As filed with the Securities and Exchange Commission on August 27, 1997
Securities Act File No. 33-[ ]
Investment Company Act File No. 811-[ ]
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-2
(Check appropriate box or boxes)
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
----------------------
MENTOR PERPETUAL GLOBAL EMERGING COMPANIES FUND
(Exact name of registrant as specified in its charter)
901 East Byrd Street, Richmond, Virginia 23219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (804) 782-3647
----------------------
Paul F. Costello, President
Mentor Perpetual Global Emerging Companies Fund
901 East Byrd Street
Richmond, Virginia 23219
(Name and address of agent for service)
Copies to:
Timothy W. Diggins, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
----------------------
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
It is proposed this filing will become effective when declared
effective pursuant to Section 8(c).
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount Being Offering Price Aggregate Registration Fee
Being Registered Registered Per Unit Offering Price
- ---------------------------------------------------------------------------------------------------
<S> <C>
Shares of
Beneficial Interest 33,000 $10 $330,000 $100
===================================================================================================
</TABLE>
<PAGE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-2-
<PAGE>
MENTOR PERPETUAL GLOBAL EMERGING COMPANIES FUND
Cross Reference Sheet Pursuant to Rule 495(a)
Under the Securities Act of 1933
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
Item No. Registration Statement Caption Location in Prospectus
- ------- ------------------------------ -----------------------
<S> <C>
1. Outside Front Cover......................................... Outside Front Cover
2. Inside Front and Outside Back Cover Page.................... Inside Front and Outside Back Cover Page
3. Fee Table and Synopsis...................................... Summary of the Fund's Expenses
4. Financial Highlights........................................ Not Applicable
5. Plan of Distribution........................................ Cover Page; Outside Front Cover; Prospectus Summary
6. Selling Shareholders........................................ Not Applicable
7. Use of Proceeds............................................. Outside Front Cover; Inside Front Cover;
Prospectus Summary; Use of Proceeds;
Investment Objective and Policies
8. General Description of Registrant........................... Outside Front Cover; Inside Front Cover;
Prospectus Summary; The Fund; Investment
Objective and Policies; Investment Restrictions;
Risk Factors; Taxes; Portfolio Transactions;
Description of Shares; Automatic Dividend
Reinvestment and Cash Purchase Plan;
Automatic Conversion to an Open-End
Investment Company
9. Management.................................................. Inside Front Cover; Prospectus Summary;
Investment Adviser; Management of the Fund;
Management Contract; Administrative Services
Contract; Portfolio Transactions; Custodian,
Transfer Agent, Dividend Disbursing Agent and
Registrar
10. Capital Stock, Long-Term Debt, and Other Securities......... Prospectus Summary; Dividends and
Distributions; Description of Shares; Taxes
11. Defaults and Arrears on Senior Securities................... Not Applicable
12. Legal Proceedings........................................... Not Applicable
13. Table of Contents of Statement of Additional Information.... Not Applicable
14. Cover Page.................................................. Not Applicable
15. Table of Contents........................................... Not Applicable
16. General Information and History............................. Not Applicable
17. Investment Objective and Policies........................... Outside Front Cover; Inside Front Cover;
Prospectus Summary; Investment Objective and
Policies; Risk Factors; Investment Restrictions
18. Management.................................................. Management of the Fund
19. Control Persons and Principal Holders of Securities
Description of Shares....................................... Not Applicable
-3-
<PAGE>
20. Investment Advisory and Other Services...................... Prospectus Summary; Investment Adviser;
Management of the Fund; Management Contract;
Administrative Services Contract; Portfolio
Transactions; Statements of Assets and Liabilities
21. Brokerage Allocation and Other Practices.................... Portfolio Transactions
22. Tax Status.................................................. Dividends and Distributions; Taxes
23. Financial Statements........................................ Experts; Report of Independent Accountants;
Statements of Assets and Liabilities
</TABLE>
- ------------------
* Pursuant to General Instructions for Part B of Form N-2, all information
required to be set forth in Part B: Statement of Additional Information has
been included in Part A: The Prospectus.
PART C
The information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
-4-
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 27, 1997
30,000 Shares
Mentor Perpetual Global Emerging Companies Fund
Beneficial Interest
Mentor Perpetual Global Emerging Companies Fund (the "Fund") is a newly
organized, diversified, closed-end management investment company. The Fund's
investment objective is to seek long-term capital appreciation. The Fund will
seek to achieve its investment objective by investing primarily in the
securities of emerging companies located anywhere in the world that Mentor
Perpetual Advisors, LLC, the Fund's investment adviser, believes offer the
potential for capital appreciation.
Prior to this offering, there has been no public market for the shares
of beneficial interest (the "Shares") in the Fund. See "Underwriting." The Fund
will apply for the listing of the Shares on the New York Stock Exchange.
Investors should be aware that shares of closed-end investment
companies have in the past frequently traded at a discount to their net asset
value. The risk of loss associated with this characteristic of closed-end
investment companies may be greater for investors purchasing Shares in the
initial public offering and expecting to sell such Shares soon after the
completion thereof.
(continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Sales Proceeds to
Public Load(1) Fund(2)
- -----------------------------------------------------------------------------
Per Share................ $10 $______ $______
Total(3)................. $300,000 $______ $______
- -----------------------------------------------------------------------------
(1) The Fund and the Investment Adviser have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deduction of organizational and offering expenses payable by the
Fund, estimated to be $ and $ , respectively, which includes up to $ to
be paid to the Underwriter in partial reimbursement of its expenses.
Organizational expenses will be amortized over a period not to exceed
60 months from the date that the Fund commences investment operations.
(3) The Fund has granted to the Underwriter an option, exercisable within
days of the date hereof, to purchase up to an additional ______ Shares
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Sales Load, and Proceeds to Fund will
be $ , $ , and $ , respectively. See
"Underwriting."
[Name of Underwriter]
The date of this Prospectus is October , 1997.
<PAGE>
This Prospectus sets forth concisely the information about the Fund
that a prospective investor should consider before investing. Investors are
advised to read this Prospectus carefully and to retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon written or oral request without
charge. The Commission's Web site (http://www.sec.gov) contains material
incorporated by reference and other information regarding registrants that file
electronically with the Commission. See "Additional Information."
The Shares are offered by the Underwriter, subject to prior sale, when,
as, and if delivered to and accepted by the Underwriter, and subject to certain
conditions. Delivery of the Shares is expected against payment therefor on or
about October , 1997, at the offices of [name and address of Underwriter].
The Fund's Agreement and Declaration of Trust provides that, beginning
after 18 months from the date of the initial public offering, the Fund will be
converted into an open-end investment company if its Shares close at a 5% or
greater discount from the net asset value of the Fund on the last business day
of any week and for each of the next 14 business days. No further approval of
the shareholders of the Fund would be necessary. See "Compulsory Conversion to
an Open-End Investment Company."
The address of Mentor Perpetual Advisors, LLC is 901 East Byrd Street,
Richmond, Virginia 23219 and its phone number is (800) 869-6042.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE MARKET
PRICE OF THE SHARES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZATION, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."
-------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information, including "Risk Factors," included elsewhere in this
Prospectus. The discussion in this Prospectus contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), which involve risks and uncertainties and
represent the Fund's expectation or beliefs, including, but not limited to,
statements concerning the Fund's investment objective and policies, performance,
and financial condition. For this purpose, any statements contained in this
Prospectus that are not statements of historical fact may be deemed to be
forward-looking statements. The Fund desires to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. The
Fund wishes to caution readers that actual results and the timing of certain
events may differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors"
and "Taxes." Unless otherwise indicated, the information in this Prospectus
assumes that the Underwriter's over-allotment option will not be exercised.
The Fund....................... Mentor Perpetual Global Emerging Companies
Fund (the "Fund") is a diversified
closed-end management investment company.
The Fund is designed for investors desiring
to invest a portion of their assets in the
securities of emerging companies located
anywhere in the world that, in the opinion
of Mentor Perpetual Advisors, LLC, the
Fund's investment adviser, offer the
potential for long-term capital
appreciation. See "Investment Objective and
Policies."
Investment Objective........... The Fund's investment objective is to seek
long-term capital appreciation. See
"Investment Objective and Policies."
Investment Policies ........... The Fund seeks its investment objective by
investing primarily in a diversified
portfolio of securities of emerging
companies located anywhere in the world,
that Mentor Perpetual Advisors, LLC, the
Fund's investment adviser ("Mentor
Perpetual"), believes offer the potential
for capital appreciation.
The Fund's investments will normally include
common stocks, preferred stocks, securities
convertible into common stocks or preferred
stocks, and warrants to purchase common
stocks or preferred stocks. The Fund may
also invest to a lesser extent in debt
securities and other types of investments if
Mentor Perpetual believes they would help
achieve the Fund's objective. The Fund may
hold a portion of its assets in cash or
money market instruments.
The Fund will normally invest at least 65%
of its assets in securities issued by
emerging companies. "Emerging companies" are
companies that, in the opinion of Mentor
Perpetual, have the potential, based on
superior or unique products or services,
operating characteristics, or financing
capabilities, for more rapid growth than the
world economy. It is likely that many of
those companies will be relatively small,
with limited operating history. See "Risk
Factors -- Investments in smaller
companies." The Fund may invest the
remainder of its asset in securities of
companies, large or small, that Mentor
Perpetual believes offer the potential for
long-term capital appreciation. See
"Investment Objective and Policies."
Under normal circumstances, the Fund will
invest at least 65% of its total assets in
securities of at least three countries, one
of which may be the United States. It is
likely that, at times, a substantial portion
of the Fund's assets will be invested in
securities of issuers in emerging markets,
including underdeveloped
- 1 -
<PAGE>
and developing nations. Investments in
emerging markets are subject to the same
risks applicable to foreign investments
generally, although those risks may be
increased due to conditions in such markets.
For example, the securities markets and
legal systems in emerging markets may only
be in a developmental stage and may provide
few, or none, of the advantages or
protections of markets or legal systems
available in more developed countries.
Although many of the securities in which the
Fund may invest are traded on securities
exchanges, they may trade in limited volume,
and the exchanges may not provide all of the
conveniences or protections provided by
securities exchanges in more developed
markets. The Fund may also invest a
substantial portion of its assets in
securities traded in the over-the-counter
markets and not on any exchange, which may
affect the liquidity of the investment and
expose the Fund to the credit risk of its
counterparties in trading those investments.
See "Risk Factors -- Investments in foreign
securities."
The Offering................... The Fund is offering 30,000 shares of
beneficial interest (the "Shares"), no par
value, at a maximum offering price of $10
per share. The Shares are being offered by
the underwriter, [name of underwriter] (the
"Underwriter"). The Fund has granted to the
Underwriter an option, exercisable within
___ days of the date hereof, to purchase up
to an additional Shares solely to
cover over-allotments, if any. The minimum
investment in the offering is 100 Shares
($1,000). See "Underwriting".
Investment Adviser............. Mentor Perpetual Advisors, LLC will act as
the Fund's investment adviser. The Fund will
pay Mentor Perpetual a monthly fee at an
annual rate of 1.00% of the average weekly
net asset value of the Fund. This fee is
higher than that paid by many other
investment companies.
Mentor Perpetual is an investment advisory
firm owned equally by Perpetual plc and
Mentor Investment Group, LLC. The Perpetual
organization currently serves as investment
adviser for assets of more than $6 billion.
Its clients include 28 unit investment
trusts and other public investment pools for
over 150 clients, including private
individuals, charities, pension plans, and
life assurance companies. Mentor Perpetual
currently serves as investment adviser to
the Mentor Perpetual Global Portfolio and
Mentor Perpetual International Portfolio,
open-end mutual funds. Investment decisions
for the Fund are made by a team of
investment professionals at Mentor
Perpetual. See "Investment Adviser" and
"Management of the Fund."
Administrator.................. Mentor Investment Group, LLC ("Mentor
Investment Group"), an affiliate of Mentor
Perpetual, will act as the Fund's
administrator. The Fund has agreed to pay
Mentor Investment Group a monthly
administrative fee at an annual rate of
0.10% of the average weekly net asset value
of the Fund. See "Management of the Fund."
Distributions and
Dividend Reinvestment Plan..... The Fund's policy is to distribute to its
shareholders all of its net investment
income and net realized capital gains, if
any, for each year. All distributions to
shareholders whose Shares are registered in
their own names will be reinvested
automatically in additional Shares of the
Fund, unless the
- 2 -
<PAGE>
shareholder elects to receive cash. Shares
will be purchased in the open market or, if
the Shares are trading at a premium to net
asset value, issued directly by the Fund.
Shareholders whose Shares are held in the
name of a broker or nominee should contact
such broker or nominee to determine whether
or how they may participate in the Fund's
dividend reinvestment plan. See "Taxes" and
"Automatic Dividend Reinvestment and Cash
Purchase Plan."
Estimated Expenses............. The Fund's annual operating expenses,
including advisory and administrative fees
and other expenses, are estimated to be
approximately $_________ in its first full
year of operation. Estimated offering
expenses of $__________ will be charged to
capital upon completion of the offering of
the Shares. Organizational expenses are
estimated to be $_______ and will be
amortized over a period not to exceed 60
months from the date the Fund commences
investment operations. See "Summary of the
Fund's Expenses" and "Management of the
Fund."
Use of Proceeds................ The principal purpose for which nearly all
the net proceeds of the offering are
intended to be used is the purchase of
investments consistent with the Fund's
investment objective and policies. Since the
Fund expects to invest its assets gradually
to benefit from short-term fluctuations in
the price of securities the Fund will
purchase, the Fund anticipates that it will
take approximately six months from the date
of this Prospectus to invest fully the
proceeds of the offering in accordance with
its investment objective and policies. See
"Use of Proceeds."
Listing........................ The Fund will apply for the listing of the
Shares on the New York Stock Exchange (the
"NYSE").
Compulsory Conversion to
Open-end Investment Company.... The Fund's Agreement and Declaration of
Trust (the "Declaration of Trust") provides
that, beginning after 18 months from the
date of the Fund's initial public offering,
the Fund will be converted to an open-end
investment company if its Shares close at a
market price that is at a 5% or greater
discount to the net asset value of the Fund
on the last business day of any week and for
each of the next 14 business days. (This
feature of the Fund is referred to as the
"Compulsory Conversion Provision.") A
business day is any day when the NYSE is
open. No further approval of shareholders
of the Fund would be necessary. This
provision may be changed only by the
affirmative vote of the holders of at least
80% of the Fund's outstanding voting
securities. See "Compulsory Conversion to
Open-End Investment Company."
If the Fund is converted to an open-end
investment company, it will be able to issue
and offer shares for sale continuously, and
each such share could be presented to the
Fund at the option of the holder for
redemption at a price based on the
then-current net asset value per share.
Shares would no longer be listed on the
NYSE. The Fund's investment objective and
policies would not change as a result of
conversion to an open-end investment
company.
In the event of a conversion to an open-end
investment company, the Fund also may charge
additional fees in connection with
distribution of its Shares,
- 3 -
<PAGE>
including fees payable under a distribution
plan adopted pursuant to Rule 12b-1 of the
Investment Company Act of 1940, as amended
(the "1940 Act"), and fees payable under a
shareholder servicing plan. In addition, if
the Fund converts to an open-end investment
company, its total annual expenses may
increase. As an open-end investment company,
the Fund may reserve the right to honor any
request for redemption by making payment in
whole or in part in securities chosen by the
Fund and valued in the same way as they
would be valued for purposes of computing
the Fund's net asset value. If payment is
made in securities, a shareholder may incur
brokerage expenses in converting these
securities to cash. If such payment is made
in securities of issuers traded outside of
the United States, a shareholder may have
more difficulty disposing of such securities
than the securities of issuers traded within
the United States.
Qualification as a Regulated
Investment Company............. The Fund intends to qualify as a regulated
investment company under Subchapter M of the
U.S. Internal Revenue Code of 1986, as
amended (the "Code"). See "Taxes."
Risk Factors -- Investments in
Smaller Companies.............. The Fund may invest a substantial portion of
its assets in securities issued by small
companies. Such companies may offer greater
opportunities for capital appreciation than
larger companies, but investments in such
companies may also involve certain special
risks. Such companies may have limited
product lines, markets, or financial
resources and may be dependent on a limited
management group. While the markets in
securities of such companies have grown
rapidly in recent years, such securities may
trade less frequently and in smaller volume
than more widely held securities. The
values of these securities may fluctuate
more sharply than those of other securities,
and the Fund may experience some difficulty
in establishing or closing out positions in
these securities at prevailing market
prices. There may be less publicly
available information about the issuers of
these securities or less market interest in
such securities than in the case of larger
companies, and it may take a longer period
of time for the prices of such securities to
reflect the full value of their issuers'
underlying earnings potential or assets.
Some securities of smaller issuers may be
restricted as to resale or may otherwise be
highly illiquid. The ability of the Fund to
dispose of such securities may be greatly
limited, and the Fund may have to continue
to hold such securities during periods when
Mentor Perpetual would otherwise have sold
the security. It is possible that Mentor
Perpetual or its affiliates or clients may
hold securities issued by the same issuers
as, and may in some cases have acquired the
securities at different times, on more
favorable terms or at more favorable prices
than, the Fund. See "Risk Factors--
Investments in Small Companies."
Risk Factors -- Investments in
Foreign Securities............. Investors should consider carefully the
risks involved in investments in foreign
equity markets, which are in addition to the
usual risks of investing in equity
securities. Due to these risks, an
investment in the Fund should be considered
as an investment for only a portion of an
investor's assets, not as a complete
investment program.
- 4 -
<PAGE>
Economic and Political Factors Affecting
Foreign Countries. The Fund may be exposed
to the direct or indirect consequences of
political, social, and economic changes in
one or more countries. There may be a
possibility of nationalization or
expropriation of assets, imposition of
currency exchange controls, confiscatory
taxation, political or financial
instability, or diplomatic developments
which could affect the value of the Fund's
investments in certain foreign countries.
Legal remedies available to investors in
certain foreign countries may be more
limited than those available with respect to
investments in the United States or in other
foreign countries. In the case of securities
issued by a foreign governmental entity, the
issuer may in certain circumstances be
unable or unwilling to meet its obligations
on the securities in accordance with their
terms, and the Fund may have limited
recourse available to it in the event of
default. In emerging countries in
particular, there is increased risk of
hyperinflation, currency devaluation and
government intervention in the economy in
general. See "Risk Factors -- Economic and
Political Factors Affecting Foreign
Countries."
Foreign currency considerations. A portion
of the Fund's assets will be invested in
securities denominated in foreign
currencies. As a result, changes in foreign
currency exchange rates will affect the
value of securities in the Fund's portfolio
and the unrealized appreciation or
depreciation of the Fund's investments.
Changes in foreign exchange rates may also
adversely affect the Fund's ability to make
distributions to its shareholders. Although
the Fund is authorized to use various
investment strategies to hedge currency
exchange rate risk, many of these strategies
may not initially be used by the Fund to a
significant extent. See "Risk Factors --
Foreign Currency Considerations."
Trading markets in foreign countries. The
securities of some foreign issuers are less
liquid and at times more volatile than
securities of comparable U.S. companies.
Trading volume in certain foreign securities
markets is substantially less than that in
the securities markets of the United States
or other developed countries. Commissions
for trading on foreign stock exchanges are
generally higher than commissions for
trading on U.S. exchanges. Foreign
settlement procedures and trade regulations
may involve certain risks (such as delay in
payment or delivery of securities or in the
recovery of the Fund's assets held abroad)
and expenses not present in the settlement
of domestic investments. There may be less
information publicly available about a
foreign company than about a U.S. company,
and foreign companies are not generally
subject to accounting, auditing, and
financial reporting standards and practices
comparable to those in the United States.
Further, certain foreign markets may have
less government supervision and regulation
of the securities markets as compared to the
U.S. markets. See "Risk Factors -- Trading
Markets in Foreign Countries."
Repatriation; investment controls. Foreign
investment in certain countries may be
restricted or controlled to varying degrees
by local or national governments. These
restrictions or controls may include the
requirement of governmental approval for the
repatriation of investment income or the
proceeds of sales of securities by foreign
investors, and could limit or preclude
foreign investment in certain foreign
securities and increase the costs and
expenses of the Fund. See "Risk Factors --
Repatriation; Investment Controls."
- 5 -
<PAGE>
Discount to Net Asset Value.... Shares of closed-end investment companies in
the past frequently have traded at a
discount to their net asset value. This
characteristic is a risk separate and
distinct from the risk that the Fund's net
asset value may decrease, and may be greater
for investors purchasing shares in the
initial public offering and expecting to
sell such Shares soon after the completion
thereof. To attempt to reduce or eliminate
any discount to net asset value, the Fund's
Declaration of Trust provides that the Fund
will be converted to an open-end investment
company if certain circumstances described
therein exist. However, notwithstanding the
elimination of the market discount upon
conversion of the Fund to an open-end
investment company, a shareholder may incur
a loss upon the sale of its Shares. See
"Risk Factors -- Discount to Net Asset
Value" and "Compulsory Conversion to an
Open-End Investment Company."
Lack of Operating History;
Dependence on Investment
Adviser........................ The Fund is a newly organized management
investment company with no prior operating
history. The Fund is dependent upon the
diligence and skill of the Mentor Perpetual
for the selection, structuring, closing, and
monitoring of its investments. See "Risk
Factors -- Lack of Operating History;
Dependence on Investment Adviser."
Foreign Taxation............... Dividends, interest, and capital gains
received by the Fund may be subject to
withholding and other taxes imposed by
foreign countries, whose taxes would reduce
the return to the Fund on those securities;
this reduction may not be recoverable by the
Fund or its shareholders. See "Risk Factors
-- Foreign Taxation" and "Taxes."
Anti-takeover Provisions....... Certain provisions of the Fund's Declaration
of Trust may have the effect of limiting
the ability of other persons to acquire
control of the Fund. In certain
circumstances, these provisions might also
inhibit the ability of shareholders to sell
their Shares at a premium over prevailing
market prices. The Fund's Trustees have
determined that these provisions are in the
best interests of shareholders generally.
See "Risk Factors -- Anti-Takeover
Provisions" and "Shares of Beneficial
Interest in the Fund."
- 6 -
<PAGE>
SUMMARY OF THE FUND'S EXPENSES
The expense summary below is intended to help you make your investment
decisions. You should consider this expense information along with other
important information in this Prospectus, including the Fund's investment
objective.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price).......................... 5.00%
Dividend Reinvestment and Cash Purchase Plan Fees....................... None
ANNUAL EXPENSES (as a percentage of average daily net assets)
Advisory Fees........................................................... 1.00%
Administration Fees..................................................... 0.10%
Other Expenses......................................................... 0.65%
-----
TOTAL ANNUAL EXPENSES................................................... 1.75%
SHAREHOLDER TRANSACTION EXPENSES represent charges paid when you
purchase shares of the Fund.
ANNUAL EXPENSES are based on the Fund's anticipated expenses for the
current fiscal year. "Other Expenses" are based on estimated amounts for the
current fiscal year and assume that the Fund receives net proceeds of $ million
from the issue and sale of Shares. Mentor Perpetual or Mentor Investment Group
may, from time to time, voluntarily agree to waive fees or absorb some or all of
the expenses of the Fund. To the extent they should do so, Mentor Perpetual and
Mentor Investment Group may seek reimbursement of such deferred fees or absorbed
expenses; provided, no repayment will be made if the Fund's expense ratio would
exceed 1.75% of net assets.
EXAMPLE OF EXPENSES
You would pay the following expenses on a $1,000 investment in the
Fund, assuming a 5% annual return:
1 3 5 10
YEAR YEARS YEARS YEARS
----- ---- ---- ----
$ * $ * $ * $ *
* To be supplied
The purpose of the this information is to assist you in understanding
the various costs and expenses that an investor in the Fund would bear directly
or indirectly. See "Management of the Fund" for more complete descriptions of
such costs and expenses.
The Example of Expenses is a hypothetical example that illustrates the
expenses associated with a $1,000 investment in the Fund over periods of one,
three, five and ten years, based on the estimated expenses in the above table
and an assumed annual rate of return of 5%. The 5% return and expenses should
not be considered a representation of future returns. Actual returns and
expenses may be greater or less than those shown. In addition, the above Example
of Expenses does not reflect offering costs in connection with the public
offering, estimated to be approximately $_______, which will be charged against
the proceeds of the offering. The Example of Expenses also assumes that all
dividends and other distributions are reinvested at net asset value and that the
percentage amounts listed under Annual Expenses remain the same in the years
shown. Although the Example of
- 7 -
<PAGE>
Expenses assumes reinvestment of all dividends and distributions at net asset
value, participants in the Fund's Automatic Dividend Reinvestment and Cash
Purchase Plan may receive shares issued at a price or value different from net
asset value. See "Automatic Dividend Reinvestment and Cash Purchase Plan."
THE FUND
Mentor Perpetual Global Emerging Companies Fund (the "Fund") is a
closed-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund was
organized as a Massachusetts business trust on August 25, 1997. A copy of the
Fund's Agreement and Declaration of Trust (the "Declaration of Trust"), which is
governed by Massachusetts law, is on file with the Secretary of State of The
Commonwealth of Massachusetts. The Fund's principal office is located at 901
East Byrd Street, Richmond, Virginia 23219, and its telephone number is (800)
869-6042.
INVESTMENT ADVISER
Mentor Perpetual Advisors, LLC ("Mentor Perpetual") will act as the
Fund's investment adviser. The Fund will pay Mentor Perpetual a monthly advisory
fee at an annual rate of 1.00% of the average weekly net asset value of the
Fund. This fee is higher than that paid by many other investment companies.
Mentor Perpetual is an investment advisory firm owned equally by
Perpetual plc and Mentor Investment Advisors LLC, an affiliate of Mentor
Investment Group. The Perpetual organization currently serves as investment
adviser for assets of more than $6 billion. Its clients include 28 unit
investment trusts and other public investment pools for over 150 clients,
including private individuals, charities, pension plans, and life assurance
companies. Mentor Perpetual currently serves as investment adviser to the Mentor
Perpetual Global Portfolio and Mentor Perpetual International Portfolio,
open-end mutual funds. Investment decisions for the Fund are made by a team of
investment professionals at Mentor Perpetual. Mentor Perpetual's address is 901
East Byrd Street, Richmond, Virginia 23219, and its telephone number is (800)
869-6042. Investment decisions for Mentor Perpetual are made by a team of
investment professionals at Mentor Perpetual.
Mentor Investment Group is a subsidiary of Wheat First Butcher Singer,
Inc. ("Wheat First Butcher Singer"), a diversified financial services holding
company. Wheat First Butcher Singer, through other subsidiaries, also engages in
securities brokerage, investment banking, and related businesses. EVEREN Capital
Corporation has a 20% ownership in Mentor Investment Group and may acquire
additional ownership based principally on the amount of Mentor Investment Group
and may acquire additional ownership based principally on the amount of Mentor
Investment Group's revenues derived from assets attributable to clients of
EVEREN Securities, Inc. and its affiliates.
On August 20, 1997, First Union Corporation agreed to purchase all of
the outstanding stock of Wheat First Butcher Singer. First Union Corporation, a
bank holding company based in Charlotte, North Carolina, is the sixth largest
banking institution in the United States, based on assets of approximately $143
billion at June 30, 1997.
USE OF PROCEEDS
The net proceeds of this offering are estimated to be $______, after
payment of the sales load and offering expenses.
The net proceeds of the offering will be invested in accordance with
the Fund's investment objective and policies described below during a period
estimated not to exceed six months from completion of the offering,
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<PAGE>
depending on market conditions and the availability of appropriate securities.
Pending such investment, the proceeds will be invested in high-quality,
short-term money market instruments.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term capital appreciation. The
Fund seeks its investment objective by investing primarily in a diversified
portfolio of securities of emerging companies located anywhere in the world that
Mentor Perpetual believes offer the potential for capital appreciation.
The Fund's investments will normally include common stocks, preferred
stocks, securities convertible into common stocks or preferred stocks, and
warrants to purchase common stocks or preferred stocks. The Fund may also invest
to a lesser extent in debt securities and other types of investments if Mentor
Perpetual believes they would help achieve the Fund's objective. The Fund may
hold a portion of its assets in cash or money market instruments.
The Fund will normally invest at least 65% of its assets in securities
issued by emerging companies. "Emerging companies" are companies that, in the
opinion of Mentor Perpetual, have the potential, based on superior or unique
products or services, operating characteristics or financing capabilities, for
more rapid growth than the world economy. It is likely that many of those
companies will be relatively small, with limited operating history. See "Risk
Factors -- Investments in smaller companies." The Fund may invest the remainder
of its assets in securities of companies, large or small, that Mentor Perpetual
believes offer the potential for long-term capital appreciation.
Under normal circumstances, the Fund will invest at least 65% of its
total assets in securities of at least three countries, one of which may be the
United States. It is likely that, at times, a substantial portion of the Fund's
assets will be invested in securities of issuers in emerging markets, including
under-developed and developing nations. Investments in emerging markets are
subject to the same risks applicable to foreign investments generally, although
those risks may be increased due to conditions in such markets. For example, the
securities markets and legal systems in emerging markets may only be in a
developmental stage and may provide few or none of the advantages or protections
of markets or legal systems available in more developed countries. Although many
of the securities in which the Fund may invest are traded on securities
exchanges, they may trade in limited volume, and the exchanges may not provide
all of the conveniences or protections provided by securities exchanges in more
developed markets. The Fund may also invest a substantial portion of its assets
in securities traded in the over-the-counter markets and not on any exchange,
which may affect the liquidity of the investment and expose the Fund to the
credit risk of its counterparties in trading those investments. See "Risk
Factors -- Investments in foreign securities."
Fixed-income securities in which the Fund may invest will be of
investment grade. A security will be deemed to be of "investment grade" if, at
the time of investment by the Fund, the security is rated at least Baa by
Moody's Investors Service, Inc. or BBB- by Standard & Poor's Ratings Group, or
at a comparable rating by another nationally recognized rating organization.
Securities rated Baa or Baa3, or BBB or BBB- lack outstanding investment
characteristics and have speculative characteristics and are subject to greater
credit and market risks than higher-rated securities. The Fund will not be
required to dispose of a security held by it if the security's rating falls
below investment grade, although Mentor Perpetual will consider whether
continued investment in the security is consistent with the Fund's investment
objective.
Mentor Perpetual may under unusual circumstances implement temporary
"defensive" strategies in order to reduce fluctuations in the value of the
Fund's assets. At those times, the Fund may invest any portion of its assets in
cash or cash equivalents, money market instruments, or other short-term,
high-quality investments Mentor Perpetual considers consistent with such
defensive strategies. At such times, the Fund may invest without limit in
securities of issuers located in the United States. It is impossible to predict
when, or for how long, the Fund will use these defensive strategies.
- 9 -
<PAGE>
The investment objective and policies described in this Prospectus will
not change if the Fund converts to an open-end investment company. See
"Compulsory Conversion to an Open-End Investment Company."
Options and futures. The Fund may buy and sell call and put options to
hedge against changes in net asset value or to realize a greater current return.
In addition, through the purchase and sale of futures contracts and related
options, the Fund may at times seek to hedge against fluctuations in net asset
value and, to the extent consistent with applicable law, to increase its
investment return.
The Fund's ability to engage in options and futures strategies will
depend on the availability of liquid markets in such instruments. It is
impossible to predict the amount of trading interest that may exist in various
types of options or futures contracts. Therefore, there is no assurance that the
Fund will be able to utilize these instruments effectively for the purposes
stated above. The tax consequences of certain hedging techniques have been
modified by the Taxpayer Relief Act of 1997.
Index futures and options. The Fund may also buy and sell index futures
contracts ("index futures") and options on index futures and on indices for
hedging purposes (or may purchase warrants whose value is based on the value
from time to time of one or more foreign securities indices). An "index future"
is a contract to buy or sell units of a particular bond or stock index at an
agreed price on a specified future date. Depending on the change in value of the
index between the time when the Fund enters into and terminates an index futures
or option transaction, the Fund will realize a gain or loss. The Fund may also,
to the extent consistent with applicable law, buy and sell index futures and
options to increase its investment return.
See Appendix A for more information concerning options and futures
transactions. Transactions in options and futures involve certain risks which
are described in the Appendix. See "Risk Factors -- Options and futures
transactions."
Repurchase agreements; securities loans. The Fund may enter into
repurchase agreements and securities loans. Under a repurchase agreement, the
Fund purchases a debt instrument for a relatively short period (usually not more
than one week), which the seller agrees to repurchase at a fixed time and price,
representing the Fund's cost plus interest. Under a securities loan, the Fund
lends portfolio securities. The Fund will enter into repurchase agreements and
securities loans only with commercial banks and with registered broker-dealers
that are members of a national securities exchange or market makers in U.S.
Government securities, and in the case of repurchase agreements, only if the
debt instrument subject to the repurchase agreement is a U.S. Government
security. These transactions must be fully collateralized at all times, but
involve some risk to the Fund if the other party should default on its
obligations and the Fund is delayed or prevented from recovering the collateral.
If the other party should become involved in bankruptcy or insolvency
proceedings, it is possible that the Fund may be treated as an unsecured
creditor and be required to return the underlying collateral to the other
party's estate.
Portfolio turnover. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of the Fund may lead to frequent changes in the Fund's
investments, particularly in periods of volatile market movements. A change in
the securities held by the Fund is known as "portfolio turnover." Portfolio
turnover generally involves some expense to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such sales may result in
realization of taxable capital gains. The Fund's annual portfolio turnover rate
is expected to be less than 200% for the current fiscal year.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which may
not be changed without the affirmative vote of a "majority of the outstanding
voting securities" of the Fund (which is defined in the 1940 Act
- 10 -
<PAGE>
to mean the affirmative vote of the lesser of (1) more than 50% of the
outstanding Shares, or (2) 67% or more of the Shares present at a meeting if
more than 50% of the outstanding Shares are represented at the meeting in person
or by proxy). The Fund may not:
1. With respect to 75% of its total assets, invest in the securities of
any issuer if, immediately after such investment, more than 5% of the
total assets of the Fund (taken at current value) would be invested in
the securities of such issuer; provided that this limitation does not
apply to obligations issued or guaranteed as to interest or principal
by the U.S. Government or its agencies or instrumentalities.
2. With respect to 75% of its total assets, acquire more than 10% of
the outstanding voting securities of any issuer.
3. Borrow money or issue any class of senior securities, except that
the Fund may borrow up to 33- 1/3% of the value of its total assets
from a bank (i) for temporary or emergency purposes, including to meet
redemption requests if the Fund is operating as an open-end investment
company, (ii) for such short-term credits as may be necessary for the
clearance or settlement of transactions, or (iii) to finance
repurchases of its Shares. This restriction does not apply to the
lending of portfolio securities.
4. Purchase securities (other than securities issued or guaranteed as
to interest or principal by the U.S. Government or its agencies or
instrumentalities) if, as a result of such purchase, more than 25% of
the Fund's total assets would be invested in any one industry.
5. Make loans, except that the Fund may purchase or hold debt
securities in accordance with its investment objective and policies.
This restriction does not apply to repurchase agreements or loans of
portfolio securities.
6. Purchase or sell real estate, except that the Fund may purchase
securities of issuers which deal in real estate, securities which are
secured by interests in real estate, and securities which represent
interests in real estate, and it may acquire and dispose of real estate
or interests in real estate acquired through the exercise of its rights
as a holder of debt obligations secured by real estate or interests
therein.
7. Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial futures contracts and options and
may enter into foreign exchange contracts and other financial
transactions not involving physical commodities.
8. Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under applicable securities laws.
All percentage limitations on investments described in this Prospectus
will apply at the time of investment and shall not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of
such investment. Except for the numbered investment restrictions listed above,
the other investment policies described in this Prospectus are not fundamental
and may be changed by approval of the Fund's Trustees without shareholder vote.
RISK FACTORS
An investment in the Fund entails a number of special risks. Investors
should carefully consider the following risk factors described below before
investing. Additional information concerning certain of those risks is provided
below.
- 11 -
<PAGE>
Investments in smaller companies
The Fund may invest a substantial portion of its assets in securities
issued by small companies. Such companies may offer greater opportunities for
capital appreciation than larger companies, but investments in such companies
may also involve certain special risks. Such companies may have limited product
lines, markets, or financial resources and may be dependent on a limited
management group. While the markets in securities of such companies have grown
rapidly in recent years, such securities may trade less frequently and in
smaller volume than more widely held securities. The values of these securities
may fluctuate more sharply than those of other securities, and the Fund may
experience some difficulty in establishing or closing out positions in these
securities at prevailing market prices. There may be less publicly available
information about the issuers of these securities or less market interest in
such securities than in the case of larger companies, and it may take a longer
period of time for the prices of such securities to reflect the full value of
their issuers' underlying earnings potential or assets.
Some securities of smaller issuers may be restricted as to resale or
may otherwise be highly illiquid. The ability of the Fund to dispose of such
securities may be greatly limited, and the Fund may have to continue to hold
such securities during periods when Mentor Perpetual would otherwise have sold
the security. It is possible that Mentor Perpetual or its affiliates or clients
may hold securities issued by the same issuers as, and may in some cases have
acquired the securities at different times, on more favorable terms or at more
favorable prices than, the Fund.
Investments in foreign securities
Economic and Political Factors Affecting Foreign Countries. The Fund
may be exposed to the direct or indirect consequences of political, social, and
economic changes in one or more countries. There may be a possibility of
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability, or
diplomatic developments which could affect the value of the Fund's investments
in certain foreign countries. Legal remedies available to investors in certain
foreign countries may be more limited than those available with respect to
investments in the United States or in other foreign countries. In the case of
securities issued by a foreign governmental entity, the issuer may in certain
circumstances be unable or unwilling to meet its obligations on the securities
in accordance with their terms, and the Fund may have limited recourse available
to it in the event of default. In emerging countries in particular, there is
increased risk of hyperinflation, currency devaluation and government
intervention in the economy in general.
Foreign Currency Considerations. The Fund will invest in securities
denominated or quoted in currencies other than the U.S. dollar. As a result,
changes in foreign currency exchange rates will affect the value of securities
in the Fund's portfolio and the unrealized appreciation or depreciation of the
Fund's investments. The Fund will also incur costs in connection with
conversions between various currencies.
The Fund will conduct its foreign currency exchange transactions either
on a spot (that is, cash) basis at the spot rate prevailing in the foreign
currency exchange market, or by entering into forwards, futures, or options
contracts to purchase or sell foreign currencies. The use of forwards, futures,
and options contracts entails certain special risks. The variable degree of
correlation between exchange rate movements of futures contracts and exchange
rate movements of a related portfolio position of the Fund, for example, could
create the possibility that losses on the hedging instrument would be greater
than gains in the value of the Fund's position. In addition, forwards, futures
and options markets may not be liquid in all circumstances, and certain
over-the-counter options may have no markets. As a result, in certain markets,
the Fund may not be able to close out a transaction without incurring
substantial losses. Although the use of forwards, futures, and options
transactions for hedging would tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time it could limit any
potential gains that might result from an increase in value of the position. In
addition, the daily variation
- 12 -
<PAGE>
margin requirements for futures contracts create a greater ongoing potential
financial risk than from purchases of options, in which case the exposure is
limited to the cost of the initial premium.
Much of the income received by the Fund may be in foreign currencies.
The Fund will, however, compute and distribute its income in U.S. dollars, and
the computation of income will be made on the date on which the income is earned
by the Fund at the foreign exchange rate in effect on that date. As a result, if
the value of the foreign currencies in which the Fund receives its income falls
relative to the U.S. dollar between the receipt of the income and the time at
which the Fund converts the foreign currencies to U.S. dollars, the Fund may be
required to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. dollars to meet distribution requirements. The
liquidation of investments, if required, could have an adverse effect on the
Fund's performance.
See Appendix B for a more detailed description, including risks, of the
foreign currency transactions in which the Fund may engage.
Trading markets in foreign countries. The securities of some foreign
issuers are less liquid and at times more volatile than securities of comparable
U.S. companies. Trading volume in certain foreign securities markets is
substantially less than that in the securities markets of the United States or
other developed countries. Commissions for trading on foreign country stock
exchanges are generally higher than commissions for trading on U.S. exchanges.
Foreign settlement procedures and trade regulations may involve certain risks
(such as delay in payment or delivery of securities or in the recovery of the
Fund's assets held abroad) and expenses not present in the settlement of
domestic investments. There may be less information publicly available about a
foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing, and financial reporting standards and
practices comparable to those in the United States. Further, certain foreign
markets may have less governmental supervision and regulation of the securities
markets as compared to the U.S. markets.
Repatriation; investment controls. Foreign investment in certain
countries may be restricted or controlled to varying degrees by local or
national governments. These restrictions or controls may include the requirement
of governmental approval for the repatriation of investment income or the
proceeds of sales of securities by foreign investors, and could limit or
preclude foreign investment in certain foreign securities and increase the costs
and expenses of the Fund.
Discount to Net Asset Value
Shares of closed-end investment companies in the past frequently have
traded at a discount to net asset value. This characteristic is a risk separate
and distinct from the risk that the Fund's net asset value may decrease. The
risk of loss associated with this characteristic of closed-end investment
companies may be greater for investors purchasing Shares in the initial public
offering and expecting to sell such Shares soon after the completion thereof.
For those investors, realization of gain or loss on their investments is likely
to be more dependent upon the existence of a premium or discount than upon
portfolio performance. The net asset value per Share immediately following the
completion of the offering will be the initial offering price per Share of $ ,
minus the sales load and other offering expenses. The Fund cannot predict
whether the Shares will trade at, below or above net asset value. The Fund
contains a Compulsory Conversion Provision whereby, beginning after 18 months
from the date of this offering, the Fund will be converted to an open-end
investment company after trading at a 5% or greater discount from net asset
value for 15 consecutive days beginning on the last business day of any week.
See "Compulsory Conversion to an Open-End Investment Company."
Lack of Operating History; Dependence on Mentor Perpetual
The Fund is a newly organized investment company with no prior
operating history. Prior to this offering, there has been no public market for
the Fund's Shares. The Fund has been organized to make
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<PAGE>
investments selected by the Mentor Perpetual. Although Mentor Perpetual has a
prior record of making and managing investments similar to those to be made by
the Fund, the Fund itself has no operating history. The Fund is dependent upon
the diligence and skill of Mentor Perpetual for the selection, structuring,
closing, and monitoring of its investments. See "Management of the Fund."
Foreign Taxation
Dividends and interest received by the Fund and other payments received
by the Fund in respect of its foreign investments may be subject to withholding
and other taxes imposed by foreign countries, which would reduce the return to
the Fund on those securities. The amount of any such withholding or other taxes
may not be recoverable by the Fund or its shareholders. See "Taxes."
Anti-takeover Provisions
Certain provisions of the Fund's Declaration of Trust may have the
effect of limiting the ability of other persons to acquire control of the Fund.
In certain circumstances, these provisions might also inhibit the ability of
shareholders to sell their Shares at a premium over prevailing market prices.
The Fund's Board of Trustees has determined that these provisions are in the
best interests of shareholders generally. See "Shares of Beneficial Interest in
the Fund."
MANAGEMENT OF THE FUND
The Trustees of the Fund are responsible for the general oversight of
the Fund's business. The Trustees and executive officers of the Fund and their
principal occupations during the last five years are set forth below. The
mailing address of each officer and each Trustee affiliated with Mentor
Perpetual is 901 East Byrd Street, Richmond, Virginia 23219. The addresses of
the other Trustees are indicated below.
Trustees and Officers
The Trustees and officers of the Trust are listed below, along with
their ages and addresses, principal occupations, and present positions,
including any positions held with affiliated persons of the Underwriter.
Positions with Principal Occupations
Name, Age, and Address the Trust During Past Five Years
- ----------------------- -------------------- ------------------------
Daniel J. Ludeman*( ) Chairman and Trustee Chairman and Chief Executive
Officer, Mentor Investment Group;
Director, Wheat, First
Securities, Inc.; Managing
Director, Wheat First Butcher
Singer; Director, Mentor Income
Fund, Inc. and America's Utility
Fund, Inc.; Chairman and Trustee,
Mentor Funds, Cash Resource
Trust, and Mentor Institutional
Trust.
[Other Trustees to be suppled by amendment]
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<PAGE>
Paul F. Costello ( ) President Managing Director, Wheat First
Butcher Singer and Mentor
Investment Group; President,
Cash Resource Trust, Mentor
Income Fund, Inc. and Mentor
Institutional Trust; Managing
Director, Mentor Investment
Advisors, LLC; Executive Vice
President and Chief
Administrative Officer,
America's Utility Fund, Inc.;
Director, Mentor Perpetual and
Mentor Trust Company;
formerly, President, Mentor
Series Trust; Director,
President and Chief Executive
Officer, First Variable Life
Insurance Company; President
and Chief Financial Officer,
Variable Investors Series
Trust; President and
Treasurer, Atlantic Capital &
Research, Inc.; Vice President
and Treasurer, Variable Stock
Fund, Inc., Monarch Investment
Series Trust and GEICO Tax
Advantage Series Trust; Vice
President, Monarch Life
Insurance Company, GEICO
Investment Services Company,
Inc., Monarch Investment
Services Company, Inc. and
Springfield Life Insurance
Company.
Terry L. Perkins ( ) Treasurer Senior Vice President, Mentor
Investment Group; Treasurer,
Cash Resource Trust, Mentor
Income Fund, Inc., Mentor
Institutional Trust and
America's Utility Fund, Inc.;
formerly, Treasurer and
Comptroller, Ryland Capital
Management, Inc.
Michael Wade ( ) Assistant Treasurer Vice President, Mentor
Investment Group; Assistant
Treasurer, Cash Resource
Trust, Mentor Income Fund,
Inc., Mentor Institutional
Trust and America's Utility
Fund; formerly, Senior
Accountant, Wheat First
Butcher Singer; formerly,
Audit Senior, BDO Seidman.
John M. Ivan ( ) Clerk Managing Director, Director of
Compliance, Senior Vice
President and Assistant
General Counsel, Wheat, First
Securities, Inc.; Clerk, Cash
Resource Trust and Mentor
Institutional Trust.
*This Trustee is deemed to be an "interested person" of the Fund as
defined in the 1940 Act.
Trustees' Compensation
The Fund pays no compensation to its Trustees who are "interested
persons" thereof.
The annual compensation of the non-interested Trustees is noted below.
Since the Fund has not yet completed its first fiscal year, the amounts listed
are estimates for the Fund's first fiscal year based upon an understanding
between the Fund and each Trustee.
- 15 -
<PAGE>
Total compensation
Estimated aggregate from all
Trustees Compensation from Fund* funds in complex during 1996
- -------- ----------------------- ----------------------------
[To be supplied]
*For the period October __ to December 31, 1997. Not annualized.
- --------------------
The Trustees do not receive pension or retirement benefits from the
Fund.
The Fund's Declaration of Trust provides that the Fund 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 Fund, except if it is determined in the manner specified in the
Declaration of Trust that they have not acted in good faith in the reasonable
belief that their actions were in the best interests of the Fund or that such
indemnification would relieve any officer or Trustee of any liability to the
Fund or its shareholders by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of his or her duties. The Fund, at its
expense, provides liability insurance for the benefit of its Trustees and
officers.
Subject to the general oversight of the Trustees of the Fund, Mentor
Perpetual manages the Fund in accordance with the stated policies of the Fund.
Mentor Perpetual makes investment decisions for the Fund and places purchase and
sale orders for the Fund's portfolio transactions. In selecting broker-dealers,
Mentor Perpetual may consider brokerage and research services furnished to it
and its affiliates. Subject to seeking the best overall terms available, Mentor
Perpetual may consider sales of shares of the Fund (and, if permitted by law, of
other funds in the Mentor family) as a factor in the selection of broker-dealers
to execute portfolio transactions for the Fund. Mentor Perpetual may at times
cause the Fund to pay commissions to broker-dealers affiliated with Mentor
Perpetual.
The Fund bears expenses incurred in the operation of the Fund or
otherwise allocated to the Fund, including but not limited to taxes, interest,
brokerage fees and commissions, fees to Trustees who are not officers,
directors, stockholders, or employees of Wheat First Butcher Singer and its
subsidiaries, Securities and Exchange Commission registration fees and related
expenses, state Blue Sky qualification fees, charges of the custodian and
transfer and dividend disbursing agents, charges for outside auditing,
accounting, and legal services, certain investor servicing fees and expenses,
charges for the printing of prospectuses for regulatory purposes or for
distribution to shareholders, certain shareholder report charges, and charges
relating to corporate matters.
MANAGEMENT CONTRACT
Under a Management Contract between the Fund and Mentor Perpetual,
subject to such policies as the Trustees may determine, Mentor Perpetual, at its
own expense, furnishes continuously an investment program for the Fund and makes
investment decisions on behalf of the Fund. Subject to the control of the
Trustees, Mentor Perpetual also places all orders for the purchase and sale of
the Fund's portfolio securities.
As compensation for the services rendered and expenses borne by Mentor
Perpetual under the Management Contract, the Fund pays Mentor Perpetual a
quarterly fee based on the Fund's average net asset value (determined as
described below) at the annual rate of 1.00% of the average weekly net asset
value of the Fund. Average weekly net
- 16 -
<PAGE>
asset value is to be determined by taking the average of the weekly
determinations of the net asset value, determined at the close of the last
business day of each week, for each week which ends during the quarter.
The Management Contract may be terminated without penalty by vote of
the Trustees or the shareholders of the Fund, or by Mentor Perpetual, on 30
days' written notice. It may be amended only by a vote of the shareholders of
the Fund. The Management Contract also terminates without payment of any penalty
in the event of its assignment. The Management Contract provides that it will
continue in effect for the two years from the date of its execution and
thereafter only so long as such continuance is approved at least annually by
vote of either the Trustees or the shareholders, and, in either case, by a
majority of the Trustees who are not "interested persons" of Mentor Perpetual or
the Fund. In each of the foregoing cases, the "vote of the shareholders" means
the affirmative vote of the lesser of (i) 67% or more of the Shares represented
at a meeting of shareholders if the holders of more than 50% of the outstanding
Shares are present or represented by proxy at such meeting, or (ii) 50% or more
of the outstanding Shares.
The Management Contract provides that Mentor Perpetual shall not be
subject to any liability to the Fund or to any shareholder of the Fund for any
act or omission in the course of or connected with rendering services to the
Fund in the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its duties on the part of Mentor Perpetual.
ADMINISTRATIVE SERVICES CONTRACT
Under an Administrative Services Contract between the Fund and Mentor
Investment Group, Mentor Investment Group, at its own expense and subject to the
control of Trustees, manages, supervises, and conducts the non-investment
related affairs and business of the Fund, furnishes office space and equipment,
and provides bookkeeping and clerical services (including determination of the
Fund's net asset value, but excluding transfer agency services). As compensation
for the services rendered, facilities furnished, and expenses borne by Mentor
Investment Group under the Administrative Services Contract, the Fund pays
Mentor Investment Group a quarterly fee based on the Fund's average weekly net
asset value (determined as described above under "Management Contract") at the
annual rate of 0.10% of average weekly net asset value of the Fund.
The Administrative Services Contract provides that Mentor Investment
Group shall not be subject to any liability to the Fund or to any shareholder of
the Fund for any act or omission in the course of or connected with rendering
services to the Fund in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its duties on the part of Mentor Investment
Group.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Investment Decisions
Investment decisions for the Fund and for the other investment advisory
clients of Mentor Perpetual and its affiliates are made with a view to achieving
their respective investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
rather than other clients even though it could have been bought or sold for such
other clients at the same time. Likewise, a particular security may be bought
for one or more clients when one or more clients are selling the security. In
some instances, one client may sell a particular security to another client. It
also sometimes happens that two or more clients simultaneously purchase or sell
the same, in which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such clients in a manner
which in Mentor Perpetual's opinion is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of securities for one or more clients will have an adverse
effect on other clients.
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Brokerage and Research Services
Mentor Perpetual will place orders for the purchase and sale of
portfolio securities for the Fund and will buy and sell securities for the Fund
through a substantial number of broker-dealers. In so doing, Mentor Perpetual
will seek to obtain for the Fund the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, Mentor Perpetual, having in mind the Fund's best interests, will
consider all factors it deems relevant, including, by way of illustration, the
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience and financial stability of
the broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive "brokerage and research services" (as defined in the Securities
Exchange Act of 1934) from broker-dealers which execute portfolio transactions
for the clients of such advisers and from third parties with which such
broker-dealers have arrangements. Consistent with this practice, Mentor
Perpetual receives brokerage and research services from many broker-dealers with
which Mentor Perpetual places the Fund's portfolio transactions and from third
parties with which these broker-dealers have arrangements. These services
include such matters as general economic and securities market reviews, industry
and company reviews, evaluations of securities, recommendations as to the
purchase and sale of securities, newspapers, magazines, pricing services,
quotation services, news services and personal computers utilized by Mentor
Perpetual's managers and analysts. Where the services referred to above are not
used exclusively by Mentor Perpetual for research purposes, Mentor Perpetual,
based upon its own allocations of expected use, bears that portion of the cost
of these services which directly relates to their non-research use. Some of
these services are of value to Mentor Perpetual and its affiliates in advising
various of its clients (including the Fund), although not all of these services
are necessarily useful and of value in managing the Fund. The management fee
paid by the Fund is not reduced as a result of Mentor Perpetual's and its
affiliate's receipt of these services, even though Mentor Perpetual might
otherwise be required to purchase some of these services for cash.
As permitted by Section 28(e) of the Securities Exchange Act of 1934
and by the Management Contract, Mentor Perpetual may cause the Fund to pay a
broker-dealer which provides brokerage and research services to Mentor Perpetual
an amount of disclosed commission for effecting a securities transaction on a
stock exchange or other agency basis for the Fund in excess of the commission
which another broker-dealer would have charged for effecting that transaction in
recognition of the brokerage and research services provided by the broker-dealer
effecting the transaction. Mentor Perpetual's authority to cause the Fund to pay
any such greater commissions is also subject to such policies as the Trustees
may adopt from time to time.
The Management Contract provides that commissions, fees, brokerage, or
similar payments received by Mentor Perpetual or an affiliate in connection with
the purchase and sale of portfolio securities of the Fund, less any direct
expenses approved by the Trustees, shall be recaptured by the Fund through a
reduction of the fee payable by the Fund under the Management Contract. Mentor
Perpetual seeks to recapture for the Fund soliciting dealer fees on the tender
of the Fund's portfolio securities in tender or exchange offers. Any such fees
which may be recaptured are likely to be minor in amount.
Consistent with the Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such policies as the Trustees may determine, Mentor Perpetual may
consider sales of shares of the Fund by underwriters and dealers in this
offering or in other offerings of the Fund's Shares (and, if permitted by law,
sales of the other Mentor Perpetual funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
The Trustees have determined that portfolio transactions for the Fund
may be effected through Wheat, First Securities, Inc. ("Wheat"), and EVEREN
Securities, Inc. ("EVEREN"), broker-dealers affiliated with Mentor Perpetual.
The Trustees have adopted certain policies incorporating the standards of Rule
17e-1 issued by the SEC under the 1940 Act which requires, among other things,
that the commissions paid to Wheat and EVEREN must be reasonable and fair
compared to the commissions, fees, or other remuneration received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. Wheat and EVEREN will not participate in
brokerage commissions given by the Fund to other brokers or dealers.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which Wheat or EVEREN makes a market.
Under rules adopted by the SEC, Wheat and EVEREN may not execute
transactions for the Fund on the floor of any national securities exchange, but
may effect transactions for the Fund by transmitting orders for execution and
arranging for the performance of this function by members of the exchange not
associated with them. Wheat and EVEREN will be required to pay fees charged to
those persons performing the floor brokerage elements out of the brokerage
compensation they receive from the Fund. The Fund has been advised by Wheat that
on most transactions, the floor brokerage generally constitutes from 5% and 10%
of the total commissions paid.
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DETERMINATION OF NET ASSET VALUE
The Fund determines the net asset value of its Shares at least once
each week as of the close of business on the last day of the week on which the
NYSE is open. Net asset value of the Shares is determined by dividing the value
of all assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses) by the total number of Shares
outstanding.
Portfolio securities for which market quotations are readily available
are stated at market value. Short-term investments that will mature in 60 days
or less are stated at amortized cost, which has been determined by the Trustees
to approximate the fair market value of such investments. All other securities
and assets are valued at their fair value following procedures approved by the
Trustees.
If any securities held by the Fund are restricted as to resale, Mentor
Perpetual determines their fair value following procedures approved by the
Trustees. The Trustees periodically review such valuations and procedures. The
fair value of such securities is generally determined as the amount which the
Fund could reasonably expect to realize from an orderly disposition of such
securities over a reasonable period of time. The valuation procedures applied in
any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of securities, if any (including any
registration expenses that might be borne by the Fund in connection with such
disposition). In addition, specific factors are also generally considered such
as the cost of the investment, the market value of any unrestricted securities
of the same class (both at the time of purchase and at the time of valuation),
the size of the holding, the prices of any recent transactions or offers with
respect to such securities, and any available analysts' reports regarding the
issuer.
Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rates or at such other rates as the Trustees may
determine in computing net asset value. As a result, fluctuations in the values
of such currencies in relation to the U.S. dollar will affect the net asset
value of the Fund's Shares even though there has not been any change in the
values of such securities as quoted in such foreign currencies.
AUTOMATIC DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
All distributions to shareholders whose Shares are registered in their
own names automatically will be reinvested in additional Shares of the Fund
pursuant to the Fund's Automatic Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), unless they elect to receive cash. Shareholders whose Shares are
held in the name of a broker or nominee should contact such broker or nominee to
determine whether or how they may participate in the Plan. Participation in the
Plan is voluntary and may be terminated or resumed at any time upon written
notice from the participant received by State Street Bank and Trust Company, the
plan agent (the "Plan Agent"), prior to the record date of the next dividend.
Additional information regarding such election may be obtained from the Fund.
Dividend payments and other distributions to be made by the Fund to
participants in the Plan ("Participants") either will be paid to the Plan Agent
in cash (which then must be used to purchase shares in the open market) or will
be represented by the delivery of shares, depending upon which of the two
options would be the most favorable to Participants, as determined in accordance
with the procedures described below. On each date on which the Fund determines
the net asset value of the shares (a "Valuation Date"), and which occurs not
more than five business days prior to a date fixed for payment of a dividend or
other distribution from the Fund, the Plan Agent will compare the determined net
asset value per share with the market price per share. For all purposes of the
Plan, "market price" shall be deemed to be the highest price bid at the close of
the NYSE or other primary exchange on which the Fund is traded on the relevant
Valuation Date, or, if no bids were made on such date, the next preceding day on
which a bid was made. If the net asset value in any such comparison is found to
be lower than the market price, the Plan Agent will instruct the Fund to satisfy
its obligation with respect to any such dividend or other distribution by
issuing additional shares to the Participants at a price per share equal to the
greater of the determined net asset value per share or 95% of
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the market price per share determined as of the close of business on the
relevant Valuation Date. However, if the net asset value per share is higher
than the market price per share, then the Plan Agent will instruct the Fund to
satisfy its obligation with respect to any such dividend or other distribution
by a cash payment to the Plan Agent for the account of Participants. The Plan
Agent then shall use such cash payment to buy additional shares of the Fund in
the "open market" for the account of the Participants; provided, however, that
the Plan Agent shall not purchase shares in the "open market" at a price in
excess of the net asset value as of the relevant Valuation Date. In the event
the Plan Agent is unable to complete its acquisition of shares to be purchased
in the "open market" by the end of the first trading day following receipt of
the cash payment from the Fund, any remaining funds shall be used by the Plan
Agent to purchase newly issued Shares from the Fund at the greater of the
determined net asset value per share or 95% of the market price per share as of
the relevant Valuation Date or the next preceding date.
Participants will also have the option of making additional cash
payments to the Plan Agent, on a monthly basis, for investment in the Fund's
shares. Such payments may be made in any amount from a minimum of $50 to a
maximum of $1,000 per month per Participant. The Fund may, in its discretion,
waive the maximum monthly limit with respect to any Participant. At the end of
each calendar month, the Plan Agent will determine the amount of funds
accumulated in the Fund. Purchases made from the accumulation of payments during
any one calendar month will be made on or about the first business day of the
following month (the "Investment Date"). The funds will be used to purchase
Shares from the Fund. If the net asset value of the shares is lower than the
market price as of the Valuation Date which occurs not more than five business
days prior to the relevant Investment Date, such shares will be newly issued
shares and will be issued at a price per share equal to the greater of the
determined net asset value per share or 95% of the market price per share. If
the net asset value per share is higher than the market price per share, then
the Plan Agent shall use such cash payments to buy additional shares in the
"open market" for the account of the Participants; provided, however, that the
Plan Agent shall not purchase shares in the "open market" at a price in excess
of the net asset value as of the relevant Valuation Date. In the event that the
Plan Agent is unable to complete its acquisition of shares to be purchased in
the "open market" by the end of the Investment Date, any remaining cash payments
shall be used by the Plan Agent to purchase newly issued Shares from the Fund at
the greater of the determined net asset value per share or 95% of the market
price per share as of the relevant Valuation Date. All cash payments received by
the Plan Agent in connection with the Plan will be held without earning
interest. To avoid unnecessary cash accumulations, and also to allow ample time
for receipt and processing by the Plan Agent, Participants who wish to make
voluntary cash payments should send such payments to the Plan Agent in such a
manner that assures that the Plan Agent will receive and collect Federal Funds
by the end of the month. This procedure will avoid unnecessary accumulations of
cash and will enable participants to realize lower brokerage commissions and to
avoid additional transaction charges. If a voluntary cash payment is not
received in time to purchase shares in any calendar month, such payment shall be
invested on the next Investment Date. A participant may withdraw a voluntary
cash payment by written notice to the Plan Agent if the notice is received by
the Plan Agent at least 48 hours before such payment is to be invested by the
Plan Agent.
The Plan Agent will perform bookkeeping and other administrative
functions, such as maintaining all shareholder accounts in the Plan and
furnishing written confirmation of all transactions in the account, including
information needed by shareholders for personal and tax records. Shares in the
account of each Participant will be held by the Plan Agent in noncertificated
form in the name of the participant, and each shareholder's proxy will include
those shares purchased pursuant to the Plan and of record as of the record date
for determining those shareholders who are entitled to vote on any matter
involving the Fund. In case of shareholders who hold shares for others who are
the beneficial owners, such as banks, brokers, or nominees, the Plan Agent will
administer the Plan on the basis of the number of Shares certified from time to
time by such shareholders as representing and limited to the total number of
Shares registered in the shareholder's name and held for the account of
beneficial owners who have elected to participate in the Plan.
There are no special fees or charges to Participants other than
reasonable transactions fees, which shall not exceed $0.75 per dividend
reinvestment per Participant.
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<PAGE>
With respect to purchases from voluntary cash payments, the Plan Agent
will charge $0.75 per investment, plus a pro rata share of the brokerage
commissions, if any, incurred on such purchases. Brokerage charges for
purchasing small blocks of stock for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions, as
the Plan Agent will purchase shares for all participants in large blocks and
prorate the commission rate.
The automatic reinvestment of dividends and distributions will not
relieve participants of any income tax liability associated therewith.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any voluntary cash payment received and any dividend or distribution
to be paid subsequent to a date specified in a notice of the change sent to all
shareholders at least 90 days before such specified date. The Plan may also be
terminated on at least 90 days' written notice to all Participants.
COMPULSORY CONVERSION TO AN OPEN-END INVESTMENT COMPANY
Compulsory Conversion Provision. The Declaration of Trust provides
that, if at any time following the date 18 months after the date on which Shares
are first sold pursuant to its initial public offering, the last sale price of
the Shares on the NYSE on the last business day of any week and for each of the
next 14 business days thereafter (the period including the last business day of
such week and the next 14 business days thereafter being referred to herein as
the "Measuring Period") is less than 95% of the net asset value per Share of the
Fund determined on each such day, then the Trustees must take all steps
necessary and appropriate to cause the Fund to be converted from a "closed-end
company" to an "open-end company" as those terms are defined in the 1940 Act.
Those steps may include, without limitation, (i) the adoption of any amendments
to the Declaration of Trust or to the Bylaws of the Fund which the Trustees may
in their discretion deem necessary or appropriate in respect of such conversion;
(ii) the preparation, execution, and filing of any documents, including without
limitation a registration statement on Form N-1A (or any other form), and
amendments thereto, that they may in their discretion deem necessary or
appropriate with the Securities and Exchange Commission, or any other person or
entity; (iii) the amendment of the registration of the Trust under the 1940 Act
from a closed-end company to an open-end company; and (iv) the delisting of the
Shares from the NYSE. For this purpose, a "business day" shall be any day on
which the New York Stock Exchange is open. The obligation of the Trustees to
cause the Fund to be converted to an open-end company will remain in effect even
if the last sale price of the Shares on the New York Stock Exchange on any day
after the Measuring Period is greater than 95% of the net asset value per Share
of the Trust determined on each such day. No vote or consent of Shareholders
will be required in connection with the conversion. The Trustees would not be
required to take any action which would violate any applicable law, rule, or
regulation.
If the Fund converts to an open-end investment company, it will be able
to continuously issue and offer for sale Shares, and each such Share could be
presented to the Fund at the option of the holder for redemption at a price
based on the then-current net asset value per share. Furthermore, the Shares
would no longer be listed on the NYSE. After the conversion, Shares may be
purchased from and redeemed by the Fund at net asset value as follows:
Purchasing shares. Investors will be permitted to purchase Shares from
the Fund's transfer agent or from other selected securities brokers or dealers
following conversion to an open-end investment company. A buyer whose purchase
order is received by the transfer agent before the close of trading on the NYSE,
currently 4:00 p.m. Eastern time, will acquire Shares at the net asset value
determined as of that day. A buyer whose purchase order is received by the
transfer agent after the close of trading on the NYSE will acquire Shares at the
net asset value set as of the next trading day. A broker may charge a
transaction fee for the purchase.
The Fund anticipates that, should it convert to an open-end investment
company, the minimum initial investment in the Fund will be $2,500 for regular
accounts and $1,000 for tax-qualified retirement plans. The Fund anticipates
that the minimum additional investment in the Fund will be $1,000 for regular
accounts and $500 for
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tax-qualified retirement plans. The Fund may further reduce or waive the
minimums for certain retirement and other employee benefit plans; for Mentor
Perpetual's [and its affiliates'] employees, clients and their affiliates; for
advisers or financial institutions offering investors a program of services; or
any other person or organization deemed appropriate by the Funds. Investors will
be permitted to purchase Shares by check or by wire. The Fund will provide a
pre-authorized investment plan to investors.
Upon conversion, the Fund may institute a distribution plan pursuant to
Rule 12b-1 under the 1940 Act. Pursuant to such plan, the Fund would be
permitted to incur distribution expenses related to the sale of its shares of up
to .25% per annum of the Fund's average daily net assets. The plan would provide
that the Fund may finance activities which are primarily intended to result in
the sale of the Fund's Shares, including, but not limited to, advertising,
printing of prospectuses and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature and
payments to dealers and shareholder servicing agents who enter into agreements
with the Fund or its distributor.
Redeeming shares. Investors will be permitted to redeem Shares through
the transfer agent of the Fund or from other selected securities brokers or
dealers following conversion to an open-end investment company. A shareholder
whose redemption order is received by the transfer agent before the close of
trading on the NYSE, currently 4:00 p.m. Eastern time, will redeem Shares at the
net asset value set as of that day. A shareholder whose redemption order is
received by the Transfer Agent after the close of trading on the NYSE will
redeem Shares at the net asset value set as of the next trading day on the NYSE.
A broker may charge a transaction fee for the redemption.
DESCRIPTION OF SHARES
General. The Fund was organized as a Massachusetts business trust by an
Agreement and Declaration of Trust dated August 25, 1997. The Declaration of
Trust provides that the Trustees of the Fund may authorize and issue an
unlimited number of shares in separate classes, and the Trustees have authorized
the Shares.
The Trustees have the authority to issue an unlimited number of Shares.
The Shares [outstanding are, and those] offered hereby when issued will be,
fully paid and nonassessable by the Fund, except as set forth in the following
paragraph. The Shares have no preemptive, conversion, exchange, or redemption
rights. Each Share has one vote, with fractional shares voting proportionately.
Shares are freely transferable.
Under Massachusetts law, shareholders of the Fund could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for any act or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Fund
or the Trustees. The Declaration of Trust provides for indemnification out of
Fund property for the loss and expense of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations. The likelihood of
such circumstances is considered remote.
The Agreement and Declaration of Trust includes provisions that could
have the effect of limiting the ability of other entities or persons to acquire
control of the Fund, or to cause it to engage in certain transactions or to
modify its structure. The affirmative vote of at least two-thirds of the
outstanding Shares of the Fund is required to authorize any of the following
actions: (1) merger or consolidation of the Fund, (2) sale of all or
substantially all of the assets of the Fund, (3) liquidation or dissolution of
the Fund, (4) conversion to an open-end investment company in certain
circumstances, or (5) amendment of the Agreement and Declaration of Trust to
reduce the two-thirds vote required to authorize the actions in (1) through (5),
unless with respect to any of the actions listed in (1) through (4) such action
has been authorized by the affirmative vote of two-thirds of the total number of
Trustees then in office in which case the affirmative vote of a majority of the
outstanding Shares is required.
The Trustees have determined that the two-thirds voting requirements
described above, which are greater than the minimum requirements under the 1940
Act, are in the best interests of the Fund and its Shareholders generally.
Reference is made to the Agreement and Declaration of Trust of the Fund, on file
with the Securities and Exchange Commission, for the full text of these
provisions. These provisions could have the effect of depriving Shareholders of
an opportunity to sell their Shares at at a premium over prevailing market
prices by discouraging a third party from seeking to obtain control of the Fund
in a tender offer or similar transaction.
TAXES
The Fund intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund will not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders. The Fund will not under present law be subject to
any excise or income taxes in Massachusetts.
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In order to qualify as a "regulated investment company," the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies; and (b) diversify its holdings so that, at the close of each quarter
of its taxable year, (i) at least 50% of the market value of its total assets
consists of cash and cash items (including receivables), Government Securities,
securities of other regulated investment companies, and other securities limited
generally with respect to any one issuer to not more than 5% of the value of its
total assets and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities (other than Government securities or securities of other
regulated investment companies) of any issuer or of two or more issuers which
the Fund controls and which are engaged in the same, similar, or related trades
or businesses. In order to receive the favorable tax treatment accorded
regulated investment companies and their shareholders, moreover, the Fund in
general must distribute with respect to each taxable year at least 90% of the
sum of its taxable net investment income, its net tax-exempt income, and the
excess, if any, of net short-term capital gains over net long-term capital
losses for such year.
Distributions from a Fund will be taxable to shareholders as ordinary
income to the extent derived from the Fund's investment income and net
short-term gains. Pursuant to the Taxpayer Relief Act of 1997 (the "1997 Act"),
two different tax rates apply to net capital gains (that is, the excess of net
gains from capital assets held for more than one year ("long-term capital
assets") over net losses from capital assets held for not more than one year
("short-term capital assets")). One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18 months
("mid-term gains") and a second, preferred rate (generally 20%) applies to the
balance of such net capital gains ("adjusted net capital gains"). Distributions
of net capital gains will be treated in the hands of shareholders as mid-term
gains to the extent designated by the Fund as deriving from net gains from
assets held for more than one year but not more than 18 months, and the balance
will be treated as adjusted net capital gains. Distributions of mid-term gains
and adjusted net capital gains will be taxable to shareholders as such,
regardless of how long a shareholder has held the shares in the Fund.
Dividend and capital gain distributions will be taxable as described
above whether received in cash or in shares under the Dividend Reinvestment
Plan. With respect to distributions received in cash or reinvested in shares
purchased on the open market, the amount of the distribution for tax purposes
will be the amount of cash distributed or allocated to the shareholder. With
respect to distributions made in shares issued by the Fund, the amount of the
distribution will be the fair market value of the shares on the payment date. In
years when the Fund distributes amounts in excess of its earnings and profits,
distributions to shareholders may be treated in part as a return of capital.
If the Fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the Fund would be subject to
tax on its taxable income at corporate rates, and all distributions from
earnings and profits, including any distributions of net long-term capital
gains, would be taxable to shareholders as ordinary income. In addition, the
Fund could be required to recognize unrealized gains, pay substantial taxes and
interest and make substantial distributions before requalifying as a regulated
investment company that is accorded special tax treatment.
If the Fund fails to distribute in a calendar year substantially all of
its ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if the Fund is
permitted so to elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the Fund in January of a year generally is
deemed to have been paid by the Fund on December 31 of the preceding year, if
the dividend was declared and payable to shareholders of record on a date in
October, November or December of that preceding year. The Fund intends generally
to make distributions sufficient to avoid imposition of the 4% excise tax.
Hedging transactions. If the Fund engages in transactions, including
hedging transactions in options, futures contracts, and straddles, or other
similar transactions, it will be subject to special tax rules (including
mark-to-market, straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to
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the Fund, cause adjustments in the holding periods of the Fund's securities, or
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders. The Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund. The tax consequences of certain hedging transactions have been modified by
the 1997 Act.
Certain of the Fund's hedging activities (including its transactions,
if any, in foreign currencies or foreign currency-denominated instruments) are
likely to produce a difference between its book income and its taxable income.
If the Fund's book income exceeds its taxable income, the distribution (if any)
of such excess will be treated as a dividend to the extent of the Fund's
remaining earnings and profits (including earnings and profits arising from
tax-exempt income), and thereafter as a return of capital or as gain from the
sale or exchange of a capital asset, as the case may be. If the Fund's book
income is less than its taxable income, the Fund could be required to make
distributions exceeding book income to qualify as a regulated investment company
that is accorded special tax treatment.
Return of capital distributions. If the Fund makes a distribution to
you in excess of its current and accumulated "earnings and profits" in any
taxable year, the excess distribution will be treated as a return of capital to
the extent of your tax basis in your shares, and thereafter as capital gain. A
return of capital is not taxable, but it reduces your tax basis in your shares,
and thus reduces any loss or increases any gain on a subsequent taxable
disposition by you or your shares.
Securities issued or purchased at a discount. The Fund's investment in
securities issued at a discount and certain other obligations will (and
investments in securities purchased at a discount may) require the Fund to
accrue and distribute income not yet received. In order to generate sufficient
cash to make the requisite distributions, the Fund may be required to sell
securities in its portfolio that it otherwise would have continued to hold.
Foreign currency-denominated securities and related hedging
transactions. The Fund's transactions in foreign currencies, foreign
currency-denominated debt securities and certain foreign currency options,
futures contracts, and forward contacts (and similar instruments) may give rise
to ordinary income or loss to the extent such income or loss results from
fluctuations in the value of the foreign currency concerned.
If more than 50% of the Fund's assets at year end consists of the debt
and equity securities of foreign corporations, the Fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign countries.
In such a case, shareholders will include in gross income from foreign sources
their pro rata share of such taxes. A shareholder's ability to claim a foreign
tax credit or deduction in respect of foreign taxes paid by the Fund may be
subject to certain limitations imposed by the Code (including a holding period
requirement applied at both the Fund and shareholder level imposed by the 1997
Act), as a result of which a shareholder may not get a full credit or deduction
for the amount of such taxes. Shareholders who do not itemize on their federal
income tax returns may claim a credit (but no deduction) for such foreign taxes.
Investment by the Fund in certain "passive foreign investment
companies" could subject the Fund to a U.S. federal income tax (including
interest charges) on distributions received from the company or on proceeds
received from the disposition of shares in the company, which tax cannot be
eliminated by making distributions to Fund shareholders. However, the Fund may
elect to treat a passive foreign investment company as a "qualified electing
fund," in which case the Fund will be required to include its share of the
company's income and net capital gain annually, regardless of whether it
receives any distribution from the company. The Fund also may make an election
to mark the gains (and to a limited extent losses) in such holdings "to the
market" as though it had sold and repurchased its holdings in those PFICs on the
last day of the Fund's taxable year. Such gains and losses are treated as
ordinary income and loss. The QEF and mark-to-market elections may have the
effect of accelerating the recognition of income (without the receipt of cash)
and increase the amount required to be distributed for the Fund to avoid
taxation. Making either of these elections therefore may require a Fund to
liquidate other investments (including when it is not
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<PAGE>
advantageous to do so) to meet its distribution requirement, which also may
accelerate the recognition of gain and affect a Fund's total return.
Sale or redemption of shares. The sale, exchange or redemption of Fund
shares may give rise to a gain or loss. In general, any gain realized upon a
taxable disposition of shares will be treated as mid-term capital gain if the
shares have been held for more than 12 months, but not more than 18 months, and
as adjusted net capital gains if the shares been held for more than 18 months.
Otherwise the gain on the sale, exchange or redemption of Fund shares will be
treated as short-term capital gain or loss. In addition, any loss (not already
disallowed as provided in the preceding sentence) realized upon a taxable
disposition of shares held for six months or less will be treated as long-term,
rather than short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the shares. All or a
portion of any loss realized upon a taxable disposition of Fund shares will be
disallowed if other Fund shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased shares will be
adjusted to reflect the disallowed loss.
Shares purchased through tax-qualified plans. Special tax rules apply
to investments through defined contribution plans and other tax-qualified plans.
Shareholders should consult their tax adviser to determine the suitability of
shares of the Fund as an investment through such plans and the precise effect of
an investment on their particular tax situation.
Backup withholding. The Fund generally is required to withhold and
remit to the U.S. Treasury 31% of the taxable dividends and other distributions
paid to any individual shareholder who fails to furnish the Fund with a correct
taxpayer identification number (TIN), who has under reported dividends or
interest income, or who fails to certify to the Fund that he or she is not
subject to such withholding. Shareholders who fail to furnish their current TIN
are subject to a penalty of $50 for each such failure unless the failure is due
to reasonable cause and not wilful neglect. An individual's taxpayer
identification number is his or her social security number.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions. Dividends and distributions also may be subject to state
and federal taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes. The foregoing
discussion relates solely to U.S. federal income tax law. Non-U.S. investors
should consult their tax advisers concerning the tax consequences of ownership
of shares of the Fund, including the possibility that distributions may be
subject to a 30% United States withholding tax (or a reduced rate of withholding
provided by treaty).
THE TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. EACH SHAREHOLDER IS ADVISED TO CONSULT ITS OWN TAX
ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO IT OF AN INVESTMENT IN
THE FUND, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL, FOREIGN, AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement
between [Name of Underwriter] (the "Underwriter") and the Fund, the Underwriter
has agreed to purchase the Shares offered hereby from the Fund, and the Fund has
agreed to sell the Shares offered hereby to the Underwriter.
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<PAGE>
The Underwriting Agreement provides that the obligations of the
Underwriter thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriter's
obligation is such that it is committed to purchase and pay for all of the
Shares if any are purchased.
The Underwriter proposes to offer the Shares offered hereby initially
at the offering price set forth on the cover page of this Prospectus. The
Underwriter proposes to offer the Shares to certain securities dealers at such
price less a concession not in excess of $ per share. After the offering, the
price to the public, concession and allowance may be changed by the Underwriter.
The Underwriting Agreement provides that the Fund will pay the Underwriter up to
$ in partial reimbursement of its expenses.
The Fund has granted to the Underwriter an option, exercisable within
days of the date of this Prospectus, to purchase up to an additional additional
Shares to cover over-allotments, if any, at the same price per share as the
initial Shares to be purchased by the Underwriter from the Fund. To the extent
that the Underwriter exercises this option, the Underwriter will be committed,
subject to certain conditions, to purchase such additional Shares. The
Underwriter may purchase such Shares only to cover over-allotments made in
connection with this offering.
Investors must pay for the Shares on the third business day following
the date of the final Prospectus. Investors should consult their brokers
concerning the manner and method of payment. In addition, physical delivery of
certificates representing Shares initially may be required to transfer
ownership.
In connection with the requirements for listing of the Shares on the
NYSE, the Underwriter has undertaken to sell lots of 100 or more shares to a
minimum of 2,000 beneficial owners in the United States. The minimum investment
requirement is 100 Shares ($1,000).
The Fund anticipates that from time to time the Underwriter may act as
broker or dealer in connection with the execution of its portfolio transactions
after it has ceased to be an Underwriter and, subject to certain restrictions,
may act as broker while it is Underwriter.
The Fund has agreed not to issue, and all Trustees and executive
officers of the Fund have agreed not to resell, any additional Shares or other
equity securities of the Fund for days after the date of this Prospectus without
the prior written consent of the Underwriter.
The Fund and Mentor Perpetual have agreed to indemnify the Underwriter
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the Underwriter may be required to make in respect
thereof.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND REGISTRAR
The Fund's custodian is Investors Fiduciary Trust Company, 127 West
10th Street, Kansas City, Missouri 64105 (the "Custodian"). The transfer agent,
dividend disbursing agent, and registrar for the Shares is State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
LEGAL MATTERS
Certain legal matters in connection with the Shares offered hereby will
be passed upon for the Fund by Ropes & Gray, Boston, Massachusetts and for the
Underwriter by [Name and address of counsel].
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<PAGE>
EXPERTS
The audited financial statement of the Fund included in this Prospectus
has been so included in reliance on the report of , independent accountants,
given on the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Fund has filed with the SEC a Registration Statement under the
Securities Act and the 1940 Act with respect to the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and its exhibits and schedules. For further information with respect
to the Fund and the Shares offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules filed as part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document are not necessarily complete, and, in each such instance,
reference is hereby made to the copy of the contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by this reference thereto. The Registration Statement, together
with its exhibits and schedules, may be inspected without charge at the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
and the regional offices of the SEC located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at 500 West Madison Street, Suite 1400 Chicago,
Illinois 60661. Copies of all or any part of such materials may be obtained from
any such office upon payment of the fees prescribed by the SEC. Such information
may also be inspected and copied at the offices of the NYSE at 20 Broad Street,
New York, New York 10005. The SEC maintains an Internet site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Fund, that file
electronically with the SEC.
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<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
of Mentor Perpetual Global Emerging Companies Fund
We have audited the accompanying statement of assets and liabilities of
Mentor Perpetual Global Emerging Companies Fund (the "Fund") as of October ,
1997. This financial statement is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial position of the
Fund at October , 1997 in conformity with generally accepted accounting
principles.
Richmond, Virginia
October , 1997
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<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
Assets
Cash.............................................................. $100,000
Deferred organization expenses (Note 1)........................... ________
Liabilities
Accrued expenses.................................................. $
Commitments (Notes 1 and 2)....................................... $_______
NET ASSETS, applicable to shares of
beneficial interest without par value issued and
outstanding; unlimited number of authorized shares................ $100,000
========
NET ASSET VALUE PER SHARE......................................... $
========
Note 1. Organization
The Fund was organized as a Massachusetts business trust on August ,
1997 and is registered under the Investment Company Act of 1940, as amended, as
a closed-end, diversified management investment company. The Fund has had no
operations other than those relating to organizational matters, and the initial
capital contribution of $100,000 has been made by . Certain expenses incurred by
the Fund in connection with its organization and its initial public offering
have been or will be paid initially by Mentor Perpetual Advisors, LLC ("Mentor
Perpetual"), the Fund's investment adviser; however, the Fund will reimburse
Mentor Perpetual for such costs. Organization costs estimated at $ will be
deferred and amortized by the Fund over a period not to exceed 60 months from
the date the Fund commences operations; offering costs will be charged to
capital upon completion of this offering.
Note 2. Management Contract
The Fund has entered into a Management Contract with Mentor Perpetual
as described under "Management Contract" in the Prospectus.
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APPENDIX A
Options
The Fund may purchase and sell put and call options on its portfolio
securities to enhance investment performance or to protect against changes in
market prices.
Covered call options. The Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.
In return for the premium received when it writes a covered call
option, the Fund gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Fund retains the risk of loss should the price of
such securities decline. If the option expires unexercised, the Fund realizes a
gain equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of sale (exercise price minus commissions) plus the amount of
the premium.
The Fund may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. The Fund may enter into
closing purchase transactions in order to free itself to sell the underlying
security or to write another call on the security, realize a profit on a
previously written call option, or protect a security from being called in an
unexpected market rise. Any profits from a closing purchase transaction may be
offset by a decline in the value of the underlying security. Conversely, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from a
closing purchase transaction is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by the Fund.
Covered put options. The Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
The Fund may terminate a put option that it has written before it
expires by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
Purchasing put and call options. The Fund may also purchase put options
to protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise
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price to cover the premium and transaction costs that the Fund must pay. These
costs will reduce any profit the Fund might have realized had it sold the
underlying security instead of buying the put option.
The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
Options on foreign securities. The Fund may purchase and sell options
on foreign securities. It is expected that risks related to such options will
not differ materially from risks related to options on U.S. securities. However,
position limits and other rules of foreign exchanges may differ from those in
the U.S. In addition, options markets in some countries, many of which are
relatively new, may be less liquid than comparable markets in the U.S.
Risks involved in the sale of options. Options transactions involve
certain risks, including the risks that Mentor Perpetual will not forecast
interest rate or market movements correctly, that the Fund may be unable at
times to close out such positions, or that hedging transactions may not
accomplish their purpose because of imperfect market correlations. The
successful use of these strategies depends on the ability of Mentor Perpetual to
forecast market and interest rate movements correctly.
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If no secondary market were to
exist, it would be impossible to enter into a closing transaction to close out
an option position. As a result, the Fund may be forced to continue to hold, or
to purchase at a fixed price, a security on which it has sold an option at a
time when Mentor Perpetual believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict the
Fund's use of options. The exchanges have established limitations on the maximum
number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the Fund
and other clients of Mentor Perpetual may be considered such a group. These
position limits may restrict the Fund's ability to purchase or sell options on
particular securities.
Options which are not traded on national securities exchanges may be
closed out only with the other party to the option transaction. For that reason,
it may be more difficult to close out unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
Government regulations, particularly the requirements for qualification
as a "regulated investment company" under the Internal Revenue Code, may also
restrict the Fund's use of options.
Futures Contracts
In order to hedge against the effects of adverse market changes the
Fund that may invest in debt securities may buy and sell futures contracts on
debt securities of the type in which the Fund may invest and on indexes of debt
securities. In addition, the Fund that may invest in equity securities may
purchase and sell stock index futures to hedge against changes in stock market
prices. The Fund may also, to the extent permitted by applicable law, buy and
sell futures contracts and options on futures contracts to increase its current
return. All such futures and related options
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will, as may be required by applicable law, be traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission (the "CFTC").
Futures on Debt Securities and Related Options. A futures contract on a
debt security is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return. By
purchasing futures on debt securities -- assuming a "long" position -- the Fund
will legally obligate itself to accept the future delivery of the underlying
security and pay the agreed price. By selling futures on debt securities --
assuming a "short" position -- it will legally obligate itself to make the
future delivery of the security against payment of the agreed price. Open
futures positions on debt securities will be valued at the most recent
settlement price, unless that price does not, in the judgment of persons acting
at the direction of the Trustees as to the valuation of the Fund's assets,
reflect the fair value of the contract, in which case the positions will be
valued by the Trustees or such persons.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions that may
result in a profit or a loss. While futures positions taken by the Fund will
usually be liquidated in this manner, the Fund may instead make or take delivery
of the underlying securities whenever it appears economically advantageous to do
so. A clearing corporation associated with the exchange on which futures are
traded assumes responsibility for such closing transactions and guarantees that
the Fund's sale and purchase obligations under closed-out positions will be
performed at the termination of the contract.
Hedging by use of futures on debt securities seeks to establish with
more certainty than would otherwise be possible the effective rate of return on
securities. The Fund may, for example, take a "short" position in the futures
market by selling contracts for the future delivery of debt securities held by
the Fund (or securities having characteristics similar to those held by the
Fund) in order to hedge against an anticipated rise in interest rates that would
adversely affect the value of the Fund's securities. When hedging of this
character is successful, any depreciation in the value of securities may
substantially be offset by appreciation in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing
futures on debt securities. This would be done, for example, when the Fund
expects to purchase particular securities when it has the necessary cash, but
expects the rate of return available in the securities markets at that time to
be less favorable than rates currently available in the futures markets. If the
anticipated rise in the price of the securities should occur (with its
concomitant reduction in yield), the increased cost to the Fund of purchasing
the securities may be offset, at least to some extent, by the rise in the value
of the futures position taken in anticipation of the subsequent purchase.
Successful use by the Fund of futures contracts on debt securities is
subject to Mentor Perpetual's ability to predict correctly movements in the
direction of interest rates and other factors affecting markets for debt
securities. For example, if the Fund has hedged against the possibility of an
increase in interest rates which would adversely affect the market prices of
debt securities held by it and the prices of such securities increase instead
the Fund will lose part or all of the benefit of the increased value of its
securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily margin maintenance
requirements. The Fund may have to sell securities at a time when it may be
disadvantageous to do so.
The Fund may purchase and write put and call options on certain debt
futures contracts, as they become available. Such options are similar to options
on securities except that options on futures contracts give the purchaser the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an option of the same series.
There is no guarantee that such closing transactions can be effected. The Fund
will be required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to brokers'
requirements, and, in addition, net option premiums received will be included as
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initial margin deposits. See "Margin Payments" below. Compared to the purchase
or sale of futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options plus transactions costs. However, there
may be circumstances when the purchase of call or put options on a futures
contract would result in a loss to the Fund when the purchase or sale of the
futures contracts would not, such as when there is no movement in the prices of
debt securities. The writing of a put or call option on a futures contract
involves risks similar to those risks relating to the purchase or sale of
futures contracts.
Index Futures Contracts and Options. The Fund may invest in debt index
futures contracts and stock index futures contracts, and in related options. A
debt index futures contract is a contract to buy or sell units of a specified
debt index at a specified future date at a price agreed upon when the contract
is made. A unit is the current value of the index. (Debt index futures in which
the Funds are presently expected to invest are not now available, although such
futures contracts are expected to become available in the future.) A stock index
futures contract is a contract to buy or sell units of a stock index at a
specified future date at a price agreed upon when the contract is made. A unit
is the current value of the stock index.
For example, the Standard & Poor's 100 Stock Index is composed of 100
selected common stocks, most of which are listed on the New York Stock Exchange.
The S&P 100 Index assigns relative weightings to the common stocks included in
the Index, and the Index fluctuates with changes in the market values of those
common stocks. In the case of the S&P 100 Index, contracts are to buy or sell
100 units. Thus, if the value of the S&P 100 Index were $180, one contract would
be worth $18,000 (100 units x $180). The stock index futures contract specifies
that no delivery of the actual stocks making up the index will take place.
Instead, settlement in cash must occur upon the termination of the contract,
with the settlement being the difference between the contract price and the
actual level of the stock index at the expiration of the contract. For example,
if the Fund enters into a futures contract to buy 100 units of the S&P 100 Index
at a specified future date at a contract price of $180 and the S&P 100 Index is
at $184 on that future date, the Fund will gain $400 (100 units x gain of $4).
If the Fund enters into a futures contract to sell 100 units of the stock index
at a specified future date at a contract price of $180 and the S&P 100 Index is
at $182 on that future date, the Fund will lose $200 (100 units x loss of $2).
The Fund may purchase or sell futures contracts with respect to any
securities indexes. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
In order to hedge the Fund's investments successfully using futures
contracts and related options, the Fund must invest in futures contracts with
respect to indexes or sub-indexes the movements of which will, in its judgment,
have a significant correlation with movements in the prices of the Fund's
securities.
Options on stock index futures. Options on index futures contracts are
similar to options on securities except that options on index futures contracts
give the purchaser the right, in return for the premium paid, to assume a
position in an index futures contract (a long position if the option is a call
and a short position if the option is a put) at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
holder would assume the underlying futures position and would receive a
variation margin payment of cash or securities approximating the increase in the
value of the holder's option position. If an option is exercised on the last
trading day prior to the expiration date of the option, the settlement will be
made entirely in cash based on the difference between the exercise price of the
option and the closing level of the index on which the futures contract is based
on the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
Options on Indices. As an alternative to purchasing and selling call
and put options on index futures contracts, each of the Funds which may purchase
and sell index futures contracts may purchase and sell call and put options on
the underlying indexes themselves to the extent that such options are traded on
national securities exchanges. Index options are similar to options on
individual securities in that the purchaser of an index option acquires the
right to
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buy (in the case of a call) or sell (in the case of a put), and the writer
undertakes the obligation to sell or buy (as the case may be), units of an index
at a stated exercise price during the term of the option. Instead of giving the
right to take or make actual delivery of securities, the holder of an index
option has the right to receive a cash "exercise settlement amount". This amount
is equal to the amount by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing value
of the underlying index on the date of the exercise, multiplied by a fixed
"index multiplier".
The Fund may purchase or sell options on stock indices in order to
close out its outstanding positions in options on stock indices which it has
purchased. The Fund may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to the Fund because
the maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
Margin Payments. When the Fund purchases or sells a futures contract,
it is required to deposit with its custodian an amount of cash, U.S. Treasury
bills, or other permissible collateral equal to a small percentage of the amount
of the futures contract. This amount is known as "initial margin". The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when the Fund sells a futures contract and the price of the
underlying security rises above the delivery price, the Fund's position declines
in value. The Fund then pays the broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the market
price of the securities underlying the futures contract. Conversely, if the
price of the underlying security falls below the delivery price of the contract,
the Fund's futures position increases in value. The broker then must make a
variation margin payment equal to the difference between the delivery price of
the futures contract and the market price of the securities underlying the
futures contract.
When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
Special Risks of Transactions in Futures Contracts and Related Options
Liquidity risks. Positions in futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.
In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although the Fund
A-5
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generally will purchase only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option or at any particular time. In
the event no such market exists for particular options, it might not be possible
to effect closing transactions in such options with the result that the Fund
would have to exercise the options in order to realize any profit.
Hedging risks. There are several risks in connection with the use by
the Fund of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or movements in the prices of the Fund's securities which are the subject
of a hedge. Mentor Perpetual will, however, attempt to reduce this risk by
purchasing and selling, to the extent possible, futures contracts and related
options on securities and indexes the movements of which will, in its judgment,
correlate closely with movements in the prices of the underlying securities or
index and the securities sought to be hedged.
Successful use of futures contracts and options by the Fund for hedging
purposes is also subject to Mentor Perpetual's ability to predict correctly
movements in the direction of the market. It is possible that, where the Fund
has purchased puts on futures contracts to hedge its portfolio against a decline
in the market, the securities or index on which the puts are purchased may
increase in value and the value of securities held in the portfolio may decline.
If this occurred, the Fund would lose money on the puts and also experience a
decline in value in its portfolio securities. In addition, the prices of
futures, for a number of reasons, may not correlate perfectly with movements in
the underlying securities or index due to certain market distortions. First, all
participants in the futures market are subject to margin deposit requirements.
Such requirements may cause investors to close futures contracts through
offsetting transactions which could distort the normal relationship between the
underlying security or index and futures markets. Second, the margin
requirements in the futures markets are less onerous than margin requirements in
the securities markets in general, and as a result the futures markets may
attract more speculators than the securities markets do. Increased participation
by speculators in the futures markets may also cause temporary price
distortions. Due to the possibility of price distortion, even a correct forecast
of general market trends by Mentor Perpetual may still not result in a
successful hedging transaction over a short time period.
Other Risks. Funds will incur brokerage fees in connection with their
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.
A-6
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APPENDIX B
Foreign Currency Transactions
The Fund may engage in currency exchange transactions, including
foreign currency forward and futures contracts, to protect against uncertainty
in the level of future foreign currency exchange rates. In addition, the Fund
may purchase and sell call and put options on foreign currency futures contracts
and on foreign currencies for hedging purposes.
The Fund may engage in both "transaction hedging" and "position
hedging". When the Fund engages in transaction hedging, it enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging the Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with transaction hedging. The
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes, the Fund may purchase exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies. A put option on a futures contract gives the Fund the
right to assume a short position in the futures contract until expiration of the
option. A put option on currency gives the Fund the right to sell a currency at
an exercise price until the expiration of the option. A call option on a futures
contract gives the Fund the right to assume a long position in the futures
contract until the expiration of the option. A call option on currency gives the
Fund the right to purchase a currency at the exercise price until the expiration
of the option. The Fund will engage in over-the-counter transactions only when
appropriate exchange-traded transactions are unavailable and when, in the
opinion of Mentor Perpetual, the pricing mechanism and liquidity are
satisfactory and the participants are responsible parties likely to meet their
contractual obligations.
When the Fund engages in position hedging, it enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which securities held by the Fund are denominated or are
quoted in their principle trading markets or an increase in the value of
currency for securities which the Fund expects to purchase. In connection with
position hedging, the Fund may purchase put or call options on foreign currency
and foreign currency futures contracts and buy or sell forward contracts and
foreign currency futures contracts. The Fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of the
Fund's securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security or securities and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the
B-1
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spot market some of the foreign currency received upon the sale of the security
or securities of the Fund if the market value of such security or securities
exceeds the amount of foreign currency the Fund is obligated to deliver.
To offset some of the costs to the Fund of hedging against fluctuations
in currency exchange rates, the Fund may write covered call options on those
currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency.
Currency Forward and Futures Contracts. A forward foreign currency
exchange 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 as agreed by the parties, at a price set at the time of the contract.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
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 commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts and related options may
be closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.
Foreign Currency Options. Options on foreign currencies operate
similarly to options on securities, and are traded primarily in the
over-the-counter market, although options on foreign currencies have recently
been listed on several exchanges. Such options will be purchased or written only
when Mentor Perpetual believes that a liquid secondary market exists for such
options. There can be no assurance that a liquid secondary market will exist for
a particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence exchange rates and investments
generally.
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<PAGE>
The value of a foreign currency option is dependent upon the value of
the foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the U.S. options
markets.
Settlement Procedures. Settlement procedures relating to investments in
foreign securities and to foreign currency exchange transactions may be more
complex than settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not present in
domestic investments. For example, settlement of transactions involving foreign
securities or foreign currency may occur within a foreign country, and the Fund
may be required to accept or make delivery of the underlying securities or
currency in conformity with any applicable U.S. or foreign restrictions or
regulations, and may be required to pay any fees, taxes or charges associated
with such delivery. Such investments may also involve the risk that an entity
involved in the settlement may not meet its obligations.
Foreign Currency Conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
B-3
<PAGE>
30,000 Shares
Mentor Perpetual Global Emerging Companies Fund
Beneficial Interest
------------------------
PROSPECTUS
------------------------
[NAME OF UNDERWRITER]
October , 1997
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTION IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements: included in Parts A and B:
(a) Statement of Assets and Liabilities(2)
(b) Independent Auditors Report(2)
(2) Exhibits
(a) Agreement and Declaration of Trust(1)
(b) Bylaws(1)
(c) Inapplicable
(d)(1) Portions of Agreement and Declaration of Trust
Relating to Shareholders' Rights(1)
(2) Portions of Bylaws Relating to Shareholders'
Rights(1)
(e)(1) Automatic Dividend Reinvestment and Cash Purchase
Plan(2)
(2) Dividend Reinvestment Plan Agency Agreement(2)
(f) Inapplicable
(g) Form of Management Contract with Mentor Perpetual
Advisors, LLC(2)
(h)(1) Form of Underwriting Agreement(2)
(i) Inapplicable
- ---------------
(1) Filed herewith.
(2) To be filed by pre-effective amendment.
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<PAGE>
(j) Form of Custodian Agreement(2)
(k) Form of Administrative Services Agreement(2)
(l) Opinion and Consent of Ropes & Gray(2)
(m) Inapplicable
(n) Consent of Independent Accountants(2)
(o) Inapplicable
(p) Initial Capital Agreement(2)
(q) Inapplicable
(r) Financial Data Schedule(2)
Item 25. Marketing Arrangements
[To be supplied.]
Item 26. Other Expenses of Issuance and Distribution
Securities and Exchange Commission fee ....... [$ ]*
Printing ..................................... [ ]*
Accounting fees and expenses.................. [ ]*
Legal fees ................................... [ ]*
Blue Sky fees and expenses.................... [ ]*
Miscellaneous................................. [ ]*
Total................................... [$ ]*
* To be provided.
- ---------------
(1) Filed herewith.
(2) To be filed by pre-effective amendment.
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<PAGE>
Item 27. Persons Controlled by or under Common Control with Registrant
After completion of the intimal public offering of the Registrant's
shares, the Registrant expects that no person will be directly or indirectly
controlled by, or under common control with the Registrant.
As of the effective date hereof, [Name] will hold all of the
outstanding shares of the Registrant which will have been purchased pursuant to
an Initial Capital Agreement before the effective date of this Registration
Statement..
Item 28. Number of Record Holders of Securities
As of the time of the filing of this registration statement, the Fund
had no shares outstanding.
Item 29. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
provides as follows:
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interests of the Trust or (b)
to be liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in satisfaction
of judgments, in compromise or as fines or penalties), shall be paid from time
to time by the Trust in advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article, provided, however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the Trust shall be
insured against losses arising from any such advance payments or (c) either a
majority of the disinterested Trustees acting on the matter (provided that
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<PAGE>
a majority of the disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial type
inquiry), that there is reason to believe that such Covered Person will be found
entitled to indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an adjudication by a
court, or by any other body before which the proceeding was brought, that such
Covered Person either (a) did not act in good faith in the reasonable belief
that his or her action was in the best interests of the Trust or (b) is liable
to the Trust or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office, indemnification shall be provided if (a) approved as in the
best interests of the Trust, after notice that it involves such indemnification,
by at least a majority of the disinterested Trustees acting on the matter
(provided that a majority of the disinterested Trustees then in office act on
the matter) upon a determination, based upon a review of readily available facts
(as opposed to a full trial type inquiry), that such Covered Person acted in
good faith in the reasonable belief that his or her action was in the best
interests of the Trust and is not liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office, or (b) there has
been obtained an opinion in writing of independent legal counsel, based upon a
review of readily available facts (as opposed to a full trial type inquiry), to
the effect that such Covered Person appears to have acted in good faith in the
reasonable belief that his or her action was in the best interests of the Trust
and that such indemnification would not protect such Covered Person against any
liability to the Trust 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. Any approval pursuant to
this Section shall not prevent the recovery from any Covered Person of any
amount paid to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators, and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as defined in
Section 2(a)(19) of the 1940 Act (or who has been exempted from being an
"interested person" by any rule, regulation or order of the Securities and
Exchange Commission) and against whom
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<PAGE>
none of such actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has been pending.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees or officers, and other persons
may be entitled by contract or otherwise under law, nor the power of the Trust
to purchase and maintain liability insurance on behalf of any such person.
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled to
be held harmless from and indemnified against all loss and expense arising from
such liability.
Reference is made to the Underwriting Agreement, to be filed as an
amendment to this Registration Statement, which contains provisions for the
indemnification by [Name of Underwriter] of the Registrant and Trustees and
officers and controlling persons of the Registrant under certain circumstances.
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended, may be permitted to Trustees, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such Trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser
The following is additional information with respect to the directors
and officers of Mentor Perpetual Advisors, LLC ("Mentor Perpetual"):
The business and other connections of each director, officer, or
partner of Mentor Perpetual in which such director, officer, or partner is or
has been, at any time during the past two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner, or trustee
are set forth in the following table.
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<PAGE>
Other Substantial
Position with the Business, Profession,
Name Investment Adviser Vocation or Employment
- ------------------- ------------------ ------------------------------
Scott A. McGlashan President Director, Perpetual Portfolio
Management Limited
Martyn Arbib Director Chairman, Perpetual Portfolio
Management Limited
Roger C. Cormick Director Deputy Chairman - Marketing,
Perpetual Portfolio Management
Limited
Paul F. Costello Director Managing Director, Wheat First
Butcher Singer, Inc.; Mentor
Investment Group, Inc.;
President, Cash Resource Trust,
Mentor Income Fund, Inc., The
Mentor Funds, and Mentor
Institutional Trust.
Daniel J. Ludeman Director Chairman and Chief Executive
Officer, Mentor Investment
Group; Director, Wheat First
Securities, Inc.; Managing
Director, Wheat First Butcher
Singer, Inc.
David S. Mossop Director Director, Perpetual Portfolio
Management Limited
The address of each of the above-named entities is 901 East Byrd
Street, Richmond, VA 23219, except that the address of Perpetual Portfolio
Management Limited is 48 Hart Street, Henley-on-Thames, Oxfordshire RG92A2,
England.
Item 31. Location of Accounts and Records
Persons maintaining physical possession of accounts, books, and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules
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<PAGE>
promulgated thereunder are Registrant's Clerk, John M. Ivan; Registrant's
investment adviser, Mentor Perpetual Advisors LLC, and Registrant's transfer
agent and custodian, [Name]. The address of the Clerk and Mentor Perpetual
Advisors LLC is 901 East Byrd Street, Richmond, Virginia 23219. The address of
the transfer agent and custodian is [to be supplied].
Item 32. Management Services
None.
Item 33. Undertakings
(1) The Registrant undertakes to suspend offering of its shares
until it amends its prospectus if (1) subsequent to the
effective date of its Registration Statement, the net asset
value declines more than 10 percent from its net asset value
as of the effective date of the Registration Statement or (2)
the net asset value increases to an amount greater than its
net proceeds as stated in the prospectus.
(2) Inapplicable.
(3) Inapplicable.
(4) Inapplicable.
(5) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to
be part of the registration statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(6) Inapplicable.
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<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of the Fund is on file
with the Secretary of State of The Commonwealth of Massachusetts and notice is
hereby given that this instrument is executed on behalf of the Registrant by an
officer of the Registrant as an officer and not individually and that the
obligations of or arising out of this instrument are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Registrant.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Richmond, and The Commonwealth of Virginia, on the
26th day of August, 1997.
MENTOR PERPETUAL GLOBAL EMERGING
COMPANIES FUND
By: /s/ Paul F. Costello
--------------------------
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of August, 1997.
Signature Title
--------- -----
/s/ Daniel. Ludeman Chairman; Trustee
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Daniel J. Ludeman
/s/ Paul F. Costello President
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Paul F. Costello
/s/ Terry L. Perkins Treasurer; Principal Financial and
- -------------------------- Accounting Officer
Terry L. Perkins
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EXHIBIT INDEX
Exhibit
Exhibit Page No.
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(A) Agreement and Declaration of Trust
(B) Bylaws
(D)(1) Portions of Agreement and Declaration of Trust
Relating to Shareholders Rights
(2) Portions of By-Laws Relating to
Shareholders' Rights
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Exhibit (a)
MENTOR PERPETUAL GLOBAL EMERGING COMPANIES FUND
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts, this
25th day of August, 1997, by the Trustee hereunder and by the holders of shares
of beneficial interest to be issued hereunder as hereinafter provided
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts voluntary association with
transferable shares in accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets, which they may from time to time acquire in
any manner as Trustees hereunder, IN TRUST to manage and dispose of the same
upon the following terms and conditions for the benefit of the holders from time
to time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "Mentor Perpetual Global
Emerging Companies Fund", and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to time determine.
Definitions
Section 2. Whenever used herein, unless otherwise required by the
context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established
by this Agreement and Declaration of Trust, as amended from time to
time;
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(b) "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one class or series of
Shares is authorized by the Trustees, the equal proportionate
transferable units into which each class or series of Shares shall be
divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "Majority Shareholder
Vote" (the 67% or 50% requirement of the third sentence of Section
2(a)(42) of the 1940 Act, whichever may be applicable) shall have the
meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust as amended or restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended from time
to time;
(i) The term "class" or "class of Shares" refers to the division of
Shares into two or more classes as provided in Article III, Section 1
hereof; and
(j) The term "series" or "series of Shares" refers to the division of
Shares representing any class into two or more series as provided in
Article III, Section 1 hereof.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities, debt instruments and other instruments and rights of a
financial character.
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ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Trustees may, without Shareholder approval, authorize one or
more classes of Shares (which classes may be divided into two or more series),
Shares of each such class or series having such preferences, voting powers and
special or relative rights or privileges (including conversion rights, if any)
as the Trustees may determine and as shall be set forth in the Bylaws. The
number of Shares of each class or series authorized shall be unlimited except as
the Bylaws may otherwise provide. The Trustees may from time to time divide or
combine the Shares of any class or series into a greater or lesser number
without thereby changing the proportionate beneficial interest in the class or
series.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the books of the
Trust or a transfer or similar agent. No certificates certifying the ownership
of Shares shall be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider appropriate for
the issuance of Share certificates, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders of
each class or series and as to the number of Shares of each class or series held
from time to time by each Shareholder.
Investment in the Trust
Section 3. The Trustees shall accept investments in the Trust from such
persons and on such terms and for such consideration, which may consist of cash
or tangible or intangible property or a combination thereof, as they or the
Bylaws from time to time authorize.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.
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Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving only the
rights provided in this Declaration of Trust or the Bylaws. Every Shareholder by
virtue of having become a Shareholder shall be held to have expressly assented
and agreed to the terms of this Declaration of Trust and the Bylaws and to have
become a party hereto and thereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. Subject to the voting powers of one or more classes or series of
Shares as set forth in the Bylaws, in each year beginning in 1998, at the annual
meeting of Shareholders or at any special meeting held in lieu thereof, or at
any special meeting held before 1998, the Shareholders shall fix the number of
and elect a Board of not less than three Trustees, each of whom shall serve
until the next annual meeting or special meeting in lieu thereof and until the
election and qualification of his or her successor, or until he or she sooner
dies, resigns or is removed. At any meeting called for the purpose and subject
to the voting powers of one or more classes of Shares as set forth in the
Bylaws, a Trustee may be removed by vote of the holders of two-thirds of the
outstanding Shares entitled to vote, except that a Trustee elected by the
holders of one or more classes of Shares may be removed only by vote of the
holders of two-thirds of the Shares entitled to vote for such Trustee. The
initial Trustees, each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or her successor is
elected and qualified, or until he or she sooner dies, resigns or is removed,
shall be Cynthia L. Weldon and such other persons as the Trustee or Trustees
then in office shall, prior to any sale of Shares pursuant to a public offering,
elect.
Effect of Death, Resignation, etc. of a Trustee
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Section 2. The death, declination, resignation, retirement, removal or
incapacity of the Trustees, or any one of them, shall not operate to annul the
Trust or to revoke any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
Section 3. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and they shall have all
powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with this
Declaration of Trust providing for the conduct of the business of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders of one or more classes or series. Subject to the
voting power of one or more classes or series of Shares as set forth in the
Bylaws, the Trustees may fill vacancies in or add to their number, and may elect
and remove such officers and appoint and terminate such agents as they consider
appropriate; they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session, exercise some or all
of the power and authority of the Trustees as the Trustees may determine; they
may employ one or more custodians of the assets of the Trust and may authorize
such custodians to employ subcustodians and to deposit all or any part of such
assets in a system or systems for the central handling of securities, retain a
transfer agent or a Shareholder servicing agent, or both, provide for the
distribution of Shares by the Trust, through one or more principal underwriters
or otherwise, set record dates for the determination of Shareholders with
respect to various matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the Trustees
and to any agent or employee of the Trust or to any such custodian or
underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust except as
otherwise provided in Article IX, Section 5;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such
power and
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discretion with relation to securities or property as the Trustees
shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in
the name of the Trustees or of the Trust or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or otherwise;
(f) To the extent necessary or appropriate to give effect to the
preferences, special or relative rights and privileges of any classes
or series of Shares, to allocate assets, liabilities, income and
expenses of the Trust to a particular class or classes or series of
Shares or to apportion the same among two or more classes or series;
(g) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of
which is or was held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer,
and to pay calls or subscriptions with respect to any security held in
the Trust;
(h) To join other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power
and authority with relation to any security (whether or not so
deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and compensation
of such committee, depositary or trustee as the Trustees shall deem
proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(k) To borrow funds;
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(l) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and
pledge the Trust property or any part thereof to secure any of or all
such obligations;
(m) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies insuring
the Shareholders, Trustees, officers, employees, agents, investment
advisers or managers, principal underwriters, or independent
contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability;
(n) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all
of the Trustees, officers, employees and agents of the Trust; and
(o) To purchase or otherwise acquire Shares.
The Trustees shall not in any way be bound or limited by any present or
future law or custom in regard to investments by trustees. Except as
otherwise provided herein or from time to time in the Bylaws, any action to
be taken by the Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a conference telephone
or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a
meeting, or by written consent of a majority of the Trustees then in office.
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Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay, or to cause to be paid out
of the assets of the Trust, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees' compensation
and such expenses and charges for the services of the Trust's officers,
employees, investment adviser or manager, principal underwriter, auditor,
counsel, custodian, transfer agent, Shareholder servicing agent, and such other
agents or independent contractors and such other expenses and charges as the
Trustees may deem necessary or proper to incur.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of the Trust shall at all times be
considered as vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder Vote, the Trustees
may, at any time and from time to time, contract for exclusive or nonexclusive
advisory and/or management services with any corporation, trust, association or
other organization (the "Manager"), every such contract to comply with such
requirements and restrictions as may be set forth in the Bylaws; and any such
contract may contain such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what investments shall be
purchased, held, sold or exchanged and what portion, if any, of the assets of
the Trust shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to time, contract
with the Manager or any other corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with such requirements
and restrictions as may be set forth in the Bylaws; and any such contract may
contain such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association, or other organization, or of or for any
parent or affiliate of any organization, with which an advisory or
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management contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other agency contract
may have been or may hereafter be made, or that any such organization,
or any parent or affiliate thereof, is a Shareholder or has an interest
in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
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ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more classes or series of
Shares as set forth in this Declaration of Trust or in the Bylaws, the
Shareholders shall have power to vote only (i) for the election of Trustees as
provided in Article IV, Section 1, (ii) for the removal of Trustees as provided
in Article IV, Section 1, (iii) with respect to any Manager as provided in
Article IV, Section 6, (iv) with respect to any termination of this Trust to the
extent and as provided in Article IX, Section 4, (v) with respect to any merger,
consolidation or sale of assets of the Trust to the extent and as provided in
Article IX, Section 5, (vi) with respect to any conversion of the Trust to the
extent and as provided in Article IX, Section 6(a), (vii) with respect to
any amendment of this Declaration of Trust to the extent and as provided in
Article IX, Section 9, (viii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders, and (ix) with
respect to such additional matters relating to the Trust as may be required by
this Declaration of Trust, the Bylaws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or any state, or as
the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote.
Notwithstanding any other provision of this Declaration of Trust, on any matter
submitted to a vote of Shareholders, all Shares of the Trust then entitled to
vote shall, except as otherwise provided in the Bylaws, be voted in the
aggregate as a single class without regard to classes or series of Shares. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares of any class or series are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law, this Declaration
of Trust or the Bylaws to be taken by Shareholders as to such class or series.
Voting Power and Meetings
Section 2. There shall be an annual meeting of the Shareholders in each
year beginning in 1998 on the date fixed in the Bylaws at the office of the
Trust or at such
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other place as may be designated in the call thereof, which call shall be made
by the Trustees. In the event that such meeting is not held in any year on the
date fixed in the Bylaws, whether the omission be by oversight or otherwise, a
subsequent special meeting may be called by the Trustees and held in lieu of the
annual meeting with the same effect as though held on such date. Special
meetings of Shareholders of any or all classes or series may also be called by
the Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders of such class or series as
herein provided or upon any other matter deemed by the Trustees to be necessary
or desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder entitled to vote at such meeting at the
Shareholder's address as it appears on the records of the Trust. If the Trustees
shall fail to call or give notice of any meeting of Shareholders for a period of
30 days after written application by Shareholders holding at least 25% of the
then outstanding Shares of all classes and series entitled to vote at such
meeting requesting a meeting to be called for a purpose requiring action by the
Shareholders as provided herein or in the Bylaws, then Shareholders holding at
least 25% of the then outstanding Shares of all classes and series entitled to
vote at such meeting may call and give notice of such meeting, and thereupon the
meeting shall be held in the manner provided for herein in case of call thereof
by the Trustees. Notice of a meeting need not be given to any Shareholder if a
written waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Shareholder who attends the
meeting without protesting prior thereto or at its commencement the lack of
notice to him or her.
Quorum and Required Vote
Section 3. A majority of Shares entitled to vote on a particular matter
shall be a quorum for the transaction of business on that matter at a
Shareholders' meeting, except that where the Bylaws require that holders of any
class or series shall vote as an individual class or series, then a majority of
the aggregate number of Shares of that class or series entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class
or series. Any lesser number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after the date set for
the original meeting, without the necessity of further notice. Except when a
different vote is required by any provision of this Declaration of Trust or the
Bylaws, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, provided that where the Bylaws require that the
holders of any class or series shall vote as an individual class or series, a
majority of the Shares of that class or series voted on the matter (or a
plurality with respect to the election of a Trustee) shall decide that matter
insofar as that class or series is concerned.
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Action by Written Consent
Section 4. Any action taken by Shareholders may be taken without a meeting
if a majority of Shareholders entitled to vote on the matter (or such different
proportion thereof as shall be required by any express provision of this
Declaration of Trust or the Bylaws) consent to the action in writing and such
written consents are filed with the records of the meetings of Shareholders.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions, not inconsistent with
this Declaration of Trust, regarding Shareholders' voting powers, the conduct of
meetings and related matters.
ARTICLE VI
Distributions
The Trustees may each year, or more frequently if they so determine,
distribute to the Shareholders of each class or series such amounts as the
Trustees may determine subject to the preferences, special or relative rights
and privileges of the various classes or series of Shares. Any such distribution
to the Shareholders of a particular class or series shall be made to said
Shareholders pro rata in proportion to the number of Shares of such class or
series held by each of them. Such distributions shall be made in cash or Shares
or other property or a combination thereof as determined by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking or other services
and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in any event for
any neglect or wrongdoing of any officer, agent, employee, manager or principal
underwriter of the Trust, nor shall any Trustee be responsible for the act or
omission of any other
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Trustee, but nothing herein contained shall protect any 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.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his or her capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the reasonable belief
that such Covered Person's action was in the best interests of the Trust or (b)
to be liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in satisfaction
of judgments, in compromise or as fines or penalties), shall be paid from time
to time by the Trust in advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article, provided, however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the Trust shall be
insured against losses arising from any such advance payments or (c) either a
majority
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of the disinterested Trustees acting on the matter (provided that a majority of
the disinterested Trustees then in office act on the matter), or independent
legal counsel in a written opinion, shall have determined, based upon a review
of readily available facts (as opposed to a full trial type inquiry), that there
is reason to believe that such Covered Person will be found entitled to
indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication by a court,
or by any other body before which the proceeding was brought, that such Covered
Person either (a) did not act in good faith in the reasonable belief that his or
her action was in the best interests of the Trust or (b) is liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office, indemnification shall be provided if (a) approved as in the best
interests of the Trust, after notice that it involves such indemnification, by
at least a majority of the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in office act on the matter)
upon a determination, based upon a review of readily available facts (as opposed
to a full trial type inquiry), that such Covered Person acted in good faith in
the reasonable belief that his or her action was in the best interests of the
Trust and is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry), to the effect that
such Covered Person appears to have acted in good faith in the reasonable belief
that his or her action was in the best interests of the Trust and that such
indemnification would not protect such Covered Person against any liability to
the Trust 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. Any approval pursuant to this
Section shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section as indemnification
if such Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the Trust or to have been
liable to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Indemnification Not Exclusive
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Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall include
such person's heirs, executors and administrators, and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as defined in
Section 2(a)(19) of the 1940 Act (or who has been exempted from being an
"interested person" by any rule, regulation or order of the Securities and
Exchange Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by contract or otherwise
under law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be held to
be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled to
be held harmless from and indemnified against all loss and expense arising from
such liability.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or having any
claim against the Trust shall look only to the assets of the Trust for payment
under such credit, contract or claim, and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officer or officers shall give notice that this
Declaration of Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts and shall recite that the same was executed or made by or on
behalf of the Trust or by them
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as Trustee or Trustees or as officer or officers and not individually and that
the obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust, and may contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholder or Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be liable
for his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be bound to make any
inquiry concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall continue
without limitation of time. Subject to the voting powers of one or more classes
or series of Shares as set forth in the Bylaws, the Trust may be terminated at
any time by vote of Shareholders holding at least two-thirds of the Shares
entitled to vote (provided, however, if such termination is recommended by
two-thirds of the total number of the Trustees then in office, the vote of a
majority of the Shares entitled to vote shall be sufficient authorization) or by
the Trustees by written notice to the Shareholders. Upon termination of the
Trust, after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, ratably according to
the number of Shares held by the several
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Shareholders on the date of termination, except to the extent otherwise required
or permitted by the preferences and special or relative rights and privileges of
any classes or series of Shares.
Merger, Consolidation and Sale of Assets
Section 5. The Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its assets, including its good will, upon such terms and
conditions and for such consideration when and as authorized at any meeting of
Shareholders called for the purpose, or may liquidate or dissolve when and as
authorized, by the affirmative vote of the holders of not less than two-thirds
of the Shares entitled to vote, provided, however, that if such merger,
consolidation, sale, lease or exchange is recommended by two-thirds of the total
number of Trustees then in office, the vote of the holders of a majority of the
Shares entitled to vote shall be sufficient authorization. Nothing contained
herein shall be construed as requiring approval of the Shareholders for any sale
of assets in the ordinary course of business of the Trust. The provisions of
this Section shall be subject to the voting powers of one or more classes or
series of Shares as set forth in the Bylaws.
Conversion
Section 6. (a) Subject to the voting powers of one or more classes or
series of Shares as set forth in the Bylaws, the Trust may be converted at any
time from a "closed-end company" to an "open-end company" as those terms are
defined in Section 5(a)(2) and 5(a)(1) of the 1940 Act, respectively, as in
effect on the date of the execution hereof, upon the approval of such a
proposal, together with any necessary amendments to the Declaration of Trust to
permit such a conversion, by the holders of two-thirds of the Shares entitled to
vote, except that if such proposal is recommended by two-thirds of the total
number of Trustees then in office, such proposal may be adopted by a vote of the
majority of the Shares entitled to vote. Upon the adoption of such proposal and
related amendments by the Trust's Shareholders as provided above, the Trust
shall, upon complying with any requirements of the 1940 Act and state law,
become an "open-end" investment company. Such affirmative vote or consent shall
be in addition to the vote or consent of the holders of the Shares otherwise
required by law, the Bylaws or any agreement between the Trust and any national
securities exchange.
(b) If at any time following the date eighteen (18) months after the date
on which Shares of the Trust are first sold pursuant to its initial public
offering, the last sale price of the Shares on the New York Stock Exchange on
the last
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business day of any week and for each of the next 14 business days thereafter
(the period including the last business day of such week and the next 14
business day thereafter being referred to herein as the "Measuring Period") is
less than 95% of the net asset value per Share of the Trust determined on each
such day, then the Trustees shall take all steps necessary and appropriate to
cause the Trust to be converted from a "closed-end company" to an "open-end
company" as those terms are defined in the 1940 Act, which may include, without
limitation, (i) the adoption of any amendments to this Declaration of Trust or
to the Bylaws of the Trust which the Trustees may in their discretion deem
necessary or appropriate in respect of such conversion; (ii) the preparation,
execution, and filing of any documents, including without limitation a
registration statement on Form N-1A (or any other form) and amendments thereto,
that they may in their discretion deem necessary or appropriate with the
Securities and Exchange Commission, or any other person or entity; (iii) the
amendment of the registration of the Trust under the 1940 Act from a closed-end
company to an open-end company; and (iv) the delisting of the Shares from any
securities exchange and the withdrawal of any registration of the Shares
pursuant to the Securities Exchange Act of 1934, as amended. For this purpose, a
"business day" shall be any day on which the New York Stock Exchange is open.
The obligation of the Trustees under this subsection (b) shall remain in effect
even if the last sale price of the Shares on the New York Stock Exchange on any
day after the Measuring Period shall be greater than 95% of the net asset value
per Share of the Trust determined on each such day.
Notwithstanding any other provision of this Declaration of Trust, no vote
or consent of Shareholders shall be required for the performance by the Trustees
of their obligations under this subsection (b) or otherwise in respect of the
conversion of the Trust from a closed-end investment company to an open-end
investment company pursuant to this subsection (b), including without limitation
their adopting amendments to this Declaration of Trust or to the Bylaws of the
Trust, and the Trustees shall perform such obligations notwithstanding the fact
that the Shareholders shall not have taken any such vote or otherwise provided
any such consent. Any actions taken by the Trustees in good faith in respect of
such conversion shall be deemed for all purposes to have been authorized by this
Declaration of Trust and the Shareholders of the Trust.
Nothing in this subsection (b) shall obligate the Trustees to take any
action which would in their judgment violate any law, rule, or regulation
applicable to the Trust or to the Trustees.
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Filing and Copies, References, Headings
Section 7. The original or a copy of this instrument and of each amendment
hereto shall be kept at the office of the Trust where it may be inspected by any
Shareholder. A copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made and as to any matters in connection with
the Trust hereunder, and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as amended
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
Applicable Law
Section 8. This Declaration of Trust is made in The Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth. The Trust shall be
of the type commonly called a Massachusetts business trust, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Amendments
Section 9. Subject to the voting powers of one or more classes or series of
Shares, as set forth in the Bylaws, this Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of the then Trustees
(a) when authorized to do so by vote of Shareholders holding a majority of the
Shares entitled to vote, except that (i) an amendment amending or affecting the
provisions of Section 1 of Article IV, Section 4, 5 or 6(a) of this Article IX
or this subpart (i) shall require the vote of Shareholders holding two-thirds of
the Shares entitled to vote, and (ii) any amendment to Section 6(b) of this
Article IX or this subpart (ii) shall require the vote of Shareholders holding
80% of the Shares entitled to vote, or (b) without Shareholder approval as may
be necessary or desirable in order to authorize one or more classes or series of
Shares as provided in Section 1 of Article III, or (c) without Shareholder
approval as and to the extent contemplated by Article IX, Section 6. Amendments
having the purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or
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curing, correcting or supplementing any defective or inconsistent provision
contained herein shall not require authorization by Shareholder vote.
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IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal in
the City of Boston, Massachusetts for himself and his assigns, as of the day and
year first above written.
/s/ Cynthia L. Weldon
-----------------------
Cynthia L. Weldon
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, August 25, 1997
Then personally appeared the above-named Cynthia L. Weldon and acknowledged
the foregoing instrument to be her free act and deed, before me,
/s/ Frances E. DeFiore
------------------------
Notary Public
My Commission Expires:
Frances E. DeFiore, Notary Public
My Commission Expires May 24, 2002
Trustees and Addresses
Cynthia L. Weldon
Ropes & Gray
Boston, Massachusetts 02110
Registered Agent
CT Corporation System
2 Oliver Street
Boston, MA 02109
Trust Address
Mentor Perpetual Global Emerging Companies Fund
Suite 3600
Boston, MA 02110
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Exhibit (b)
BYLAWS
OF
MENTOR PERPETUAL GLOBAL EMERGING COMPANIES FUND
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These Bylaws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of the Massachusetts business trust established by the
Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the
Trust shall be located in Richmond, Virginia.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Trustees, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Clerk or
an Assistant Clerk or by the officer or the Trustees calling the meeting.
2.3 Notice of Special Meetings. It shall be sufficient notice to a
Trustee of a special meeting to send notice by mail at least forty-eight hours
or by telegram at least twenty-four hours before the meeting addressed to the
Trustee at his or her usual or last known business or residence address or to
give notice to him or her in person or by telephone at least twenty-four hours
before the meeting. Notice of a special meeting need not be given to any Trustee
if a written waiver of notice, executed by him or her before or after the
meeting, is filed with the records of the meeting, or to any Trustee who attends
the meeting without protesting prior thereto or at its commencement the lack of
notice to him or her. Neither notice of a meeting nor a waiver of a notice need
specify the purposes of the meeting.
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2.4 Quorum. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Notice of Certain Actions by Consent. If in accordance with the
provisions of the Declaration of Trust any action is taken by the Trustees by
written consent of less than all of the Trustees, then prompt notice of any such
action shall be furnished to each Trustee who did not execute such written
consent, provided that the effectiveness of such action shall not be impaired by
any delay or failure to furnish such notice.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
Chairman of the Trustees, a President, a Treasurer, a Clerk and such other
officers, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The Chairman of the Trustees and the President
shall be a Trustee and may but need not be a shareholder; and any other officer
may but need not be a Trustee or a shareholder. Any two or more offices may be
held by the same person. A Trustee may but need not be a shareholder.
3.2 Election. The Chairman of the Trustees, the President, the
Treasurer and the Clerk shall be elected by the Trustees upon the occurrence of
any vacancy in any such office. Other officers, if any, may be elected or
appointed by the Trustees at any time. Vacancies in any such other office may be
filled at any time.
3.3 Tenure. The Chairman of the Trustees, the President, the Treasurer
and the Clerk shall hold office in each case until he or she dies, resigns, is
removed or becomes disqualified. Each other officer shall hold office and each
agent shall retain authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide,
the Chairman of the Trustees or, if there is none or in the absence of the
Chairman of the Trustees, the
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President shall preside at all meetings of the shareholders and of the Trustees.
Unless the Trustees otherwise provide, the President shall be the chief
executive officer.
3.6 Treasurer. Unless the Trustees shall provide otherwise, the
Treasurer shall be the chief financial and accounting officer of the Trust, and
shall, subject to the provisions of the Declaration of Trust and to any
arrangement made by the Trustees with a custodian, investment adviser or
manager, or transfer, shareholder servicing or similar agent, be in charge of
the valuable papers, books of account and accounting records of the Trust, and
shall have such other duties and powers as may be designated from time to time
by the Trustees or by the President. The chief accounting officer of the Trust
shall be elected by the Trustees and shall have tenure as provided in Paragraph
3.3 of these Bylaws.
3.7 Clerk. The Clerk shall record all proceedings of the shareholders
and the Trustees in books to be kept therefor, which books or a copy thereof
shall be kept at the principal office of the Trust. In the absence of the Clerk
from any meeting of the shareholders or Trustees, an Assistant Clerk, or if
there be none or if he or she is absent, a temporary Clerk chosen at such
meeting shall record the proceedings thereof in the aforesaid books.
3.8 Resignations and Removals. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman of
the Trustees, the President or the Clerk or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time. The Trustees may remove any officer elected by them with or
without cause. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee or officer resigning and no officer removed shall
have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal.
ARTICLE 4
Committees
4.1 Quorum; Voting. A majority of the members of any Committee of the
Trustees shall constitute a quorum for the transaction of business, and any
action of such a Committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may participate in a
meeting of such Committee by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
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ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time otherwise provided by the
Trustees, the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer, and subsequent fiscal
years shall end on such date in subsequent years.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flatfaced die
with the word "Massachusetts," together with the name of the Trust and the year
of its organization cut or engraved thereon but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, Vice Chairman, a Vice President or the Treasurer and need not
bear the seal of the Trust.
ARTICLE 9
Issuance of Shares and Share Certificates
9.1 Sale of Shares. Except as otherwise determined by the Trustees, the
Trust will issue and sell for cash or securities from time to time, full and
fractional shares of its shares of beneficial interest, such shares to be issued
and sold at a price of not less than the par value
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per share, if any, and not less than the net asset value per share, if any, as
from time to time determined in accordance with the Declaration of Trust and
these Bylaws and, in the case of fractional shares, at a proportionate reduction
in such price. In the case of shares sold for securities, such securities shall
be valued in accordance with the provisions for determining the value of the
assets of the Trust as stated in the Declaration of Trust and these Bylaws. The
officers of the Trust are severally authorized to take all such actions as may
be necessary or desirable to carry out this Paragraph 9.1.
9.2 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in such form as shall be
prescribed from time to time by the Trustees. Such certificate shall be signed
by the President or a Vice President and by the Treasurer or an Assistant
Treasurer. Such signatures may be facsimile if the certificate is signed by a
transfer agent or by a registrar. In case any officer who has signed or whose
facsimile signature has been placed on such certificate shall cease to be such
officer before such certificate is issued, it may be issued by the Trust with
the same effect as if he or she were such officer at the time of its issue.
9.3 Loss of Certificates. The transfer agent of the Trust, with the
approval of any two officers of the Trust, is authorized to issue and
countersign replacement certificates for the shares of the Trust which have been
lost, stolen or destroyed upon (i) receipt of an affidavit or affidavits of loss
or non-receipt and of an indemnity agreement executed by the registered holder
or his or her legal representative and supported by an open penalty surety bond,
said agreement and said bond in all cases to be in form and content satisfactory
to and approved by the President or the Treasurer, or (ii) receipt of such other
documents as may be approved by the Trustees.
9.4 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder and entitled to vote
thereon.
9.5 Discontinuance of Issuance of Certificates. The Trustees may
at any time discontinue the issuance of share certificates and may, by written
notice to each shareholder,
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require the surrender of share certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the ownership of shares in the
Trust.
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
10.1 Certain Definitions. When used herein the following words
shall have the following meanings: "Distributor" shall mean any one or more
corporations, firms or associations which have distributor's or principal
underwriter's contracts in effect with the Trust. "Manager" shall mean any
corporation, firm or association which may at the time have an advisory or
management contract with the Trust.
10.2 Limitations on Dealings with Officers or Trustees. The Trust will
not lend any of its assets to the Distributor or Manager or to any officer or
director of the Distributor or Manager or any officer or Trustee of the Trust,
and shall not permit any officer or Trustee of the Trust or any officer or
director of the Distributor or Manager to deal for or on behalf of the Trust
with himself or herself as principal or agent, or with any partnership,
association or corporation in which he or she has a financial interest; provided
that the foregoing provisions shall not prevent (a) officers and Trustees of the
Trust or officers and directors of the Distributor or Manager from buying,
holding or selling shares in the Trust or from being partners, officers or
directors or otherwise financially interested in the Distributor or the Manager;
(b) purchases or sales of securities or other property if such transaction is
permitted by or is exempt or exempted from the provisions of the Investment
Company Act of 1940 or any Rule or Regulation thereunder, all as amended from
time to time, and if such transaction does not involve any commission or profit
to any security dealer who is, or one or more of whose partners, shareholders,
officers or directors is, an officer or Trustee of the Trust or an officer or
director of the Distributor or Manager; (c) employment of legal counsel,
registrar, transfer agent, shareholder servicing agent, dividend disbursing
agent or custodian who is, or has a partner, shareholder, officer or director
who is, an officer or Trustee of the Trust or an officer or director of the
Distributor or Manager; and (d) sharing statistical, research, legal and
management expenses and office hire and expenses with any other investment
company in which an officer or Trustee of the Trust or an officer or director of
the Distributor or Manager is an officer or director or otherwise financially
interested.
10.3 Securities and Cash of the Trust to be held by Custodian
Subject to Certain Terms and Conditions.
(a) All securities and cash owned by the Trust shall be held
by or deposited with one or more banks or trust companies having (according to
its last published report) not less than $5,000,000 aggregate capital, surplus
and undivided profits (any such bank or trust company being hereby designated as
"Custodian"), provided such a Custodian can be found ready and willing to act;
subject to such rules, regulations and orders, if any, as the Securities
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and Exchange Commission may adopt, the Trust may, or may permit any Custodian
to, deposit all or any part of the securities owned by the Trust in a system for
the central handling of securities pursuant to which all securities of any
particular class or series of any issue deposited within the system may be
transferred or pledged by bookkeeping entry, without physical delivery. The
Custodian may appoint, subject to the approval of the Trustees, one or more
subcustodians.
(b) The Trust shall enter into a written contract with each
Custodian regarding the powers, duties and compensation of such Custodian with
respect to the cash and securities of the Trust held by such Custodian. Said
contract and all amendments thereto shall be approved by the Trustees.
(c) The Trust shall upon the resignation or inability to
serve of any Custodian or upon change of any Custodian:
(i) in case of such resignation or inability to
serve, use its best efforts to obtain a successor Custodian;
(ii) require that the cash and securities owned
by the Trust be delivered directly to the successor Custodian; and
(iii) in the event that no successor Custodian can
be found, submit to the shareholders, before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor Custodian, the
question whether the Trust shall be liquidated or shall function without a
Custodian.
10.4 Reports to Shareholders. The Trust shall send to each shareholder
of record at least semiannually a statement of the condition of the Trust and of
the results of its operations, containing all information required by applicable
laws or regulations.
10.5 Valuation of Assets. In valuing the portfolio investments of the
Trust, securities for which market quotations are readily available shall be
valued at prices which, in the opinion of the Trustees or the person designated
by the Trustees to make the determination, most nearly represent the market
value of such securities, and other securities and assets shall be valued at
their fair value as determined by or pursuant to the direction of the Trustees,
which in the case of debt obligations, commercial paper and repurchase
agreements may, but need not, be on the basis of yields for securities of
comparable maturity, quality and type, or on the basis of amortized cost.
Expenses and liabilities of the Trust shall be accrued each day. Liabilities may
include such reserves for taxes, estimated accrued expenses and contingencies as
the Trustees or their designates may in their sole discretion deem fair and
reasonable under the circumstances. No accruals shall be made in respect of
taxes on unrealized appreciation of securities owned unless the Trustees shall
otherwise determine.
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ARTICLE 11
Shareholders
11.1 Annual Meeting. The annual meeting of the shareholders of the
Trust shall be held on the last Friday in April in each year or on such other
day as may be fixed by the Trustees. The meeting shall be held at such time as
the Chairman of the Trustees or the Trustees may fix in the notice of the
meeting or otherwise. Purposes for which an annual meeting is to be held,
additional to those prescribed by law or these Bylaws, may be specified by the
Chairman of the Trustees or by the Trustees.
11.2 Record Dates. For the purpose of determining the shareholders of
any series or class of shares of the Trust who are entitled to vote or act at
any meeting or any adjournment thereof, or who are entitled to receive payment
of any dividend or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date of any meeting
of shareholders or more than 60 days before the date of payment of any dividend
or of any other distribution, as the record date for determining the
shareholders of such series or class having the right to notice of and to vote
at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of record on such
record date shall have such right notwithstanding any transfer of shares on the
books of the Trust after the record date; or without fixing such record date the
Trustees may for any such purposes close the register or transfer books for all
or part of such period.
ARTICLE 12
Amendments to the Bylaws
12.1 General. Except as otherwise expressly stated herein, these Bylaws
may be amended or repealed, in whole or in part, by a majority of the Trustees
then in office at any meeting of the Trustees, or by one or more writings signed
by such a majority.
-8-
Exhibit (d)(1)
Portions of the Agreement and Declaration of Trust
Relating to Shareholders' Rights
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Trustees may, without Shareholder approval, authorize
one or more classes of Shares (which classes may be divided into two or more
series), Shares of each such class or series having such preferences, voting
powers and special or relative rights or privileges (including conversion
rights, if any) as the Trustees may determine and as shall be set forth in the
Bylaws. The number of Shares of each class or series authorized shall be
unlimited except as the Bylaws may otherwise provide. The Trustees may from time
to time divide or combine the Shares of any class or series into a greater or
lesser number without thereby changing the proportionate beneficial interest in
the class or series.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the books of
the Trust or a transfer or similar agent. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who are
the Shareholders of each class or series and as to the number of Shares of each
class or series held from time to time by each Shareholder.
**********
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving only
the rights provided in this Declaration of Trust or the Bylaws. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms of this Declaration of Trust and the
Bylaws and to have become a party hereto and thereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said
<PAGE>
decedent under this Trust. Ownership of Shares shall not entitle the Shareholder
to any title in or to the whole or any part of the Trust property or right to
call for a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust nor
the Trustees, nor any officer, employee or agent of the Trust shall have any
power to bind personally any Shareholder, nor except as specifically provided
herein to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. Subject to the voting powers of one or more classes or
series of Shares as set forth in the Bylaws, in each year beginning in 1998, at
the annual meeting of Shareholders or at any special meeting held in lieu
thereof, or at any special meeting held before 1998, the Shareholders shall fix
the number of and elect a Board of not less than three Trustees, each of whom
shall serve until the next annual meeting or special meeting in lieu thereof and
until the election and qualification of his or her successor, or until he or she
sooner dies, resigns or is removed. At any meeting called for the purpose and
subject to the voting powers of one or more classes of Shares as set forth in
the Bylaws, a Trustee may be removed by vote of the holders of two-thirds of the
outstanding Shares entitled to vote, except that a Trustee elected by the
holders of one or more classes of Shares may be removed only by vote of the
holders of two-thirds of the Shares entitled to vote for such Trustee. The
initial Trustees, each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or her successor is
elected and qualified, or until he or she sooner dies, resigns or is removed,
shall be Cynthia L. Weldon and such other persons as the Trustee or Trustees
then in office shall, prior to any sale of Shares pursuant to a public offering,
elect.
**********
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder Vote, the
Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory and/or management services with any corporation, trust,
association or other organization (the "Manager"), every such contract to comply
with such requirements and restrictions as may be set forth in the Bylaws; and
any such contract may contain such other terms interpretive of or in addition to
said requirements and restrictions as the Trustees may determine, including,
without limitation, authority to determine from time to time what investments
shall be purchased, held, sold or exchanged and what portion, if any, of the
assets of the Trust shall be held uninvested and to make changes in the Trust's
investments. The Trustees may also, at any time and from time to time, contract
with the Manager or any other corporation, trust, association or other
organization, appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with such requirements
<PAGE>
and restrictions as may be set forth in the Bylaws; and any such contract may
contain such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
corporation, trust, association, or other organization, or of or for
any parent or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or distributor's
contract, or transfer, Shareholder servicing or other agency contract
may have been or may hereafter be made, or that any such organization,
or any parent or affiliate thereof, is a Shareholder or has an interest
in the Trust, or that
(ii) any corporation, trust, association or other organization with
which an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract may have been or may hereafter be made also has an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
agency contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more classes or
series of Shares as set forth in this Declaration of Trust or in the Bylaws, the
Shareholders shall have power to vote only (i) for the election of Trustees as
provided in Article IV, Section 1, (ii) for the removal of Trustees as provided
in Article IV, Section 1, (iii) with respect to any Manager as provided in
Article IV, Section 6, (iv) with respect to any termination of this Trust to the
extent and as provided in Article IX, Section 4, (v) with respect to any merger,
consolidation or sale of assets of the Trust to the extent and as provided in
Article IX, Section 5, (vi) with respect to any conversion of the Trust to the
extent and as provided in Article IX, Section 6(a), (vii) with with respect to
any amendment of this Declaration of Trust to the extent and as provided in
Article IX, Section 9, (viii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the
<PAGE>
Trust or the Shareholders, and (ix) with respect to such additional matters
relating to the Trust as may be required by this Declaration of Trust, the
Bylaws or any registration of the Trust with the Securities and Exchange
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. Each whole Share shall be entitled to one vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote. Notwithstanding any other
provision of this Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall, except as
otherwise provided in the Bylaws, be voted in the aggregate as a single class
without regard to classes or series of Shares. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares of any class or
series are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such class or series.
Voting Power and Meetings
Section 2. There shall be an annual meeting of the Shareholders in each
year beginning in 1998 on the date fixed in the Bylaws at the office of the
Trust or at such other place as may be designated in the call thereof, which
call shall be made by the Trustees. In the event that such meeting is not held
in any year on the date fixed in the Bylaws, whether the omission be by
oversight or otherwise, a subsequent special meeting may be called by the
Trustees and held in lieu of the annual meeting with the same effect as though
held on such date. Special meetings of Shareholders of any or all classes or
series may also be called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of the
Shareholders of such class or series as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder entitled
to vote at such meeting at the Shareholder's address as it appears on the
records of the Trust. If the Trustees shall fail to call or give notice of any
meeting of Shareholders for a period of 30 days after written application by
Shareholders holding at least 25% of the then outstanding Shares of all classes
and series entitled to vote at such meeting requesting a meeting to be called
for a purpose requiring action by the Shareholders as provided herein or in the
Bylaws, then Shareholders holding at least 25% of the then outstanding Shares of
all classes and series entitled to vote at such meeting may call and give notice
of such meeting, and thereupon the meeting shall be held in the manner provided
for herein in case of call thereof by the Trustees. Notice of a meeting need not
be given to any Shareholder if a written waiver of notice, executed by him or
her before or after the meeting, is filed with the records of the meeting, or to
any Shareholder who attends the meeting without protesting prior thereto or at
its commencement the lack of notice to him or her.
<PAGE>
Quorum and Required Vote
Section 3. A majority of Shares entitled to vote on a particular matter
shall be a quorum for the transaction of business on that matter at a
Shareholders' meeting, except that where the Bylaws require that holders of any
class or series shall vote as an individual class or series, then a majority of
the aggregate number of Shares of that class or series entitled to vote shall be
necessary to constitute a quorum for the transaction of business by that class
or series. Any lesser number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after the date set for
the original meeting, without the necessity of further notice. Except when a
different vote is required by any provision of this Declaration of Trust or the
Bylaws, a majority of the Shares voted shall decide any questions and a
plurality shall elect a Trustee, provided that where the Bylaws require that the
holders of any class or series shall vote as an individual class or series, a
majority of the Shares of that class or series voted on the matter (or a
plurality with respect to the election of a Trustee) shall decide that matter
insofar as that class or series is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be taken without a
meeting if a majority of Shareholders entitled to vote on the matter (or such
different proportion thereof as shall be required by any express provision of
this Declaration of Trust or the Bylaws) consent to the action in writing and
such written consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as a vote taken at
a meeting of Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions, not inconsistent
with this Declaration of Trust, regarding Shareholders' voting powers, the
conduct of meetings and related matters.
ARTICLE VI
Distributions
The Trustees may each year, or more frequently if they so determine,
distribute to the Shareholders of each class or series such amounts as the
Trustees may determine subject to the preferences, special or relative rights
and privileges of the various classes or series of Shares. Any such distribution
to the Shareholders of a particular class or series shall be made to said
Shareholders pro rata in proportion to the number of Shares of such class or
series held by each of them. Such distributions shall be made in cash or Shares
or other property or a combination thereof as determined by the Trustees.
**********
<PAGE>
ARTICLE VIII
Indemnification
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled to
be held harmless from and indemnified against all loss and expense arising from
such liability.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or having
any claim against the Trust shall look only to the assets of the Trust for
payment under such credit, contract or claim, and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officer or officers shall give notice that
this Declaration of Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or Trustees or as
officer or officers and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, and may contain such
further recital as he or she or they may deem appropriate, but the omission
thereof shall not operate to bind any Trustee or Trustees or officer or officers
or Shareholder or Shareholders individually.
**********
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall
continue without limitation of time. Subject to the voting powers of one or more
classes or series of Shares as
<PAGE>
set forth in the Bylaws, the Trust may be terminated at any time by vote of
Shareholders holding at least two-thirds of the Shares entitled to vote
(provided, however, if such termination is recommended by two-thirds of the
total number of the Trustees then in office, the vote of a majority of the
Shares entitled to vote shall be sufficient authorization) or by the Trustees by
written notice to the Shareholders. Upon termination of the Trust, after paying
or otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, of the Trust as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets to distributable form in cash
or shares or other property, or any combination thereof, and distribute the
proceeds to the Shareholders, ratably according to the number of Shares held by
the several Shareholders on the date of termination, except to the extent
otherwise required or permitted by the preferences and special or relative
rights and privileges of any classes or series of Shares.
Merger, Consolidation and Sale of Assets
Section 5. The Trust may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of its assets, including its good will, upon
such terms and conditions and for such consideration when and as authorized at
any meeting of Shareholders called for the purpose, or may liquidate or dissolve
when and as authorized, by the affirmative vote of the holders of not less than
two-thirds of the Shares entitled to vote, provided, however, that if such
merger, consolidation, sale, lease or exchange is recommended by two-thirds of
the total number of Trustees then in office, the vote of the holders of a
majority of the Shares entitled to vote shall be sufficient authorization.
Nothing contained herein shall be construed as requiring approval of the
Shareholders for any sale of assets in the ordinary course of business of the
Trust. The provisions of this Section shall be subject to the voting powers of
one or more classes or series of Shares as set forth in the Bylaws.
Conversion
Section 6. (a) Subject to the voting powers of one or more classes or
series of Shares as set forth in the Bylaws, the Trust may be converted at any
time from a "closed-end company" to an "open-end company" as those terms are
defined in Section 5(a)(2) and 5(a)(1) of the 1940 Act, respectively, as in
effect on the date of the execution hereof, upon the approval of such a
proposal, together with any necessary amendments to the Declaration of Trust to
permit such a conversion, by the holders of two-thirds of the Shares entitled to
vote, except that if such proposal is recommended by two-thirds of the total
number of Trustees then in office, such proposal may be adopted by a vote of the
majority of the Shares entitled to vote. Upon the adoption of such proposal and
related amendments by the Trust's Shareholders as provided above, the Trust
shall, upon complying with any requirements of the 1940 Act and state law,
become an "open-end" investment company. Such affirmative vote or consent shall
be in addition to the vote or consent of the holders of the Shares otherwise
required by law, the Bylaws or any agreement between the Trust and any national
securities exchange.
<PAGE>
**********
Amendments
Section 9. Subject to the voting powers of one or more classes or
series of Shares, as set forth in the Bylaws, this Declaration of Trust may be
amended at any time by an instrument in writing signed by a majority of the then
Trustees (a) when authorized to do so by vote of Shareholders holding a majority
of the Shares entitled to vote, except that an amendment amending or affecting
the provisions of Section 1 of Article IV, Section 4, 5 or 6 of this Article IX
or this sentence shall require the vote of Shareholders holding two-thirds of
the Shares entitled to vote, or (b) without Shareholder approval as may be
necessary or desirable in order to authorize one or more classes or series of
Shares as provided in Section 1 of Article III, or (c) without Shareholder
approval as contemplated by Article IX, Section 6. Amendments having the purpose
of changing the name of the Trust or of supplying any omission, curing any
ambiguity or curing, correcting or supplementing any defective or inconsistent
provision contained herein shall not require authorization by Shareholder vote.
Exhibit (d)(2)
Portions of the Bylaws Relating to Shareholders' Rights
ARTICLE 9
Issuance of Shares and Share Certificates
9.1 Sale of Shares. Except as otherwise determined by the Trustees, the
Trust will issue and sell for cash or securities from time to time, full and
fractional shares of its shares of beneficial interest, such shares to be issued
and sold at a price of not less than the par value per share, if any, and not
less than the net asset value per share, if any, as from time to time determined
in accordance with the Declaration of Trust and these Bylaws and, in the case of
fractional shares, at a proportionate reduction in such price. In the case of
shares sold for securities, such securities shall be valued in accordance with
the provisions for determining the value of the assets of the Trust as stated in
the Declaration of Trust and these Bylaws. The officers of the Trust are
severally authorized to take all such actions as may be necessary or desirable
to carry out this Paragraph 9.1.
9.2 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him or her, in such form as shall be
prescribed from time to time by the Trustees. Such certificate shall be signed
by the President or a Vice President and by the Treasurer or an Assistant
Treasurer. Such signatures may be facsimile if the certificate is signed by a
transfer agent or by a registrar. In case any officer who has signed or whose
facsimile signature has been placed on such certificate shall cease to be such
officer before such certificate is issued, it may be issued by the Trust with
the same effect as if he or she were such officer at the time of its issue.
9.3 Loss of Certificates. The transfer agent of the Trust, with the
approval of any two officers of the Trust, is authorized to issue and
countersign replacement certificates for the shares of the Trust which have been
lost, stolen or destroyed upon (i) receipt of an affidavit or affidavits of loss
or non-receipt and of an indemnity agreement executed by the registered holder
or his or her legal representative and supported by an open penalty surety bond,
said agreement and said bond in all cases to be in form and content satisfactory
to and approved by the President or the Treasurer, or (ii) receipt of such other
documents as may be approved by the Trustees.
9.4 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as
<PAGE>
collateral security shall be entitled to a new certificate if the instrument of
transfer substantially describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it is held as
collateral security, and the name of the pledgor shall be stated thereon, who
alone shall be liable as a shareholder and entitled to vote thereon.
9.5 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
*************
10.4 Reports to Shareholders. The Trust shall send to each shareholder
of record at least semiannually a statement of the condition of the Trust and of
the results of its operations, containing all information required by applicable
laws or regulations.
*************
ARTICLE 11
Shareholders
11.1 Annual Meeting. The annual meeting of the shareholders of the
Trust shall be held on the last Friday in April in each year or on such other
day as may be fixed by the Trustees. The meeting shall be held at such time as
the Chairman of the Trustees or the Trustees may fix in the notice of the
meeting or otherwise. Purposes for which an annual meeting is to be held,
additional to those prescribed by law or these Bylaws, may be specified by the
Chairman of the Trustees or by the Trustees.
11.2 Record Dates. For the purpose of determining the shareholders of
any series or class of shares of the Trust who are entitled to vote or act at
any meeting or any adjournment thereof, or who are entitled to receive payment
of any dividend or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date of any meeting
of shareholders or more than 60 days before the date of payment of any dividend
or of any other distribution, as the record date for determining the
shareholders of such series or class having the right to notice of and to vote
at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of record on such
record date shall have such right notwithstanding any transfer of shares on the
books of the Trust after the record date; or without fixing such record date the
Trustees may for any such purposes close the register or transfer books for all
or part of such period.
<PAGE>
ARTICLE 12
Amendments to the Bylaws
12.1 General. Except as otherwise expressly stated herein, these Bylaws
may be amended or repealed, in whole or in part, by a majority of the Trustees
then in office at any meeting of the Trustees, or by one or more writings signed
by such a majority.
