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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SS 240.a-11(c) or SS 240.a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
FIRST EAGLE FUND OF AMERICA, INC.
FIRST EAGLE INTERNATIONAL FUND, INC.
(NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS AND
PERSONS FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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IMPORTANT NOTICE January 1998
TO THE SHAREHOLDERS OF
FIRST EAGLE FUND OF AMERICA, INC.
AND
FIRST EAGLE INTERNATIONAL FUND, INC.
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Although we recommend that you read the complete Proxy Statement, for your
convenience, we have provided a brief overview of the issues to be voted.
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Q: What is being proposed?
A: First Eagle Fund of America, Inc. and First Eagle International Fund, Inc.
are planning to become separate Series of First Eagle Trust, a Delaware
business trust.
Q: What is a Delaware business trust?
A: A business trust is an entity like a corporation and a very popular form of
organization for mutual funds. A business trust may operate with multiple
series or portfolios, so that each Fund can be operated as a separate entity.
First Eagle Trust is being organized in the State of Delaware, which has
favorable business laws.
Q: Why make this change?
A: The combination of First Eagle Fund of America, Inc. and First Eagle
International Fund, Inc. will lead to cost savings and operating
efficiencies.
Q: Will the investment adviser remain the same?
A: Yes, you can expect the same level of management expertise and high quality
shareholder service to which you've grown accustomed. Arnhold and S.
Bleichroeder Advisers, Inc. will continue to advise First Eagle Fund of
America and First Eagle International Fund.
Q: What about the investment advisory fees?
A: Arnhold and S. Bleichroeder Advisers, Inc. is proposing to lower the
investment advisory fees if the reorganization is approved. The investment
advisory fees for both First Eagle Fund of America and First Eagle
International Fund would be reduced to the annual rate of 1.0% of each Fund's
average daily net assets.
Q: Is this reorganization a taxable event for me?
A: No. There will be no recognition of gain or loss for a Shareholder due to
conversion of the Funds from a Maryland corporation to a Delaware business
trust.
Q: How does the Board of Directors of my Fund recommend that I vote?
A: The Board of Directors of First Eagle Fund of America, Inc. and the Board of
Directors of First Eagle International Fund, Inc. both unanimously recommend
that Shareholders vote in favor of all the matters presented in the Proxy
Statement.
Q: How do I vote?
A: Please vote each issue, sign, date and return the proxy card in the enclosed
postage-paid envelope.
Q: Whom do I call for more information?
A: Please call Shareholder Services at 1-800-451-3623.
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ABOUT THE PROXY CARD
Please vote on each issue using blue or black ink to mark an X in one of the
boxes provided on the proxy card.
APPROVAL OF CONVERSION TO DELAWARE BUSINESS TRUST -- mark 'For,' 'Against' or
'Abstain.'
ELECTION OF TRUSTEES -- mark 'For' or 'Withhold.'
To withhold authority to vote for any individual nominee, write the nominee's
number on the line provided.
APPROVAL OF INVESTMENT ADVISORY AGREEMENT WITH A LOWER FEE -- mark 'For,'
'Against' or 'Abstain.'
PROPOSALS TO RECLASSIFY AS NON-FUNDAMENTAL POLICIES AND AMEND CERTAIN INVESTMENT
RESTRICTIONS -- mark 'For,' 'Against' or 'Abstain.'
PROPOSALS TO DELETE CERTAIN INVESTMENT RESTRICTIONS -- mark 'For,' 'Against' or
'Abstain.'
RATIFICATION OF INDEPENDENT ACCOUNTANTS -- mark 'For,' 'Against' or 'Abstain.'
Sign, date and return the proxy card in the enclosed postage-paid envelope. All
registered owners of an account, as shown in the address, must sign the card.
When signing as attorney, trustee, executor, administrator, custodian, guardian
or corporate officer, please indicate your full title.
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FIRST EAGLE FUND OF AMERICA, INC.
Vote On Directors
2. Election of Directors: 01) John P. Arnhold, 02) Candace K. Beinecke, For Withhold For All To withhold authority to vote,
03) Edwin J. Ehrlich, 04) K. Georg Gabriel, 05) Robert J. Gellert, All All Except mark "For All Except" and
06) Michael M. Kellen, 07) William M. Kelly and 08) Stanford S. write the nominee's number on
Warshawsky [ ] [ ] [ ] the line below.
_____________________________
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Vote On Proposals For Against Abstain
1. Proposal to approve the conversion of the Fund [ ] [ ] [ ]
from a Maryland Corporation into a Delaware
Business Trust.
3. Proposal to approve an investment advisory [ ] [ ] [ ]
agreement for the Trust and reduce advisory
fees.
4. Proposal to reclassify as non-fundamental and [ ] [ ] [ ]
amend certain investment restrictions:
a. concerning purchase of other investment [ ] [ ] [ ]
companies.
b. concerning pledging, mortgaging or [ ] [ ] [ ]
hypothecating assets.
c. concerning investment limitations. [ ] [ ] [ ]
5. Proposal to amend investment restriction [ ] [ ] [ ]
concerning industry concentration of assets.
6. Proposal to reclassify as non-fundamental and
amend certain investment restrictions:
a. regarding investments in issuers owned by an [ ] [ ] [ ]
officer or director.
b. to limit investments to 10% of an issuer. [ ] [ ] [ ]
7. Proposal to delete the following investment
restrictions concerning:
a. The purchase of securities on margin. [ ] [ ] [ ]
b. Investments made for exercising control. [ ] [ ] [ ]
c. Oil, gas or other such investments. [ ] [ ] [ ]
d. Investments in issuers with limited [ ] [ ] [ ]
operating history.
8. Proposal to ratify selection of KPMG Peat [ ] [ ] [ ]
Marwick LLP as independent accountants.
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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FIRST EAGLE FUND OF AMERICA, INC.
FIRST EAGLE INTERNATIONAL FUND, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
January 7, 1998
DEAR SHAREHOLDER:
We are pleased to invite you to a Special Joint Meeting of Shareholders of
First Eagle Fund of America, Inc. ('FEFA') and First Eagle International Fund,
Inc. ('FEIF') (collectively, the 'Funds') to be held on February 19, 1998.
In recent years a number of mutual funds have reorganized as Delaware
business trusts to minimize operating expenses and to obtain favorable
operational flexibility. Your Funds are seeking your approval for this new
organizational structure, which is expected to improve organizational
efficiencies and lower operating costs.
Your vote will permit your Fund to convert to a separate Series of First
Eagle Trust, a Delaware business trust (the 'Trust').
Also, you are being asked to consider a number of other related proposals,
including election of trustees, and amendments to certain investment
restrictions. You are also being asked to approve a new investment management
agreement with lower fees.
Pursuant to this tax-free reorganization, FEFA will continue to be known as
'First Eagle Fund of America' and FEIF as the 'First Eagle International Fund.'
Each Fund will continue to operate with its same investment objectives and
policies, except as described herein.
The Boards of Directors, after careful review, have unanimously approved
this restructuring of the Funds and recommend that you vote 'FOR' each of the
proposals. Your vote is important.
Please cast your vote on the enclosed Proxy Card, and kindly return it in
the enclosed postage-paid envelope. Thank you very much for your consideration.
Sincerely yours,
JOHN P. ARNHOLD JOHN P. ARNHOLD
HAROLD J. LEVY President and Chief Executive Officer
Co-Presidents and Co-Chief First Eagle International Fund, Inc.
Executive Officers
First Eagle Fund of America, Inc.
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FIRST EAGLE FUND OF AMERICA, INC.
FIRST EAGLE INTERNATIONAL FUND, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
January 7, 1998
TO THE SHAREHOLDERS:
Notice is hereby given that a Special Joint Meeting including any
adjournment of the Shareholders of First Eagle Fund of America, Inc., a Maryland
corporation ('FEFA'), and First Eagle International Fund, Inc., a Maryland
corporation ('FEIF') (collectively, the 'Funds'), will be held at the Funds'
offices at 1345 Avenue of the Americas, New York, New York, at 10:30 a.m. on
Thursday, February 19, 1998, to consider a plan of reorganization unanimously
recommended by the Board of Directors of each of the Funds that would promote
the ability of the Funds to adapt to future change, while reducing operating
expenses and preserving the Funds' investment characteristics and management
style.
In connection with this reorganization, Shareholders of the Funds are being
asked:
A. To consider and vote upon the following eight Proposals:
1. To approve the conversion of the Funds from Maryland corporations
into a Delaware business trust.
2. To elect certain individuals to serve as Directors on the Board of
Directors of the Funds and as Trustees of the Board of Trustees of
the Trust.
3. To approve an Investment Advisory Agreement for the Trust and reduce
advisory fees.
4. To reclassify as non-fundamental and amend certain investment
restrictions of the Funds:
a) concerning purchase of other investment companies;
b) concerning pledging, mortgaging or hypothecating assets; and
c) concerning investment limitations.
5. To amend certain fundamental investment restrictions:
a) concerning industry concentration of assets; and
b) concerning commodities and commodity contracts.
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6. To reclassify as non-fundamental and amend certain investment
restrictions of FEFA:
a) regarding investments in issuers owned by an officer or director;
and
b) to limit investments to 10% of an issuer.
7. To delete certain investment restrictions of the Funds concerning:
a) the purchase of securities on margin;
b) investments for the purpose of exercising control;
c) oil, gas or other such investments; and
d) investments in issuers with a limited operating history.
8. To ratify the selection of KPMG Peat Marwick LLP as the Funds'
independent accountants.
B. To transact such other business as may properly come before the Meeting.
The Boards of Directors of the Funds have fixed the close of business on
December 29, 1997 as the record date for determining Shareholders entitled to
receive notice of and to vote at the Meeting.
By Order of the Boards of Directors
ROBERT BRUNO
Secretary
SHAREHOLDERS ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN
THE ENCLOSED ENVELOPE.
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FIRST EAGLE FUND OF AMERICA, INC.
AND
FIRST EAGLE INTERNATIONAL FUND, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
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PROXY STATEMENT
------------------------
This Proxy Statement and enclosed form of proxy are being furnished in
connection with the solicitation of proxies on behalf of the Boards of Directors
of First Eagle Fund of America, Inc. and First Eagle International Fund, Inc.
for use at the Special Joint Meeting of Shareholders to be held on Thursday,
February 19, 1998 at 10:30 a.m. at 1345 Avenue of the Americas, New York, New
York, including any adjournment ('Meeting'), for the purposes set forth in the
accompanying Notice of Special Joint Meeting of the Shareholders (the 'Notice').
This Proxy Statement is expected to be mailed on January 7, 1998 to Shareholders
of record on December 29, 1997.
First Eagle Fund of America, Inc. ('FEFA') and First Eagle International
Fund, Inc. ('FEIF') are open-end, nondiversified management investment companies
organized as Maryland corporations (collectively, the 'Funds', and each, a
'Fund'). The following table indicates which Shareholders are being solicited
with respect to each item listed on the Notice:
ITEM FEFA FEIF
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1. Conversion of Funds to Delaware business trust.......... X X
2. Election of Directors/Trustees.......................... X X
3. Approval of Investment Management Agreement............. X X
4. Reclassification as non-fundamental and amendment of
certain investment restrictions....................... X X
5. Amendment of investment restrictions
a) concerning industry concentrations................... X
b) concerning commodities and commodity contracts....... X
6. Reclassification as non-fundamental and amendment of
certain investment restrictions of FEFA............... X
7. Deletion of certain investment restrictions............. X X
8. Ratification of selection of auditors................... X X
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INTRODUCTION
This Proxy Statement is being furnished to Shareholders in connection with
the Meeting called by the Board of Directors of each of the Funds for the
purposes set forth in the accompanying Notice of Special Joint Meeting of
Shareholders. Any proxy given pursuant to such solicitation and received in time
for the Meeting will be voted as specified in such proxy. If no instructions are
given, proxies will be voted 'FOR' approval of each proposal as to which the
shares represented by each such proxy are entitled to vote and in the discretion
of the proxies named on the proxy card with respect to any other matters
properly brought before the Meeting or any adjournment thereof. You may revoke
the enclosed proxy at any time prior to the exercise thereof by submitting a
written notice of revocation or subsequently executed proxy to the Funds at any
time prior to the Meeting or at the Meeting to the Secretary of the Meeting.
Signing and mailing the proxy will not affect your right to give a later proxy
or to attend the Meeting and vote your shares in person.
In addition to the solicitation of proxies by mail, the Funds may utilize
the services of officers and employees of the Funds, Arnhold and S. Bleichroeder
Advisers, Inc., the investment manager of each of the Funds (the 'Adviser '),
and Arnhold and S. Bleichroeder, Inc., the distributor of each of the Funds (the
'Distributor'), none of whom will receive any compensation therefor, to solicit
proxies by telephone, telegraph and personal interview, and may also provide
Shareholders with a procedure for recording their votes by telegraph, facsimile,
telephone or other electronic means. The costs of the solicitation of proxies
will be borne by the Funds. The Funds may request brokers, custodians, nominees
and fiduciaries to forward proxy material to the beneficial owners of shares of
record. Persons holding shares as nominees will, upon request, be reimbursed for
their reasonable expenses incurred in sending soliciting material to their
principals.
On December 29, 1997, the date for determination of Shareholders entitled
to receive notice of and to vote at the Meeting, there were 13,888,825 Shares of
FEFA and 2,417,919 Shares of FEIF entitled to vote. To the knowledge of FEFA,
except for Central National Gottesman, Inc., Three Manhattanville Road,
Purchase, NY, which owns 7.4% of FEFA Shares, no person is the beneficial owner
of 5% or more of the outstanding voting FEFA Shares. To the knowledge of FEIF,
except for Arnhold and S. Bleichroeder, Inc. Profit Sharing Plan, 1345 Avenue of
the Americas, New York, NY, which owns 14.7% of FEIF Shares, no person is the
beneficial owner of 5% or more of the outstanding voting FEIF Shares.
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PROPOSALS
At a joint meeting of the Boards of Directors of FEFA and FEIF held on
December 16, 1997, the Board of each of the Funds adopted resolutions to: (i)
move the domicile of each of the Funds from Maryland to Delaware and to
reorganize the Funds as separate Series of the Trust; (ii) reconstitute the
Board of Directors of each of the Funds; (iii) approve a new Investment Advisory
Agreement for the Trust with Arnhold and S. Bleichroeder Advisers, Inc. with
lower investment advisory fees; (iv) reclassify certain investment restrictions
of the Funds as non-fundamental investment policies; (v) amend certain
investment restrictions of the Funds (vi) delete certain investment restrictions
of the Funds; and (vii) ratify KPMG Peat Marwick LLP as the Fund's independent
auditors. The resolutions adopted by the Boards are intended to promote the
ability of the Funds to adapt to economic, market and regulatory changes without
the expense and delay of costly additional Shareholders' meetings, while
preserving the basic investment characteristics and management style of the
Funds.
This Proxy Statement contains eight proposals (the 'Proposals').
Shareholders are being solicited to vote on each of the Proposals. Approval of
Proposals ONE through SEVEN requires the affirmative 'vote of a majority of the
outstanding voting securities' of each Fund, which is defined in the Investment
Company Act of 1940, as amended (the '1940 Act'), as the lesser of (a) 67% of a
Fund's voting securities present at a meeting if the holders of more than 50% of
that Funds outstanding voting securities are present or represented by proxy or
(b) more than 50% of a Fund's outstanding voting securities. If the Shareholders
of a Fund do not approve Proposal ONE, then such Fund will continue to operate
as a Maryland corporation and the Shareholders will not need to approve Proposal
THREE, as such Fund's current investment advisory agreement with the current
advisory fee will continue. If the Shareholders of a Fund do not approve the
changes in such Fund's investment policies proposed in Proposals FOUR through
SEVEN, the applicable Fund's investments will continue to be governed by its
present policies. Approval of Proposal EIGHT requires the affirmative vote of a
majority of votes cast at the Meeting by Shareholders of each of the Funds.
If a Proxy that is properly executed and returned with instructions to
withhold authority to vote represents an abstention or a broker 'nonvote' (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the person entitled to vote Shares on a particular
matter or does not have discretionary power to vote on such
mat-
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ter), the Shares represented thereby will be considered present at the Meeting
for purposes of determining the existence of a quorum for the transaction of
business. On Proposal TWO (election of directors) and Proposal EIGHT
(ratification of auditors), abstentions and broker nonvotes will not be counted
as 'votes cast' and will have no effect on the results of the vote. However, on
all other Proposals abstentions and broker 'nonvotes' are considered present at
the Meeting and as issued and outstanding Shares and as a result they have the
same effect as a negative or 'No' vote.
PROPOSAL ONE:
PROPOSAL TO APPROVE THE CONVERSION OF THE FUNDS FROM MARYLAND
CORPORATIONS INTO A DELAWARE BUSINESS TRUST.
INTRODUCTION
If the Shareholders of First Eagle Fund of America, Inc. ('FEFA') and First
Eagle International Fund, Inc. ('FEIF') (collectively, the 'Funds', and each a
'Fund') approve this Proposal, the Funds will be converted from Maryland
corporations into a single Delaware business trust, to be known as First Eagle
Trust (the 'Trust'). The proposed conversion into a Delaware business trust (the
'Conversion') would take place pursuant to an Agreement and Plan of Conversion
and Termination (the 'Plan of Conversion') in the form attached as EXHIBIT A to
this Proxy Statement.
Currently, FEFA and FEIF are separate corporations, each organized under
the laws of the State of Maryland. If the Shareholders approve the Conversion,
the Funds will be converted into a single Delaware business trust with multiple
Series and classes. The Trust would initially have two Series: FEFA will be
converted into a successor Series to be known as 'First Eagle Fund of America'
(the 'FEFA Series') and FEIF will be converted into a successor Series to be
known as 'First Eagle International Fund' (the 'FEIF Series', and collectively
the 'Series').
On December 16, 1997 the Board of Directors of FEFA and the Board of
Directors of FEIF approved a proposal made by the Adviser, to change the
jurisdiction and organizational structure of the Funds from separate Maryland
corporations into separate Series of a Delaware business trust. The Conversion
of the Funds into a Delaware business trust is being recommended for the purpose
of providing the Funds with certain advantages over their current organizational
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structures. These advantages include: (1) more flexibility and efficiency in the
administration of the Funds, (2) a clearer and more developed body of law (the
law of Delaware) regulating the Funds and (3) the potential to obtain certain
cost savings for the Funds and their Shareholders. See 'Evaluation by the Boards
of Directors' below.
DESCRIPTION OF THE CURRENT FUNDS
Currently, FEFA's Amended and Restated Articles of Incorporation, as filed
with the Secretary of State of Maryland, authorize the Directors to issue
1,000,000,000 shares of common stock, par value $.01 (the 'FEFA Shares'). FEIF's
Amended Articles of Incorporation, as filed with the Secretary of State of
Maryland, authorize the Directors of FEIF to issue 100,000,000 shares of common
stock, par value $.01 (the 'FEIF Shares', and, collectively with the FEFA
Shares, the 'Shares'). The Articles of Incorporation of both Funds authorize the
Directors to classify and reclassify any unissued Shares in additional classes
by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualification, or terms or
conditions or redemption privileges of such unissued Shares.
ADVANTAGES OF A DELAWARE BUSINESS TRUST
The Trust was established on December 24, 1997 pursuant to a trust
instrument under the laws of Delaware substantially in the form attached hereto
as EXHIBIT B (the 'Delaware Trust Instrument'). As a Delaware business trust,
the Trust's operations will be governed by a single Delaware Trust Instrument,
one set of By-laws and applicable Delaware law rather than by separate Articles
of Incorporation and By-laws and applicable Maryland law. Except as described in
this Proxy Statement, the Conversion will not affect the operations of the
Funds, which will continue to have the same investment objectives and policies
(except to the extent the investment restrictions may be modified as described
in this Proxy Statement) and be subject to the provisions of the 1940 Act, the
rules and regulations thereunder, and applicable state securities laws.
Delaware has achieved a favorable national reputation for its business laws
and business environment. The Delaware courts, which may be called upon to
interpret the Delaware Business Trust Act, adopted in 1988, are among the
nation's most highly respected and have an expertise in corporate matters that
in part grew out of the fact that Delaware corporate legal issues are
concentrated in the Court of Chancery, where there are no juries and where
judges issue written opinions explaining their decisions. Thus, there is a
well-established
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body of precedent that may be relevant in deciding issues pertaining to a
Delaware business trust.
Under Delaware law, the Trust will have greater flexibility to respond to
future business contingencies. For example, Delaware law authorizes electronic
or telephonic communications between Shareholders and the Trust, and this
provision improves Shareholder voting procedures and reduces costs. In addition,
the Board of Trustees will have the power to incorporate the Trust, to merge or
consolidate it with another entity, to cause each Series to become a separate
trust and to change the Trust's domicile without a Shareholder vote. The
Trustees may also create additional Series and classes of the Trust without
making any further state filings. This flexibility could help to assure that the
Trust operates under the most advanced form of organization and could reduce the
expense and frequency of future Shareholders' meetings for non-investment
related issues.
The provisions of the Delaware Trust Instrument are similar to those of the
Maryland Articles of Incorporation of FEFA and of FEIF, except that various
ambiguities and deficiencies have been addressed and clarified in the Delaware
Trust Instrument. In addition, the Delaware Trust Instrument provides additional
flexibility as to certain matters that were not addressed in the Articles of
Incorporation of the Funds. Shareholders will be deemed to have pre-authorized
certain changes that the Board of Trustees could adopt for the structural form
of each of the Funds.
The Delaware Trust Instrument differs from the Maryland Articles of
Incorporation of the Funds in several important ways. For example, the Delaware
Trust Instrument provides for (1) dollar-based voting as opposed to voting based
upon one-share, one-vote; (2) elimination of the need for Shareholder votes in
certain instances; (3) voting in the aggregate as opposed to voting by
individual Series in regard to changes affecting all Series; (4) different
mechanics with respect to the termination of the Trust, a Series or a class; (5)
a broader ability of the Trustees to redeem Shares of a Series or class than
under the Articles of Incorporation of the Funds; and (6) increased flexibility
to permit the Trustees to provide for the charging of expenses on a per account
basis.
COMPARISON OF THE CURRENT FUNDS AND THE SUCCESSOR TRUST
Although the Conversion would result in certain changes that are described
in this Proxy Statement, many aspects of administering the operations of the
Funds as a Delaware business trust will remain
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unchanged. However, the costs of administering the Funds should be reduced.
Dollar-Based Voting Rights for Shareholders of the Trust. The Delaware
Trust Instrument provides voting rights based on a Shareholder's total dollar
interest in a Series or class (dollar-based voting), rather than on the number
of Shares owned for all Shareholder votes. As a result, voting power would be
allocated in proportion to the dollar amount of each Shareholder's investment,
rather than to the number of Shares held. The original intent of the one-share,
one-vote provision was to provide equitable voting rights as required by the
1940 Act. In the case where a trust has several series or funds, voting rights
may have become disproportionate since the net asset value per share of the
separate series or funds may not be identical. Dollar-based voting will provide
a more equitable distribution of voting rights than the one-share, one-vote
system. Shareholders' voting power would be commensurate with the value of a
Shareholder's investment rather than with the number of Shares held.
Accordingly, on matters requiring a Trust-wide vote in which all Series are
required to vote on the same issue, a Shareholder who owns Shares of a Series
with a lower net asset value per share would not be given greater voting 'power'
than another Shareholder of a different Series with a higher net asset value per
share when each has an identical amount invested in the Trust.
Management by the Board of Trustees. Currently, each of the Funds has a
separate and distinct Board of Directors. The Funds' Boards of Directors are
submitting for Shareholder approval a separate Proposal for a consolidated Board
of Trustees who will manage the Trust. The Trustees will serve indefinite terms
and have substantially the same responsibilities, powers and fiduciary duties as
the Directors of FEFA and FEIF. Substantially, the present officers of the Funds
will be prepared to serve as officers of the Trust.
Issuance of Shares in Separate Series. The Delaware Trust will be able to
establish separate Series and classes of Shares. Both the Funds and the Trust
could have additional classes of Shares with different relative rights and
preferences for each class. However, the Board of Trustees of the Trust will be
able to establish both Series and classes for the Trust. Initially, the Trust
will have two Series, the FEFA Series and the FEIF Series. Shares of each Series
shall represent equal proportionate interests in the assets of that Series only,
and each Share of a particular Series shall be equal to each other Share of that
Series (subject to any rights and preferences that may have been established
with respect to classes of Shares within such Series). The liabilities of
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each Series shall be borne solely by that Series, and no Series will be
responsible for the liabilities of another Series. Each Series may issue an
unlimited number of Shares, and all Shares issued will be fully paid and
nonassessable. Shares will have no subscription or preemptive rights or other
rights to subscribe to any additional shares and only such conversion or
exchange rights as the Trustees may grant in their discretion. Since most mutual
funds offer several different classes of Shares, the Trustees could establish
new classes of Shares with different pricing structures to accommodate different
sales charge arrangements. These new classes of Shares, however, would have no
effect on current Shareholders.
Shareholder Meetings and Voting. Under the Delaware Trust Instrument,
Shareholders of each Series vote together on all matters, except (1) when
required by the 1940 Act; (2) when the Board of Trustees has determined that the
matter affects only the interests of one or more Series; or (3) when otherwise
required by the provisions of the Delaware Trust Instrument, in which case
Shares must be voted by individual Series. There normally will be no meetings of
Shareholders for the purposes of electing Trustees unless and until such time as
less than a majority of the Trustees have been elected by the Shareholders, at
which time the Trustees then in office would call a Shareholders' meeting for
the election of Trustees.
Liability of Trustees. The Delaware Trust Instrument provides that a
Trustee, when acting in such capacity, shall not be personally liable for any
act or omission as Trustee, except by reason of the Trustee's willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office. The Trust may advance money for
expenses, provided that the Trustee undertakes to repay such amounts if his or
her conduct is later determined to preclude indemnification, and one of the
following conditions are met: (1) the Trustee provides security for the
undertaking; (2) the Trust is insured against losses stemming from such an
advance; or (3) there is a determination by a majority of the Trust's nonparty
Trustees or by independent legal counsel that there is reason to believe that
the Trustee ultimately will be entitled to indemnification. The current Articles
of Incorporation and By-laws of the Funds provide similar indemnification of the
Directors.
Termination of the Trust. Currently, a vote of a majority of the
outstanding voting securities of a Fund is required to sell or convey the assets
of a Fund to another trust, partnership, association or corporation organized
under the laws of any state that is a diversified open-end management investment
company, as defined in the 1940 Act, or to
8
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<PAGE>
convert all the assets of a Fund into cash. In comparison, the Trust, or any
Series or class of the Trust, may be terminated at any time by vote of a
majority of the Shares entitled to vote. The Trust, or any Series or class of
the Trust, may also be terminated by the Trustees by written notice to the
Shareholders of the Trust or the affected Series or class.
THE PLAN OF CONVERSION
Summary of the Plan of Conversion. The following discussion summarizes the
important terms of the Plan of Conversion. This summary is qualified in its
entirety by reference to the Plan of Conversion itself, which is included as
EXHIBIT A to this Proxy Statement. A Delaware Certificate of Trust was filed on
December 24, 1997 to establish the Trust as a Delaware entity. Each successor
Series will have only nominal assets and no liabilities.
On the exchange date of the Conversion (the 'Exchange Date'), FEFA will
transfer all its assets and liabilities to the FEFA Series, and the FEFA Series
will acquire all of the assets and liabilities of FEFA in exchange for shares of
beneficial interest of the FEFA Series (the 'FEFA Delaware Trust Shares') equal
in number to the outstanding Shares of FEFA. Also on the Exchange Date, FEIF
will transfer all its assets and liabilities to the FEIF Series, and the FEIF
Series will acquire all of the assets and liabilities of FEIF in exchange for
shares of beneficial interest of the FEIF Series (the 'FEIF Delaware Trust
Shares', and, together with the FEFA Delaware Trust Shares, the 'Delaware Trust
Shares') equal in number to the outstanding Shares of FEIF. Thereafter, FEFA
will distribute to FEFA's Shareholders, and FEIF will distribute to FEIF's
Shareholders, the same number of Delaware Trust Shares of the successor Series
as are then owned by each Shareholder.
Upon completion of the Conversion, each FEFA Shareholder will be the owner
of FEFA Delaware Trust Shares equal in number and aggregate net asset value to
his or her FEFA Shares. Also, each FEIF Shareholder will be the owner of FEIF
Delaware Trust Shares equal in number and aggregate net asset value to his or
her FEIF shares. Of course, the value of a Shareholder's investment will
continue to fluctuate thereafter, based on the future investment performance of
the successor Series of the Trust. As soon as practicable thereafter, the
Maryland corporations will be wound up and dissolved.
If the Conversion is approved, FEFA Delaware Trust Shares will be held by
FEFA and FEIF Delaware Trust Shares will be held by FEIF on the Exchange Date
pending distribution to Shareholders. Approval by Shareholders of this Proposal
will be deemed to authorize
9
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FEFA and FEIF (as sole initial Shareholders of each successor Series of the
Trust on the Exchange Date) to vote in favor of each of the Proposals set forth
in this Proxy Statement as approved by the Shareholders, so that the approval of
the Proposals may be made effective with respect to the Trust as well as the
Funds.
Approval of this Proposal will authorize FEFA and FEIF (as sole initial
Shareholders on the Exchange Date) to render approval on such matters as may be
necessary, for regulatory purposes, in order to adopt or enter into any
agreements or plans on behalf of the Trust and successor Series that had
previously been approved by Shareholders and are currently in effect for the
Funds. The Plan of Conversion contemplates that the Funds as the then sole
initial shareholders of the successor Series will approve (1) the election of
Trustees for the Trust; (2) the investment advisory agreement with the Adviser
for the Trust; (3) the distribution agreement and services agreement with
Arnhold and S. Bleichroeder, Inc. for the Trust; (4) selection of independent
auditors; and (5) continuation of all other contracts and agreements currently
in effect with the Funds, including, but not limited to, accounting, custody,
transfer agency, service, procedural and safekeeping and repurchase agreements.
Each Trustee will hold office without limit in time until such Trustee
resigns, dies, is declared bankrupt or incompetent by a court of appropriate
jurisdiction, is not reelected by a vote of the outstanding Shares at a meeting
to elect Trustees, or is removed by a vote of the Trustees or the outstanding
Shares of the Trust. If less than a majority of the Trustees holding office has
been elected by Shareholders, the Trustees then in office shall call a
Shareholders meeting for the purpose of electing a Board of Trustees. The
initial Trustees will be deemed to have been elected by the Shareholders
pursuant to the mechanism described above.
Assuming the Plan of Conversion is approved, it is currently contemplated
that the Conversion will become effective at the close of business on February
27, 1998, unless the Trustees determine that it would not be in the best
interests of the Shareholders to do so at that time or at all. The Plan of
Conversion will apply to FEFA and FEIF if their respective Shareholders approve
the Plan of Conversion; thereafter, FEFA will transfer its assets to the FEFA
Series of the Trust and FEIF will transfer its assets to the FEIF Series of the
Trust.
The obligations of the Funds and the Trust under the Plan of Conversion are
subject to various conditions as stated therein. Notwithstanding the approval of
the Plan of Conversion by the Shareholders of each of the Funds, the Plan of
Conversion may be
10
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<PAGE>
terminated or amended at any time prior to the transfer of assets on the
Exchange Date by action of the Boards of Directors if (1) there is a material
breach by the other party of any representation, warranty or agreement contained
in the Plan of Conversion; (2) it reasonably appears that a party cannot meet a
condition of the Plan of Conversion; or (3) circumstances should develop that,
in the opinion of either the Boards of Directors of the Funds or the Board of
Trustees of the Trust, make proceeding with the Plan of Conversion in its
current form unadvisable. The Funds and the Trust may at any time waive
compliance with any of the covenants and conditions contained in, or may amend,
the Plan of Conversion, provided that such waiver or amendment does not
materially adversely affect the interests of the Funds Shareholders.
Temporary Waiver of Fundamental Policies. Certain fundamental policies of
the Funds (e.g., those that (1) prohibit the Funds from making investments for
the purpose of exercising control over or management of an issuer; (2) restrict
the percentage of a Fund's total assets that may be invested in any one
industry; (3) require diversification of investments; and (4) restrict
investments in issuers with limited operating histories), might be construed as
restricting the Funds ability to carry out the Conversion. To the extent that
any of the fundamental policies of either of the Funds could be construed as
restricting the ability of such Fund to effect the Conversion, a vote to approve
the Plan of Conversion will also constitute a vote to waive, to the extent
necessary to effect the Conversion, any such fundamental policy. Apart from the
Conversion, this Proxy Statement also solicits Shareholder approval to amend or
reclassify as non-fundamental certain fundamental policies.
Tax Consequences of the Conversion. The Funds and the Trust have been
advised by their counsel, Shearman & Sterling, that no gain or loss will be
recognized for federal income tax purposes by the Funds, the Trust or the
Shareholders upon the transfer of each of the Fund's assets in exchange solely
for the Delaware Trust Shares and the assumption by the Trust of each of the
Funds liabilities or upon the distribution of Delaware Trust Shares to each of
the Fund's Shareholders in liquidation of their current Shares. The opinion of
counsel further provides, among other things, that the basis for federal income
tax purposes of the Delaware Trust Shares to be received by each of the current
Shareholders will be the same as that of his or her FEFA or FEIF Shares, and a
Shareholder's holding period for his or her Delaware Trust Shares will include a
Shareholder's holding period for
11
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his or her FEFA or FEIF Shares, provided that said FEFA or FEIF Shares were held
as capital assets on the date of the exchange.
EVALUATION BY THE BOARDS OF DIRECTORS
Based on a recommendation by the Adviser, the Boards of Directors of the
Funds reviewed the potential benefits associated with the proposed Conversion
and adoption of the proposed Delaware Trust Instrument. In this regard, the
Directors considered the following:
(1) the advantages described above that apply to managing the
successor Series as a Delaware business trust, including the increased
flexibility afforded to the Trustees to direct the operations of the Trust;
(2) the advantages to be gained by the Funds in adopting the Delaware
Trust Instrument;
(3) the fact that the Conversion itself will not affect the investment
advisory arrangements applicable to the Funds, the investment objectives or
policies of the Funds, or otherwise affect in any significant manner the
general characteristics of FEFA or FEIF or a Shareholders investment
therein, except to the extent that the investment policies of the Funds are
amended pursuant to a Shareholder vote at this meeting;
(4) the expected lack of federal income tax consequences to the Funds,
the Trust, successor Series and Shareholders resulting from the proposed
Conversion, and the likelihood that there will be no recognition of income,
gain or loss for federal income tax purposes to the Funds, the Trust,
successor Series or Shareholders; and
(5) the fact that the interests of the Shareholders of the Funds will
not be diluted as a result of the proposed Conversion.
CONCLUSION. Each of the Boards of Directors of FEFA and FEIF has concluded that
the proposed Conversion of the Funds into a Delaware business trust is in the
best interests of its Fund's Shareholders and recommends a vote 'FOR' the
approval of the Conversion. Approval of this Proposal requires the affirmative
vote of a majority of outstanding voting securities of each Fund.
A vote in favor of the Plan of Conversion is deemed to be a vote in favor
of the Conversion of the Funds to a Delaware business trust; temporary waiver of
certain investment policies of the Funds to permit the Conversion; authorization
of the Funds to approve (1) the election of Trustees for the Trust; (2) the
investment advisory agreement with the Advisers the Trust; (3) the distribution
agreement and services
12
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agreement with the Distributor for the Trust; (4) selection of independent
auditors; and (5) continuation of all other contracts and agreements currently
in effect with the Funds, including, but not limited to, accounting, custody,
transfer agency, service, procedural and safekeeping and repurchase agreements.
Approval of the proposed conversion of the Funds to the Trust shall constitute
approval of each of the foregoing actions, including approval of the
continuation of the Funds contracts with the Trust. If the Plan of Conversion is
not approved, either or both of the Funds will continue to operate as a Maryland
corporation. Appraisal rights are not available to Shareholders with respect to
the Conversion.
The Board of Directors of each Fund recommends that Shareholders vote 'FOR'
approval of the Conversion described in this Proposal ONE.
* *
PROPOSAL TWO:
PROPOSAL TO ELECT CERTAIN INDIVIDUALS TO SERVE AS DIRECTORS ON THE
BOARDS OF DIRECTORS OF THE FUNDS AND AS TRUSTEES OF THE BOARD OF
TRUSTEES OF THE TRUST.
Currently, each Board of Directors of the Funds consists of nine members.
The Board of Directors of each of the Funds have voted to nominate the
individuals set forth in Table 2.1 below to serve as Directors for each of the
Funds and to serve as Trustees of the Trust, if Shareholders vote to approve the
Conversion.
All the individuals set forth in Table 2.1 below as nominees currently
serve as Directors of one or both of the Funds, except Mr. John P. Arnhold, who
serves as an executive officer of FEFA and FEIF. Except for Mr. John P. Arnhold
and Ms. Candace K. Beinecke, all such nominees were elected as Directors of
either FEFA or FEIF or both at the last special meeting of Shareholders of FEFA
held on October 12, 1995, or at the last special meeting of Shareholders of FEIF
held on December 12, 1995.
13
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TABLE 2.1
NOMINEES AS DIRECTORS OF THE FUNDS AND TRUSTEES OF THE TRUST
DIRECTOR SINCE
AND NO. SHARES
OWNED
NOMINEE'S NAME, AGE, ADDRESS AND -----------------
PRINCIPAL OCCUPATION AND AFFILIATION FEFA FEIF
- ---------------------------------------------------------- ------ ------
*John P. Arnhold (44) n.a. n.a.
1345 Avenue of the Americas, New York, NY 10105 160,800 86,182
President, Chief Executive Officer and Director, Arnhold
and S. Bleichroeder Advisers, Inc.; Co-President since
1994 and Director, Arnhold and S. Bleichroeder, Inc.;
Director, Aquila International Fund, Ltd. and The Global
Beverage Fund Ltd.; President, Worldvest, Inc.;
Co-President, FEFA; and President, FEIF
Candace K. Beinecke (51) 1996 n.a.
One Battery Park Plaza, New York, NY 10004 -0- -0-
Partner, Hughes Hubbard & Reed; Director, Jacob's Pillow
Dance Festival, Inc., Historic Preservation Projects, Inc.
and Merce Cunningham Dance Foundation, Inc.; and a
Director, FEFA
Edwin J. Ehrlich (66) n.a. 1994
2976 Lonni Lane, Merrick, NY 11566 5,107 1,862
President, Ehrlich Capital Management; Director, Pension
Fund Trusts -- ITT Corp.; Advisory Board Member, Emerging
World Investors Limited; Director, FEIF
K. Georg Gabriel (69) 1988 1994
2401 Tracy Place, N.W., Washington, D.C. 20008 36,284 -0-
Senior Advisor, Strategic Investment Partners, Inc.;
Member, Investment Committee, Eugene and Agnes Meyer
Foundation; Director, FEFA and FEIF
Robert J. Gellert (67) n.a. 1994
122 East 42nd Street, New York, NY 10168 -0- 29,172
Manager, United Continental Corporation; General Partner,
Windcrest Partners; Director, FEIF
*Michael M. Kellen (53) 1993 1994
1345 Avenue of the Americas, New York, NY 10105 19,421 49,816
Director and Senior Vice President, Arnhold and S.
Bleichroeder, Inc.; Vice Chairman and Director, FEFA and
FEIF
14
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<PAGE>
DIRECTOR SINCE
AND NO. SHARES
OWNED
NOMINEE'S NAME, AGE, ADDRESS AND -----------------
PRINCIPAL OCCUPATION AND AFFILIATION FEFA FEIF
- ---------------------------------------------------------- ------ ------
William M. Kelly (53) n.a. 1994
40 Wall Street, Suite 4201, New York, NY 10005 -0- 2,264
Manager, Lingold Association; Independent General Partner,
ML Venture Partners I L.P. and ML Venture Partners II,
L.P.; Trustee, New York Foundation; Treasurer and Trustee,
Black Rock Forest Conservation; Director, FEIF
*Stanford S. Warshawsky (60) 1987 1994
1345 Avenue of the Americas, New York, NY 10105 48,207 11,882
Co-President since 1994, Secretary and Director,
previously Vice Chairman of the Board, Arnhold and S.
Bleichroeder, Inc.; Director, German-American Chamber of
Commerce; Chairman and Director, FEIF; Director, FEFA
- ------------
* Interested persons of each Fund as defined in the 1940 Act because of their
positions with the Adviser and/or the Distributor.
------------------------
On December 29, 1997, the Directors and officers of FEFA as a group owned
beneficially 1,527,618 shares or approximately 11.0% of the outstanding shares
of FEFA. The Directors and officers of FEIF as a group owned beneficially
645,055 shares or approximately 26.7% of the outstanding shares of FEIF. In
addition, the Arnhold and S. Bleichroeder, Inc. Profit Sharing Plan owned
356,379 shares or approximately 14.7% of the outsanding shares of FEIF. In
addition to the shares listed above, on December 29, 1997, Mr. Ehrlich, on
behalf of his clients, had the power to vote or dispose of 17,042 shares of FEFA
and 7,201 shares of FEIF, and Mr. Kelly, on behalf of his clients, had the power
to vote or dispose of 90,335 shares of FEFA and 85,141 shares of FEIF, which on
a combined basis amounted to approximately 0.8% of the outstanding shares of
FEFA and 3.8% of the outstanding shares of FEIF.
All Directors who are not 'interested persons' are members of the Audit
Committees of their respective Funds. During the fiscal year ended October 31,
1997, the Board of Directors of FEFA met five times, and all the nominees listed
above attended 75% or more of the Directors' meetings and its Audit Committee
met once and all the nominees were in attendance except for Ms. Beinecke. During
the ten-month fiscal period ended October 31, 1997, the Board of Directors of
FEIF met three times, and all the nominees listed above attended 75% or more of
the Board of
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Directors' meetings, except Messrs. Kellen and Warshawsky, who each missed one
meeting, and its Audit Committee met once and all the nominees listed above were
in attendance.
FEFA and FEIF pay each of their Directors who is not an interested person
of the Fund annual compensation of $5,000 plus $500 per meeting of the Board of
Directors and certain out-of-pocket expenses. The Funds do not pay any
compensation to interested directors or any officers of the Funds. The Funds do
not pay any pension or retirement benefits to Directors. The following table
sets out the compensation received by each of the Director/nominees from FEFA
for its most recently completed fiscal year, and from FEIF for its most recent
ten-month fiscal period ended October 31, 1997.
COMPENSATION TABLE
COMPENSATION
---------------------------
NOMINEE FEFA FEIF TOTAL
- ------------------------------------------------ ------ ------ -------
John P. Arnhold*................................ -0- -0- -0-
Candace K. Beinecke............................. $8,750 -0- $ 8,750
Edwin J. Ehrlich................................ -0- $5,250 $ 5,250
K. Georg Gabriel................................ $8,750 $5,250 $14,000
Robert J. Gellert............................... -0- $5,250 $ 5,250
Michael M. Kellen*.............................. -0- -0- -0-
William M. Kelly................................ -0- $5,250 $ 5,250
Stanford S. Warshawsky*......................... -0- -0- -0-
- ------------
* Interested person by reason of affiliation with the Funds Adviser or
Distributor.
Fund Officers. Information about the executives officers of the Funds,
their ages, positions with the Funds and with the Adviser or principal
distributor, is set forth below.
John P. Arnhold (44), Co-President and Co-Chief Executive Officer of FEFA,
President, Chief Executive Officer and Chief Financial Officer of FEIF,
President of the Adviser and Co-President and Director of the Distributor;
Harold J. Levy (44), Co-President and Co-Chief Executive Officer of FEFA and a
Portfolio Manager of the Adviser; David L. Cohen (42), Vice President of FEFA
and a Portfolio Manager of the Adviser; Arthur F. Lerner (55), Vice President of
FEIF, a Portfolio Manager of the Adviser and Senior Vice President of the
Distributor; Martha B. Pierce (49), Vice President of FEFA and FEIF, and Vice
President of the Distributor; Robert Miller (54), Treasurer, Chief Accounting
Officer and Chief Financial Officer of FEFA, Treasurer and Chief Accounting
Officer of FEIF, Vice
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President, Secretary and Treasurer of the Adviser, and Senior Vice President of
the Distributor; Robert Bruno (35), Secretary and Assistant Treasurer of FEFA
and FEIF and Vice President of the Distributor; Tracy LaPointe Saltwick (38),
Assistant Vice President of FEFA and FEIF and Senior Vice President of the
Distributor; Cari Levine (30), Assistant Secretary of FEFA and FEIF and Fund
Administrator of the Distributor.
It is intended that the proxies of each Fund will be voted 'FOR' the
election of the nominees listed above in Table 2.1. Each Director so elected
will serve as a Director until the next meeting of Shareholders of such Fund, if
any, called for the purpose of electing Directors and until the election and
qualification of his successor or until such Director sooner dies, resigns or is
removed as provided in the By-laws of each of the Funds. Since the Funds do not
hold annual Shareholder meetings, Directors will hold office for an indefinite
period.
If Proposal ONE is approved by the Shareholders, the Directors elected by
this Proposal for each of the Funds shall also be elected by FEFA and FEIF, as
sole shareholders of each successor Series, as Trustees to serve on the Board of
Trustees of the Trust.
Each nominee has consented to serve as a Director of each of the Funds and
a Trustee of the Trust, if elected. In case any nominee shall be unable or shall
fail to act as a Director because of an unexpected occurrence, the proxies may
be voted for such other person(s) as shall be determined by the persons acting
under the proxies in their discretion.
CONCLUSION. The Board of Directors of each Fund recommends that Shareholders
vote 'FOR' the election of the nominees listed above to serve as Directors of
each of the Funds and as Trustees of the Trust.
* *
PROPOSAL THREE:
PROPOSAL TO APPROVE AN INVESTMENT ADVISORY AGREEMENT FOR THE TRUST AND
TO REDUCE ADVISORY FEES.
Arnhold and S. Bleichroeder Advisers, Inc. (the 'Adviser') currently serves
as the investment adviser to each of the Funds pursuant to separate investment
advisory agreements entered into on behalf of each Fund. The current investment
advisory agreement between FEFA and Arnhold and S. Bleichroeder, Inc. dated
Novem-
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<PAGE>
ber 1, 1995 was approved by the Shareholders on October 12, 1995 and was
subsequently transferred to the Adviser. The current investment advisory
agreement between FEIF and Arnhold and S. Bleichroeder, Inc. dated January 1,
1996 was approved by the Shareholders on December 12, 1995 and was subsequently
transferred to the Adviser. The Board of Directors of FEFA most recently
approved the continuance of that Fund's investment advisory agreement on October
28, 1997. The Board of Directors of FEIF most recently approved the continuance
of that Fund's investment advisory agreement on November 18, 1997. The Adviser
is a wholly owned subsidiary of Arnhold and S. Bleichroeder, Inc., the Funds'
Distributor.
In connection with their approval of the Proposal to change the
jurisdiction and organizational structure of the Funds, subject to Shareholder
approval, the Boards of Directors of the Funds have approved a new investment
advisory agreement for the Trust (the 'Trust's Investment Advisory Agreement'),
in the form attached hereto as EXHIBIT C, which sets forth the terms under which
the Adviser will provide investment advisory services to the Trust. If this
Proposal THREE were approved by the Shareholders of a Fund in conjunction with
Proposal ONE above, the Trust's Investment Advisory Agreement will become
effective upon the implementation of the Conversion described above in Proposal
ONE. If the Shareholders of a Fund do not approve Proposal ONE, the Conversion
of the Fund to the Trust, that Fund's current investment advisory agreement
would continue in effect.
The Trust's Investment Advisory Agreement is substantially similar to the
current investment advisory agreements, except it provides for a reduction from
the current investment advisory fee paid to the Adviser and it provides for
monthly rather than quarterly payments of the investment advisory fee to the
Adviser. The Trust's Investment Advisory Agreement provides for investment
advisory fees of both Funds, which are less than the current investment advisory
fees. The investment advisory fee for FEFA would be reduced from 1.25% to 1.00%
and the investment advisory fee for FEIF would be reduced from 1.50% to 1.00%.
The Trust's Investment Advisory Agreement provides that the Adviser will
continue to manage each Fund's investment operations, administer each Fund's
business affairs, and provide clerical, bookkeeping and administrative services.
The Adviser pays all compensation of and furnishes office space for all the
Trust's officers and personnel, and all expenses incurred by it in the ordinary
course of business, as well as the fees of all Trustees of the Trust who are
18
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affiliated persons of the Adviser or any of its affiliates. For the services and
facilities furnished, each Fund, as a Series of the Trust, will pay to the
Adviser an annual investment advisory fee, payable monthly.
The Funds' advisory fees do not cover the following fees and expenses: fees
and expenses of the non-interested Trustees; legal, auditing, distribution,
custodian, transfer agency, depository, brokerage and accounting fees and
expenses; expenses relating to the issuance or redemption of Fund shares; cost
of calculating the net asset value per share of Fund shares; costs of preparing
and filing the Trust's registration statements and other documents with the
Securities and Exchange Commission and state regulatory authorities; taxes and
governmental fees, including those to register or qualify the Funds' shares for
sale in various states; costs of preparing and mailing each of the Funds'
dividends, distributions, reports, prospectuses and notices to stockholders;
fees and expenses of the Trust's memberships in investment company
organizations; costs of Shareholders' meetings, including preparation and
distribution of proxy materials; and the premiums on the Funds' fidelity bonds
required by the Investment Company Act.
The following table shows the current investment advisory fees for the
Funds and the proposed investment advisory fee for each Fund upon Conversion to
the Trust.
TABLE 3.1
INVESTMENT MANAGEMENT FEE SCHEDULE
FUND NAME CURRENT FEE PROPOSED FEE
- ------------------------ ------------------------ ------------------------
FEFA.................... Annual rate of 1.25% of Annual rate of 1.00% of
average daily net average daily net
assets, payable assets, payable monthly
quarterly
FEIF.................... Annual rate of 1.50% of Annual rate of 1.00% of
average daily net average daily net
assets, payable assets, payable monthly
quarterly
19
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The following table shows the amount FEFA and FEIF would have saved by the
proposed investment advisory fee, which is less than the current investment
advisory fees, if the investment advisory fee had been in effect for the fiscal
year ended October 31, 1997 for FEFA and for the ten-month fiscal period ended
October 31, 1997 for FEIF.
TABLE 3.2
1997 ACTUAL AND PRO FORMA ADVISORY FEE COMPARISON
FISCAL 1997 FISCAL 1997 AMOUNT OF FEE
FUND NAME ACTUAL PRO FORMA REDUCTION
- ------------------------------ ----------- ----------- -------------
FEFA.......................... $ 2,672,362 $ 2,137,893 $ 534,469
FEIF.......................... $ 452,626* $ 301,750 $ 150,875
- ------------
* Currently, the Adviser has agreed to cap or limit the expenses of FEIF to
2.25% of average net assets through December 31, 1997. As a result, the actual
investment advisory fee shown above was reduced by $134,696 due to the expense
limitation described above.
------------------------
The following tables illustrate for FEFA and FEIF the expenses on a $1,000
investment under the existing and proposed fee schedules stated above, assuming
(1) a 5% annual return and (2) redemption at
the end of each time period.
FEFA EXPENSE TABLE
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Expenses under current fee structure... $ 17 $53 $91 $198
Expenses under proposed fee
structure............................ $ 14 $45 $78 $170
FEIF EXPENSE TABLE
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Expenses under current fee structure... $ 28 $87 $ 148 $313
Expenses under proposed fee
structure............................ $ 23 $72 $ 123 $264
20
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The following is a list of the names and addresses of the Directors and
executive officers of the Adviser, positions they hold with FEFA or FEIF and any
other principal positions.
<TABLE>
<CAPTION>
NAME AND ADDRESS* AND POSITION WITH OTHER PRINCIPAL
POSITION WITH ADVISER THE FUNDS OCCUPATION
- ----------------------- ---------------------- ------------------------------------
<S> <C> <C>
Henry H. Arnhold Director of both Funds Co-Chairman of the Board, Arnhold
Director and Chairman of FEFA and S. Bleichroeder, Inc.; Director,
Aquila International Fund Ltd.;
Trustee, The New School for Social
Research; and Director, Conservation
International
John P. Arnhold Co-President and Co-President and Director, Arnhold
President, Chief Co-Chief Executive and S. Bleichroeder, Inc.; Director,
Executive Officer Officer of FEFA and Aquila International Fund Ltd.;
and Director President of FEIF Director, The Global Beverage Fund
Ltd.; and President, Worldvest, Inc.
Stanford S. Warshawsky Director of both Funds Co-President, Secretary and
Director and Chairman of FEIF Director, Arnhold and S.
Bleichroeder, Inc.; Director,
German-American Chamber of Commerce
Stephen M. Kellen Director of FEFA and Co-Chairman of the Board, Arnhold
Director FEIF and S. Bleichroeder, Inc.; Director,
The Carnegie Hall Society; Trustees
Council of The National Gallery of
Art; and Trustee, WNET/Thirteen
Robert Miller Treasurer, Chief Senior Vice President, Arnhold and
Vice President, Accounting Officer S. Bleichroeder, Inc.
Secretary and and Chief Financial
Treasurer Officer of FEFA and
Treasurer and Chief
Accounting Officer
of FEIF
</TABLE>
- ------------
* The address for all the above named individuals is 1345 Avenue of the
Americas, New York, NY 10105.
The Distributor, which owns all the outstanding shares of the Adviser, has
a services agreement with each of the Funds, pursuant to which it receives a
services fee of .25% of each Fund's average daily net assets to cover expenses
incurred for shareholder communications and other services. During the fiscal
year ended October 31, 1997, FEFA paid the Distributor $515,932 pursuant to the
services agreement and paid $18,540 to independent financial services firms that
are providing similar assistance to the Fund. During the ten-month fiscal period
ended October 31, 1997, FEIF paid the Distributor $75,096 pursuant to the
services agreement and FEIF paid $342 to independent financial services firms
that are providing similar assistance to the Fund.
The Distributor at times acts as the broker-dealer for the Funds in
executing portfolio transactions. During the fiscal year ended October
21
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<PAGE>
31, 1997, FEFA paid $453,073 in brokerage commissions of which it paid $26,580
to the Distributor. During the ten-month fiscal period ended October 31, 1997,
FEIF paid $53,846 in brokerage commissions of which it paid $7,709 to the
Distributor.
The Adviser has employment agreements with Harold J. Levy and David L.
Cohen to serve as portfolio managers for FEFA. Messrs. Levy and Cohen are also
the principal owners of Iridian Asset Management LLC ('Iridian'). The
Distributor owns 27.5% of Iridian and, pursuant to an operating agreement with
Iridian, does not direct or control the management, affairs or policies of
Iridian.
As is provided in the current investment advisory agreements, the Trust's
Investment Advisory Agreement provides that the Adviser shall not be liable for
any error of judgment or of law, or for any loss suffered by either of the Funds
or the Trust in connection with the matters to which the Trust's Investment
Advisory Agreement relates, except loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Adviser in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under the Trust's Investment Advisory Agreement.
The Trust's Investment Advisory Agreement may continue in effect for a
period of more than two years from the date it first comes into effect, but only
so long as such continuance is specifically approved at least annually in
conformity with the requirements of the 1940 Act. The Trust's Investment
Advisory Agreement may be terminated by either party at any time without penalty
upon not more than sixty (60) days' nor less than thirty (30) days' written
notice to the other party or by a majority vote, as defined in the 1940 Act, of
the beneficiaries of the Trust. The Trust's Investment Advisory Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
CONCLUSION. The Board of Directors of each Fund recommends that Shareholders
approve the Trust's Investment Advisory Agreement, which provides for a
reduction in the investment advisory fees of FEFA and FEIF.
The Board of Directors of each of the Funds recommends that Shareholders
vote 'FOR' the approval of the Trust's Investment Advisory Agreement.
* *
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PROPOSALS FOUR THROUGH SEVEN WOULD MAKE CERTAIN MODIFICATIONS TO THE
FUNDS' INVESTMENT RESTRICTIONS.
Each of the Funds currently has a number of investment restrictions that
have been designated as fundamental policies. Mutual funds may designate
investment restrictions as either fundamental or non-fundamental policies.
Fundamental policies can be changed only with the prior approval of
shareholders, while non-fundamental policies can be changed or eliminated by a
resolution of a mutual fund's board of directors with notice of the change to
its shareholders. Each Fund's current designation of an investment restriction
as a fundamental policy requires a vote of the Shareholders each time a Fund may
need to amend or otherwise adjust an investment restriction. This results in the
Funds incurring the costs of Shareholders' meetings.
Currently, all of the investment restrictions of FEFA and most of the
investment restrictions of FEIF are designated as fundamental policies. Since
most of the investment restrictions of the Funds are designated as fundamental
policies, it is necessary to have a Shareholders' meeting to obtain approval by
a vote of the Shareholders each time a Fund needs to amend or otherwise adjust
an investment restriction that is designated as a fundamental policy, resulting
in the Fund incurring the costs of a Shareholders' meeting.
Dynamic changes in the market and economy as well as in the regulation of
the securities industry require that the Funds be flexible in their ability to
adapt their investment policies to such changes. Since the Funds are currently
having a Shareholders' meeting, the Boards of Directors of the Funds recommend
that Shareholders vote to reclassify certain investment restrictions of the
Funds as non-fundamental policies, to amend certain restrictions to make them
uniform and to delete other investment restrictions that are no longer required
by State 'Blue Sky' laws due to the recent passage by the U.S. Congress of the
National Securities Market Improvement Act of 1996 (the 'National Securities
Market Improvement Act').
The Board of Directors of each Fund, based upon the Adviser's
recommendation, believes that the Proposals to reclassify certain investment
restrictions of the Funds as non-fundamental policies, to amend certain
investment restrictions to make them uniform and to delete other investment
restrictions is in the best interests of each Fund and its Shareholders and
recommends a vote 'FOR' Proposals FOUR through SEVEN.
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PROPOSAL FOUR:
PROPOSAL TO CLASSIFY AS NON-FUNDAMENTAL AND AMEND CERTAIN INVESTMENT
RESTRICTIONS OF THE FUNDS:
Each of the Funds has certain investment restrictions that are designated
as fundamental policies. The Board of Directors of each of the Funds recommends
that the following investment restrictions be reclassified as non-fundamental
policies. The following investment restrictions of each Fund are similar and it
is proposed that they be amended so that they are uniform.
A) CONCERNING PURCHASE OF OTHER INVESTMENT COMPANIES.
Each Fund has an investment restriction which is a fundamental policy that
limits its ability to make investments in other investment companies. The
Securities and Exchange Commission has relaxed its restrictions on a mutual fund
being able to invest part of its assets in other investment companies. At times,
a mutual fund can invest in a market or market segment more efficiently by
investing in another investment company than by direct investments in the
securities of such market or market segment. This investment restriction may be
designated as a non-fundamental policy. The Board of Directors of each Fund,
based upon the Adviser's recommendation, believes that it would be advantageous
for each Fund to have greater flexibility in investing in other investment
companies.
FEFA's investment restriction concerning investment in securities of other
investment companies currently states:
The Fund may not: Invest in securities of other registered investment
companies, except by purchases in the open market involving only customary
brokerage commissions and as a result not more than 5% of its total assets
(determined at the time of investment) would be invested in such
securities, or except as part of a merger, consolidation, reorganization or
other acquisition.
FEIF's investment restriction concerning investment in securities of other
investment companies currently states:
The Fund may not: Invest in securities of other investment companies,
except in accordance with the Investment Company Act and the rules and
regulations thereunder.
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The Board of Directors of each Fund recommends the adoption of the
following uniform investment restriction concerning investment in securities of
other investment companies as a non-fundamental policy:
The Fund may not: Purchase securities of any other investment company,
except (i) by purchase in the open market involving only customary brokers'
commissions, (ii) in connection with a merger, consolidation,
reorganization or acquisition of assets or (iii) as otherwise permitted by
applicable law.
Modification of this investment restriction would permit a Fund to invest
all of its assets in another investment company whose assets are invested with
substantially the same investment objectives and policies as the Fund (a
'master-feeder structure'). Beyond this potential application, the primary
purpose of this Proposal is to amend and update each Fund's investment
restriction in light of current regulatory interpretations permitting investing
in other investment companies, to clarify application of the limitation in light
of current law and regulatory interpretations, to provide additional investment
flexibility and to reclassify this investment restriction as a non-fundamental
investment policy.
CONCLUSION. The Board of Directors of each Fund, based upon the Adviser's
recommendation, believes that the amendment of this investment restriction and
its reclassification as a non-fundamental policy are in each Fund's best
interests and recommends that Shareholders vote 'FOR' Proposal FOUR A.
B) CONCERNING PLEDGING, MORTGAGING OR HYPOTHECATING ASSETS.
Each Fund has an investment restriction which is a fundamental policy
relating to pledging, mortgaging or hypothecating its assets.
FEFA's investment restrictions currently reads as follows:
The Fund may not: Borrow, pledge, mortgage, or hypothecate its assets
in an amount exceeding one-third of its total assets.
FEIF's investment restriction currently reads as follows:
The Fund may not: Pledge, mortgage, or hypothecate its assets in an
amount exceeding 33 1/3% of its total assets.
The Board of Directors of FEIF recommends that the following investment
restriction be designated as non-fundamental and the Board of Directors of FEFA
recommends that its investment restric-
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tion be reclassified as non-fundamental and be amended to read as follows:
The Fund may not: Pledge, mortgage or hypothecate its assets in an
amount exceeding 33 1/3% of its total assets.
Each of the Funds has a separate fundamental policy dealing with borrowing.
Therefore, it is proposed that the word 'borrow' be deleted from this investment
restriction of FEFA. Changing this restriction from a fundamental to
non-fundamental policy would not affect the way in which the Funds are currently
managed.
CONCLUSION. Based upon the Adviser's recommendation, the Board of Directors of
FEIF believes that reclassification of the above stated investment restriction
as a non-fundamental policy is in FEIF's best interests, and the Board of
Directors of FEFA believes that the amendment of this investment restriction and
the reclassification of it as a non-fundamental policy are in FEFA's best
interests. The Board of Directors of each Fund recommends that Shareholders vote
'FOR' Proposal FOUR B.
C) CONCERNING INVESTMENT LIMITATIONS.
Each of the Funds currently has the following identical and redundant
investment restrictions which are fundamental policies that relate to the status
of each Fund as a non-diversified investment company. Each of the Funds are and
will remain non-diversified investment companies, and will retain the following
investment restriction as a fundamental policy:
The Fund may not: Change its sub-classification under the Investment
Company Act of 1940 from non-diversified to diversified.
Each Fund also has the following redundant investment restriction which is
a fundamental policy that describes how a non-diversified investment company may
invest its assets. It is proposed that the following investment restriction for
each of the Funds be reclassified as a non-fundamental policy:
The Fund may not: With respect to 50% of the value of its total
assets, invest more than 25% of the value of its total assets in the
securities of one issuer, and with respect to the other 50% of the value of
its total assets, invest more than 5% of the value of its total assets in
the securities of one issuer or acquire more than 10% of the outstanding
voting securities of a single issuer. This restriction shall not apply to
U.S. Government securities.
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Since the Securities and Exchange Commission could at some time in the
future change how it defines the investment limitations for a non-diversified
investment company, it is proposed that the above investment restriction be
reclassified as a non-fundamental policy. This would permit the Funds to revise
this investment restriction to conform to any such changes without the expense
of a Shareholder vote, and to continue its fundamental policy to be a
non-diversified investment company.
CONCLUSION. The Board of Directors of each Fund, based upon the Adviser's
recommendation, believes that the reclassification of the above stated
investment restriction as a non-fundamental policy is in each Fund's best
interests and recommends that Shareholders vote 'FOR' Proposal FOUR C.
* *
PROPOSAL FIVE:
PROPOSAL TO AMEND CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS:
It is proposed that these two investment restrictions which are fundamental
policies be amended so that they are uniform for both Funds.
A) CONCERNING INDUSTRY CONCENTRATION OF ASSETS.
The Funds have similar investment restrictions which are designated as
fundamental policies concerning the concentration of assets in specific
industries.
FEFA's investment restriction currently states:
The Fund may not: Concentrate its assets in the securities of issuers
engaged in specific industries or industry groups.
FEIF's investment restriction currently states:
The Fund may not: Invest more than 25% of its assets in securities of
issuers engaged in specific industries or industry groups.
The Board of Directors of FEFA recommends that its investment restriction
be amended to read as follows:
The Fund may not: Invest more than 25% of its assets in securities of
issuers engaged in specific industries or industry groups.
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This Proposal will not affect the way in which FEFA is managed.
CONCLUSION. Based upon the Adviser's recommendation, the Board of Directors of
FEFA believes that the amendment of this investment restriction is in FEFA's
best interests and recommends that Shareholders vote 'FOR' Proposal FIVE A.
B) CONCERNING COMMODITIES AND COMMODITY CONTRACTS.
Each of the Funds currently has an investment restriction which is a
fundamental policy that relates to purchase of commodities and commodity
contracts. Most financial futures contracts and forward currency contracts are
considered to be commodity contracts.
FEFA's investment restriction currently states:
The Fund may not: Buy or sell commodities or commodity contracts,
except that the Fund may purchase and sell commodity futures contracts to
establish bona fide hedge transactions.
FEIF's investment restriction currently states:
The Fund may not: Buy or sell commodities or commodity contracts which
under the Commodity Exchange Act and Regulations promulgated thereunder
would require the Fund to register as a 'commodity pool operator' as that
term is defined under the Commodity Exchange Act.
The Board of Directors of FEIF recommends that its investment restriction
be amended to read as follows:
The Fund may not: Buy or sell commodities or commodity contracts,
except that the Fund may purchase and sell commodity futures contracts to
establish bona fide hedge transactions.
This Proposal will not affect the way in which FEIF's currently managed.
CONCLUSION. Based upon the Adviser's recommendation, the Board of Directors of
FEIF believes that the amendment of this investment restriction in FEIF's best
interests and recommends that Shareholders vote 'FOR' Proposal FIVE B.
* *
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PROPOSAL SIX:
PROPOSAL TO RECLASSIFY AS NON-FUNDAMENTAL AND AMEND CERTAIN INVESTMENT
RESTRICTIONS OF FEFA:
FEFA has two investment restrictions that are currently classified as
fundamental policies and FEIF has two similar investment restrictions that are
classified as non-fundamental policies. It is proposed that these two investment
restrictions be reclassified as non-fundamental policies for FEFA and amended so
that they are uniform for both Funds.
A) REGARDING INVESTMENTS IN ISSUERS OWNED BY AN OFFICER OR DIRECTOR.
Each of the Funds has a similar investment restriction that prohibits
investing in the securities of an issuer if the Fund knows that an officer or
director of the Fund or its investment adviser owns more than 1/2 of 1% of such
issuer or if such officers and directors own in the aggregate more than 5% of
such issuer.
FEFA has an investment restriction which is a fundamental policy and FEIF
has an investment restriction which is a non-fundamental policy that states:
The Fund may not: Invest in securities of any issuer if, to the
knowledge of the Fund, any officer or director of the Fund or the Fund's
investment adviser owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers and directors who own more than 1/2 of 1%
own in the aggregate more than 5% of the outstanding securities of such
issuer.
The Board of Directors of FEFA believes that the amendment and
reclassification of the following investment restriction as a non-fundamental
policy are in the best interests of FEFA, and the Board of Directors of FEIF
hereby gives notice that FEIF's above stated investment restriction will be
restated to read as follows:
The Fund may not: Invest in securities of any issuer if, to the
knowledge of the Fund, any officer or director of the Fund or the Fund's
investment adviser owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers and directors who own more than 1/2 of 1%
of such issuer's securities own in the aggregate more than 5% of the
outstanding securities of such issuer.
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This Proposal is not expected to affect the way the Funds are managed.
CONCLUSION. Based upon the Adviser's recommendation, the Board of Directors of
FEFA believes that the reclassification as a non-fundamental policy and
amendment of the above stated investment restriction are in the best interests
of FEFA and recommends that Shareholders vote 'FOR' Proposal SIX A.
B) TO LIMIT INVESTMENTS TO 10% OF AN ISSUER.
The Funds have similar investment restrictions concerning the percentage of
the voting securities of an issuer that they can purchase. FEFA's investment
restriction is designated as a fundamental policy and FEIF's investment
restriction is designated as a non-fundamental policy. The Board of Directors of
each of the Funds believes that it would be advantageous to make this investment
restriction uniform for the Funds.
FEFA has an investment restriction which is a fundamental policy that
provides:
The Fund may not: Purchase the securities of any issuer if such
purchase at the time thereof would cause more than ten percent of the
voting securities of any issuer to be held by the Fund.
FEIF has an investment restriction which is a non-fundamental policy that
provides:
The Fund may not purchase securities of any issuer if, as to 75% of
the assets of the Fund at the time of purchase, more than 10% of the voting
securities of any issuer would be held by the Fund.
The Board of Directors of FEFA believes that the amendment and
reclassification of following investment restriction as a non-fundamental policy
are in the best interests of FEFA, and the Board of Directors of FEIF hereby
gives notice that FEIF's above stated investment restriction will be restated to
read as follows:
The Fund may not: Purchase the securities of any issuer if, as to 75%
of the assets of the Fund at the time of purchase, more than 10% of the
voting securities of such issuer would be held by the Fund.
This Proposal is not expected to affect the way in which the Funds are
managed.
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CONCLUSION. Based upon the Adviser's recommendation, the Board of Directors of
FEFA believes that the reclassification as a non-fundamental policy and
amendment of the above stated investment restriction are in the best interests
of FEFA and recommends that Shareholders vote 'FOR' Proposal SIX B.
PROPOSAL SEVEN:
PROPOSAL TO DELETE CERTAIN INVESTMENT RESTRICTIONS.
The U.S. Congress recently passed the National Securities Market
Improvement Act. This legislation realigned responsibility for the regulation of
mutual funds in the United States. Prior to the passage of the National
Securities Market Improvement Act, the Securities and Exchange Commission and
all the States were involved in regulatory and disclosure issues involving
mutual funds. In passing the National Securities Market Improvement Act, the
U.S. Congress eliminated the States' substantive regulation of mutual funds. The
States may continue to charge mutual funds fees and regulate against fraud. The
Boards of Directors of the Funds, based upon the Adviser's recommendation,
believe that it would be advantageous for each of the Funds to delete the
following investment restrictions, which were originally required by the 'Blue
Sky' laws of the various States, but may be eliminated due to the passage of the
National Securities Market Improvement Act.
A) THE PURCHASE OF SECURITIES ON MARGIN.
Each of the Funds currently has an investment restriction which is a
fundamental policy that relates to the purchase of securities on margin. Each of
the Funds' investment restrictions currently states:
The Fund may not: Purchase securities on margin (but the Fund may
obtain such short-term credits as may be necessary for the clearance of
transactions); the deposit or payment by the Fund of initial or maintenance
margin in connection with futures contracts is not considered the purchase
of a security on margin.
Deletion of this investment restriction is not expected to affect the way
in which the Funds are managed. The main purpose of this Proposal is to simplify
the Funds' investment restrictions due to the elimination of this State 'Blue
Sky' law requirement.
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B) INVESTMENTS MADE FOR EXERCISING CONTROL.
Each of the Funds currently has an investment restriction which is a
fundamental policy that relates to making investments for the purpose of
exercising control over the management of the portfolio investment. Each of the
Funds' investment restrictions currently states:
The Fund may not: Make investments in securities for the purpose of
exercising control.
Deletion of this investment restriction is not expected to affect the way
in which the Funds are managed. The main purpose of this Proposal is to simplify
the Funds' investment restrictions due to the elimination of this State 'Blue
Sky' law requirement.
C) OIL, GAS OR OTHER SUCH INVESTMENTS.
Each of the Funds has an investment restriction which is a fundamental
policy that relates to investments in gas, oil and other similar investments.
Each of the Funds' investment restrictions currently states:
The Fund may not: Invest in interests in oil, gas or other mineral
exploration or development programs, except that the Fund may invest in the
securities of companies which invest in or sponsor such programs.
Deletion of this investment restriction is not expected to affect the way
in which the Funds are managed. The main purpose of this Proposal is to simplify
the Funds' investment restrictions due to the elimination of this State 'Blue
Sky' law requirement.
D) INVESTMENTS IN ISSUERS WITH LIMITED OPERATING HISTORY.
Each of the Funds has an investment restriction which is a fundamental
policy that relates to investing in companies with less than three year
operating history. Each of the Funds' investment restrictions currently states:
The Fund may not: Invest more than 10% of its total assets in the
securities of issuers which together with any predecessors have a record of
less than three years continuous operation or securities of issuers which
are restricted as to disposition.
Deletion of this investment restriction is not expected to affect the way
in which the Funds are managed. The main purpose of this Proposal is to simplify
the Funds' investment restrictions due to the elimination of this State 'Blue
Sky' law requirement.
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CONCLUSION. The Board of Directors of each Fund, based upon the Adviser's
recommendation, believes that the elimination of these above listed investment
restrictions is in the best interests of the Funds and their respective
Shareholders and recommends the Shareholders vote 'FOR' Proposal SEVEN.
* *
PROPOSAL EIGHT:
PROPOSAL TO RATIFY SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
ACCOUNTANTS.
The Board of Directors of each Fund has selected the firm of KPMG Peat
Marwick LLP, 757 Third Avenue, New York, New York 10017, to act as independent
accountants for each of the Funds for the next fiscal year ending October 31,
1998, and to certify any financial statements of each of the Funds required to
be certified by an independent accountant. As required by the 1940 Act, the vote
of the Board of Directors of each Fund is subject to the rights of the
Shareholders of each Fund, by vote of a majority of its outstanding voting
securities at any meeting called for the purpose of voting on such action, to
terminate such employment without penalty. KPMG Peat Marwick LLP has advised
each of the Funds that it has no direct or material indirect ownership interest
in either of the Funds.
KPMG Peat Marwick LLP served as the independent auditors for each of the
Funds during the most recent fiscal year. Services performed by KPMG Peat
Marwick LLP during such time have included (i) the audit of annual financial
statements and limited review of unaudited semiannual financial statements; (ii)
assistance and consultation in connection with filings with the SEC; and (iii)
the preparation of federal income tax returns filed on behalf of the Funds. In
recommending the selection of each Fund's accountants, the Board of Directors of
each Fund has reviewed the nature and scope of the services to be provided
(including non-audit services) and whether the performance of such services
would affect the accountant's independence. Representatives of KPMG Peat Marwick
LLP are expected to be present at the Meeting and will have the opportunity to
make a statement if they so desire.
The ratification of the selection of KPMG Peat Marwick LLP as the
independent accountants for a Fund requires the affirmative vote of a majority
of votes cast at the Meeting by Shareholders of the Funds.
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CONCLUSION. The Board of Directors of each Fund recommends that Shareholders
vote 'FOR' the ratification of the selection of KPMG Peat Marwick LLP as
independent accountants for the Funds.
OTHER MATTERS
Annual reports of each Fund were recently mailed to Shareholders. You can
obtain a copy of the most recent annual report of either Fund without charge by
calling 1-800-451-3623 or by writing to the Funds at 1345 Avenue of the
Americas, New York, New York 10105.
The Funds do not know of any other matters to be presented at the Special
Joint Meeting of Shareholders. If any other business should come before the
Meeting, the proxies will vote thereon in accordance with their best judgment.
If you cannot attend the Meeting in person, please complete, sign and
return the enclosed proxy in the envelope provided so that the Meeting may be
held and action taken with the greatest possible number of Shares participating.
SHAREHOLDER PROPOSALS FOR SUBSEQUENT MEETINGS
Neither of the Funds holds regular annual meetings of Shareholders. Any
Shareholder who wishes to submit proposals to be considered at a subsequent
meeting of Shareholders should send such proposals to the Funds at 1345 Avenue
of the Americas, New York, New York 10105.
INVESTMENT MANAGER
Arnhold and S. Bleichroeder Advisers, Inc., 1345 Avenue of the Americas,
New York, New York 10105, serves as the investment manager for each of the
Funds.
PRINCIPAL DISTRIBUTOR
Arnhold and S. Bleichroeder, Inc., 1345 Avenue of the Americas, New York,
New York 10105, serves as the principal distributor of each of the Funds.
REVOCATION OF PROXIES
You can revoke the enclosed proxy at any time prior to the exercise thereof
by submitting a written notice of revocation or subsequently executed proxy to
your Fund at any time prior to the Meeting or at the Meeting to the Secretary
of the Meeting. Signing and
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mailing the proxy will not affect your right to give a later proxy or to attend
the Meeting and vote your Shares in person.
VOTING INFORMATION
Proxies are being solicited by the Board of Directors of each of the Funds
for the Special Joint Meeting of Shareholders to be held on February 19, 1998,
at the Fund's offices at 1345 Avenue of the Americas, New York, New York 10105,
at 10:30 a.m. A proxy may be revoked at any time before the Meeting by oral or
written notice to your Fund. Valid proxies will be voted in accordance with the
specification thereon or, in the absence of specification, 'FOR' approval of all
Proposals.
In the event that a quorum is not present at the Meeting, the persons named
as proxies intend to propose one or more adjournments of the Meeting to permit
further solicitations of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the adjourned
Meeting in person or by proxy.
HELP AVOID THE COST OF ADDITIONAL SOLICITATIONS. PLEASE COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE.
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EXHIBIT A
AGREEMENT AND PLAN OF
CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF CONVERSION AND TERMINATION (the 'Agreement') is
made and entered into as of December 29, 1997, by and among First Eagle Fund of
America, Inc. ('FEFA'), a Maryland corporation having an office at 1345 Avenue
of the Americas, New York, New York 10105 and First Eagle International Fund,
Inc. ('FEIF'), a Maryland corporation having an office at 1345 Avenue of the
Americas, New York, New York 10105 (FEFA and FEIF being collectively referred to
as the 'Funds'), and First Eagle Trust, a Delaware business trust having an
office at 1345 Avenue of the Americas, New York, New York 10105 (the 'Trust').
WHEREAS, each of the Boards of Directors of the Funds and Initial Trustee
of the Trust has determined that it is in the best interests of the Funds and
the Trust, respectively, that the assets of each of the Funds be acquired by the
Trust pursuant to this Agreement and in accordance with the applicable laws of
the State of Maryland and the State of Delaware; and
WHEREAS, the parties desire to enter into a plan of exchange pursuant to
Section 368(a) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Plan of Exchange.
(a) Subject to the requisite approval of the shareholders of FEFA
and FEIF and to the terms and conditions contained herein, on February
27, 1998, or such earlier or later date as may be mutually agreed upon
by the parties (the 'Exchange Date'), FEFA shall assign, transfer and
convey its assets to the First Eagle Fund of America series (the 'FEFA
Series') of the Trust and FEIF shall assign, transfer and convey its
assets to the First Eagle International Fund series (the 'FEIF
Series') of the Trust (collectively, the 'Successor Series'); the FEFA
Series shall acquire all of the assets of FEFA and the FEIF Series
shall acquire all of the assets of FEIF; and the Trust shall accept
such assignment, transfer and conveyance.
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(b) Subject to the requisite approval of the shareholders of the
Funds and to the terms and conditions contained herein, on the
Exchange Date, FEFA shall assign, transfer and convey the obligations,
duties and liabilities of, or attributable to, FEFA to the FEFA Series
and FEIF shall assign, transfer and convey the obligations, duties and
liabilities of, or attributable to, FEIF to the FEIF Series; and the
FEFA Series shall acquire the obligations, duties and liabilities
attributable to FEFA and the FEIF Series shall acquire the
obligations, duties and liabilities attributable to FEIF.
(c) FEFA shall assign, transfer and convey its assets, as
provided in Section 1(a), in exchange for shares of beneficial
interest of the FEFA Series (the 'FEFA Trust Shares') equal in number
to the outstanding shares of FEFA, and FEIF shall assign, transfer and
convey its assets, as provided in Section 1(a), in exchange for shares
of beneficial interest of the FEIF Series (the 'FEIF Trust Shares' and
the FEFA Trust Shares and the FEIF Trust Shares being collectively
referred to as the 'Trust Shares') equal in number to the outstanding
shares of FEIF. In lieu of delivering certificates for the Trust
Shares, the Trust shall credit the Trust Shares to each Funds' account
on the share record books of the Trust and shall deliver a
confirmation thereof to the Funds. The Funds shall then deliver
written instructions to the Trust's transfer agent to establish
accounts for the shareholders of FEFA and FEIF on the share record
books relating to each corresponding Successor Series.
(d) FEFA agrees to distribute FEFA Trust Shares equal in number
to the corresponding number of then outstanding shares of FEFA to its
shareholders, and FEIF agrees to distribute FEIF Trust Shares equal in
number to the corresponding number of then outstanding shares of FEIF
to its shareholders.
(e) The Trust further assumes and agrees to observe, perform and
be bound by all of the grants, terms, covenants, representations,
warranties, and conditions contained in all contracts and agreements
currently in effect with the Funds, including, but not limited to, the
Distribution Agreements, the Services Agreements, and the other
agreements and documents delivered thereunder which are binding upon,
and to be observed or performed by, the Funds thereunder, as
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though the Trust were the Funds, and hereby ratifies and confirms the
validity of all contracts and agreements currently in effect with the
Funds, including, but not limited to, the Distribution and the
Services Agreements.
(f) All references to the Funds in all agreements to which the
Funds are a party will be deemed to refer to the Trust.
(g) It is contemplated that the net asset value of each
outstanding share of each Successor Series of the Trust immediately
after the effectiveness of this Agreement will be equivalent to the
net asset value of each outstanding share of FEFA and FEIF.
(h) Delivery of the assets of FEFA and FEIF to be transferred
shall be made not later than the next business day following the
Exchange Date. Assets transferred shall be delivered to The Bank of
New York, the Trust's custodian (the 'Custodian'). Such delivery shall
be made for the account of the Trust and the Successor Series, with
all securities not in bearer or book entry form duly endorsed, or
accompanied by duly executed separate assignments or stock powers, in
proper form for transfer, with signatures guaranteed, and with all
necessary stock transfer stamps, sufficient to transfer good and
marketable title thereto (including all accrued interest and dividends
and rights pertaining thereto) to the Custodian for the account of the
Trust and the Successor Series free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered
shall be in the form of immediately available funds payable to the
order of the Custodian for the account of the Trust and the Successor
Series. All assets of FEFA delivered to the Custodian as provided
herein shall be allocated by the Trust to the FEFA Series and all
assets of FEIF delivered to the Custodian as provided herein shall be
allocated by the Trust to the FEIF Series. All of the liabilities of
FEFA shall, on and as of the Effective Date, be deemed liabilities of,
and shall be deemed assumed by, the FEFA Series and all of the
liabilities of FEIF shall, on and as of the Effective Date, be deemed
liabilities of, and shall be deemed assumed by, the FEIF Series.
(i) FEFA and FEIF will pay or cause to be paid to the Trust any
interest received on or after the Exchange Date with respect to assets
transferred to the corresponding
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Successor Series hereunder and the Trust shall allocate any such
interest to the appropriate Successor Series. The Funds will transfer
to the Trust any distributions, rights or other assets received by the
Funds after the Exchange Date as distributions on or with respect to
the securities transferred from FEFA and FEIF to the corresponding
Successor Series hereunder. The Trust shall allocate any such
distributions, rights or other assets to the appropriate Successor
Series. All such assets shall be deemed included in assets transferred
from FEFA and FEIF on the Exchange Date and shall not be separately
valued.
(j) If the requisite number of shareholders of FEFA do not
approve this Agreement, FEFA will continue to operate as a Maryland
corporation and if the requisite number of shareholders of FEIF do not
approve this Agreement, FEIF will continue to operate as a Maryland
corporation.
(k) As soon as practicable after the Exchange Date, and following
distribution by FEFA and FEIF of the Trust Shares of each of the
Successor Series received by it among its shareholders in proportion
to the number of shares each such shareholder holds in FEFA and FEIF,
the Funds will dissolve and terminate.
2. The Funds' Representations and Warranties. Each of the Funds
individually represents and warrants to and agrees with the Trust as
follows:
(a) It is a corporation duly organized and validly existing under
the laws of the State of Maryland and has power to own all of its
properties and assets and, subject to the approval of its shareholders
as contemplated hereby, to carry out this Agreement.
(b) It is registered under the Investment Company Act of 1940, as
amended (the '1940 Act'), as an open-end, diversified, management
investment company, and such registration has not been revoked or
rescinded and is in full force and effect.
(c) On the Exchange Date, it will have full right, power and
authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
3. The Trust's Representations and Warranties. The Trust represents
and warrants to and agrees with the Funds as follows:
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(a) The Trust is a business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has power to carry on its business and to carry out this
Agreement.
(b) On the Exchange Date, the Trust Shares to be issued to each
of the Funds will have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be legally and validly
issued and will be fully paid and non-assessable by the Trust. No
Trust or Successor Series shareholder will have any preemptive right
of subscription or purchase in respect thereof.
4. The Trust's Conditions Precedent. The obligations of the Trust
hereunder shall be subject to the following conditions:
(a) FEFA and FEIF each shall have furnished to the Trust a
statement of its assets, including a list of securities with their
respective values owned by it.
(b) As of the Exchange Date, all representations and warranties
of FEFA and of FEIF made in this Agreement shall be true and correct
as if made on and as of such date, and FEFA and FEIF each shall have
complied with all the agreements and satisfied all the conditions to
be performed or satisfied by each of them on or prior thereto.
(c) A vote approving this Agreement and the transactions and
exchange contemplated hereby shall have been adopted by the
affirmative vote of at least a majority of the outstanding shares
(within the meaning of the 1940 Act) of FEFA and FEIF entitled to vote
and the shareholders of FEFA and of FEIF each shall have voted, by the
vote specified in the proxy materials of the Funds relating to this
Agreement, to direct the Funds to vote, and the Funds shall have voted
by or on the Exchange Date, as sole shareholder of the Trust, (i) to
vote on each of the proposals set forth in the Proxy Statements and
approved by the shareholders, so that the approval of the respective
proposals may be made effective with respect to the Trust as well as
the Funds; (ii) to elect the nominees as trustees of the Trust, (iii)
to render approval on such matters as may be necessary, for regulatory
purposes, in order to adopt or enter into any agreements or plans on
behalf of the Trust that had previously been approved by shareholders
of the Funds and are then in effect with respect to the Funds, and
(iv) to approve all other
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contracts and agreements currently in effect with the Funds,
including, but not limited to, accounting, custody, transfer agency,
distribution, services, procedural and safekeeping and repurchase
agreements.
5. The Funds' Conditions Precedent. The obligations of the Funds
hereunder shall be subject to the condition that, as of the Exchange Date,
all representations and warranties of the Trust made in this Agreement
shall be true and correct as if made on and as of such date, and that the
Trust shall have complied with all of the agreements and satisfied all the
conditions on its part to be performed or satisfied on or prior to such
date.
6. The Trust's and the Funds' Conditions Precedent. The obligations of
both the Trust and each of the Funds hereunder shall be subject to this
Agreement and the transactions contemplated hereby having been approved by
the affirmative vote of at least a majority of the outstanding shares
(within the meaning of the 1940 Act) of each of the Funds entitled to vote
as of the close of business on December 29, 1997, or such earlier or later
proxy record date as may be mutually agreed upon by the parties.
7. Amendment or Termination of Agreement. This Agreement and the
transactions contemplated hereby may be amended or terminated and abandoned
by resolution of the Board of Directors of FEFA or of FEIF, or the Board of
Trustees of the Trust, at any time prior to the transfer of assets on the
Exchange Date (and notwithstanding any vote of the shareholders of each of
the Funds) if (i) there is a material breach by the other party of any
representation, warranty or agreement contained in this Agreement, (ii) it
reasonably appears that a party cannot meet a condition of this Agreement
or (iii) circumstances should develop that, in the opinion of the Board of
Directors of FEFA or of FEIF, or the Board of Trustees of the Trust, make
proceeding with this Agreement in its current form inadvisable.
In addition, prior to the transfer of assets on the Exchange Date, any
provision of this Agreement may be amended or modified by the Board of
Directors of FEFA or of FEIF and the Board of Trustees of the Trust if such
amendment or modification would not have a material adverse effect upon the
benefits intended under this Agreement and would be consistent with the
best interests of the shareholders.
If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this
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Section 7, this Agreement shall become void and have no effect, without any
liability on the part of any party hereto or the trustees, officers or
shareholders of the Trust or the directors, officers or shareholders of the
Funds, in respect of this Agreement.
8. Waiver. At any time prior to the Exchange Date, any of the
foregoing conditions may be waived by the Board of Directors of FEFA or of
FEIF, or the Board of Trustees of the Trust, if, in the judgment of the
waiving party, such waiver will not have a material adverse effect on the
benefits intended under this Agreement to the shareholders of the Funds or
the shareholders of the Trust, as the case may be.
9. No Survival of Representations. None of the representations and
warranties included or provided for herein shall survive consummation of
the transactions contemplated hereby.
10. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware; provided,
however, that the due authorization, execution and delivery of this
Agreement, in the case of the Funds, shall be governed and construed in
accordance with the internal laws of the State of Maryland.
11. Counterparts. This Agreement may be executed in counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
IN WITNESS WHEREOF, each of the Funds and the Trust have caused this
Agreement and Plan of Conversion and Termination to be duly executed as of the
day and year first above written.
First Eagle Fund of America, Inc. First Eagle International Fund, Inc.
By: .................................. By: ..................................
Title: Title:
First Eagle Trust
By: ..................................
Title:
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EXHIBIT B
AGREEMENT AND DECLARATION OF TRUST
OF
FIRST EAGLE TRUST
THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as of the
date set forth below by the Trustees named hereunder for the purpose of forming
a Delaware business trust in accordance with the provisions hereinafter set
forth,
NOW, THEREFORE, the Initial Trustees hereby direct that the Certificate of
Trust be filed with Office of the Secretary of State of the State of Delaware,
and the Initial Trustees do hereby declare that the Trustees will hold in trust
all cash, securities and other assets that the Trust now possesses or may
hereafter acquire from time to time in any manner and manage and dispose of the
same upon the following terms and conditions for the benefit of the holders of
Shares in the Trust.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1. Name. This Trust shall be known as First Eagle Trust 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.
SECTION 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) 'By-Laws' shall mean the By-Laws of the Trust, as amended from
time to time, which By-Laws are expressly herein incorporated by reference
as part of the governing instrument within the meaning of the Delaware Act;
(b) 'Certificate of Trust' means the certificate of trust, as amended
or restated from time to time, filed by the Trustees in the Office of the
Secretary of State of the State of Delaware in accordance with the Delaware
Act;
(c) 'Class' means a class of Shares of a Series of the Trust
established in accordance with the provisions of Article III hereof;
(d) 'Commission' means the Securities and Exchange Commission;
(e) 'Declaration of Trust' means this Agreement and Declaration of
Trust, as amended or restated from time to time;
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(f) 'Delaware Act' means the Delaware Business Trust Act, 12 Del. C.
3801 et seq., as amended from time to time;
(g) 'Initial Trustees' means the person or persons who have signed
this Declaration of Trust;
(h) 'Manager' means a party furnishing services to the Trust pursuant
to an investment management or investment advisory agreement described in
Article IV, Section 8(a) hereof;
(i) '1940 Act' means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, all as amended from time to time;
(j) 'Person' means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof, whether domestic or foreign;
(k) 'Principal Underwriter' shall have the meaning given to it in the
1940 Act;
(l) 'Series' means each Series of Shares established and designated
under or in accordance with the provisions of Article III hereof;
(m) 'Shareholder' means a beneficial owner of outstanding Shares;
(n) 'Shares' means the Shares of beneficial interest into which the
beneficial interest in the Trust shall be divided, from time to time, and
includes fractions of Shares as well as whole Shares;
(o) 'Trust' means the Delaware business trust established under the
Delaware Act by this Declaration of Trust and the filing of the Certificate
of Trust in the Office of the Secretary of State of the State of Delaware;
(p) 'Trust Property' means any and all property, real or personal,
tangible or intangible, that is from time to time owned or held by or for
the account of the Trust; and
(q) 'Trustees' means the Initial Trustees, and all other Persons who
may, from time to time, be duly elected or appointed to serve as Trustees
in accordance with the provisions hereof, in each case so long as such
Person shall continue in office in accordance with the terms of this
Declaration of Trust, and reference herein to a Trustee or the Trustees
shall refer to such
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Person or Persons in her or his or their capacity as Trustees hereunder.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to conduct, operate and carry on the business
of a management investment company registered under the 1940 Act through one or
more Series investing primarily in securities, and to carry on such other
business as the Trustees may, from time to time, determine pursuant to their
authority under this Declaration of Trust.
ARTICLE III
SHARES
SECTION 1. Division of Beneficial Interests. The beneficial interests in
the Trust may be divided into one or more Series. Each Series may be divided
into one or more Classes. Subject to the further provisions of this Article III
and any applicable requirements of the 1940 Act, the Trustees shall have full
power and authority, in their sole discretion, and without obtaining any
authorization or vote of the Shareholders of any Series or Class thereof, (i) to
divide the beneficial interests in the Trust or in each Series or Class thereof
into Shares, with or without par value as the Trustees shall determine, (ii) to
issue Shares without limitation as to number (including fractional Shares) to
such Persons and for such amount and type of consideration, including cash or
securities, at such time or times and on such terms as the Trustees may deem
appropriate, (iii) to establish and designate and to change in any manner any
Series or Class thereof and to fix such preferences, voting powers, rights,
duties and privileges and business purpose of each Series or Class thereof as
the Trustees may, from time to time, determine, which preferences, voting
powers, rights, duties and privileges may be senior or subordinate to (or in the
case of business purpose, different from) any existing Series or Class thereof
and may be limited to specified property or obligations of the Trust or profits
and losses associated with specified property or obligations of the Trust, (iv)
to divide or combine the Shares of any Series or Class thereof into a greater or
lesser number, or issue dividends in Shares with respect to Shares of any Series
or Class, without thereby materially changing the proportionate beneficial
interest of the Shares of such Series or Class in the assets held with respect
to that Series or Class thereof, (v) to classify or reclassify any issued Shares
of any
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Series or Class thereof into Shares of one or more Series or Classes thereof and
(vi) to take such other action with respect to the Shares as the Trustees may
deem desirable.
Subject to the distinctions permitted among Classes or otherwise in Shares
of the same Series as established by the Trustees consistent with the
requirements of the 1940 Act, each Share of a Series of the Trust shall
represent an equal beneficial interest in the net assets of such Series, and
each holder of Shares of a Series shall be entitled to receive such holders pro
rata share of distributions of income and capital gains, if any, made with
respect to such Series. Upon redemption of the Shares of any Series or Class
thereof, the applicable Shareholder shall be entitled to be paid solely out of
the funds and property of such Series or Class thereof of the Trust.
All references to Shares in this Declaration of Trust shall be deemed to be
Shares of any or all Series or Classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust and each Class thereof, except as the context otherwise requires.
All Shares issued hereunder, including, without limitation, Shares issued
in connection with a dividend in Shares or a split or reverse split of Shares,
shall be fully paid and non-assessable. Except as otherwise provided by the
Trustees, Shareholders shall have no appraisal, preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.
SECTION 2. Ownership of Shares. The ownership of Shares shall be recorded
on the books of the Trust or a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series (or Class).
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 of each Series (or Class) 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 the identity of the Shareholders of each
Series (or Class) and as to the number of Shares of each Series (or Class) held,
from time to time, by each Shareholder.
SECTION 3. Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his duly authorized agent upon delivery to the
Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share certificate if one is
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outstanding, and such evidence of the genuineness of the execution and
authorization thereof as may be required by the Trustees and of such other
matters as may be required by the Trustees. Upon such delivery, and subject to
any further requirements specified by the Trustees or contained in the By-Laws,
the transfer shall be recorded on the books of the Trust. Until a transfer is so
recorded, the record holder of Shares shall be deemed to be the holder of such
Shares for all purposes hereunder and neither the Trustees nor the Trust, nor
any transfer agent, shareholder servicing agent or similar agent, any officer,
employee or agent of the Trust, shall be affected by any notice of a proposed
transfer.
SECTION 4. Investments in the Trust. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration as the Trustees, from time to time, may authorize.
SECTION 5. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder, by virtue of having become a Shareholder, shall
be held to have expressly assented and agreed to the terms hereof. The death,
incapacity, dissolution, termination or bankruptcy of a Shareholder during the
existence of the Trust shall not operate to dissolve the Trust, nor entitle the
representative of any such Shareholder to an accounting or to take any action in
court or elsewhere against the Trust or the Trustees, but entitles such
representative only to the rights of such Shareholder 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 as 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. Except as specifically provided herein, no Shareholder shall be
personally liable for the debts, liabilities, obligations or expenses incurred
by, contracted for, or otherwise existing with respect to, the Trust or by or on
behalf of any Series or Class. Every note, bond, contract or other understanding
issued by or on behalf of the Trust or Trustees relating to the Trust or to a
Series or Class may include a recitation limiting the obligation represented
thereby to the Trust or to one or more Series or Class and its respective assets
(but the omission
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of such a recitation shall not operate to bind any Shareholder or Trustee of the
Trust).
SECTION 6. Establishment and Designation of Series (or Class). Without
obtaining any authorization or vote of the Shareholders of any Series or Class
thereof (except as otherwise required by the 1940 Act), the establishment and
designation of any Series (or Class) of Shares shall be effective upon the
adoption by a majority of the then Trustees of a resolution that sets forth such
establishment and designation and the relative rights and preferences of such
Series (or Class), whether directly in such resolution or by reference to
another document including, without limitation, any registration statement of
the Trust, or as otherwise provided in such resolution.
Shares of each Series (or Class) established pursuant to this Article III,
unless otherwise provided in the resolution establishing such Series, shall have
the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series (or Class). All
consideration received by the Trust for the issue or sale of Shares of a
particular Series or Class thereof, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably be held
with respect to that Series (or Class) for all purposes, subject only to
the rights of creditors of such Series (or Class thereof to the extent
provided below), and shall be so recorded upon the books of account of the
Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, including, without limitation, any
proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, are herein referred to as 'assets held with
respect to' that Series (or Class thereof). In the event that there are any
assets, income, earnings, profits and proceeds thereof, funds or payments
that are not readily identifiable as assets held with respect to any
particular Series (and the Classes thereof) (collectively 'General
Assets'), the Trustees shall allocate such General Assets to, between or
among any one or more of the Series (and the Classes thereof) in such
manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable, and any General Assets so allocated to a particular
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Series (and the Classes thereof) shall be assets held with respect to that
Series and such Classes. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series and Classes for
all purposes. Separate and distinct records shall be maintained for each
Series (and the Classes thereof) and the assets held with respect to each
Series (and the Classes thereof) shall be held and accounted for separately
from the assets held with respect to all other Series (and the Classes
thereof) and the General Assets of the Trust not allocated to such Series
or Classes.
(b) Liabilities Attributable to a Particular Series (or Class). The
assets of the Trust held with respect to each particular Series (or Class
thereof) shall be charged exclusively with the liabilities of the Trust
attributable to that Series or Class and all expenses, costs, charges and
reserves attributable to that Series or Class. Any general liabilities of
the Trust that are not readily identifiable as being attributable to any
particular Series (and the Classes thereof) shall be allocated and charged
by the Trustees to and among any one or more of the Series (and the Classes
thereof) in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. All liabilities, expenses, costs,
charges, and reserves so charged to a Series (and the Classes thereof) are
herein referred to as 'liabilities attributable to' that Series (or Class
thereof). Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon the
Shareholders of all Series and Classes for all purposes. All liabilities
attributable to a particular Series shall be enforceable against the assets
held with respect to such Series only and not against the assets of the
Trust generally or against the assets held with respect to any other
Series. Notice of this limitation on the liability of each Series shall be
set forth in the Certificate of Trust or in an amendment thereto prior to
the issuance of any Shares of a Series. To the extent that the Trustees,
pursuant to Section 2 of Article VII hereof, include a Class limitation on
liability in any note, bond, contract, instrument, certificate or
undertaking made with respect to any Class, the parties to such note, bond,
contract, instrument, certificate or undertaking shall look only to the
assets of such Class in satisfaction of the liabilities arising thereunder
and not to the assets of any other Class of the applicable Series.
(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provision of this Declaration of Trust,
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including, without limitation, Article VI, no dividend or distribution,
including, without limitation, any distribution paid upon dissolution of
the Trust or of any Series (or Class) thereof with respect to, nor any
redemption or repurchase of, the Shares of any Series (or Class thereof)
shall be effected by the Trust other than from the assets held with respect
to such Series (or Class thereof), nor shall any Shareholder of any
particular Series (or Class thereof) otherwise have any right or claim
against the assets held with respect to any other Series or Class except to
the extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series or Class. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to determine
which items shall be treated as income and which items as capital; and each
such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Equality. All the Shares of each particular Series (or Class
thereof) shall represent an equal proportionate interest in the assets held
with respect to that Series (or Class thereof), and each Share of any
particular Series shall be equal to each other Share of that Series
(subject to the liabilities attributable to that Series and such rights and
preferences as may have been established and designated with respect to
Classes, or otherwise, of Shares within such Series).
(e) Fractions. Any fractional Share of a Series (or Class thereof)
shall carry proportionately all the rights and obligations of a whole Share
of that Series or Class, including rights with respect to voting, receipt
of dividends and distributions, redemption of Shares and dissolution of the
Trust.
(f) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series (or Class thereof),
unless otherwise required by applicable law, to combine the assets and
liabilities attributable to any two or more Series (or Classes) into assets
and liabilities attributable to a single Series or Class.
(g) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series (or Class) previously established and
designated, the Trustees may by resolution of a majority of the Trustees
abolish that Series (or Class) and rescind the establishment and
designation thereof and may thereafter establish a new Series (or Class)
with such designation and otherwise as herein provided.
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SECTION 7. Indemnification of Shareholders. If any Shareholder or former
Shareholder shall be exposed to liability by reason of a claim or demand
relating to such Person being or having been a Shareholder, and not because of
such Person's acts or omissions, the Shareholder or former Shareholder (or such
Person's 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 out of the
assets of the Trust against all cost and expense reasonably incurred in
connection with such claim or demand, but only out of the assets held with
respect to the particular Series (or Class thereof) of Shares of which such
Person is or was a Shareholder and from or in relation to which such liability
arose. The Series (or Class thereof) may, at its option, and shall, upon request
by the Shareholder, assume the defense of any claim made against the Shareholder
for any act or obligation of such Series and satisfy any judgment thereon.
ARTICLE IV
TRUSTEES
SECTION 1. Election of Trustees. Upon the issuance of beneficial interests
of the Trust, First Eagle Fund of America, Inc., a Maryland corporation, and
First Eagle International Fund, Inc., a Maryland corporation, as initial
shareholders of the Trust, shall each elect the Trustees of the Trust; to the
extent that persons so elected are different from the Initial Trustee, such
persons shall replace the Initial Trustee as Trustees of the Trust.
SECTION 2. Number, Election and Tenure. The Initial Trustee shall be Robert
Bruno. After the initial election of Trustees, the number of Trustees shall be
eight or such other number as shall, from time to time, be determined by the
Trustees pursuant to Section 4 of this Article IV. Except as described above
with respect to the Initial Trustee, each Trustee shall serve during the
continued term of the Trust until she or he dies, resigns, is declared bankrupt
or incompetent by a court of appropriate jurisdiction, or is removed, or, if
sooner, until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of her or his
successor. In the event that less than the majority of the Trustees holding
office have been elected by the Shareholders, to the extent required by the 1940
Act, the Trustees then in office shall call a Shareholder's meeting for the
election of Trustees. Any Trustee may resign at any time by written instrument
signed by her or him and delivered to any officer of the Trust or to the
secretary of any meeting of the Trustees. Such
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resignation shall be effective upon receipt unless specified to be effective at
some other time. Except to the extent expressly provided in a written agreement
with the Trust, no Trustee resigning and no Trustee removed shall have any right
to any compensation for any period following her or his resignation or removal,
or any right to damages on account of such removal. The Shareholders may elect
Trustees at any meeting of Shareholders called by the Trustees for that purpose.
Any Trustee may be removed at any meeting of Shareholders by a majority vote of
the outstanding Shares of the Trust, as defined in the 1940 Act.
SECTION 3. Effect of Death, Resignation or Removal of a Trustee. The death,
declination to serve, resignation, retirement, removal, or incapacity of one or
more Trustees, or all 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.
Whenever there shall be fewer than the designated number of Trustees, until
additional Trustees are elected or appointed as provided herein to bring the
total number of Trustees equal to the designated number, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this Declaration
of Trust. As conclusive evidence of such vacancy, a written instrument
certifying the existence of such vacancy may be executed by an officer of the
Trust or by a majority of the Trustees then in office. In the event of the
death, declination, resignation, retirement, removal, or incapacity of all the
then Trustees within a short period of time and without the opportunity for at
least one Trustee being able to appoint additional Trustees to replace those no
longer serving, the Trust's Manager is empowered to appoint new Trustees subject
to the applicable provisions of the 1940 Act.
SECTION 4. Powers. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees; the Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary or
appropriate in connection with the management of the Trust, including the power
to engage in securities transactions of all kinds on behalf of the Trust.
Without limiting the foregoing, the Trustees may: adopt By-Laws not inconsistent
with this Declaration of Trust providing for the regulation and management of
the affairs of the Trust and may amend and repeal them to the extent that such
By-Laws do not reserve that right to the Shareholders; enlarge or reduce their
number; remove any Trustee with or without cause at any time by written
instrument signed by at least two-thirds of
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the number of Trustees prior to such removal, specifying the date when such
removal shall become effective and fill vacancies caused by enlargement of their
number or by the death, resignation or removal of a Trustee; elect and remove,
with or without cause, such officers and appoint and terminate such agents as
they consider appropriate; appoint from their own number and establish and
terminate one or more committees consisting of two or more Trustees which may
exercise the powers and authority of the Board of Trustees to the extent that
the Board of Trustees determine; deposit all or any part of such assets in a
system or systems for the central handling of securities or with a Federal
Reserve Bank; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; declare and pay
dividends and distributions to Shareholders from the assets available therefor;
and in general exercise, or delegate 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, transfer or Shareholder servicing agent, or Principal
Underwriter, such authority as they consider desirable. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Trustees shall be deemed effective if approved or taken by a majority of the
Trustees present at a meeting of Trustees at which a quorum of Trustees is
present, within or without the State of Delaware.
Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):
(a) To operate as and carry out the business of an investment company,
and exercise all the powers necessary or appropriate to the conduct of such
operations;
(b) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own,
hold, pledge, sell, assign, transfer, exchange, distribute, purchase or
write options on, lend, enter into contracts for the future acquisition or
delivery of, or otherwise deal in or dispose of, securities, indices,
currencies, commodities or other property of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repur-
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chase agreements, bankers' acceptances, and other securities, commodities
or contracts of any kind, issued, created, guaranteed, or sponsored by any
and all Persons, including, without limitation, states, territories, and
possessions of the United States and the District of Columbia and any
political subdivision, agency, or instrumentality thereof, the U.S.
Government or any foreign government or any political subdivision of the
U.S. Government or any foreign government, or any domestic or international
instrumentality, or by any bank or savings institution, or by any
corporation or organization organized under the laws of the United States
or of any state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in 'when issued' contracts
for any such securities; to change the investments of the assets of the
Trust; and to exercise any and all rights, powers, and privileges of
ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent
and otherwise act with respect thereto, with power to designate one or more
Persons to exercise any of said rights, powers, and privileges in respect
of any of said instruments;
(c) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options (including options on futures contracts) with respect to or
otherwise deal in any property rights relating to any or all of the assets
of the Trust or any Series or Class thereof;
(d) 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 discretion with relation to securities or property as the Trustees
shall deem proper;
(e) To set record dates for the determination of Shareholders with
respect to various matters, which, for purposes of determining the
Shareholders of any Series (or Class) who are entitled to receive payment
of any dividend or of any other distribution shall be on or before the date
for the payment of such dividend or such other payment, as the record date
for determining the Shareholders of such Series (or Class) having the right
to receive such dividend or distribution; without fixing a record date, the
Trustees may for distribution purposes close the register or transfer books
for one or more Series (or Classes) at any time prior to the payment of a
distribution; nothing in this subsection shall be
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construed as precluding the Trustees from setting different record dates
for different Series (or Classes);
(f) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities or other property;
(g) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its
own name or in the name of a custodian or a nominee or nominees or
otherwise;
(h) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security or
property which is 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 or property held
in the Trust;
(i) To join with other security or property holders in acting through
a committee, depository, voting trustee or otherwise, and in that
connection to deposit any security or property with, or transfer any
security or property to, any such committee, depositary or trustee, and to
delegate to them such power and authority with relation to any security or
property (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;
(j) 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;
(k) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(l) To borrow funds or other property in the name of the Trust or any
Series thereof exclusively for Trust or the relevant Series purposes and in
connection therewith issue notes or other evidences of indebtedness; and to
mortgage and pledge the Trust Property or any part thereof to secure any or
all of such indebtedness;
(m) 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
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to mortgage and pledge the Trust Property or any part thereof to secure any
of or all of such obligations;
(n) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct
of the business, including, without limitation, insurance policies insuring
the assets of the Trust or payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, principal
underwriters, or independent contractors of the Trust, individually against
all claims and liabilities of every nature arising by reason of holding
Shares, holding, being in 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 Trustee, officer, employee, agent, investment adviser, 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 liability;
(o) To adopt, establish and carry out pension, profit-sharing, Share
bonus, Share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, 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;
(p) To enter into contracts of any kind and description;
(q) To interpret the investment policies, practices or limitations of
any Series or Class;
(r) To establish a registered office and have a registered agent in
the State of Delaware;
(s) To invest part or all of the Trust Property (or part or all of the
assets of any Series), or to dispose of part or all of the Trust Property
(or part or all of the assets of any Series) and invest the proceeds of
such disposition, in securities issued by one or more other investment
companies registered under the 1940 Act (including investment by means of
transfer of part or all of the Trust Property in exchange for an interest
or interests in such one or more investment companies) all without any
requirement of approval by Shareholders unless required by the 1940 Act.
Any such other investment company may (but need not) be a trust (formed
under the laws of the State of Delaware or of any other
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state) which is classified as a partnership for federal income tax
purposes;
(t) Subject to the 1940 Act, to engage in any other lawful act or
activity in which a business trust organized under the Delaware Act may
engage; and
(u) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment
of any object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every other act or
thing incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general power of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trust shall not be limited to investing in obligations maturing before
the possible dissolution of the Trust or one or more of its Series or Classes
thereof. The Trust shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust shall not
be required to obtain any court order to deal with any assets of the Trust or
take any other action hereunder.
SECTION 5. Payment of Expenses by the Trust. The Trustees are authorized to
pay or cause to be paid out of the principal or income of the Trust, or partly
out of the principal and partly out of income, as they deem fair, 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 Trusts officers, employees, investment adviser or manager, Principal
Underwriter, auditors, 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, which
expenses, fees, charges, taxes and liabilities shall be allocated in accordance
with Article III, Section 6 hereof.
SECTION 6. Payment of Expenses by Shareholders. The Trustees shall have the
power to cause each Shareholder, or each Shareholder of any particular Series or
Class, to pay directly, at such intervals as the
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Trustees may determine, in advance or arrears, for charges of the Trust's
transfer agent, Shareholder servicing or similar agent, an amount fixed, from
time to time, by the Trustees, by setting off such charges due from such
Shareholder from declared but unpaid dividends owed such Shareholder and/or by
reducing the number of Shares in the account of such Shareholder by that number
of full and/or fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
SECTION 7. Ownership of Assets of the Trust. The assets of the Trust shall
be held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trust, except that
the Trustees shall have power to cause legal title to any Trust Property to be
held by or in the name of one or more of the Trustees, or in the name of any
other Person as nominee, on such terms as the Trustees may determine. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, she or he shall automatically cease
to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
SECTION 8. Service Contracts.
(a) Subject to such requirements and restrictions as may be set forth under
applicable federal or state law and in the By-Laws, including, without
limitation, on the date hereof the requirements of Section 15 of the 1940 Act,
or any successor provision, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive investment advisory, management or
administrative services for the Trust or for any Series (or Class thereof) with
any corporation, trust, association or other organization; and any such contract
may contain such other terms as the Trustees may determine, including, without
limitation, authority for the Manager or administrator to delegate certain or
all of its duties under such contracts to qualified investment advisers or
administrators and to determine from time to time, without prior consultation
with the Trustees, 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, or such other activities as may
specifically be delegated to such party.
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(b) The Trustees may also, at any time and from time to time, contract with
any corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or Principal Underwriter for the Shares of
one or more of the Series (or Classes) or other securities to be issued by the
Trust. Every such contract shall comply with such requirements and restrictions
as may be set forth under applicable federal or state law and in the By-Laws,
including, without limitation, at the date hereof the requirements of Section 15
of the 1940 Act, or any successor provision; and any such contract may contain
such other terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to time, to
contract with any corporations, trusts, associations or other organizations,
appointing it or them the custodian, transfer agent or Shareholder servicing
agent for the Trust or one or more of its Series (or Classes). Every such
contract shall comply with such requirements and restrictions as may be set
forth under applicable federal or state law and in the By-Laws or stipulated by
resolution of the Trustees. The Trustees are empowered, at any time and from
time to time, to retain sub-agents (foreign or domestic) in connection with any
service provider to the Trust or one or more of its Series (or Classes).
(d) Subject to applicable law, the Trustees are further empowered, at any
time and from time to time, to contract with any entity to provide such other
services, including, without limitation, accounting and pricing services, to the
Trust or one or more of the Series (or Classes thereof), as the Trustees
determine to be in the best interests of the Trust and the applicable Series (or
Class).
(e) 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, distributor, or affiliate or agent of or
for any corporation, trust, association, or other organization, or for any
parent or affiliate of any organization, with which an advisory, management
or administration contract, or Principal Underwriter's or distributor's
contract, or transfer, shareholder servicing or other type of service
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, management or administration contract or Principal
Underwriter's or distributor's contract, or transfer,
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shareholder servicing or other type of service contract may have been or
may hereafter be made with the Trust or any Series of the Trust also has an
advisory, management or administration contract, or principal underwriter's
or distributor's contract, or transfer, shareholder servicing or other
service 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,
provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
SECTION 9. Trustees and Officers as Shareholders. Any Trustee, officer or
agent of the Trust may acquire, own and dispose of Shares to the same extent as
if he or she were not a Trustee, officer or agent; and the Trustees may issue
and sell and cause to be issued and sold Shares to, and redeem such Shares from,
any such Person or any firm or company in which such Person is interested,
subject only to the general limitations contained herein or in the By-Laws
relating to the sale and redemption of such Shares.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 1. Voting Powers, Meetings, Notice and Record Dates. The
Shareholders shall have power to vote only (i) for the election or removal of
Trustees to the extent and as provided in Article IV, Section 2, and (ii) with
respect to such additional matters relating to the Trust as may be required by
applicable law, this Declaration of Trust, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each Shareholder shall be entitled
to one vote for each dollar of net asset value (determined as of the applicable
record date) of each Share owned by such Shareholder (number of Shares owned
times net asset value per Share) on any matter on which such Shareholder is
entitled to vote and each fractional dollar amount 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 the Shareholders, all
Shares of the Trust then entitled to vote shall be voted in aggregate, except
(i) when required by the 1940 Act, Shares shall be voted by individual Series or
Class; and (ii) when the matter involves the termination of a
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Series or Class or any other action that the Trustees have determined will
affect only the interests of one or more Series or Classes, then only
Shareholders of such Series or Classes shall be entitled to vote thereon. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy may be given in writing. The By-Laws may provide
that proxies may also, or may instead, be given by any electronic or
telecommunications device or in any other manner. Notwithstanding anything else
contained herein or in the By-Laws, in the event a proposal by anyone other than
the officers or Trustees of the Trust is submitted to a vote of the Shareholders
of one or more Series or Classes thereof or of the Trust, or in the event of any
proxy contest or proxy solicitation or proposal in opposition to any proposal by
the officers or Trustees of the Trust, Shares may be voted only in person or by
written proxy at a meeting. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by the Shareholders. Meetings of
the Shareholders shall be called and notice thereof and record dates therefor
shall be given and set as provided in the By-Laws.
SECTION 2. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
(i) thirty-three and one-third percent (33-1/3%) of the Shares entitled to vote
shall constitute a quorum at a Shareholder's meeting and (ii) when any one or
more Series (or Classes) is to vote as a single class separate from any other
Shares, thirty-three and one-third percent (33-1/3%) of the Shares of each such
Series (or Class) entitled to vote shall constitute a quorum at a Shareholder's
meeting of that Series (or Class). Except when a larger vote is required by any
provision of this Declaration of Trust or the By-Laws or by applicable law, when
a quorum is present at any meeting, a majority of the Shares voted shall decide
any questions and a plurality of the Shares voted shall elect a Trustee,
provided that where any provision of law or of this Declaration of Trust
requires that the holders of any Series shall vote as a Series (or that holders
of a Class shall vote as a Class), then a majority of the Shares of that Series
(or Class) voting on the matter (or a plurality with respect to the election of
a Trustee) shall decide that matter insofar as that Series (or Class) is
concerned.
SECTION 3. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
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ARTICLE VI
NET ASSET VALUE, DISTRIBUTIONS AND REDEMPTIONS
SECTION 1. Determination of Net Asset Value, Net Income, and Distributions.
Subject to applicable law and Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in the Registration
Statement of the Trust as filed on Form N-1A or any successor form with the
Commission (the 'Registration Statement of the Trust') such bases and time or
times for determining the net asset value of the Shares of any Series or Class,
the net income attributable to the Shares of any Series or Class, or the
declaration and payment of dividends and distributions on the Shares of any
Series or Class, as they may deem necessary or desirable from time to time.
SECTION 2. Redemptions and Repurchases.
(a) The Trust shall purchase such Shares as are offered by any record
holder of such Shares for redemption, upon the presentation of a proper
instrument of transfer together with a request directed to the Trust or a Person
designated by the Trust that the Trust purchase such Shares or in accordance
with such other procedures for redemption as the Trustees may, from time to
time, authorize, and the Trust will pay therefor the net asset value thereof as
determined by the Trustees (or on their behalf), in accordance with any
applicable provisions of the By-Laws and applicable law. Unless extraordinary
circumstances exist, payment for said Shares shall be made by the Trust to the
Shareholder within seven (7) days after the date on which the request is made in
proper form. The obligation set forth in this Section 2 is subject to the
provisions regarding the suspension of the right of redemption that are set
forth in the Registration Statement of the Trust, and as the Trustees, in their
absolute discretion, may prescribe. In the case of a suspension of the right of
redemption as provided herein, a record holder of such Shares may either
withdraw the request for redemption or receive payment based on the net asset
value per Share next determined after the termination of such suspension.
(b) The redemption price may, in any case or cases, be paid wholly or
partly in-kind if the Trustees determine that such payment is advisable and in
the interest of the remaining Shareholders of the Series or Class for which the
Shares are being redeemed. The fair value, selection and quantity of securities
or other property so paid or delivered as all or part of the redemption price
may be determined by or under authority of the Trustees. In no case shall the
Trust be liable
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for any delay of any corporation or other Person in transferring securities
selected for delivery as all or part of any payment in-kind.
(c) If the Trustees shall, at any time and in good faith, determine that
direct or indirect ownership of Shares of any Series or Class has or may become
concentrated in any Person to an extent that would disqualify any Series as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(or any successor statute thereto), then the Trustees shall have the power (but
not the obligation) by such means as they deem equitable (i) to involuntarily
redeem any number, or principal amount, of Shares of such Person sufficient to
maintain or bring the direct or indirect ownership of Shares into conformity
with the requirements for such qualification, and (ii) to refuse to transfer or
issue Shares to any Person whose acquisition of the Shares in question would
result in such disqualification. Any such redemption shall be effected at the
redemption price and in the manner provided in this Article VI.
(d) The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the provisions of the Internal
Revenue Code of 1986, as amended (or any successor statute thereto), or to
comply with the requirements of any other taxing or regulatory authority.
(e) Subject to the requirements of the 1940 Act, the Board of Trustees may
cause the Trust to redeem, at the price and in the manner provided in this
Article VI, Shares of any Series or Class held by any Person (i) if such Person
is no longer qualified to hold such Shares in accordance with such
qualifications as may be established by the Trustees, (ii) if the net asset
value of such Shares is below the minimum investment amount which is set forth
in the Registration Statement of the Trust or (iii) if otherwise deemed by the
Trustees to be in the best interest of the Trust or that particular Series (or
Class) as a whole.
(f) Shares redeemed shall, upon redemption, be deemed to be retired and
restored to the status of unissued shares.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
SECTION 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal,
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accounting, investment banking or other services and payment for the same by the
Trust.
SECTION 2. Indemnification and Limitation of Liability. A Trustee, when
acting in such capacity, shall not be personally liable to any Person, other
than the Trust or a Shareholder to the extent provided in this Article VII, for
any act, omission or obligation of the Trust, of such Trustee or of any other
Trustee. 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. The Trust (i) may indemnify an agent of the Trust or
any Person who is serving or has served at the Trust's request as an agent of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise and (ii) shall indemnify each Person who is, or has been,
a Trustee, officer or employee of the Trust and any Person who is serving or has
served at the Trust's request as a director, officer, trustee, or employee of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise, in the case of (i) and (ii), to the fullest extent
consistent with the 1940 Act and in the manner provided in the By-Laws; provided
that such indemnification shall not be available to any of the foregoing Persons
in connection with a claim, suit or other proceeding by any such Person against
the Trust or a Series (or Class) thereof.
All persons extending credit to, contracting with or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series (or Class thereof if the Trustees have included a Class
limitation on liability in the agreement with such person as provided below),
or, if the Trustees have yet to establish Series, of the Trust for payment under
such credit, contract or claim; and neither the Trustees nor the Shareholders,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.
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 by any of them in connection with the Trust shall
conclusively be deemed to have been executed or done only in or with respect to
his or their capacity as Trustee or Trustees, and such Trustee or Trustees shall
not be personally liable thereon. At the Trustee's discretion, any note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officer or officers may give notice that the Certificate of Trust is
on file in the Office of the Secretary of State of the State of Delaware and
that a statutory limitation on liability of Series exists and such note, bond,
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contract, instrument, certificate or undertaking may, if the Trustees so
determine, recite that the same was executed or made on behalf of the Trust by a
Trustee or Trustees in such capacity and not individually or by an officer or
officers in such capacity 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 on the assets and property of the Trust or a Series thereof,
and may contain such further recital as such Person or Persons may deem
appropriate including, without limitation, a requirement, in any note, bond,
contract, instrument, certificate or undertaking made with respect to one or
more Classes of any Series that the parties thereto look only to the assets of
such Class or Classes in satisfaction of the liabilities arising thereunder. The
omission of any such notice or recital shall in no way operate to bind any
Trustees, officers or Shareholders individually.
SECTION 3. Trustee's Good Faith Action; Expert Advice; No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable to the Trust and to
any Shareholder solely for her or his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and shall not be liable for errors of judgment or mistakes of
fact or law. 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 nor
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.
SECTION 4. Insurance. The Trustees shall be entitled and empowered to the
fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee, officer, employee or agent of the Trust in connection with
any claim, action, suit or proceeding in which she or he becomes involved by
virtue of her or his capacity or former capacity with the Trust.
ARTICLE VIII
MISCELLANEOUS
SECTION 1. Liability of Third Persons Dealing with Trustees. 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.
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SECTION 2. Termination of Trust or Series.
(a) Unless dissolved as provided herein, the Trust shall continue without
limitation of time. The Trust may be dissolved at any time by vote of a majority
of the Shares of each Series entitled to vote, voting separately by Series, or
by the Trustees by written notice to the Shareholders. Any Series of Shares (or
Class thereof) may be dissolved at any time by vote of a majority of the Shares
of such Series or Class entitled to vote or by the Trustees by written notice to
the Shareholders of such Series or Class.
(b) Upon the requisite Shareholder vote or action by the Trustees to
dissolve the Trust or any one or more Series of Shares (or any Class thereof),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or of the
particular Series (or any Class thereof) as may be determined by the Trustees,
the Trust shall in accordance with such procedures as the Trustees consider
appropriate reduce the remaining assets of the Trust or of the affected Series
or Class to distributable form in cash or Shares (if any Series remain) or other
securities, or any combination thereof, and distribute the proceeds to the
Shareholders of the Series or Classes involved, ratably according to the number
of Shares of such Series or Class held by the several Shareholders of such
Series or Class on the date of distribution. Thereupon, the Trust or any
affected Series (or Class thereof) shall terminate and the Trustees and the
Trust shall be discharged of any and all further liabilities and duties relating
thereto or arising therefrom, and the right, title and interest of all parties
with respect to the Trust or such Series or Class shall be canceled and
discharged.
(c) Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's Certificate of Trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
SECTION 3. Reorganization and Master/Feeder.
(a) Notwithstanding anything else herein, the Trustees may, without any
Shareholder approval or vote unless such approval or vote is required by
applicable law, in order to change the form or jurisdiction of organization of
the Trust or for any other purpose (i) cause the Trust to merge or consolidate
with or into one or more trusts (or series thereof to the extent permitted by
law), partnerships, associations, corporations or other business entities
(including trusts, partnerships, associations, corporations or other business
entities
B-24
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<PAGE>
created by the Trustees to accomplish such merger or consolidation), (ii) cause
the Shares to be exchanged under or pursuant to any state or federal statute to
the extent permitted by law or (iii) cause the Trust to reorganize under the
laws of any state or other political subdivision of the United States, if such
action is determined by the Trustees to be in the best interests of the Trust.
Any agreement of merger or consolidation or exchange or certificate of merger
may be signed by a majority of the Trustees and facsimile signatures conveyed by
electronic or telecommunication means shall be valid.
(b) Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Declaration of Trust, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 3 of Article VIII may effect any
amendment to the governing instrument of the Trust or effect the adoption of a
new trust instrument of the Trust if the Trust is the surviving or resulting
trust in the merger or consolidation.
(c) The Trustees may, without any Shareholder approval or vote unless such
approval or vote is required by applicable law, create one or more business
trusts to which all or any part of the assets, liabilities, profits or losses of
the Trust or any Series or Class thereof may be transferred and may provide for
the conversion of Shares in the Trust or any Series or Class thereof into
beneficial interests in any such newly created trust or trusts or any series or
classes thereof.
(d) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval (unless required by the 1940 Act), invest all or a portion
of the Trust Property of any Series, or dispose of all or a portion of the Trust
Property of any Series, and invest the proceeds of such disposition in interests
issued by one or more other investment companies registered under the 1940 Act.
Any such other investment company may (but need not) be a trust (formed under
the laws of the State of Delaware or any other state or jurisdiction) (or series
thereof) which is classified as a partnership for federal income tax purposes.
Notwithstanding anything else herein, the Trustees may, without Shareholder
approval unless such approval is required by the 1940 Act, cause a Series that
is organized in the master/feeder fund structure to withdraw or redeem its Trust
Property from the master fund and cause such Series to invest its Trust Property
directly in securities and other financial instruments or in another master
fund.
SECTION 4. Amendments. Except as specifically provided in this Section 4 of
Article VIII, the Trustees may, without Shareholder vote,
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restate, amend or otherwise supplement this Declaration of Trust. Shareholders
shall have the right to vote (i) on any amendment that would affect their right
to vote granted in Article V, Section 1 hereof, (ii) on any amendment to this
Section 4 of Article VIII, (iii) on any amendment that may be required to be
approved by Shareholders by applicable law or by the Trust's registration
statement filed with the Commission, and (iv) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to the
Shareholders that, as the Trustees determine, shall affect the Shareholders of
one or more Series (or Classes thereof) shall be authorized by a vote of the
Shareholders of each Series or Class affected and no vote of Shareholders of a
Series or Class not affected shall be required. Notwithstanding anything else
herein, no amendment hereof shall limit the rights to insurance provided by
Article VII, Section 4 with respect to any acts or omissions of Persons covered
thereby prior to such amendment nor shall any such amendment limit the rights to
indemnification referenced in Article VII, Section 2 hereof as provided in the
By-Laws with respect to any actions or omissions of Persons covered thereby
prior to such amendment. The Trustees may, without Shareholder vote, restate,
amend, or otherwise supplement the Certificate of Trust as they deem necessary
or desirable.
SECTION 5. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each restatement and/or amendment hereto shall be kept
at the office of the Trust where it may be inspected by any Shareholder. Anyone
dealing with the Trust may rely on a certificate by an officer of the Trust as
to whether or not any such restatements and/or 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 restatements and/or
amendments. In this instrument and in any such restatements and/or amendments,
references to this instrument, and all expressions such as 'herein,' 'hereof'
and 'hereunder,' shall be deemed to refer to this instrument as amended or
affected by any such restatements and/or 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.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable. This instrument may be
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<PAGE>
executed in any number of counterparts each of which shall be deemed an
original.
SECTION 6. Applicable Law.
(a) The Trust is created under, and this Declaration of Trust is to be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
business trusts or actions that may be engaged in by business trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
(b) Notwithstanding the first sentence of Section 6(a) of this Article
VIII, there shall not be applicable to the Trust, the Trustees or this
Declaration of Trust (x) the provisions of section 3540 of Title 12 of the
Delaware Code or (y) any provisions of the laws (statutory or common) of the
State of Delaware (other than the Delaware Act) pertaining to trusts that relate
to or regulate: (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining a court or other governmental approval
concerning the acquisition, holding or disposition of real or personal property,
(iv) fees or other sums applicable to trustees, officers, agents or employees of
a trust, (v) the allocation of receipts and expenditures to income or principal,
(vi) restrictions or limitations on the permissible nature, amount or
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding of trust assets, or (vii) the establishment
of fiduciary or other standards or responsibilities or limitations on the acts
or powers of trustees that are inconsistent with the limitations or liabilities
or authorities and powers of the Trustees set forth or referenced in this
Declaration of Trust.
SECTION 7. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration of Trust are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code of 1986, as amended (or any successor
statute thereto), and the regulations thereunder, with the Delaware Act or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have
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constituted a part of the Declaration of Trust; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of the Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration of Trust in any jurisdiction.
SECTION 8. Business Trust Only. It is the intention of the Trustees to
create a business trust pursuant to the Delaware Act. It is not the intention of
the Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other than
a business trust pursuant to the Delaware Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners or members of a joint stock association.
SECTION 9. Derivative Actions. In addition to the requirements set forth in
Section 3816 of the Delaware Act, a Shareholder may bring a derivative action on
behalf of the Trust only if the following conditions are met:
(a) The Shareholder or Shareholders must make a pre-suit demand upon
the Trustees to bring the subject action unless an effort to cause the
Trustees to bring such an action is not likely to succeed. For purposes of
this Section 9(a), a demand on the Trustees shall only be deemed not likely
to succeed and therefore excused if a majority of the Board of Trustees, or
a majority of any committee established to consider the merits of such
action, has a personal financial interest in the transaction at issue, and
a Trustee shall not be deemed interested in a transaction or otherwise
disqualified from ruling on the merits of a Shareholder demand by virtue of
the fact that such Trustee receives remuneration for his service on the
Board of Trustees of the Trust or on the boards of one or more Trusts that
are under common management with or otherwise affiliated with the Trust.
(b) Unless a demand is not required under paragraph (a) of this
Section 9, Shareholders eligible to bring such derivative action under the
Delaware Act who hold at least 10% of the outstanding Shares of the Trust,
or 10% of the outstanding Shares of the Series
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or Class to which such action relates, shall join in the request for the
Trustees to commence such action; and
(c) Unless a demand is not required under paragraph (a) of this
Section 9, the Trustees must be afforded a reasonable amount of time to
consider such shareholder request and to investigate the basis of such
claim. The Trustees shall be entitled to retain counsel or other advisors
in considering the merits of the request and shall require an undertaking
by the Shareholders making such request to reimburse the Trust for the
expense of any such advisors in the event that the Trustees determine not
to bring such action.
For purposes of this Section 9, the Board of Trustees may designate a
committee of one Trustee to consider a Shareholder demand if necessary to create
a committee with a majority of Trustees who do not have a personal financial
interest in the transaction at issue.
IN WITNESS WHEREOF, the Initial Trustee named below does hereby make and
enter into this Declaration of Trust as of December 23, 1997.
INITIAL TRUSTEE
/s/ ROBERT BRUNO
........................................
Robert Bruno, as Initial Trustee
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EXHIBIT C
FIRST EAGLE TRUST
INVESTMENT ADVISORY AGREEMENT
Agreement, made as of 27th day of February 1998, between FIRST EAGLE TRUST,
a Delaware business trust (the 'Trust'), and ARNHOLD AND S. BLEICHROEDER
ADVISERS, INC., a registered investment adviser organized under the laws of the
State of New York (the 'Adviser'),
WITNESSETH:
WHEREAS, the Trust is a non-diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
'1940 Act'), and its shares of beneficial interest ('Shares') are registered
under the Securities Act of 1933;
WHEREAS, the Trust is authorized to issue Shares in Series and initially
intends to offer two Series, the First Eagle Fund of America and First Eagle
International Fund (individually the 'Fund' and collectively with any
subsequently formed Series the 'Funds'); and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services to the Trust, and the Adviser is willing to render such
services;
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust and the initial Funds, and any other Funds as agreed upon by the
Adviser and Trust, for the period and on the terms set forth in this Agreement
or an Addendum hereto. The Adviser accepts such appointment and agrees to render
the services herein described, for the compensation herein provided.
2. Subject to the supervision of the Board of Trustees of the Trust, the
Adviser shall manage the investment operations of the Trust and the Funds and
the composition of the Funds' portfolios, including the purchase, retention and
disposition thereof, in accordance with the Funds' investment objectives,
policies and restrictions as stated in the Prospectus and Statement of
Additional Information of the Trust and subject to the following understandings:
(a) The Adviser shall provide supervision of the Funds' investments
and determine from time to time what investments, securities or commodity
futures contracts and options thereon
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('futures') will be purchased, retained, sold or loaned by the Funds, and
what portion of the assets will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Agreement and
Declaration of Trust, By-Laws, Prospectus and Statement of Additional
Information of the Trust and with the instructions and directions of the
Board of Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act and all other applicable federal and state
laws and regulations.
(d) The Adviser shall determine the securities and futures to be
purchased or sold by the Funds and will place orders pursuant to its
determinations with or through such persons, brokers, dealers or futures
commission merchants (including the Adviser) in conformity with the policy
with respect to brokerage as set forth in the Trust's Prospectus and
Statement of Additional Information or as the Board of Trustees may direct
from time to time. In providing the Trust and the Funds with investment
management, it is recognized that the Adviser will give primary
consideration to securing most favorable prices and efficient executions.
Consistent with this policy, the Adviser may consider the financial
responsibility, research and investment information and other services
provided by brokers, dealers or futures commission merchants who may effect
or be a party to any such transaction or other transactions to which other
clients of the Adviser may be a party. It is understood that neither the
Trust nor the Adviser has adopted a formula for allocation of the Funds'
investment business. It is also understood that it is desirable for the
Trust and the Funds that the Adviser have access to supplemental investment
and market research and security and economic analysis provided by brokers
or futures commission merchants who may execute brokerage transactions at a
higher cost to the Trust and the Funds than may result when allocating
brokerage to other brokers or futures commission merchants on the basis of
seeking the most favorable prices and efficient executions. Therefore, the
Adviser is authorized to place orders for the purchase and sale of
securities or futures for the Trust and the Funds with such brokers or
futures commission merchants, subject to review by the Trust's Board of
Trustees, from time to time, with respect to the extent and continuation of
this practice. It is understood that the services
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provided by such brokers or futures commission merchants may be useful to
the Adviser in connection with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a security
or a futures contract to be in the best interest of the Trust and the Funds
as well as other clients, the Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities or futures contract to be so sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities or futures
contract so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the
Trust and the Funds and to such other clients.
(e) The Adviser shall maintain all books and records with respect to
the Trust and the Funds' portfolio transactions that the Trust is required
to keep under Rule 31a-1 under the 1940 Act.
(f) The Adviser shall provide the Trust's Custodian and the Trust on
each business day with information relating to all transactions concerning
the Funds' assets.
(g) The investment management services provided by the Adviser
hereunder are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others.
3. The Trust has delivered to the Adviser copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) The Agreement and Declaration of Trust filed with the State of
Delaware (such Agreement and Declaration of Trust, as in effect on the date
hereof and as amended from time to time, is herein called the 'Agreement
and Declaration of Trust');
(b) The By-Laws of the Trust (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the 'By-Laws');
(c) Certified resolutions of the Board of Trustees of the Trust
authorizing the appointment of the Adviser and approving the form of this
Agreement;
(d) The Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended, on Form N-1A (the 'Registration Statement'), as
filed with the Securities and
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Exchange Commission (the 'Commission') relating to the Trust and the
Trust's Shares and all amendments thereto;
(e) The Trust's Notification of Registration of under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus and Statement of Additional Information of the Trust
(such Prospectus and Statement of Additional Information, as currently in
effect and as amended or supplemented, from time to time, being herein
called the 'Prospectus').
4. The Adviser shall authorize and permit any of its directors, officers
and employees who may be elected as trustees or officers of the Trust to serve
in the capacities in which they are elected. Services to be furnished by the
Adviser under this Agreement may be furnished through the medium of any of such
directors, officers or employees.
5. The Adviser shall keep the Trust's books and records required to be
maintained by it pursuant to paragraph 2 hereof. The Adviser agrees that all
records which it maintains for the Trust are the property of the Trust and it
will surrender promptly to the Trust any of such records upon the Trust's
request. The Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 of the Commission under the 1940 Act any such records as are required
to be maintained by the Adviser pursuant to paragraph 2 hereof.
6. For the services provided pursuant to this Agreement by the Investment
Adviser, the Trust will pay monthly an investment management fee at the annual
rate of 1.00% of the average daily net assets First Eagle Fund of America and at
the annual rate of 1.00% of the average daily net assets First Eagle
International Fund. Net assets of the Funds shall be computed on such days and
at such time or times as described in the Trust's then-current Prospectus and
Statement of Additional Information. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be prorated
and shall be payable upon the date of termination of this Agreement.
7. The Adviser shall not be liable for any error of judgment or for any
loss suffered by the Trust or the Funds in connection with the matters to which
this Agreement relates, except a loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance,
bad faith or gross negligence
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on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
8. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Trust at any
time, without the payment of any penalty, by the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Trust, or by the Adviser at any time, without the payment of
any penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event of
its assignment (as defined in the 1940 Act) by the Adviser.
9. Nothing in this Agreement shall limit or restrict the right of any of
the Adviser's directors, officers, or employees who may also be a trustee,
officer or employee of the Trust to engage in any other business or to devote
time and attention in part to the management or other aspects of any business,
whether of a similar or a dissimilar nature, nor limit or restrict the Adviser's
right to engage in any other business or to render services of any kind to any
other corporation, firm, individual or association.
10. Except as otherwise provided herein or authorized by the Board of
Trustees of the Trust, from time to time, the Adviser shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Trust in any way or otherwise be deemed an agent of the
Trust.
11. During the term of this Agreement, the Trust agrees to furnish the
Adviser at its principal office all prospectuses, proxy statements, reports to
Shareholders, sales literature, or other material prepared for distribution to
Shareholders of the Trust or the public, which refer to the Adviser in any way,
prior to use thereof and not to use such material if the Adviser reasonably
objects in writing within five business days (or such other time as may be
mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Trust will continue to furnish to the Adviser copies of any of
the above-mentioned materials which refer in any way to the Adviser. Sales
literature may be furnished to the Adviser hereunder by first class or overnight
mail, facsimile transmission equipment or hand delivery. The Trust shall furnish
or otherwise make available to the Adviser such other information relating to
the business affairs of the
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Trust as the Adviser at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
12. This Agreement constitutes the entire Agreement between the parties
with respect to the subject matter hereof. This Agreement may be amended by
mutual consent, but the consent of the Trust must be approved in conformity with
the requirements of the 1940 Act.
13. Any notice or other communication required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, (1) to the Adviser at 1345 Avenue of the Americas, New York, NY
10105, Attention: President; or (2) to the Trust at 1345 Avenue of the Americas,
New York, NY 10105, Attention: President.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
15. The Trust may use the name 'First Eagle' in connection with the name of
the Trust or any of the Funds or any name including Arnhold and S. Bleichroeder
or any variant thereof, only for so long as this Agreement or any extension,
renewal or amendment hereof remain in effect, including any similar agreement
with any organization which shall have succeeded to the Adviser's business as
investment adviser, or the Distribution Agreement between the Trust and Arnhold
and S. Bleichroeder, Inc. (the 'Distributor') or any extension, renewal or
amendment thereof, remains in effect, including any similar agreement with any
organization which shall have succeeded to the Distributor's business as
distributor. At such time as such Agreement shall no longer be in effect, the
Trust will (to the extent that it lawfully can) cease to use such a name or any
other name indicating that it is advised by, managed by or otherwise connected
with the Adviser, the Distributor or any organization which shall have so
succeeded to such businesses. In no event shall the Trust use the name 'Arnhold
and S. Bleichroeder' or any variant thereof if the Adviser's or Distributor's
functions are transferred or assigned to a company of which Arnhold and S.
Bleichroeder, Inc. does not have control. In the event that such Agreement shall
no longer be in effect or the Adviser's or Distributor's functions are
transferred or assigned to a company of which Arnhold and S. Bleichroeder, Inc.
does not have control, the Trust shall use its best efforts to legally change
its name by filing the required documentation with appropriate state and federal
agencies.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
FIRST EAGLE TRUST
By: ......................................
ARNHOLD AND S. BLEICHROEDER ADVISERS, INC.
By: ......................................
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APPENDIX 1
<TABLE>
<S> <C>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
FIRST EAGLE FUND OF AMERICA, INC.
SPECIAL JOINT MEETING OF SHAREHOLDERS
FIRST EAGLE FUND OF AMERICA, INC. FEBRUARY 19, 1998
1345 AVENUE OF THE AMERICAS
43RD FLOOR The undersigned hereby appoints Robert Miller and
NEW YORK, NY 10105-4300 Robert Bruno, and each of them, the proxies of the
undersigned, with full power of substitution, to vote all shares
of First Eagle Fund of America, Inc. which the undersigned is
entitled to vote at the Special Joint Meeting of Stockholders
of First Eagle Fund of America, Inc. to be held at Arnhold and
S. Bleichroeder, Inc., 1345 Avenue of the Americas, New York,
New York 10105, on Thursday, February 19, 1998 at 10:30 a.m.,
New York time, and at any adjournment thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR all
proposals.
Please sign exactly as your name or names appear above.
</TABLE>
When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporation name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE - NO POSTAGE REQUIRED.
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X] FIREFA KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- ------------------------------------------------------------------------------------------------------------------------------
FIRST EAGLE FUND OF AMERICA, INC.
<S> <C>
Vote On Directors
2. Election of Directors: 01) John P. Arnhold, 02) Candace K. Beinecke, For Withhold For All To withhold authority to vote,
03) Edwin J. Ehrlich, 04) K. Georg Gabriel, 05) Robert J. Gellert, All All Except mark "For All Except" and
06) Michael M. Kellen, 07) William M. Kelly and 08) Stanford S. write the nominee's number on
Warshawsky [ ] [ ] [ ] the line below.
_____________________________
</TABLE>
Vote On Proposals For Against Abstain
1. Proposal to approve the conversion of the Fund [ ] [ ] [ ]
from a Maryland Corporation into a Delaware
Business Trust.
3. Proposal to approve an investment advisory [ ] [ ] [ ]
agreement for the Trust and reduce advisory
fees.
4. Proposal to reclassify as non-fundamental and
amend certain investment restrictions:
a. concerning purchase of other investment [ ] [ ] [ ]
companies.
b. concerning pledging, mortgaging or [ ] [ ] [ ]
hypothecating assets.
c. concerning investment limitations. [ ] [ ] [ ]
5. Proposal to amend investment restriction [ ] [ ] [ ]
concerning industry concentration of assets.
6. Proposal to reclassify as non-fundamental and
amend certain investment restrictions:
a. regarding investments in issuers owned by an [ ] [ ] [ ]
officer or director.
b. to limit investments to 10% of an issuer. [ ] [ ] [ ]
7. Proposal to delete the following investment
restrictions concerning:
a. The purchase of securities on margin. [ ] [ ] [ ]
b. Investments made for exercising control. [ ] [ ] [ ]
c. Oil, gas or other such investments. [ ] [ ] [ ]
d. Investments in issuers with limited [ ] [ ] [ ]
operating history.
8. Proposal to ratify selection of KPMG Peat [ ] [ ] [ ]
Marwick LLP as independent accountants.
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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<PAGE>
<PAGE>
APPENDIX 2
<TABLE>
<S> <C>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
FIRST EAGLE INTERNATIONAL FUND, INC.
SPECIAL JOINT MEETING OF SHAREHOLDERS
FIRST EAGLE INTERNATIONAL FUND, INC. FEBRUARY 19, 1998
1345 AVENUE OF THE AMERICAS
43RD FLOOR The undersigned hereby appoints Robert Miller and
NEW YORK, NY 10105-4300 Robert Bruno, and each of them, the proxies of the
undersigned, with full power of substitution, to vote all shares
of First Eagle International Fund, Inc. which the undersigned is
entitled to vote at the Special Joint Meeting of Stockholders
of First Eagle International Fund, Inc. to be held at Arnhold and
S. Bleichroeder, Inc., 1345 Avenue of the Americas, New York,
New York 10105, on Thursday, February 19, 1998 at 10:30 a.m.,
New York time, and at any adjournment thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR all
proposals.
Please sign exactly as your name or names appear above.
</TABLE>
When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporation name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE - NO POSTAGE REQUIRED.
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X] FIREIF KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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FIRST EAGLE FUND OF AMERICA, INC.
<S> <C>
Vote On Directors
2. Election of Directors: 01) John P. Arnhold, 02) Candace K. Beinecke, For Withhold For All To withhold authority to vote,
03) Edwin J. Ehrlich, 04) K. Georg Gabriel, 05) Robert J. Gellert, All All Except mark "For All Except" and
06) Michael M. Kellen, 07) William M. Kelly and 08) Stanford S. write the nominee's number on
Warshawsky [ ] [ ] [ ] the line below.
_____________________________
</TABLE>
Vote On Proposals For Against Abstain
1. Proposal to approve the conversion of the Fund [ ] [ ] [ ]
from a Maryland Corporation into a Delaware
Business Trust.
3. Proposal to approve an investment advisory [ ] [ ] [ ]
agreement for the Trust and reduce advisory
fees.
4. Proposal to reclassify as non-fundamental and
amend certain investment restrictions:
a. concerning purchase of other investment [ ] [ ] [ ]
companies.
b. concerning pledging, mortgaging or [ ] [ ] [ ]
hypothecating assets.
c. concerning investment limitations. [ ] [ ] [ ]
5. Proposal to amend investment restriction [ ] [ ] [ ]
concerning commodities and commodity contracts.
7. Proposal to delete the following investment
restrictions concerning:
a. The purchase of securities on margin. [ ] [ ] [ ]
b. Investments made for exercising control. [ ] [ ] [ ]
c. Oil, gas or other such investments. [ ] [ ] [ ]
d. Investments in issuers with limited [ ] [ ] [ ]
operating history.
8. Proposal to ratify selection of KPMG Peat [ ] [ ] [ ]
Marwick LLP as independent accountants.
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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