Limited
Old Mutual International Asset Managers Old Mutual Asset 100 GUERNSEY Asset managing company
(Guernsey) Ltd. Managers Holdings
(Bda) Limited
Old Mutual International Financial Services Fairbairn 100 GUERNSEY Holding company
Ltd. International SA
Old Mutual International (Guernsey) Ltd. Old Mutual 100 GUERNSEY Life assurance
International
Holdings Ltd.
77
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
Solomon Information Services Ltd. Old Mutual 100 GUERNSEY Administrative services
International
Holdings Ltd.
L & S Properties Ltd. Old Mutual 100 GUERNSEY Property holding company
International
(Guernsey) Ltd.
Naftiaux Holdings Ltd. Old Mutual 100 GUERNSEY Property holding company
International
(Guernsey) Ltd.
Providence Capitol Fund Managers Int. Ltd. Old Mutual 100 GUERNSEY Management of unit trusts
International
Holdings Ltd.
Fairbairn Trust Company Ltd. Old Mutual 50.1 GUERNSEY Trust and company formation
International
Holdings Ltd.
FRT Directors Ltd. Fairbairn Trust 100 GUERNSEY Acts as director of companies
Company Ltd.
Fairbairn Portfolio Management Limited Old Mutual 100 GUERNSEY Product company
Finexco International Technical Services Old Mutual 100 GUERNSEY Distribution company
Limited
Novos Navegadores Limited Old Mutual 50 GUERNSEY Distribution company
Old Mutual Guernsey Branch Old Mutual 100 GUERNSEY Life Assurance
FRT Secretarial Ltd. Fairbairn Trust 100 GUERNSEY Company secretaries
Company Ltd.
Spectrum Nominees Ltd. Fairbairn Trust 100 GUERNSEY Provision of nominee services
Company Ltd.
Finexco International Ltd. Old Mutual 100 GUERNSEY Holding company
International
Holdings Ltd.
Pioneer International Ltd. Old Mutual 100 GUERNSEY Holding company
International
Holdings Ltd.
Fairbairn Marketing Services Ltd. Fairbairn 100 GUERNSEY International consultancy and
International SA marketing
Merriman Services Ltd. Fairbairn 100 GUERNSEY International consultancy and
International SA marketing
Old Mutual Trustees Limited Old Mutual 100 JERSEY Trustee Company
International
Holdings Ltd.
Old Mutual Holdings Ltd. Fairbairn Hold. Ltd. 100 KENYA Holding company
Old Mutual Life Assurance Company Ltd. Old Mutual Holdings 38.9 KENYA Insurance company
Ltd.
Old Mutual Asset Managers (Kenya) Limited Old Mutual 100 KENYA Management company
Millstream Ltd. Old Mutual 100 BAHAMAS Investment company
Old Mutual International Asset Managers Old Mutual Asset 100 BAHAMAS Asset managing company
(Bahamas) Ltd. Managers Holdings
(Bermuda) Limited
Poplar Services Inc. Old Mutual 100 BAHAMAS Trading in European hedge
International funds
(Guernsey) Ltd.
Fairbairn Managed Futures Ltd. Old Mutual 100 BAHAMAS Trading in managed futures
International
(Guernsey) Ltd.
Rohais Managed Futures (Holding) (Bahamas) Fairbairn Guaranteed 100 BAHAMAS Holding zero coupon stocks
Ltd. Futures (Bermuda)
Ltd.
Rohais Series Five Futures Trading (Bahamas) Rohais Managed 100 BAHAMAS Dealing in currency futures
Ltd. Futures (Holding)
(Bahamas) Ltd.
Rohais Series Six Futures Trading (Bahamas) Rohais Managed 100 BAHAMAS Futures trading
Ltd. Futures (Holding)
(Bahamas) Ltd.
78
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
Old Mutual International Asset Managers Old Mutual Asset 100 BERMUDA Asset managing company
(Bermuda) Ltd. Managers Holdings
(Bermuda) Limited
Old Mutual Fund Holdings (Bermuda) Ltd. Old Mutual Bermuda 100 BERMUDA Holding Company for Global
Holdings (SA) Asset Fund
Limited
Old Mutual Asset Managers (Bermuda) Ltd. Old Mutual Asset 100 BERMUDA Investment manager
Managers Holdings
(Bermuda) Limited
Old Mutual Global Assets Fund Ltd. Old Mutual Fund 100 BERMUDA Asset managing company
Holdings (Bermuda)
Limited
Fairbairn Guaranteed Futures (Bermuda) Ltd. Old Mutual 100 BERMUDA Holding zero coupon stocks
International
(Guernsey) Ltd.
Fairbairn Futures Trading (Bermuda) Ltd. Fairbairn Guaranteed 100 BERMUDA Dealing in non US futures
Futures (Bermuda)
Ltd.
Fairbairn US Futures Trading (Bermuda) Ltd. Fairbairn Futures 100 BERMUDA Dealing in US futures
Trading (Bermuda)
Ltd.
Fairbairn Futures Trading (1992) (Bermuda) Fairbairn Guaranteed 100 BERMUDA Dealing in non US futures
Ltd. Futures (Bermuda)
Ltd.
Fairbairn US Futures Trading (1992) (Bermuda) Fairbairn Futures 100 BERMUDA Dealing in US futures
Ltd. Trading (1992)
Old Mutual Group Limited Old Mutual 100 BERMUDA Holding company
Old Mutual Asset Managers (Holdings) Bermuda Old Mutual Group 100 BERMUDA Holding company
Limited Limited
Old Mutual International Holdings Limited Old Mutual Group 100 BERMUDA Holding company
Limited
Old Mutual International Developments Limited Old Mutual Group 100 BERMUDA Holding company
Limited
Old Mutual International Limited Old Mutual 100 BERMUDA Operating company
International
Holdings Limited
Old Mutual Group Services Limited Old Mutual Group 100 BERMUDA Operating company
Limited
Old Mutual Investment Advisers, Inc. Old Mutual Asset 100 USA Investment Adviser
Managers Holdings
(Bermuda) Limited
Finexco Hellas Company Ltd. Finexco 100 GREECE Provision of administrative
Administrative services
Services (FAS) BV
Finexco Europe SA Finexco 100 BELGIUM Provision of administrative
Administrative services
Services (FAS) BV
Finexco (HK) Ltd. Finexco 100 HONG KONG Provision of administrative
Administrative services
Services (FAS) BV
Old Mutual Hong Kong Branch Old Mutual 100 HONG KONG Life Assurance
Finexco (M) SDN BHD Finexco 100 MALAYSIA Provision of administrative
Administrative services
Services (FAS) BV
Finexpa Financial Expatriate Consultancy BV Finexco 100 NETHERLANDS Administrative services
Administrative
Services (FAS) BV
Finexco Administrative Services (FAS) BV Finexco 100 NETHERLANDS Administrative services
International Ltd.
79
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
Finexco Financial Services (Cyprus) Ltd. Finexco 100 CYPRUS Administrative services
International Ltd.
Old Mutual International (Cyprus) Limited Old Mutual 100 CYPRUS Distribution company
Pioneer Administrative Services Pioneer 100 ISRAEL Provision of administrative
International Ltd. services
Pioneer Global Funds (92) Ltd. Pioneer 100 ISRAEL Provision of administrative
International Ltd. services
Old Mutual Financial Services Botswana (Pty) Fairbairn Holdings 100 BOTSWANA Provision of financial
Ltd. Ltd. services
Old Mutual Asset Managers (Botswana) (Pty) Old Mutual 100 BOTSWANA Management company
Limited
</TABLE>
80
<PAGE>
Item 26. Number of Holders of Securities.
81
<PAGE>
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class As of September 24,1998
-------------- -------------------------
<S> <C>
Beneficial Interests 2
</TABLE>
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, incorporated herein by reference; and (b) Section 11 of the Placing
Agreement between the Registrant, Fleming Martin Inc., Barnard Jacobs Mellet
(USA) LLC (formerly Rand International Securities LLC), Warburg Dillon Read LLC
(formerly SBC Warburg Inc.) and certain other parties, incorporated herein by
reference.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
Old Mutual Asset Managers (Bermuda) Limited (the "Adviser"), a company
organized under the laws of Bermuda, serves as the investment adviser to the
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.
82
<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 (22 Church Street,
Hamilton, Bermuda)
Director, Old Mutual Investment Advisers, Inc. (1 Exeter Plaza, 699
Boylston Street, Boston, Massachusetts)
Director, Fairbairn Fund Managers Limited (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 (22 Church Street, Hamilton, Bermuda)
Director, Capel-Cure Myers Capital Management (Holdings) Limited (The
Registry, Royal Mint Court, London, United Kingdom)
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 Holdings (UK) Limited (5th Floor, 80
Cheapside, London, United Kingdom)
Director, Old Mutual Asset Managers (UK) Ltd. (5th Floor, 80
83
<PAGE>
Cheapside, London, United Kingdom)
Director, Old Mutual Fund Holdings (Bermuda) Limited (22 Church Street,
Hamilton, Bermuda)
Name: Garth Griffin
Position: Director of the Adviser and Director and Deputy Chairman of OMAM
Holdings
Director, Barlow Limited (Barlow Park, Katherine Street, Sandton, South
Africa)
Managing Director, Fairbairn Investment Company Limited (Providence House,
2 Bartley Way, Hook, Hampshire, United Kingdom)
Director, Fairbairn Investment Holdings SA (Pty) Limited (Mutualpark, Jan
Smuts Drive, Pinelands, South Africa)
Director, Old Mutual Asset Managers (South Africa) (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)
Chairman, 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)
84
<PAGE>
Chairman, Fairbairn Ireland Limited (50 Dawson Street, Dublin, Ireland)
Director, Old Mutual Fund Holdings (Bermuda) Limited (22 Church 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 (22 Church 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 (22 Church Street,
Hamilton, Bermuda)
Director and Chairman, Old Mutual International Limited (22 Church Street,
Hamilton, Bermuda)
Director and Deputy Chairman, Old Mutual International Holdings Limited (22
Church Street, Hamilton, Bermuda)
Director and Chairman, Old Mutual Group Services Limited (22 Church Street,
Hamilton, Bermuda)
Director and Chairman, Old Mutual International Developments Limited (22
Church 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
85
<PAGE>
House, St. Peter Port, Guernsey)
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 Limited (Mutualpark, Jan Smuts Drive, Pinelands, South
Africa)
Chairman, Old Mutual International (Ireland) Limited (50 Dawson Street,
Dublin, Ireland)
Director, Capel-Cure Myers Capital Management (Holdings) Limited (The
Registry, Royal Mint Court, London, United Kingdom)
Director, Capel-Cure Myers Capital Management Limited (The Registry, Royal
Mint Court, London, United Kingdom)
Director, Central Capital Acquisitions Limited (Providence House, 2 Bartley
Way, Hook, Basingstoke, Hampshire, United Kingdom)
Director, Mutual & Federal Investments Limited (Mutualpark, Jan Smuts
Drive, Pinelands 7405, Cape, South Africa)
Chairman, Old Mutual Asset Managers Holdings (UK) Limited (5th Floor, 80
Cheapside, London, United Kingdom)
Director, Old Mutual International Holdings (UK) Limited (Providence House,
2 Bartley Way, Hook, Basingstoke, Hampshire, United Kingdom)
Director, Old Mutual Properties (Pty) Limited (Mutualpark, Jan Smuts Drive,
Pinelands 7405, Cape, South Africa)
86
<PAGE>
Name: William Langley
Position: Chairman, President and Director of the Adviser, and 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 (22 Church Street, Hamilton, Bermuda)
Director and Treasurer, Old Mutual Global Assets Fund Limited (22 Church
Street, Hamilton, Bermuda)
Director, Old Mutual Investment Advisers, Inc. (1 Exeter Plaza, 699
Boylston Street, Boston, Massachusetts)
Director and Deputy Chairman, Old Mutual International Asset Managers
(Bermuda) Limited (22 Church 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 (22
Church Street, Hamilton, Bermuda)
Assistant General Manager, Old Mutual (Mutualpark, Jan Smuts Drive,
Pinelands, South Africa)
Alternate Director, Old Mutual Group Limited (22 Church Street, Hamilton,
Bermuda)
Alternate Director, Old Mutual International Holdings Limited (22 Church
Street, Hamilton, Bermuda)
Deputy Chairman and Director, Old Mutual Group Services Limited (22 Church
Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Developments Limited (22
Church Street Street, Hamilton, Bermuda)
87
<PAGE>
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 (22 Church
Street, Hamilton, Bermuda)
Alternate Director, Old Mutual Fund Holdings (Bermuda) Limited (22 Church
Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Asset Managers (Bermuda)
Limited (22 Church Street, Hamilton, Bermuda)
Alternate Director, Old Mutual Group Limited (22 Church Street, Hamilton,
Bermuda)
Director and Deputy Chairman, Old Mutual International Limited (22 Church
Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Holdings Limited (22 Church
Street, Hamilton, Bermuda)
Director and President, Old Mutual Group Services Limited (22 Church
Street, Hamilton, Bermuda)
Alternate Director, Old Mutual International Developments Limited (22
Church 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 (22 Church
Street, Hamilton, Bermuda)
Secretary, Old Mutual Global Assets Fund Limited (22 Church Street,
Hamilton, Bermuda)
Secretary, Old Mutual Fund Holdings (Bermuda) Limited (22 Church Street,
Hamilton, Bermuda)
88
<PAGE>
Secretary, Old Mutual Group Limited (22 Church Street, Hamilton, Bermuda)
Secretary, Old Mutual International Asset Managers (Bermuda) Limited (22
Church 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 (22 Church Street, Hamilton,
Bermuda)
Secretary, Old Mutual International Holdings Limited (22 Church Street,
Hamilton, Bermuda)
Secretary, Old Mutual Group Services Limited (22 Church Street, Hamilton,
Bermuda)
Secretary, Old Mutual International Developments Limited (22 Church Street,
Hamilton, Bermuda)
Item 29. Principal Underwriters.
(a) Not applicable.
89
<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:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
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 22 Church Street
Hamilton, Bermuda
</TABLE>
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
90
<PAGE>
(c) Not applicable.
91
<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 30th day of October, 1998.
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
By: William Langley
William Langley
Treasurer of Old Mutual South Africa Equity Trust
92
<PAGE>
EXHIBIT INDEX
1(d) Third Amendment to the Declaration of Trust of the Registrant
8(d) Amendment to Custodian Contract between the Registrant and State
Street Bank and Trust Company
9(k) First Amendment to Securities Lending Authorisation Agreement
9(l) Second Amendment to Securities Lending Authorisation Agreement
9(m) Loan Agreement between the Registrant and Robert Fleming & Co. Limited
9(n) Notice of Redemption of the OMEGA Fund's entire interest in the Master
Trust
11 Consent of Independent Auditors
27 Financial Data Schedule
93
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST POS AMI
- --------------------------------------------------------------------------------
Exhibit 1(d)
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
Third Amendment to the Declaration of Trust
The undersigned, being a majority of the Trustees of Old Mutual South Africa
Equity Trust (the "TRUST"), a Massachusetts trust, acting pursuant to Section
11.7 of the Declaration of Trust, dated as of 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 and the Second Amendment to the
Declaration of Trust dated as of May 5, 1997, hereby amend the said Declaration
as follows:
1. AMENDMENT. That Section 11.7 of Article XI of the Declaration be, and
it is hereby, 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,
Washington Mall Phase II, 4th Floor, 22 Church Street, Hamilton,
Bermuda. The principal office of the Trust is Washington Mall Phase
II, 4th Floor, 22 Church 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 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 first day of June, 1998.
---------------------------------------
1
<PAGE>
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.
- ----------------------------
* 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.
---------------------------------------
THOMAS HASKINS DAVIS
as Trustee
and not individually
Winchester Global Trust Company Limited
Williams House
20 Reid Street
Hamilton, Bermuda
---------------------------------------
MICHEL JOHN DREW
as Trustee
and not individually
International Services Limited
22 Church Street
Hamilton HM 11, Bermuda
2
<PAGE>
---------------------------------------
WILLIAM LANGLEY
as Trustee
and not individually
Old Mutual Asset Managers (Bermuda) Limited
Washington Mall Phase II, 4th Floor
22 Church Street
Hamilton, Bermuda
---------------------------------------
MICHAEL JOHN LEVETT
as Trustee
and not individually
South African Mutual Life Assurance Society
Mutualpark
Jan Smuts Drive
Pinelands,
Cape Town, South Africa
---------------------------------------
KENNETH RIGBY WILLIAMS
as Trustee
and not individually
15 Lime Tree Walk
Virginia Park
Virginia Water
Surrey, United Kingdom
3
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST POS AMI
- --------------------------------------------------------------------------------
Exhibit 8(d)
AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of this 6th day of
November, 1997 by and between Old Mutual South Africa Equity Trust (the "Fund")
and State Street Bank and Trust Company (the "Custodian"). Capitalized terms
used in this Amendment without definition shall have the respective meanings
given to such terms in the Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Custodian Contract dated
as of October 23, 1995 (as amended and in effect from time to time, the
"Contract"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions of
the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under
the Investment Company Act of 1940, as amended; and
WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the custody of assets of the Fund
held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Contract, pursuant to the terms thereof, as follows:
I. Article 3 of the Contract is hereby deleted, and Articles 4 through 24 of
the Contract are hereby renumbered, as of the effective date of this Amendment,
as Articles 5 through 25, respectively.
II. New Articles 3 and 4 of the Contract are hereby added, as of the effective
date of this Amendment, as set forth below.
3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.1. DEFINITIONS.
Capitalized terms in this Article 3 shall have the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
1
<PAGE>
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, except that the term does not include Mandatory Securities Depositories.
"Foreign Assets" means any of the Fund's investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Fund's
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.
3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board of Trustees (the "Board of
Trustees"), hereby delegates to the Custodian, subject to Section (b) of Rule
17f-5, the responsibilities set forth in this Article 3 with respect to Foreign
Assets held outside the United States, and the Custodian hereby accepts such
delegation, as Foreign Custody Manager of the Fund.
3.3. COUNTRIES COVERED.
The Foreign Custody Manager shall be responsible for performing the delegated
responsibilities defined below only with respect to the countries and custody
arrangements for each such country listed on Schedule A to this Contract, which
may be amended from time to time by the Foreign Custody Manager with the
approval of the Fund. The Foreign Custody Manager shall list on Schedule A the
Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain
the Fund's assets. Mandatory Securities Depositories are listed on Schedule B
to this Contract, which Schedule B may be amended from time to time by the
Foreign Custody Manager with notice to the Fund. The Foreign Custody Manager
will provide amended versions of Schedules A and B in accordance with Section
3.7 of this Article 3.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open
an account, or to place or maintain Foreign Assets, in a country listed on
Schedule A, and the fulfillment by the Fund of the applicable account opening
requirements for such country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board responsibility as Foreign Custody Manager with
respect to
2
<PAGE>
that country and to have accepted such delegation. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of the Fund with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board to the Custodian as
Foreign Custody Manager for that country shall be deemed to have been withdrawn
and the Custodian shall immediately cease to be the Foreign Custody Manager of
the Fund with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Ninety days (or such other period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS.
Subject to the provisions of this Article 3, the requirements of Rule 17f-5 and
any other applicable law, the Foreign Custody Manager may place and maintain the
Foreign Assets in the care of the Eligible Foreign Custodian selected by the
Foreign Custody Manager in each country listed on Schedule A, as amended from
time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the relevant
market, after considering all factors relevant to the safekeeping of such
assets, including, without limitation, the factors specified in Rule
17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS.
The Foreign Custody Manager shall assure that the Fund's custody arrangements
for the Foreign Assets with each Eligible Foreign Custodian selected by the
Foreign Custody Manager are governed by a written contract (or in the case of a
foreign securities depository or clearing agency by such a contract, by the
rules or established practices or procedures of the depository, or by a
combination of the foregoing) that satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING.
In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian selected by the Foreign Custody Manager, the
Foreign Custody Manager shall comply with Rule 17f-5(c)(3).
3
<PAGE>
3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY.
For purposes of this Article 3, the Board (or the Fund's investment adviser,
pursuant to authority delegated by the Board) shall be deemed to have considered
and determined to accept such Country Risk as is incurred by placing and
maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Fund, and the Board (or the Fund's
investment adviser, pursuant to authority delegated by the Board) shall be
deemed to be monitoring on a continuing basis such Country Risk to the extent
that the Board considers necessary or appropriate. The Fund and the Custodian
each expressly acknowledge that the Foreign Custody Manager shall not be
delegated any responsibilities under this Article 3 with respect to Mandatory
Securities Depositories.
3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE FUND.
In performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the Investment Company Act of 1940, as amended, would
exercise.
3.7. REPORTING REQUIREMENTS.
The Foreign Custody Manager shall report the placement of the Foreign Assets
with any Eligible Foreign Custodian, the withdrawal of the Foreign Assets from
an Eligible Foreign Custodian and the placement of such Foreign Assets with
another Eligible Foreign Custodian by providing to the Board amended Schedules A
or B prior to each quarterly meeting of the Board occurring after an amendment
to either Schedule has occurred. The Foreign Custody Manager shall make written
reports notifying the Board of any other material change in the foreign custody
arrangements of the Fund described in this Article 3 promptly after the
occurrence of the material change.
The Foreign Custody Manager shall provide an annual certification to the Board
that the foreign custody arrangements delegated by the Board to the Foreign
Custody Manager are in compliance with Rule 17f-5.
The Custodian shall from time to time provide information to the Fund regarding
the settlement and safekeeping practices and procedures in foreign markets in
which it provides custody services. Such information shall be in a form
reasonably requested by the Fund or delivered to the Fund by the Custodian.
3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5.
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
4
<PAGE>
The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of the Fund. This representation shall not limit the
responsibility of the Custodian in its capacity as Foreign Custody Manager.
3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Board of Trustees' delegation to the Custodian as Foreign Custody Manager of
the Fund shall be effective as of the date of execution of this Amendment and
shall remain in effect until terminated at any time, without penalty, by written
notice from the terminating party to the non-terminating party. Termination
will become effective thirty days after receipt by the non-terminating party of
such notice. The provisions of Section 3.3 of this Article 3 shall govern the
delegation to and termination of the Custodian as Foreign Custody Manager of the
Fund with respect to designated countries.
4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
THE UNITED STATES.
4.1 DEFINITIONS.
Capitalized terms in this Article 4 shall have the following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian or a Permissible Foreign Custodian that holds assets
of the Fund.
"Permissible Foreign Custodian" means any person with whom property of the Fund
may be placed and maintained outside of the United States under (i) section
17(f) of the Investment Company Act of 1940, as amended, without regard to Rule
17f-5 or (ii) an order of the U.S. Securities and Exchange Commission.
4.2. HOLDING SECURITIES.
The Custodian shall identify on its books as belonging to the Fund the foreign
securities held by each Foreign Sub-Custodian or Foreign Securities System. The
Custodian may hold foreign securities for all of its customers, including the
Fund, with any Foreign Sub-Custodian in an account that is identified as
belonging to the Custodian for the benefit of its customers, PROVIDED HOWEVER,
that (i) the
5
<PAGE>
records of the Custodian with respect to foreign securities of the Fund which
are maintained in such account shall identify those securities as belonging to
the Fund and (ii) the Custodian shall require that securities so held by the
Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS.
Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign
Sub-Custodian in such country pursuant to the terms of this Contract. The
Custodian shall confirm that each such Foreign Securities System is an Eligible
Foreign Custodian within the meaning of section (a)(1) of Rule 17f-5.
4.4. HOLDING OF FOREIGN ASSETS WITH PERMISSIBLE FOREIGN CUSTODIANS.
Subject to the requirements of Sections 17(f) of the Investment Company Act of
1940, as amended (and any other applicable law or order), the Custodian may
place and maintain Foreign Assets in the care of any Permissible Foreign
Custodian, provided the Foreign Custody Manager shall assure that any such
arrangements meet the requirements of Section 17(f) and any rules thereunder.
Article 3 (other than the definitions in Section 3.1) of this Contract shall not
apply to placement of Foreign Assets by the Custodian with a Permissible Foreign
Custodian.
4.5. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.5.1. DELIVERY OF FOREIGN SECURITIES.
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of the Fund held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
(i) upon the sale of such foreign securities for the Fund in
accordance with reasonable market practice in the country
where such foreign securities are held or traded, including,
without limitation: (A) delivery against expectation of
receiving later payment; or (B) in the case of a sale effected
through a Foreign Securities System, in accordance with the
rules governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar
6
<PAGE>
offers for foreign securities of the Fund;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with reasonable
market custom; PROVIDED that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement,
provided that in any such case the new securities and cash are
to be delivered to the Custodian or a Foreign Sub-Custodian;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities, provided that
in any such case the new securities and cash are to be
delivered to the Custodian or a Foreign Sub-Custodian;
(ix) for delivery as security in connection with any borrowing by
the Fund requiring a pledge of assets by the Fund;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities against
the receipt of adequate collateral; and
(xii) for any other proper trust purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a copy of a resolution of
the Board of Trustees or of an Executive Committee of the
Board of Trustees so
7
<PAGE>
authorized by the Board of Trustees, signed by an officer of
the Fund and certified by its Secretary or an Assistant
Secretary that the resolution was duly adopted and is in full
force and effect (a "Certified Resolution"), specifying the
foreign securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose
to be a proper trust purpose, and naming the person or persons
to whom delivery of such securities shall be made.
4.5.2. PAYMENT OF FUND MONIES.
Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, monies of the Fund in the following cases only:
(i) upon the purchase of foreign securities for the Fund, unless
otherwise directed by Proper Instructions, by (A) delivering
money to the seller thereof or to a dealer therefor (or an
agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities in
accordance with customary established securities trading or
processing practices and procedures in the jurisdiction or
market in which the transaction occurs; or (B) in the case of
a purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such
Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Fund;
(iii) for the payment of any expense or liability of the Fund
including but not limited to the following payments:
interest, taxes, investment advisory fees, transfer agency
fees, fees under this Contract, legal fees, accounting fees,
and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Fund, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing/lending of foreign
securities; and
(viii) for any other proper trust purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a Certified Resolution
specifying the amount of such payment, setting forth the
purpose for which such
8
<PAGE>
payment is to be made, declaring such purpose to be a proper
trust purpose, and naming the person or persons to whom such
payment is to be made.
4.5.3. MARKET CONDITIONS.
Notwithstanding any provision of this Contract to the contrary but in no way
limiting the duty of the Foreign Custody Manager to assure compliance of the
custody arrangements for the Foreign Assets under Rule 17f-5 and Article 3 of
this Contract, settlement and payment for Foreign Assets received for the
account of the Fund and delivery of Foreign Assets maintained for the account of
the Fund may be effected in accordance with the customary established securities
trading or processing practices and procedures in the country or market in which
the transaction occurs, including, without limitation, delivering Foreign Assets
to the purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) with the expectation of receiving later payment for such Foreign
Assets from such purchaser or dealer.
4.6. REGISTRATION OF FOREIGN SECURITIES.
The foreign securities maintained in the custody of a Foreign Custodian (other
than bearer securities) shall be registered in the name of the Fund or in the
name of the Custodian or in the name of any Foreign Sub-Custodian or in the name
of any nominee of the foregoing, and the Fund agrees to hold any such nominee
harmless from any liability as a holder of record of such foreign securities
except for liabilities related to the negligence or willful misconduct of the
Custodian or the Foreign Sub-Custodian. The Custodian or a Foreign
Sub-Custodian shall not be obligated to accept securities on behalf of the Fund
under the terms of this Contract unless the form of such securities and the
manner in which they are delivered are in accordance with reasonable market
practice.
4.7. BANK ACCOUNTS.
A bank account or bank accounts opened and maintained outside the United States
on behalf of the Fund with a Foreign Sub-Custodian shall be subject only to
draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant
to the terms of this Contract to hold cash received by or from or for the
account of the Fund.
4.8. COLLECTION OF INCOME.
The Custodian shall collect all income and other payments in due course with
respect to the Foreign Assets held hereunder to which the Fund shall be entitled
and shall credit such income, as collected, to the Fund. In the event that
extraordinary measures are required to collect such income, the Fund and the
Custodian shall consult as to such measures and as to the compensation and
expenses of the Custodian relating to such measures.
9
<PAGE>
4.9. PROXIES.
The Custodian will with respect to the foreign securities held under this
Article 4 facilitate the exercise of voting and other shareholder proxy rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued.
4.10. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.
The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. The Custodian shall not be liable for any untimely exercise of
any tender, exchange or other right or power in connection with foreign
securities or other property of the Fund at any time held by it unless the
Custodian has failed to perform its obligations under the first two sentences of
this Section or (i) the Custodian or the respective Foreign Sub-Custodian is in
actual possession of such foreign securities or property and (ii) the Custodian
receives Proper Instructions with regard to the exercise of any such right or
power, and both (i) and (ii) occur at least three business days prior to the
date on which such right or power is to be exercised.
4.11. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties and, to the extent possible, to
indemnify, and hold harmless, the Custodian and the Fund from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with such Foreign Sub-Custodian's performance of such obligations. At the
election of the Fund, the Fund shall be entitled to be subrogated to the rights
of the Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
4.12. ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND
Upon request of the Fund, the Custodian will use its best efforts to arrange for
the independent accountants of the Fund to be afforded access to the books and
10
<PAGE>
records of any Foreign Sub-Custodian insofar as such books and records relate to
the performance of such Foreign Sub-Custodian under its agreement with the
Custodian.
4.13. TAX LAW.
The Custodian shall have no responsibility or liability for any obligations now
or hereafter imposed on the Fund or the Custodian as custodian of the Fund by
the tax law of the United States or of any state or political subdivision
thereof (except taxes attributable to the domicile of the Custodian in
Massachusetts and in such case the Custodian shall notify the Fund). It shall
be the responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the tax law of
countries other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
4.14. LIABILITY OF CUSTODIAN.
Except as may arise from the Custodian's own negligence, bad faith or willful
misconduct or the negligence, bad faith or willful misconduct of a
Sub-Custodian, the Custodian shall be without liability to the Fund for any
loss, liability, claim or expense resulting from or caused by anything which is
(A) part of Country Risk or (B) part of the "prevailing country risk" of the
Fund, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May 12, 1997).
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.
4.15. LIMITATION ON LIABILITY OF TRUSTEES.
This Amendment is executed and made by the Trustees of the Fund not
individually, but as trustees under the Declaration of Trust of the Fund dated
as of September 1, 1995, and the obligations of this Agreement are not binding
upon any of such Trustees.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and
effect.
11
<PAGE>
In the event of any conflict between the terms of the Contract prior to
this Amendment and this Amendment, the terms of this Amendment shall
prevail. If the Custodian is delegated the responsibilities of Foreign
Custody Manager pursuant to the terms of Article 3 hereof, in the event
of any conflict between the provisions of Articles 3 and 4 hereof, the
provisions of Article 3 shall prevail.
12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
WITNESSED BY: STATE STREET BANK AND TRUST
COMPANY
____________________ By:_____________________________
Name: Name: Ronald E. Logue
Title: Title: Executive Vice President
WITNESSED BY: OLD MUTUAL SOUTH AFRICA EQUITY TRUST
____________________ By:_____________________________
Name: Name:
Title: Title:
13
<PAGE>
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND OPTIONAL DEPOSITORIES
COUNTRY SUBCUSTODIAN OPTIONAL DEPOSITORIES
South Africa Standard Bank of South Africa Limited --
United Kingdom State Street Bank and Trust Company --
14
<PAGE>
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
None
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
15
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST POS AMI
- --------------------------------------------------------------------------------
Exhibit 9(k)
FIRST AMENDMENT TO
SECURITIES LENDING AUTHORIZATION AGREEMENT
BETWEEN
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
AND
STATE STREET BANK AND TRUST COMPANY
WHEREAS, OLD MUTUAL SOUTH AFRICA EQUITY TRUST, a Massachusetts trust and
investment company registered under the Investment Company Act of 1940 (the
"Client") and State Street Bank and Trust Company, a Massachusetts trust company
("State Street") entered into a Securities Lending Authorization Agreement dated
6 September 1996 ( the "Agreement");
WHEREAS, Section 19 of the Agreement provides that the Agreement shall not
be modified except by an instrument in writing signed by the party against whom
enforcement is sought;
WHEREAS, the Client and State Street both desire to amend the Agreement;
NOW, THEREFORE, for value received and in order to induce the parties to
enter into the amendment contemplated hereby, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties mutually agree to amend the Agreement in the following respects:
1. EXHIBIT 8.2 is hereby amended by deleting the exhibit in its entirety
and replacing with the exhibit attached hereto.
2. The Agreement shall remain the same in all other respects.
3. This Amendment 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, as amended, and the obligations of this
Amendment are not binding upon any of such trustees individually.
The Amendment is effective as of the 6th day of November, 1997.
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute the above Amendment by
affixing their signatures below.
OLD MUTUAL SOUTH AFRICA EQUITY
TRUST
By:___________________
Name: M. J. Levett
Its: President
STATE STREET BANK AND TRUST
COMPANY
By:___________________
Name: Donald L. Hodgman
Its: Senior Vice President
2
<PAGE>
EXHIBIT 8.2
This Exhibit is attached to and made part of the Securities Lending
Authorization Agreement dated 6 September, 1996 between OLD MUTUAL SOUTH
AFRICA EQUITY TRUST ("Client") and STATE STREET BANK AND TRUST COMPANY
("State Street").
Investment Guidelines:
1. State Street may enter into Repurchase Agreements on behalf of the Client
with the Financial Markets Group at State Street Bank and Trust Company, and
2. Such other investments as State Street and the Client may agree from time
to time.
3
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST POS AMI
- --------------------------------------------------------------------------------
Exhibit 9(l)
SECOND AMENDMENT TO
SECURITIES LENDING AUTHORIZATION AGREEMENT
BETWEEN
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
AND
STATE STREET BANK AND TRUST COMPANY
WHEREAS, OLD MUTUAL SOUTH AFRICA EQUITY TRUST, a Massachusetts trust and
investment company registered under the Investment Company Act of 1940 (the
"Client") and State Street Bank and Trust Company, a Massachusetts trust company
("State Street") entered into a Securities Lending Authorization Agreement dated
6 September 1996 ( the "Agreement");
WHEREAS, Section 19 of the Agreement provides that the Agreement shall not
be modified except by an instrument in writing signed by the party against whom
enforcement is sought;
WHEREAS, the Client and State Street entered into a First Amendment to the
Agreement on 6 November 1997;
WHEREAS, the Client and State Street both desire to amend the Agreement
further to provide for the acceptance of Sovereign Debt as Collateral.
NOW, THEREFORE, for value received and in order to induce the parties to
enter into the amendment contemplated hereby, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties mutually agree to amend the Agreement in the following respects:
1. Section 8, COLLATERAL, is hereby amended by deleting the word "or" before
roman numeral (iv) at the end of the first paragraph and replacing the period at
the end of subsection (iv) thereof with a semicolon and adding the following:
"or (v) Sovereign Debt."
2. Section 14, DEFINITIONS, is hereby amended by inserting after subsection
(l) the following:
"(m) "Sovereign Debt" means securities issued by the governments, agencies
or political subdivisions of countries belonging to the Organization for
Economic Co-operation and Development (OECD)."
1
<PAGE>
3. The Agreement shall remain the same in all other respects.
4. This Amendment 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 Amendment are not binding upon
any of such trustees individually.
The Amendment is effective as of the 12th day of March, 1998.
IN WITNESS WHEREOF, the parties hereto execute the above Amendment by
affixing their signatures below.
OLD MUTUAL SOUTH AFRICA EQUITY
TRUST
By:___________________
Name: William Langley
Its: Treasurer
STATE STREET BANK AND TRUST
COMPANY
By:___________________
Name: Donald L. Hodgman
Its: Senior Vice President
2
<PAGE>
OLD MUTUAL SOUTH AFRICA EQUITY TRUST POS AMI
- --------------------------------------------------------------------------------
Exhibit 9(m)
LOAN AGREEMENT
DATED: 20 MARCH, 1998.
BETWEEN:
(1) OLD MUTUAL SOUTH AFRICA EQUITY TRUST a trust organised under the laws of
Massachusetts and registered as an investment company under the United
States Investment Company Act of 1940 (the "BORROWER") whose principal
place of business is at Phase II, 4th Floor, Washington Mall, 22 Church
Street, Hamilton HM11, Bermuda (Fax Number 1 441 296 1200) and
(2) ROBERT FLEMING & CO. LIMITED (the "BANK") whose registered office is at 25
Copthall Avenue, London EC2R 7DR (Telex Number 297451) (Fax Number 0171 256
5036) or such other office as it may select from time to time
PRELIMINARY:
The Bank has agreed to provide the Borrower with an uncommitted revolving credit
facility in the aggregate principal amount not exceeding US$50,000,000 or its
equivalent as determined by the Bank in the Alternative Currency on the
following terms and conditions.
OPERATIVE PROVISIONS:
1 INTERPRETATION
1.1 DEFINITIONS In this agreement:-
"ADDRESS FOR SERVICE" means Norose Notices Limited 2855757, for the
attention of the Director of Administration, at the address of the
registered office for the time being (currently Kempson House,
Camomile Street, London EC3A 7AN, England) or such other address in
England or Wales as the Borrower may from time to time designate by
not less than ten days' notice to the Bank for that purpose;
"ALTERNATIVE CURRENCY" means South African Rand;
"ADVANCE" means each amount advanced or to be advanced by the Bank, as
reduced by repayment from time to time;
"BUSINESS DAY" means a day (other than a Saturday) on which
1
<PAGE>
banks are open for business in London, New York and in so far as
payment in the Alternative Currency is to be made under this agreement
on a particular date the principal financial centre of the Alternative
Currency;
"COMMITMENT" means, subject to clause 2.3, the amount of US$50,000,000
LESS the aggregate of the amount the Bank has advanced under this
agreement;
"ENCUMBRANCE" includes any mortgage, charge (fixed or floating),
pledge, hypothecation or lien and any other arrangement or interest
(whether by way of assignment, trust, title retention or otherwise)
which has the effect of creating security or payment priority;
"INITIAL FINANCIAL STATEMENTS" means the audited financial statements
of the Borrower for its financial year ended 30 June 1997;
"LIBOR" means
(a) in the case of Advances in US dollars the LIBOR rate for US dollar deposits
in the same amount as the Advance and for the same period as the relevant Term
which appears on the display designated as "Page 3750" on the Telerate Service
(or such other page as may replace Page 3750 on that service) or such other
service as may be nominated by the British Bankers Association for the purposes
of displaying the British Bankers' Association Interest Settlement Rates for US
dollars at approximately 11:00 am on the second Business Day prior to the
proposed drawdown date; provided that:
(i) if the offered rate so appearing is replaced by the corresponding rates
of more than one bank, the rate shall be the arithmetic mean of the respective
rates so appearing;
(ii) if an offered rate does not appear on such screen for a period
corresponding to the relevant Term, the rate shall be the rate appearing on such
screen for the period closest in length to that Term adjusted in the reasonable
determination of the Bank to reflect the difference in such period; and
(iii) if the relevant page is unavailable, the rate at which the Bank was being
offered US dollar deposits in the same amount as the Advance for a period equal
to the relevant Term by prime banks in the London Interbank Market at
approximately 11:00am on the second Business Day prior to the proposed drawdown
date;
(b) in the case of Advances in the Alternative Currency the rate per
annum determined by the Bank to be the rate at which it was being
offered by prime banks in the London Inter-Bank Market at or
about 11.00 a.m. on the second Business Day prior to the proposed
drawdown date of the relevant Advance deposits in the currency
of, and in an amount equal to, the relevant Advance for a period
equal to its proposed Term;
2
<PAGE>
"LIQUIDITY FACILITY" means the undertaking of Old Mutual Fund
Holdings (Bermuda) Limited to sell assets of Old Mutual Global
Assets Fund Limited and apply the proceeds to make such
additional investments in the Borrower as may be required from
time to time in order to provide funds for redeeming the shares
of Old Mutual SAGA Fund and OMEGA Fund;
"LOAN" means the aggregate amount from time to time advanced to
the Borrower under this agreement and not repaid;
"MARGIN" means 0.3 per cent. per annum;
"MONTH" means a period starting on one day in a calendar month
and ending on the numerically corresponding day in the next
calendar month unless that later day is not a Business Day, in
which case it shall end on the next succeeding Business Day
Provided that if a period starts on the last Business Day in a
calendar month or if there is no numerically corresponding day in
the calendar month in which it is to end, it shall end on the
last Business Day in that later calendar month;
"NET ASSET VALUE" means the amount (expressed in US dollars)
which is the aggregate of the market value of all of the
securities and other assets of the Borrower less:-
(i) the value of any Unquoted Investments;
(ii) where the value of any single Quoted Investment
represents more than 5% of the value of the Borrower's
total assets, the value over 5%; and
(iii) the aggregate of all of the Borrower's liabilities,
(as evidenced in the latest valuation);
"OLD MUTUAL SAGA FUND" means Old Mutual South Africa Growth
Assets Fund Limited;
"OMEGA FUND" means the Old Mutual Equity Growth Assets South
Africa Fund;
"QUALIFYING BANK" means a financial institution which is:-
(i) a bank as defined in Section 840(A) of the Income and
Corporation Taxes Act 1988 and which is within the charge
to United Kingdon corporation tax as regards any interest
3
<PAGE>
received by it under this agreement and accordingly
satisfies the requirements of Section 349 of the Income
and Corporation Taxes Act 1988 enabling interest to be
paid without withholding tax; or
(ii) resident in a country with which the United Kingdom has
an appropriate double taxation treaty pursuant to which
it is entitled to receive principal, interest and fees
under this agreement without withholding of United
Kingdom income Tax (and such financial institution has
effectively claimed the benefit of such treaty in respect
of this agreement) so that the Borrower is not requested
to make any such withholding (or is otherwise entitled to
receive principal, interest and fee without such
withholding);
"QUOTED INVESTMENT" means any securities listed on the London
Stock Exchange Limited, the New York Stock Exchange or the
Johannesburg Stock Exchange;
"SOUTH AFRICAN RAND" means the lawful currency of South Africa;
"TAX" includes any form of taxation, levy, duty, charge,
contribution or impost of whatever nature (including any
applicable fine, penalty, surcharge or interest);
"TERM" means in relation to an Advance, the period for which such
Advance is borrowed as specified in the drawdown notice for such
Advance;
" TOTAL BORROWINGS" means, at any time, the aggregate (without
double counting) of the following:-
(i) the outstanding principal amount of any moneys borrowed
by the Borrower and any outstanding overdraft or debit
balance;
(ii) the outstanding principal amount of any debenture, bond,
note, loan stock or other security (other than equity
security) of the Borrower;
(iii) the outstanding principal amount of any acceptance under
any acceptance credit opened by a bank or other financial
institution in favour of the Borrower;
(iv) the outstanding principal amount of all moneys owing by
the Borrower in connection with the sale or discounting
of receivables (otherwise than on a non-recourse basis);
4
<PAGE>
(v) the outstanding principal amount of any indebtedness of
the Borrower arising from any advance or deferred payment
agreement arranged primarily as a method of raising
finance or financing the acquisition of an asset;
(vi) the capitalised element of indebtedness of the Borrower
in respect of a lease entered into primarily as a method
of raising finance or financing the acquisition of the
asset leased;
(vii) any fixed or minimum premium payable on the repayment or
redemption of any instrument referred to in sub-paragraph
(ii) above; and
(viii) the outstanding principal amount of any indebtedness of
any person of a type referred to in sub-paragraphs
(i)-(vii) above which is the subject of a guarantee
against financial loss by the Borrower;
any amount outstanding in a currency other than US dollars is to
be taken into account at its equivalent in US dollars as
determined by the Bank on the day the relevant amount falls to be
calculated;
"UNQUOTED INVESTMENT" means any securities which are not Quoted
Investments;
"VALUATION" means a valuation prepared by the Borrower, in the
form annexed hereto as Annex 1, providing details of the
Borrower's total assets and liabilities, including Net Asset
Value and the value of any Unquoted Investments; and
"US DOLLAR" and "US$" means the lawful currency of the United
States of America.
(c) REFERENCES In this agreement, each reference to:-
any document or agreement (including this agreement) is deemed,
unless stated otherwise, to include a reference to such document
or agreement as amended, novated, supplemented, substituted or
replaced from time to time;
the "BANK" and the "BORROWER", where the context so admits, is
deemed to include their respective successors, assigns and/or
transferees;
a provision of a statute is, unless otherwise indicated, deemed
to
5
<PAGE>
include a reference to such provision as amended, modified or
re-enacted from time to time;
the singular, where the context so admits, is deemed to include
the plural and vice versa; and
a person is deemed to include a reference to a company,
partnership, unincorporated body and any other entity and vice
versa.
(d) TITLES The title of any provision of this agreement shall not
affect the meaning of that or any other provision.
2 THE FACILITY
2.1 NATURE OF FACILITY The loan facility is an uncommitted facility
and the Bank is under no obligation to make any Advance to the
Borrower. It is also subject to review by the Bank from time to
time and may be terminated by the Bank at any time by notice to the
Borrower in accordance with clause 5.2.
2.2 PURPOSE The Loan will be used by the Borrower solely for the
purpose of funding delays in settlement resulting from the sale and
purchase of investments by the Borrower. The Bank will not be
obliged to ascertain whether the Loan is so used.
2.3 MAXIMUM AMOUNT AVAILABLE The maximum amount which the Bank is
prepared to consider making available to the Borrower is the lower
of (i) US$50,000,000 or its equivalent as determined by the Bank in
the Alternative Currency and (ii) 5% of the value of the total
assets of the Borrower (expressed in US dollars) as shown in the
latest Valuation delivered to the Bank or its equivalent as
determined by the Bank in the Alternative Currency.
2.4 ANNUAL RENEWAL FEE The Borrower will pay to the Bank an annual
renewal fee of US$12,500 at the end of each 12 Month period
commencing on the date of this agreement or, if the Borrower has
notified the Bank that it no longer wishes to utilise the facility
or the facility is no longer available under clauses 5.2 or 5.3, on
the date of such notification or termination of the facility, the
Borrower will pay to the Bank a fee, the amount payable being the
annual renewal fee pro-rated for the period since the date of
signing this agreement or, if later, the date on which the annual
renewal fee was last paid pursuant to this clause, provided that
such fee shall be reduced to the extent of the excess (if any) over
US$20,000 of payments in respect of Margin accruing on Advances
made by the Borrower to the Bank in the relevant period.
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3 DRAWINGS
3.1 CONDITIONS PRECEDENT The Borrower will not be entitled to request
any Advances under this agreement until the Bank confirms to the
Borrower that the Bank has received each of the documents and
evidence specified in schedule 1 in form and substance acceptable
to it.
3.2 MECHANICS Subject to clause 3.1, the Borrower may request Advances
on separate Business Days by sending to the Bank:
3.2.1 a duly completed and executed notice in the form of
schedule 2 (to be received by the Bank no later than
10.00 a.m. on the second Business Day prior to the proposed
drawdown date) specifying:-
(i) the amount and currency of the Advance (which is to be in an
amount which is equal to or less than the Commitment and, if
less than the Commitment, is to be in an amount of at least
US$500,000 or its equivalent as determined by the Bank in
the Alternative Currency and a multiple of US$250,000 or its
equivalent as determined by the Bank in the Alternative
Currency); and
(ii) the Term of the Advance which shall be a period of up to 60
days; and
3.2.2 an up to date Valuation.
If the Bank agrees to make available the requested Advance (which
it will have no obligation to do) and if each of the
representations and warranties contained in clause 7 are true and
accurate on the proposed drawdown date, then the Bank shall make
the Advance available to the Borrower by payment to such bank
account of the Borrower as the Borrower has specified in the
relevant drawdown notice.
COMPENSATION If for any reason an Advance is not drawn down after
its drawdown notice has been given and accepted by the Bank, the
Borrower will pay to the Bank on demand such amount as the Bank
reasonably considers necessary to compensate it for any cost,
expense or loss incurred in relation to the proposed Advance.
4 INTEREST
4.1 CALCULATION Interest will accrue from day to day on each Advance
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and will be calculated at the applicable rate for its Term, both
before and after judgment, on the basis of the actual number of
days elapsed in a 360 day year in the case of Advances denominated
in US dollars and a 365 day in the case of Advances denominated in
the Alternative Currency. Interest on an Advance will be payable
by the Borrower in arrears on the last day of its Term.
4.2 ORDINARY RATE The rate of interest applicable to each Advance
during its Term will be the aggregate of LIBOR and the Margin.
4.3 CHANGES The Bank will give notice to the Borrower if at any time
on or before the first day of its Term the Bank determines that:-
4.3.1 by reason of circumstances generally affecting the London
Inter-Bank Market adequate and fair means do not exist for
ascertaining LIBOR for such Term; or
4.3.2 deposits in the relevant currency are not available to the
Bank in the London Inter-Bank Market in sufficient amounts
and for the relevant maturity in the ordinary course of
business.
4.4 ALTERNATIVE RATE If a notice is given under clause 4.3 then the
Term will be of such duration as the Bank may think appropriate and
the rate of interest applicable to the relevant Advance will be the
aggregate of the Margin and the rate per annum determined by the
Bank to be the rate which represents the cost to the Bank of
funding that Advance from whatever sources it may select.
4.5 DEFAULT RATE If the Borrower fails to pay any amount payable by it
under this agreement on its due date, the Borrower will on demand
by the Bank from time to time pay interest on such overdue amount
from its due date up to its date of actual payment in full, both
before and after judgment, at the rate per annum determined by the
Bank to be the aggregate of one per cent. per annum, LIBOR for such
period or periods (not exceeding three Months) as it shall consider
appropriate and the Margin. For the purposes of calculating such
interest, such overdue amount and each such period will be deemed
to be an "Advance" and a "Term" respectively and, if a notice is
given under clause 4.3 in relation to any such period, LIBOR will
be replaced by the Bank's cost of funding as contemplated in clause
4.4.
5 REPAYMENT, TERMINATION, PREPAYMENT AND CANCELLATION
5.1 REPAYMENT AT END OF TERM Without prejudice to clauses 5.2 and 5.3,
the Borrower will repay each Advance to the Bank on the last day of
its Term and amounts repaid under this clause will be available for
redrawing.
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5.2 DEMAND REPAYMENT AND TERMINATION OF FACILITY The Bank may at any
time:-
5.2.1 demand repayment within six Business Days of all outstanding
Advances, accrued interest thereon, fees and all other
amounts outstanding under this agreement provided that the
Bank may demand immediate repayment of all such Advances,
interest, fees and other amounts if the Bank is advised by
legal counsel that it is necessary or desirable to do so in
order to protect the Bank's interests; and/or
5.2.2 give notice that the facility is no longer available and
that no further requests for Advances may be made.
5.3 CANCELLATION OF LIQUIDITY FACILITY Without prejudice to clause
5.2, if at any time notice is given by Old Mutual Fund Holdings
(Bermuda) Limited to cancel the Liquidity Facility or the Liquidity
Facility is terminated, then the Borrower will immediately repay
all outstanding Advances, accrued interest thereon, fees and all
other amounts outstanding under this agreement. Thereafter, the
facility will no longer be available and the Borrower will not be
entitled to make any request for Advances hereunder.
5.4 CANCELLATION The Borrower may at any time, provided that no
Advances are then outstanding, give notice to the Bank that it no
longer wishes to request Advances hereunder.
5.5 PREPAYMENT The Borrower will be entitled to prepay the whole or
any part of an Advance at any time if:-
5.5.1 the Borrower has given to the Bank not less than 10 Business
Days' prior written irrevocable notice of such prepayment;
and
5.5.2 any prepayment of part is in respect of an amount or
multiple of US$500,000 or its approximate equivalent in the
Alternative Currency.
6 EXTERNAL FACTORS
6.1 WITHHOLDINGS If at any time the Borrower is required by law to
make any deduction or withholding from any payment due from the
Borrower to the Bank, the Borrower shall simultaneously pay to the
Bank whatever additional amount is necessary to ensure that the
Bank receives a net sum equal to the payment it would have received
had no deduction or withholding been made.
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6.2 TAXES ON RECEIPT If the Bank is required to pay Tax (other than
Tax on its overall net income) on any payment receivable or
received under this agreement or any liability to Tax in respect of
any such payment is assessed, imposed or levied on the Bank, then
the Borrower will indemnify the Bank on demand against such payment
or liability.
6.3 INCREASED COSTS If any introduction of or change in law or in its
interpretation or administration by any relevant governmental
authority or any request from or requirement of any other fiscal,
monetary or other authority:-
6.3.1 subjects the Bank, or any holding company of the Bank, to a
cost in relation to its performance of this agreement, its
maintenance of its Commitment or its making of any Advance
or the Loan or increases any such cost; or
6.3.2 imposes or changes any reserve or other requirement against
or in respect of any commitments or assets of the Bank, or
any holding company of the Bank, (including the Commitment
or any Advance or the Loan); or
6.3.3 imposes on the Bank, or any holding company of the Bank, any
other condition or payment obligation in relation to the
Commitment, any Advance, the Loan or any other matter
arising under this agreement or affects the manner in which
the Bank, or any holding company of the Bank allocates its
capital resources to its obligations under this agreement
and the result of any of the above is to increase the cost to the
Bank of making or maintaining all or any part of the Commitment or
any Advance or the Loan or otherwise to reduce the Bank's, or any
holding company of the Bank's, expected return from any advance or
all or any part of the Loan, then:
(a) the Bank, or the holding company of the Bank (as the case
may be), will promptly notify the Borrower of the happening
of such event; and
(b) the Borrower will pay to the Bank, or the holding company of
the Bank (as the case may be), on demand from time to time
such amounts as the Bank or the holding company of the Bank
(as the case may be) determines will compensate it for such
increased cost or for such reduced return which
determination the Bank shall provide to the Borrower in
writing in reasonable detail.
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6.4 ILLEGALITY If at any time it becomes unlawful for the Bank to
allow the Commitment to remain in effect or to make or fund any
Advance or allow the Loan to remain outstanding then the Bank will
promptly notify the Borrower and:-
6.4.1 the Bank will not be required to make any Advances and the
Commitment will be reduced to zero; and
6.4.2 if the Bank so requires by notice to the Borrower, the
Borrower will repay the Loan and pay to the Bank all accrued
interest, fees and other sums owed by the Borrower under
this agreement within six Business Days of such notice or
such shorter period as may be required by the relevant law.
6.5 MITIGATION If circumstances arise which would result in an increase
in the amounts payable by the Borrower under this agreement
pursuant to Clauses 6.1, 6.2 and 6.3 above, the Bank shall consult
with the Borrower with a view to taking all reasonable steps to
mitigate the effects of such circumstances (provided that nothing
herein shall require the Bank to take any action which would or
might have any adverse effect on its business) and, if the Bank
obtains a credit against, or relief or remission for, or a payment
of, any Tax as a result it shall use all reasonable endeavours to
identify the amount concerned and to pay the Borrower such amount
as leaves the Bank in the same position as if such circumstances
had not arisen (provided that nothing herein shall interfere in the
right of the Bank to organise its tax affairs as it thinks fit nor
oblige it to disclose any information relating to its tax affairs
or any computations in respect thereof).
7 REPRESENTATIONS AND WARRANTIES
7.1 BORROWER REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank that:-
7.1.1 STATUS it is duly established and in good standing under
the laws of Massachusetts and it has the appropriate power
and authority to own its property and assets and to carry on
its business as now conducted;
7.1.2 POWERS, APPROVALS AND OBLIGATIONS BINDING it has the
appropriate power to enter into and perform this agreement,
it has taken all necessary action to authorise the
execution, delivery and performance of this agreement, and
the obligations expressed as being assumed by it constitute
its valid, legal and binding obligations and their
performance will not contravene any provision of its
constituting documents or any law or other obligation
binding upon it;
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7.1.3 CONSENTS no approval, authorisation, consent, licence,
permit or registration of or with any governmental, judicial
or other authority or other third party is required by it or
desirable to be obtained by it in connection with the
execution, performance, validity or enforceability of this
agreement;
7.1.4 AUTHORISATIONS it holds (and has at all times complied with
in all material respects) all authorisations required to
carry on its business and it is not aware of any event or
circumstance which could reasonably be expected adversely to
affect its right to hold and/or to obtain renewal of all
such authorisations and/or to obtain any new authorisations
which will be required in the future to enable it to carry
on its business;
7.1.5 ENCUMBRANCES except as disclosed in writing to the Bank
prior to the date of this agreement, there are no
Encumbrances affecting any of its property, assets or
undertaking (whether present or future) and it has not given
any guarantee, indemnity or other assurance against loss in
relation to the liability of any other person;
7.1.6 INFORMATION the factual information provided by it to the
Bank prior to the date of this agreement was true, complete
and accurate in all material respects when so provided and
it is not aware of any material facts or circumstances that
have not been disclosed and which might, if disclosed, make
any such information misleading in any material respect;
7.1.7 INITIAL FINANCIAL STATEMENTS the Initial Financial
Statements give a true and fair view of the Borrower's
financial condition as at the end of the period to which
they relate and there has been no material adverse change in
the Borrower's financial condition since that date;
7.1.8 LITIGATION AND OTHER PROCEEDINGS no litigation, arbitration
or administrative proceedings before or of any court or
governmental authority are presently pending or (to the best
of its knowledge, information and belief) threatened which
would have a material adverse effect on its ability to
perform its obligations under this agreement; and
7.1.9 INSOLVENCY/DISSOLUTION it is not insolvent or in liquidation
or administration or subject to any other insolvency
procedure, no receiver, manager, trustee, custodian or
analogous officer has been appointed in respect of all or
any part of its property, undertaking or assets and no vote
has been passed or other
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step taken for its termination or dissolution.
7.2 REPETITION The representations and warranties contained in clause
7.1 shall be deemed to be repeated by the Borrower on each drawdown
date by reference to the facts and circumstances then existing on
each drawdown date save that references to Initial Financial
Statements in clause 7.1.7 shall be deemed to be references to the
latest audited financial statements delivered pursuant to clause
8.1.3.
7.3 BANK REPRESENTATION AND WARRANTY The Bank represents and warrants
to the Borrower that it is a bank falling within subsection (i) of
the definition of Qualifying Bank. If the Bank ceases to be such a
Qualifying Bank it will as soon as practicable notify the Borrower.
8 UNDERTAKINGS
8.1 POSITIVE The Borrower will:-
8.1.1 PARI PASSU procure that its liabilities under this
agreement rank all times at least pari passu with all its
other unsecured liabilities except those preferred solely by
law;
8.1.2 INSURANCE maintain such insurance against such risks and at
such levels in relation to its assets and business as is
reasonable and customary for a company engaged in the same
or a similar activity and in the same or similar localities
to the Borrower;
8.1.3 FINANCIAL STATEMENTS provide the Bank:
(a) as soon as the same become available, but in any event
within 180 days after the end of each of the Borrower's
financial years, with copies of its annual audited
financial statements;
(b) as soon as the same become available, but in any event
within 120 days of the end of the first half-year of
each of the Borrower's financial year, with copies of
its unaudited financial statements for that period;
8.1.4 VALUATION provide the Bank with a Valuation:
(a) within five Business Days of the end of each month; and
(b) on the next Business Day following a 15% decline in the
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Johannesburg Stock Exchange Actuaries All-Share Index over any period of one or
more days between the date of a Valuation received by the Bank (or, if a
Valuation is not received in respect of a month, the due date of such Valuation)
and the due date of the next following Valuation; and
(c) at any other time on the reasonable request of the
Bank.
8.1.5 PROVISION OF FURTHER INFORMATION provide the Bank with such
other financial or other information as the Bank may
reasonably require from time to time;
8.1.6 FINANCIAL COVENANTS ensure that at all times :-
(a) its Net Asset Value is greater than US$500,000,000; and
(b) Total Borrowings shall not exceed 10 per cent of its
Net Asset Value.
These covenants will be tested monthly by reference to the
Valuation delivered to the Bank at the end of each month and
at any other time following a 15% decline in the JSE
Actuaries All-Share Index over any period of one or more
days between the date of a Valuation received by the Bank
(or, if a Valuation is not received in respect of a month,
the due date of such Valuation) and the due date of the next
following Valuation;
8.1.7 AUTHORISATIONS obtain, observe and renew all such
authorisations, consents and licences which are required in
relation to its business or in order to perform its
obligations under this agreement;
8.1.8 LITIGATION immediately upon becoming aware of the same,
give the Bank notice in writing of all litigation,
arbitration or administrative proceedings falling within the
provisions of clause 7.1.8;
8.1.9 STATUS retain its status as a trust established under
Massachusetts law and an investment company registered under
the United States Investment Company Act 1940; and
8.1.10 INVESTMENT MANAGER forthwith give notice to the Bank if (i)
it intends to replace its existing investment manager or
(ii) it receives notice from its investment manager that
such manager wishes to resign or (iii) it intends to appoint
any additional investment manager.
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8.2 NEGATIVE The Borrower will not without the prior written consent
of the Bank:-
8.2.1. ENCUMBRANCES create or permit to arise or continue any
Encumbrance or other third party right affecting any of its
property, assets and undertaking (whether present or future)
other than (i) an Encumbrance created solely by operation of
law or (ii) any lien arising from the provision in the
standard terms of business of a custodian in respect of
amounts not more than 30 days overdue and not exceeding in
aggregate US$1,000,000;
8.2.2 CHANGE IN BUSINESS make, or permit to be made, any change
in the nature of its business as carried on at the date of
this agreement;
8.2.3 SUBSIDIARIES acquire, create or permit to subsist any
subsidiaries (as defined in section 736 Companies Act 1985)
of itself;
8.2.4 CHANGE IN INVESTMENT POLICY fundamentally change its
investment policy or the investment restrictions in each
case as described in the Placing Memoranda of Old Mutual
SAGA Fund and OMEGA fund dated 1 June 1997;
8.2.5 FINANCIAL YEAR END change its financial year end; or
8.2.6 LOANS ETC make any loans (other than securities lending in
the ordinary course of business), grant any credit (save in
the ordinary course of business) or give any guarantee,
indemnity or other assurance against loss to or for the
benefit of any person or otherwise voluntarily assume any
liability, whether actual or contingent, in respect of any
obligation of any other person.
9 INDEMNITIES
9.1 GENERAL COSTS The Borrower will from time to time on demand
reimburse the Bank for all costs and expenses (including legal
fees) and VAT chargeable on them reasonably incurred in or in
connection with the preparation, negotiation, execution,
preservation and/or enforcement of this agreement.
9.2 STAMP DUTIES The Borrower will pay on demand all stamp and other
duties and Taxes, if any, to which this agreement may be subject or
give rise and indemnify the Bank on demand against any and all
liabilities with respect to or resulting from any delay or
15
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omission on the part of the Borrower to pay any such duties or
Taxes.
9.3 BREAK COSTS If any repayment of all or any part of an Advance is
made otherwise than on the last day of its Term, the Borrower will
pay to the Bank on written demand showing the Bank's basis of
calculation such additional amount as the Bank may reasonably
determine is necessary to compensate it for any related loss,
premium, penalty or expense incurred or to be incurred by it
(including, without limitation, the costs of redeploying any funds
borrowed or other commitments entered into by the Bank in respect
of this agreement) and the Bank agrees that if such repayment
produces a profit, the Bank will account to the Borrower for such
profit, less reasonable costs within ten Business Days of the date
on which such profit is realised.
9.4 DEFAULT The Borrower will indemnify the Bank on demand against any
loss or expenses (including legal fees) sustained or incurred as a
consequence of any failure by the Borrower to perform any of its
obligations under this agreement.
10 PAYMENTS
10.1 SET OFF The Bank shall be entitled at any time or times without
notice (both before and after demand) to set off any liability of
the Borrower to the Bank against any liability of the Bank to the
Borrower (in either case whether actual or contingent, present or
future and irrespective of the branch or office, currency or place
of payment) and may for such purpose convert or exchange any
currency.
10.2 CURRENCY The Borrower's liability under this agreement is to
discharge its payment obligations in the currency in which the
obligation is payable. If at any time the Bank receives any payment
(including by set-off) referable to any of the Borrower's
liabilities under this agreement from any source in a currency
other than in the required currency then such payment shall take
effect as a payment to the Bank of the amount in US dollars or the
Alternative Currency which the Bank is able to purchase (after
deduction of any relevant costs) with the amount of the payment so
received in accordance with its usual practice.
10.3 INDEMNITY If a payment is made under a court order and is treated
by clause 10.2 a payment of an amount which falls short of the
relevant liability of the Borrower expressed in the relevant
currency, the Borrower as a separate and independent obligation
shall on demand from time to time indemnify the Bank against such
shortfall and shall pay interest on such shortfall from the date of
such
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payment to the date the shortfall is paid. Such interest will be
calculated under clause 4.5 as if such shortfall were an overdue
amount.
10.4 FUNDS All payments made by the Borrower to the Bank shall be made
in the required currency in immediately available cleared funds to
the credit of such account as the Bank may designate. Such payments
shall be made in full without set off or counter-claim and free and
clear of any deduction or withholding for or on account of any Tax
(save for such deductions or withholdings as are required by law)
or any other matter.
10.5 CERTIFICATES A certificate signed by an official of the Bank as to
any amount due or owing from the Borrower shall be conclusive
evidence against the Borrower except in the case of manifest error
or any question of law.
11 COMMUNICATIONS
11.1 WRITTEN All communications under this agreement must be in
writing.
11.2 ADDRESSES Any communication may be sent by prepaid post, telex or
fax or delivered to the Bank or the Borrower at its address, telex
or fax number shown above unless it has communicated another
address, telex or fax number to the other in which case it must be
sent to the last address, telex or fax number so communicated to
the other for this purpose. Communications to the Borrower may
also be sent or delivered to the Address for Service.
11.3 DELIVERY A communication by post will be deemed made on the day
after posting by first class post, postage prepaid (but, if to
another country, ten days after posting by airmail, postage
prepaid). Communications by telex or fax will be deemed completed
upon receipt of the appropriate answerback (in the case of a telex)
or when confirmed by the transmitting machine (in the case of a
fax).
12 LAW AND JURISDICTION
12.1 LAW This Agreement is governed by and will be construed in
accordance with English law.
12.2 JURISDICTION For the benefit only of the Bank, the parties
irrevocably agree that the English courts are to have jurisdiction
to settle any disputes and to entertain any suit, action or
proceedings in each case arising out of or in connection with this
agreement (together, in this clause 12, "PROCEEDINGS").
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12.3 OTHER COURTS Nothing contained in this clause 12 shall limit the
right of the Bank to take proceedings against the Borrower in the
courts of any country in which the Borrower has assets or in any
other courts of competent jurisdiction, nor shall the taking of
proceedings in one or more jurisdictions preclude the taking of
proceedings in any other jurisdiction, whether concurrently or not.
12.4 WAIVER The Borrower irrevocably waives any objection which it may
now or in the future have to any court referred to in this clause
12 as a venue for any proceedings and any claim which it may now or
in the future be able to make that any proceedings in any such
court have been instituted in an inconvenient or inappropriate
forum.
12.5 JUDGMENTS A judgment in any proceedings against the Borrower in
any court referred to in this clause 12 shall be conclusive and
binding upon the Borrower and may be enforced in the courts of any
other jurisdiction.
12.6 SERVICE The Address for Service shall be an effective address for
service of proceedings in the English courts on the Borrower.
13 ASSIGNMENT AND TRANSFER
13.1 CONSENT The prior written consent of the Borrower (not to be
unreasonably withheld or delayed) is required prior to the
assignment and/or transfer by the Bank of any one or more of its
rights and/or obligations under this agreement to any other person
provided that in no event shall any such rights and/or obligations
be assigned and/or transferred to any person that is not a
Qualifying Bank.
13.2 ASSIGNMENTS Upon notice to the Borrower of any assignment (under
and in accordance with clause 13.1) of rights against the Borrower
under this agreement, such assignment shall take effect as an
absolute assignment and the assignee shall be entitled to sue the
Borrower without joining the assignor as a party to the
proceedings. For the avoidance of doubt the assignor shall be
entitled to sue the Borrower pursuant to any right not assigned
without joining the assignee as a party to the proceedings.
13.3 TRANSFERS The Borrower irrevocably agrees that if it receives
notice of any transfer (under and in accordance with clause 13.1)
of obligations owed to the Borrower under this agreement and the
transferee confirms in such notice that it will perform such
transferred obligations, then such obligations shall be novated and
after that shall be owed to the Borrower by the transferee and not
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the transferor.
13.4 PROHIBITION The Borrower may not assign and/or transfer any one or
more of its rights and/or obligations under this agreement.
13.5 DISCLOSURE The Bank may give to a proposed assignee, transferee or
any other person entering into contractual relations with it in
respect of this agreement such information relating to the Borrower
as it thinks fit provided the recipient of such information agrees
to hold it confidential and the Borrower has given its prior
approval (not to be unreasonably withheld or delayed).
14 MISCELLANEOUS
14.1 DELAYS The Bank's rights and powers under this agreement will not
be affected or impaired by any delay or omission by the Bank in
exercising them or any previous exercise of any such rights or
powers.
14.2 SEVERABILITY Each of the provisions of this agreement shall be
severable and distinct from one another and if at any time any one
or more of these provisions (or any part of them) is or becomes
invalid, illegal or unenforceable the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired.
THIS AGREEMENT has been signed on the date first stated on page 1 above.
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SCHEDULE 1
CONDITIONS PRECEDENT
1 A copy, certified as true complete and up to date by the secretary or a
trustee of the Borrower, of the declaration of trust, bye-laws and other
constituting documents of the Borrower.
2 A copy, certified as true complete and up to date by the secretary or a
trustee of the Borrower of a vote of the trustees of the Borrower approving the
Borrower's entry into and performance of this agreement and giving details of
the persons authorised to sign this agreement and any communications and
documents relating to it on behalf of the Borrower, together with their specimen
signatures.
3 An opinion of the Borrower's Counsel in Massachusetts.
4 Copies, certified as true complete and up to date by the secretary or a
trustee of the Borrower, of each approval, consent, licence, permit and
registration document (if any) as is mentioned as being required in relation to
this agreement in the opinion of the Bank's Counsel.
5 An up to date Valuation.
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SCHEDULE 2
DRAWDOWN NOTICE
To: Robert Fleming & Co. Limited
From: Old Mutual South Africa Equity Trust
Date: [ ]
Dear Sirs
US$50,000,000 LOAN AGREEMENT DATED [ ] 1998
- -------------------------------------------------------
We refer to the above loan agreement (the "LOAN AGREEMENT") made between (1)
ourselves as Borrower and (2) yourselves as Bank. Expressions defined in the
Loan Agreement will have the same meaning in this notice.
We give you notice that we wish to make a drawing of [specify currency and
amount] with a Term of [ ] on [ ] under
the Loan Agreement. Please make it available to our account number:
[ ] with [ ].
As at the date of this notice the representations and warranties contained in
Clause 7 of the Loan Agreement are true and accurate.
Yours faithfully
21
<PAGE>
THE BORROWER
OLD MUTUAL SOUTH AFRICA EQUITY TRUST
By:
THE BANK
ROBERT FLEMING & CO. LIMITED
By:
22
<PAGE>
DATED 1998
______________________________________________________
(1) OLD MUTUAL SOUTH AFRICA
EQUITY TRUST
(2) ROBERT FLEMING & CO. LIMITED
_________________________________________
LOAN AGREEMENT
_________________________________________
STEPHENSON HARWOOD
ONE, ST. PAUL'S CHURCHYARD
LONDON EC4M 8SH
TEL: 0171 329 4422
FAX: 0171 606 0822
REF: (537/114)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1 INTERPRETATION 108
2 THE FACILITY 113
3 DRAWINGS 114
4 INTEREST 115
5 REPAYMENT, TERMINATION, PREPAYMENT
AND CANCELLATION 116
6 EXTERNAL FACTORS 117
7 REPRESENTATIONS AND WARRANTIES 119
8 UNDERTAKINGS 120
9 INDEMNITIES 123
10 PAYMENTS 124
11 COMMUNICATIONS 125
12 LAW AND JURISDICTION 125
13 ASSIGNMENT AND TRANSFER 126
14 MISCELLANEOUS 127
</TABLE>
<PAGE>
Exhibit 9(n)
Old Mutual Equity Growth Assets South Africa Fund
Washington Mall Phase II, 4th Floor
22 Church Street
Hamilton HM11
Bermuda
September 21, 1998
By Hand
Old Mutual South Africa Equity Trust
Washington Mall Phase II, 4th Floor
22 Church Street
Hamilton HM11
Bermuda
Dear Sirs,
This is a notice that the Old Mutual Equity Growth Assets South Africa Fund
(the "Fund") intends to redeem its entire beneficial interest in the Old Mutual
South Africa Equity Trust (the "Master Trust") effective the close of business
(Boston time) on September 23, 1998.
This notice is executed and made by the Trustees of the Fund not
individually, but as Trustees under the Declaration of Trust of the Fund dated
as of September 1, 1995, and the obligations of this notice are not binding upon
any of such Trustees or the shareholders of the Fund individually, but bind only
the trust estate of the Fund.
<PAGE>
Very truly yours,
Old Mutual Equity Growth Assets
South Africa Fund
By: ________________________
William Langley
Treasurer
Accepted and Agreed to this
_____ day of ____________, 1998.
Old Mutual South Africa Equity Trust
By: __________________________
William Langley
Treasurer
<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 24, 1998, 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
October 26, 1998
<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-30-1998
<PERIOD-START> JUL-01-1997
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<INVESTMENTS-AT-COST> 1,044,600
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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