Filed with the Securities and Exchange Commission on October 31, 1997
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<CAPTION>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
[ ] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
</TABLE>
Mentor Funds
Mentor Institutional Trust
Cash Resource Trust
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on a 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 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:
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(4) Date Filed:
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<PAGE>
MENTOR FAMILY OF FUNDS
901 East Byrd Street
Richmond, Virginia 23219
November 18, 1997
Dear Shareholder:
You are cordially invited to attend a Meeting of Shareholders of Mentor
Funds, Mentor Institutional Trust, and Cash Resource Trust (collectively, the
"Mentor Family of Funds") to be held on Monday, December 22, 1997, at 9:00 a.m.,
Eastern Standard Time, at 901 East Byrd Street, Richmond, Virginia. At the
Meeting, shareholders will be asked to approve new investment advisory and
sub-advisory agreements for each of the mutual funds in the Mentor Family of
Funds, to become effective upon consummation of the proposed acquisition of
Wheat First Butcher Singer, Inc., corporate parent of the Mentor group of
companies, by First Union Corporation.
In addition, shareholders will also be asked to approve new investment
advisory and sub- advisory agreements for certain of the funds in contemplation
of the potential acquisition of an additional interest in Mentor Investment
Group, LLC by EVEREN Securities Holdings, Inc.
Although the Trustees of the Mentor Family of Funds would like very
much to have each shareholder attend the Meeting, they realize that this is not
possible. Whether or not you plan to be present at the Meeting, your vote is
needed. Please complete, sign, and return the enclosed proxy card(s) promptly. A
postage-paid envelope is enclosed for this purpose.
We look forward to seeing you at the Meeting or receiving your proxy
card(s) so your shares may be voted at the Meeting.
Sincerely yours,
Paul F. Costello
President
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD(S) IN THE
ENCLOSED ENVELOPE SO AS TO BE REPRESENTED AT THE MEETING.
<PAGE>
MENTOR FAMILY OF FUNDS
Mentor Funds Mentor Institutional Trust Cash Resource Trust
-----------------------------------
Notice of Meeting of Shareholders
-----------------------------------
A Meeting of Shareholders of Mentor Funds, Mentor Institutional Trust,
and Cash Resource Trust (collectively, the "Trusts") will be held at 901 East
Byrd Street, Richmond, Virginia, on Monday, December 22, 1997, at 9:00 a.m.,
Eastern Standard Time, for the following purposes:
1. To approve new investment advisory agreements between each of the
Funds or Portfolios comprising the Trusts and Mentor Investment
Advisors, LLC or Mentor Perpetual Advisors, LLC, as the case may
be, and, where applicable, related sub-advisory agreements, in each
case as described in the attached Proxy Statement;
2. To approve new investment advisory agreements between certain of
the Funds or Portfolios comprising the Trusts and Mentor Investment
Advisors, LLC, and, where applicable, related sub-advisory
agreements, in contemplation of the potential acquisition of an
additional interest in Mentor Investment Group, LLC by EVEREN
Securities Holdings, Inc.; and
3. To consider and act upon such other matters as may properly come
before the Meeting.
Shareholders of record as of the close of business on November 5, 1997
are entitled to notice of and to vote at the Meeting.
By order of the Trustees
John M. Ivan
Secretary/Clerk
November 18, 1997
<PAGE>
Mentor Family of Funds
901 East Byrd Street
Richmond, Virginia 23219
-----------------------------------
Proxy Statement
-----------------------------------
The enclosed proxies are solicited by the Boards of Trustees of Mentor
Funds, Mentor Institutional Trust, and Cash Resource Trust (each a "Trust", and
collectively, the "Trusts") for use at the Meeting of Shareholders of each of
the Trusts to be held at 901 East Byrd Street, Richmond, Virginia, on December
22, 1997, at 9:00 a.m., Eastern Standard Time, and at any adjournment thereof.
Shareholders of record at the close of business on November 5, 1997 (the
"Record Date") are entitled to vote at the Meeting or any adjourned session.
These proxy materials are first being made available to shareholders on or about
November 18, 1997.
The shares of Mentor Funds are divided into eleven portfolios: Mentor
Growth Portfolio, Mentor Capital Growth Portfolio, Mentor Strategy Portfolio,
Mentor Income and Growth Portfolio, Mentor Perpetual Global Portfolio, Mentor
Quality Income Portfolio, Mentor Municipal Income Portfolio, Mentor
Short-Duration Income Portfolio, Mentor Balanced Portfolio, Mentor Institutional
Money Market Portfolio, and Mentor Institutional U.S. Government Money Market
Portfolio. The shares of Mentor Institutional Trust are divided into five
portfolios: Mentor U.S. Government Cash Management Portfolio, Mentor
Intermediate Duration Portfolio, Mentor Fixed-Income Portfolio, Mentor Perpetual
International Portfolio, and SNAP Fund. The shares of Cash Resource Trust are
divided into five funds: Cash Resource Money Market Fund, Cash Resource U.S.
Government Money Market Fund, Cash Resource Tax-Exempt Money Market Fund, Cash
Resource California Tax-Exempt Money Market Fund, and Cash Resource New York
Tax-Exempt Money Market Fund. For convenience, the word "Fund" will be used
throughout this proxy statement to refer to both the Portfolios and Funds that
comprise the Trusts.
If you own shares of more than one Fund, you should sign and return a
proxy card for each Fund of which you are a shareholder; for example, if you own
shares of Mentor Growth
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<PAGE>
Portfolio and shares of Cash Resource Money Market Fund, you should sign and
return the enclosed proxy cards for each of those Funds. A different proxy card
is enclosed for each Fund in which you are a shareholder. You should sign and
return each of the cards.
Shares represented by duly executed proxies will be voted in accordance
with the specification made. If no specification is made, shares will be voted
in accordance with the recommendation of the Trustees of the Trusts. You may
revoke a proxy at any time before it is exercised by sending or delivering a
written revocation to the Secretary or Clerk of the relevant Trust (which will
be effective when it is received by the Secretary/Clerk), by properly executing
a later-dated proxy, or by attending the Meeting, requesting return of your
proxy, and voting in person.
Copies of the most recent annual and semi-annual reports issued by any
of the Trusts may be obtained without charge by calling Mentor Investment Group
at 1-800-382- 0016 or writing to Mentor Investment Group at P.O. Box 1357,
Richmond, Virginia 23218- 1357.
I. APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS
On August 20, 1997, Wheat First Butcher Singer, Inc. ("Wheat First")
entered into an Agreement and Plan of Merger with First Union Corporation
("First Union"), pursuant to which Wheat First would be merged into First Union.
Upon the consummation of the merger (expected to occur as early as December of
this year), First Union will become the owner of a majority of the beneficial
interest in Mentor Investment Advisors, LLC ("Mentor Advisors") and Mentor
Perpetual Advisors, LLC ("Mentor Perpetual"). (In this Proxy Statement this
series of transactions is referred to as the "Merger".)
Your Trustees are recommending that shareholders of each Fund approve a
new investment advisory agreement between the Fund and Mentor Advisors or Mentor
Perpetual, as the case may be. The new agreements will replace the existing
investment advisory agreements between the Funds and Mentor Advisors and Mentor
Perpetual. Your approval of the new agreements is being sought because the
Merger will result in an "assignment", as defined in the Investment Company Act
of 1940, as amended (the "1940 Act), of the existing agreements, resulting in
their automatic termination.
The Agreement and Plan of Merger (the "Merger Agreement"). Under the
Merger Agreement, Wheat First will be merged into First Union, and will cease to
exist as a separate
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<PAGE>
entity. (The surviving entity in the Merger is referred to in this Proxy
Statement as "Wheat First Union".)
Under the terms of the Merger Agreement, First Union will exchange up
to 10,267,029 shares of First Union common stock, valued at $471 million, based
on First Union's closing stock price of $45.875 on August 15, 1997, for all of
the outstanding stock of Wheat First. In addition, First Union has agreed to
establish an employee retention pool consisting of approximately 1,700,000
shares of restricted stock of First Union to be granted to certain key employees
of Wheat First, which would vest over a three-year period following the Merger,
if they remain employed by Wheat First Union during that period. In addition,
First Union has entered into employment agreements with the five senior
executive officers of Wheat First, which provide for salary, bonus, and
continuing payments with a three-year term for four of such executives, and
salary, bonus and a termination payment over a one-year term for one such
executive.
Mentor Advisors has informed the Trusts that the purpose of the
retention pool is principally to provide an incentive to Wheat First employees,
including key investment professionals at Mentor Advisors and Mentor Perpetual,
to continue their association with Wheat First Union. Any person who terminates
his or her employment with Wheat First Union before he or she receives all of
the shares of restricted stock from the retention pool to which he or she would
otherwise be entitled will forfeit any such amount not yet paid.
The Merger Agreement does not contemplate any changes in the management
or operations of Mentor Advisors or Mentor Perpetual, including any changes in
the personnel managing the Funds or other services or business activities
relating to the Funds. Neither Mentor Advisors nor Mentor Perpetual anticipate
that the Merger will cause any reduction in the quality of services now provided
to any of the Funds, or have any adverse effect on Mentor Advisors' or Mentor
Perpetual's ability to fulfill its obligations to the Funds.
First Union. First Union is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended. Through its network of
subsidiaries, First Union provides numerous banking and banking-related
services, including retail and commercial banking, retail investment, and
capital market services. First Union also provides other financial services
including mortgage banking, home equity lending, leasing, insurance, and
securities brokerage services. At September 30, 1997, First Union had assets of
$144 billion, making it the sixth largest banking company in the United States.
The existing investment advisory agreements. Mentor Advisors and Mentor
Perpetual currently provide investment advisory services to each of the Funds
pursuant to investment
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<PAGE>
advisory agreements in effect between the Funds and them (the "Existing
Agreements"). Under the Existing Agreements and subject to the general oversight
of the Trustees, Mentor Advisors and Mentor Perpetual manage each of the Funds
in accordance with the stated policies of that Fund. Each makes investment
decisions for the Fund and places purchase and sale orders for portfolio
transactions. Mentor Advisors and Mentor Perpetual bear all their expenses in
connection with the performance of their services (except as may be approved
from time to time by the Trustees) and pay the salaries of all officers and
employees who are employed by them and the Trusts.
Mentor Advisors and Mentor Perpetual are both located at 901 East Byrd
Street, Richmond, Virginia 23219.
Each of the Funds pays Mentor Advisors or Mentor Perpetual, as the case
may be, fees as compensation for the services provided under the Existing
Agreements, except that certain of the Funds comprising Mentor Institutional
Trust pay no fees under the Existing Agreements. The amount of the fees is
calculated daily and payable monthly at the annual rate applicable to each Fund,
based on the average daily net assets of that Fund. Except in respect of Mentor
Institutional Trust, the annual rates applicable to and the fees paid to Mentor
Advisors or Mentor Perpetual by each of the Funds under the Existing Agreements
during the most recently completed fiscal year for which figures are available
are also set forth in Table 1.
In the case of Mentor Institutional Trust, only the SNAP Fund and the
Perpetual International Portfolio pay investment advisory fees. The SNAP Fund
pays investment advisory fees at the following rate: 0.09% of the first $500
million of the Fund's average net assets; 0.08% of the next $250 million; 0.07%
of the next $250 million; 0.06% of the next $250 million; and 0.05% of any
amounts over $1.25 billion. During the most recently completed fiscal year, the
SNAP Fund incurred no investment advisory fees. The Perpetual International
Portfolio pays investment advisory fees at an annual rate of 1.00% based on
average net assets. During the most recent fiscal year, it paid fees of $12,402
net of a fee waiver by Mentor Advisors in the amount of $23,292.
Each of the Existing Agreements was approved by the initial shareholder
of the Fund in question at the time of the Fund's organization. The year in
which each of the Funds comprising Mentor Funds and Cash Resource Trust was
organized is set out in Table 1 below. In the case of Mentor Institutional
Trust, each of the U.S. Government Cash Management Portfolio, Intermediate
Duration Portfolio, and Fixed Income Portfolio was organized in 1994; the SNAP
Fund and Perpetual International Portfolio were organized in 1995 and 1996,
respectively.
Administrative fees. Each of the Portfolios comprising Mentor Funds and
Mentor Institutional Trust has entered into an Administration Agreement with
Mentor Investment Group, LLC ("Mentor Group"), an affiliate of Mentor Advisors
and Mentor Perpetual, pursuant to which Mentor Group provides continuous
business management services to the Portfolios and, subject to the general
oversight of the Trustees, generally manages all of the business and affairs of
the Portfolios subject to the provisions of the relevant Trust's Declaration of
Trust, By-laws and the 1940 Act, and other policies and instructions the
Trustees may from time to time establish. Mentor Group pays the compensation of
all officers and executive employees of the Trusts (except those employed by or
serving at the request of the investment advisor or sub-advisor) and makes
available to the Trusts the services of its directors, officers, and employees
as elected by the Trustees or officers of the Trusts. In addition, Mentor Group
provides all clerical services relating to the Portfolios' business. Mentor
Group's address is 901 East Byrd Street, Richmond, Virginia 23219.
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<PAGE>
Each of the Portfolios comprising Mentor Funds pays Mentor Group an
administration fee, calculated daily and payable monthly, at the annual rate of
0.10% of its average daily net assets. The fees paid by each Portfolio to Mentor
Group under the Administration Agreements during fiscal year 1996 are set forth
in Table 1 below. None of the Funds comprising Mentor Institutional Trust paid
any fees under the Administration Agreements during the most recently completed
fiscal year.
In addition, certain of the Funds paid amounts to Mentor Group for
certain accounting and operations related costs not covered by their respective
administration arrangements. The amounts paid in the Funds' most recently
completed fiscal year for which figures are available are set forth in Table 1.
The Administration Agreements will terminate by their terms upon
consummation of the Merger. The Trustees have approved new Administration
Agreements with Mentor Group upon substantially identical terms, to become
effective upon consummation of the Merger.
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<PAGE>
Table 1
<TABLE>
<CAPTION>
Investment Amount of Investment Amount of Cost
Fund (Year Organized) Advisory Advisory Fee (1) Administrative Fee (1) Reimbursement
Fee
<S> <C>
Mentor Funds
Growth Portfolio (1985) 0.70% $2,313,470 $330,496 $23,289
Capital Growth Portfolio (1992) 0.80% $728,536 $91,067 $5,901
Strategy Portfolio (1993) 0.85% $2,287,369 $269,102 $17,744
Income and Growth Portfolio (1993) 0.75% $575,647 $76,753 $5,210
Perpetual Global Portfolio (1994) 1.10%(2) $368,592 $33,508 $2,752
Quality Income Portfolio (1992) 0.34%(3) $278,216 $82,591 $5,005
($217,329)
Municipal Income Portfolio (1992) 0.60% $344,784 $57,464 $3,465
Short-Duration Income Portfolio (1994) 0.20%(3) $54,833 -- $1,842
($83,567) ($27,680)
Balanced Portfolio (1994) 0.75% $6,790 -- --
($18,976)
Institutional Money Market Portfolio (1997) 0.22% -- -- --
U.S. Government Institutional Money Market 0.22% -- -- --
Portfolio (1997)
Cash Resource Trust
Money Market Fund (1993) 0.19%(4) $4,041,000 -- --
U.S. Government Money Market Fund (1993) 0.19%(4) $4,470,000 -- --
Tax-Exempt Money Market Fund (1993) 0.22%(4) $1,326,000 -- --
California Tax-Exempt Money Market Fund 0.22%(4) $121,000 -- --
(1996)
New York Tax-Exempt Money Market Fund 0.10%(4) $5,000 -- --
(1996) ($6,000)
</TABLE>
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(1) Amounts shown as paid are net of amounts waived or reimbursed. Amounts
shown in parentheses reflect fees waived or reimbursed by Mentor Advisors
or Mentor Group, as the case may be.
(2) The Global Portfolio pays fees to Mentor Perpetual equal to 1.10% of its
average daily net assets up to and including $75 million and 1.00% of the
average daily net assets of the Portfolio in excess of $75 million.
(3) After expense limitation. Mentor Advisors agreed to limit its investment
advisory fees from each of the Quality Income and Short-Duration Income
Portfolios until September 30, 1997 to the extent necessary to limit the
total operating expenses of those Portfolios. In the absence of these
expense limitations, investment advisory fees for the Quality Income and
Short-Duration Income Portfolios would have been 0.60% and 0.50%,
respectively.
(4) Each of the Funds comprising Cash Resource Trust pays investment advisory
fees at the following annual rates: 0.22% of the first $500 million of the
Fund's average net assets; 0.20% of the next $500 million; 0.175% of the
next $1 billion; 0.16% of the next $1 billion; and 0.15% of any amounts
over $3 billion.
The new investment advisory agreements. Each of the Existing
Agreements will by its terms terminate upon the consummation of the Merger,
since the Merger will constitute a change of control of Mentor Advisors and
Mentor Perpetual for purposes of the 1940 Act. The Trustees are recommending
that shareholders of each Fund approve new investment advisory agreements (each,
a "New Agreement") to be effective immediately upon consummation of the Merger.
Each New Agreement is substantially identical to the Existing Agreement it
replaces, other than its effective and termination dates. Each provides that,
subject to the supervision of the Trustees of the Trusts, Mentor Advisors or
Mentor Perpetual, as the case may be, will manage a Fund's assets in accordance
with its investment objective, policies, and limitations, make investment
decisions for the Fund, and place all orders for the purchase and sale of the
Fund's investments with broker-dealers.
Each of the New Agreements provides that it will continue in effect
for an initial term of two years from its effective date (which is expected to
be the date on which the Merger is consummated) and thereafter only so long as
such Agreement is approved at least annually by (i) the vote, cast in person at
a meeting called for such purpose, of a majority of the Trustees who
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are not "interested persons" (as defined in the 1940 Act) of Mentor Advisors,
Mentor Perpetual, or the Trusts, as the case may be, and by (ii) the majority
vote of either the Boards of Trustees or the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund in
question. It is intended that each of the proposed New Agreements will take
effect upon consummation of the Merger, with its continuing effectiveness
subject to the receipt of shareholder approval, as described below.
The New Agreements provide, as do the Existing Agreements, that Mentor
Advisors or Mentor Perpetual, as the case may be, shall not, in the absence of
willful misfeasance, bad faith, gross negligence, or reckless disregard by it of
its obligations or duties, be subject to liability to the Trusts, the Fund in
question, or the shareholders of the Fund for any act or omission in the course,
or connected with, its rendering services thereunder, or for any losses that may
be sustained in the purchase, holding, or sale of any security by the Fund.
Any of the New Agreements may be terminated, without penalty, (i) at
any time by the Trustees of the Trust in question or by a vote of a majority of
the outstanding voting securities of the affected Fund on 60 days' written
notice, or (ii) by Mentor Advisors or Mentor Perpetual, as the case may be, upon
60 days' written notice. Each New Agreement terminates automatically in the
event of its assignment.
It is possible that shareholders will not have acted on all of the New
Agreements prior to the consummation of the Merger. The Trusts and Mentor
Advisors and Mentor Perpetual have filed with the Securities and Exchange
Commission an application for an exemption from relevant provisions of the 1940
Act permitting each of the Funds to enter into a New Agreement following the
consummation of the Merger, even if the Fund's shareholders have not yet
approved the Agreement by that time. Any New Agreement implemented under those
circumstances will provide that the fees payable by the Fund under the Agreement
prior to shareholder approval of the New Agreement will be held in an
interest-bearing escrow account to be paid to Mentor Advisors or Mentor
Perpetual, as the case may be, only upon shareholder approval of the New
Agreement, or, if shareholders do not approve the Agreement within the 60 days
following consummation of the Merger, to the Fund. A vote to approve a New
Agreement with respect to a Fund will include a vote in favor of this provision
and in favor of the release to Mentor Advisors or Mentor Perpetual, as the case
may be, upon receipt of shareholder approval of the New Agreement, of any
amounts held in the escrow account.
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<PAGE>
A copy of the form of each of the New Agreements is attached to this
proxy statement as Exhibit A.
Sub-advisory agreements. Van Kampen American Capital Management, Inc.
("Van Kampen") provides sub-advisory services to the Municipal Income Portfolio
pursuant to a sub- advisory agreement among Mentor Advisors, the Portfolio, and
Van Kampen. Similarly, Wellington Management Company, LLP ("Wellington
Management") provides sub-advisory services to the Income and Growth Portfolio
pursuant to a sub-advisory agreement among Mentor Advisors, the Portfolio, and
Wellington Management.
Because the Merger will result in a change of control of Mentor
Advisors and so in the termination of the sub-advisory agreements, the Board of
Trustees is recommending that shareholders of each of those Portfolios approve a
new sub-advisory agreement with Van Kampen and Wellington Management. Each of
the new sub-advisory agreements will be substantially identical to the existing
agreements, other than its effective and termination dates.
Van Kampen, located at One Parkview Plaza, Oakbrook Terrace, Illinois
60181, is a wholly owned subsidiary of Van Kampen American Capital, Inc., which,
in turn, is a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc.
is an indirect wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover
& Co. Morgan Stanley, Dean Witter, Discover & Co. and various of its
subsidiaries, including Morgan Stanley & Co. Incorporated, a registered
broker-dealer, are engaged in a wide range of financial services. As of
September 30, 1997, Van Kampen, together with its affiliates, advised or
supervised approximately $67.5 billion of assets. Under the sub-advisory
agreement, Van Kampen receives a fee from Mentor Advisors at the following
annual rate: 0.25% of the first $60 million of the Municipal Income Portfolio's
average net assets and 0.20% of the Portfolio's average net assets over $60
million. During fiscal year 1996, Van Kampen received sub-advisory fees of
$172,392.
Wellington Management is a Massachusetts limited liability partnership
with principal offices at 75 State Street, Boston, Massachusetts 02109.
Wellington Management is a professional investment counseling firm which
provides investment services to investment companies, employee benefit plans,
endowments, foundations and other institutions and individuals. Wellington
Management's predecessor organizations have provided investment advisory
services for over 60 years. As of September 30, 1997, Wellington Management had
investment management authority with respect to approximately $168.7 billion in
assets. Under the sub-advisory agreement, Wellington Management receives a fee
from Mentor Advisors at the following annual rate: 0.325% of the first $50
million of the Income and Growth Portfolio's average net assets, 0.275% of the
next $150 million of the Portfolio's average net assets, 0.225% of the next $300
million of the Portfolio's average net assets, and 0.200% of the Portfolio's net
assets over $500 million. During fiscal year 1996, Wellington Management
received sub-advisory fees of $236,071.
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Under the sub-advisory agreements, Van Kampen and Wellington
Management, subject to the supervision of Mentor Advisors and the Trustees of
Mentor Funds, manage the Portfolios' assets in accordance with their respective
investment objectives, policies, and limitations, make investment decisions for
the Portfolios, and place all orders for the purchase and sale of the
Portfolios' investments with broker-dealers. Each of Van Kampen and Wellington
Management pays all expenses incurred by it and its staff, including salaries of
its personnel, in connection with the performance of its obligations under the
sub-advisory agreement.
In executing portfolio transactions and selecting brokers and dealers,
Van Kampen and Wellington Management seek the best overall terms available. The
sub-advisory agreements provide that, in assessing the best overall terms
available for any transaction, Van Kampen and Wellington Management shall
consider all factors they deem relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission for the specific transaction and on a
continuing basis. Each of Van Kampen and Wellington Management may enter into
transactions with broker-dealers that furnish it, without cost to it, certain
brokerage and research services of value to it and its affiliates in advising
the Portfolios and other clients. In doing so, Van Kampen and Wellington
Management may cause the Portfolios to pay greater brokerage commissions than
they might otherwise pay.
The sub-advisory agreements provide that Van Kampen and Wellington
Management shall not be subject to any liability, error of judgment, or mistake
of law or for any loss suffered by Mentor Advisors or the Trust in connection
with matters relating to the applicable sub- advisory agreement in the absence
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
its obligations or duties.
The sub-advisory agreements may be terminated at any time, without
penalty, (i) by Mentor Advisors on 60 day's written notice, (ii) at any time by
the Trustees or by a vote of a majority of the outstanding voting securities of
the Portfolio in question on 60 days' written notice, or (iii) by Van Kampen or
Wellington Management, as the case may be, upon 60 days'
written notice. Each of the sub-advisory agreements terminates automatically in
the event of its assignment.
Set forth below is information regarding the management of Van Kampen
and Wellington Management.
Van Kampen
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<PAGE>
Name and Address Position Principal Occupation
- ---------------- -------- --------------------
Don G. Powell Chairman and Chairman and Director,
2800 Post Oak Boulevard Director VK/AC Holding, Inc., Van
Houston, Texas 77056 Kampen American Capital, Inc.,
Van Kampen American Capital
Distributors, Inc., Van Kampen
American Capital Asset
Management, Inc., Van Kampen
American Capital Investment
Advisory Corp., and Van Kampen
American Capital Advisors, Inc.
Philip N. Duff Chief Executive President and Chief
One Parkview Plaza Officer Executive Officer, VK/AC
Oakbrook Terrace, Illinois Holding, Inc. and Van
60181 Kampen American Capital, Inc.
Dennis J. McDonnell President and Executive Vice President,
One Parkview Plaza Chief Operating VK/AC Holding, Inc. and
Oakbrook Terrace, Illinois Officer Van Kampen American
60181 Capital, Inc.; President and
Chief Operating Officer, Van
Kampen American Capital Advisors,
Inc., Van Kampen American Capital
Asset Management, Inc., and Van
Kampen American Capital
Investment Advisory Corp.
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Name and Address Position Principal Occupation
- ---------------- -------- --------------------
Ronald A. Nyberg Executive Vice Executive Vice President
One Parkview Plaza President and and General Counsel,
Oakbrook Terrace, Illinois General Counsel VK/AC Holding, Inc., Van Kampen
60181 American Capital, Inc., Van
Kampen American Capital
Distributors, Inc., Van Kampen
American Asset Management, Inc.,
Van Kampen American Investment
Advisory Corp., and Van Kampen
American Capital Advisors, Inc.
William R. Rybak Executive Vice Executive Vice President
One Parkview Plaza President and and Chief Financial Officer,
Oakbrook Terrace, Illinois Chief Financial VK/AC Holding, Inc., Van
60181 Officer Kampen American Capital, Inc.,
Van Kampen American Capital
Distributors, Inc., Van Kampen
American Capital Asset Management
Inc., Van Kampen American Capital
Investment Advisory Corp., and
Van Kampen American Capital
Advisors, Inc.
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<PAGE>
Name and Address Position Principal Occupation
- ---------------- -------- --------------------
Peter W. Hegel Executive Vice Executive Vice President,
One Parkview Plaza President Van Kampen American
Oakbrook Terrace, Illinois Capital Asset Management,
60181 Inc., Van Kampen American Capital
Investment Advisory Corp., and
Van Kampen American Capital
Advisors, Inc.
Alan T. Sachtleben Executive Vice Executive Vice President,
2800 Post Oak Blvd. President Van Kampen American
Houston, Texas 77506 Capital Asset Management, Inc.,
Van Kampen American Capital
Investment Advisory Corp., and
Van Kampen American Capital
Advisors, Inc.
Wellington Management
Wellington Management is managed by its active partners. The managing
partners of Wellington Management as of September 30, 1997 were Robert W. Doran,
Duncan M. McFarland, and John R. Ryan. Set forth below is a listing of the
general partners and Senior Vice Presidents of Wellington Management, each of
whom may be reached at the principal offices of the firm. The principal
occupation of each is as general partner or Senior Vice President of Wellington
Management. Paul D. Kaplan, Senior Vice President of Wellington Management
serves as portfolio manager of the fixed-income and U.S. Government securities
portion of the Income and Growth Portfolio; Wellington Management's Equity
Income Team manages the equity securities portion of the Portfolio.
Kenneth L. Abrams Paul D. Kaplan Robert D. Rands
Nicholas C. Adams John C. Keogh Eugene E. Record, Jr.
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<PAGE>
Rand L. Alexander Mark T. Lynch John R. Ryan
Deborah L. Allinson Nanch T. Lukitsh Joseph H. Schwartz
Nancy T. August Christine S. Manfredi David W. Scudder
James H. Averill Patrick J. McCloskey Binkley C. Shorts
Marie-Claude Bernal Earl E. McEvoy Trond Skramstad
William N. Booth Duncan M. McFarland Catherine A. Smith
Paul Braverman Paul M. Mecray, III Stephen A. Soderberg
William D. DiIanni Matthew E. Megargel Harriett Tee Taggart
Pamela Dippel James N. Mordy Perry M. Traquina
Robert W. Doran Diane C. Nordin Gene R. Tremblay
Charles T. Freeman Edward P. Owens Mary Ann Tynan
Laurie A. Gabriel Saul J. Pannell Ernst H. von Metzsch
Frank J. Gilday Thomas L. Pappas Clare Villari
John H. Gooch David M. Parker James L. Walters
Nicholas P. Greville Jonathan M. Payson Kim Williams
William C.S. Hicks Stephen M. Pazuk Frank V. Wisneski
A copy of the form of each of the new sub-advisory agreements is
attached to this proxy statement as Exhibit B.
Exhibit C and Exhibit D provide information relating to investment
companies similar to the Portfolios for which Van Kampen and Wellington
Management, respectively, provide investment advisory services.
Trustee Action. The Trustees of the Trusts approved each of the New
Agreements at a meeting held on October 14, 1997, at which a representative of
First Union was present.
In evaluating the New Agreements, the Trustees considered the fact that
the Existing Agreements and the New Agreements are substantially identical,
including the terms relating to the services to be provided and the fees to be
paid by the Funds thereunder. The Trustees considered the performance of Mentor
Advisors and Mentor Perpetual to date in providing services to the Funds, and
the skills and capabilities of the personnel of Mentor Advisors and Mentor
Perpetual.
The Trustees also considered statements made at their meeting by a
representative of senior management of First Union. He stated, among other
things, that First Union expects that Mentor Group would continue to operate as
an independent operating unit of First Union after the Merger and that the
integrity of the Mentor group of companies as an operating unit would remain
intact; that First Union intended to maintain Mentor Group's ownership interest
in Mentor Perpetual at the current level; and that there would be no change in
the investment advisory or administration services, or the pricing of those
services, provided by the Mentor group of companies to the Funds. The Trustees
also considered generally the financial resources of First Union, and the
reputation, expertise, and resources of First Union and its affiliates,
including those engaged in investment management businesses, and in domestic and
international financial markets.
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<PAGE>
The Trustees also considered the fact that key members of senior
management of Wheat First had entered into the employment agreements, described
above, with First Union, and that key members of management of Mentor Group
would be entitled to receive stock of First Union from the retention pool
described above.
Mr. Stanley F. Pauley, a Trustee of each of the Trusts will become
an "interested person," as that term is defined in the 1940 Act, of each Trust,
and of Mentor Advisors and Mentor Perpetual following the Merger by virtue
of his ownership of shares of First Union.
General. Investment decisions for the Funds and for the other
investment advisory clients of Mentor Advisors and Mentor Perpetual and their
affiliates are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in the opinion of Mentor
Advisors or Mentor Perpetual, as the case may be, is equitable to each and in
accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients. Mentor Advisors and Mentor
Perpetual employ professional staffs of portfolio managers who draw upon a
variety of resources for research information for the Funds.
Each Fund pays all expenses related to its operation which are not
borne by Mentor Advisors or Mentor Perpetual, including but not limited to
taxes, interest, brokerage fees and commissions, compensation paid under a
Fund's 12b-1 Plans and Shareholder Service Plans, fees paid Trustees who are not
officers, directors, stockholders, or employees of Mentor Advisors or Mentor
Perpetual, Securities and Exchange Commission fees and related expenses, state
Blue Sky qualification fees, charges of custodians, transfer agents, registrars
or other agents, outside auditing, accounting, and legal services, charges for
the printing of prospectuses and statements of additional information for
regulatory purposes or for distribution to shareholders, certain shareholder
report charges, and charges relating to corporate matters.
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<PAGE>
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Mentor Advisors and Mentor Perpetual receive brokerage and research
services and other similar services from many broker-dealers with which they
place a Fund's portfolio transactions and from third parties with which these
broker-dealers have arrangements. These services include such matters as general
economic and market reviews, industry and company reviews, evaluations of
investments, recommendations as to the purchase and sale of investments,
newspapers, magazines, pricing services, quotation services, news services, and
personal computers utilized by Mentor Advisors and Mentor Perpetual's managers
and analysts. Where the services referred to above are not used exclusively by
Mentor Advisors and Mentor Perpetual for research purposes, Mentor Advisors and
Mentor Perpetual, based upon their own allocations of expected use, bear that
portion of the cost of these services which directly relates to its non-
research use. Some of these services are of value to Mentor Advisors and Mentor
Perpetual and their affiliates in advising various of their clients (including
the Funds), although not all of these services are necessarily useful and of
value in managing the Funds. The investment advisory fees paid by a Fund are not
reduced because Mentor Advisors or Mentor Perpetual or their affiliates receive
these services even though Mentor Advisors and Mentor Perpetual might otherwise
be required to purchase some of these services for cash.
Mentor Advisors and Mentor Perpetual place all orders for the purchase
and sale of portfolio investments for the Funds and buy and sell investments for
the Funds through a substantial number of brokers and dealers. Mentor Advisors
and Mentor Perpetual seek the best overall terms available for the Funds, except
to the extent Mentor Advisors and Mentor Perpetual may be permitted to pay
higher brokerage commissions as described below. In doing so, Mentor Advisors
and Mentor Perpetual, having in mind a Fund's best interests, consider all
factors they deem relevant, including, by way of illustration, price, the size
of the transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience, and financial
stability of the broker-dealer involved, and the quality of service rendered by
the broker-dealer in other transactions. Mentor Advisors and Mentor Perpetual
may enter into transactions with broker-dealers that furnish them, without cost
to them, certain brokerage and research services of value to them and their
affiliates in advising the Funds and other clients. In doing so, Mentor Advisors
and Mentor Perpetual may cause the Funds to pay greater brokerage commissions
than they might otherwise pay.
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<PAGE>
As permitted by Section 28(e) of the 1934 Act, and by the Existing
Agreements, Mentor Advisors and Mentor Perpetual may cause a Fund to pay a
broker-dealer which provides "brokerage and research services" (as defined in
the 1934 Act) to Mentor Advisors and Mentor Perpetual an amount of disclosed
commission for effecting securities transactions on stock exchanges and other
transactions for the Fund on an agency basis in excess of the commission which
another broker-dealer would have charged for effecting that transaction. Mentor
Advisors' and Mentor Perpetual's authority to cause a Fund to pay any such
greater commissions is also subject to such policies as the Trustees may adopt
from time to time. Neither Mentor Advisors nor Mentor Perpetual currently
intends to cause the Funds to make such payments.
Wheat, First Securities, Inc. ("Wheat") and EVEREN Securities, Inc.,
affiliates of Mentor Advisors and Mentor Perpetual, may receive brokerage
commissions from certain of the Funds in accordance with certain procedures
adopted by the Trustees. See "Ownership of Mentor Advisors and Mentor
Perpetual," below, for a description of the affiliation between EVEREN
Securities, Inc. and Mentor Advisors and Mentor Perpetual.
The aggregate amount of commissions paid to Wheat by each of the Funds
during fiscal year 1996, and the percentage that such amount represents of the
aggregate brokerage commissions paid by the Fund for that year, is as follows:
Growth Portfolio -- $72,923 (3.91%); Capital Growth Portfolio -- $54,642
(18.24%); Strategy Portfolio -- $87,458 (7.64%); and Income and Growth Portfolio
- -- $52,534 (35.90%).
Distribution plans. Mentor Distributors, LLC ("Mentor Distributors"),
an affiliate of Mentor Advisors and Mentor Perpetual, currently serves as the
principal underwriter of the shares of each Fund (other than SNAP Fund). Each of
the Funds (other than certain of the Funds comprising Mentor Institutional
Trust) has adopted a Distribution Plan under Rule 12b-l of the 1940 Act (each, a
"Plan"). The Plans relate to a Fund's Class B shares, or, in the case of the
various money market funds, to the single class of shares currently outstanding.
The purpose of each Plan is to permit a Fund to compensate Mentor Distributors
for services provided and expenses incurred by it in promoting the sale of
shares of the Fund (or Class B shares of the Funds, as the case may be),
reducing redemptions, or maintaining or improving services provided to
shareholders by Mentor Distributors or financial institutions.
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<PAGE>
The fees paid by each of the Funds comprising Mentor Funds and Cash
Resource Trust under their respective Plans both as a percentage of average
daily net assets and the dollar amounts paid during the most recently completed
fiscal year for which figures are available are set forth in Table 2 below. In
each case where a Fund issues more than one class of shares, the fees shown are
paid out of the Fund's assets attributable to its Class B shares. None of the
Funds comprising Mentor Institutional Trust pay 12b-1 fees, except that the
Perpetual International Portfolio pays such fees at the annual rate of 0.75% of
its average net assets. During the most recently completed fiscal year, the
Perpetual International Portfolio incurred no 12b-1 fees (because no Class B
shares were outstanding during the year).
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<PAGE>
Table 2
Amount of
Fund 12b-1 Fees 12b-1 Fees(1)
Mentor Funds
Growth Portfolio 0.75% $2,260,899
Capital Growth Portfolio 0.75% $458,606
Strategy Portfolio 0.75% $1,910,928
Income and Growth Portfolio 0.75% $411,096
Perpetual Global Portfolio 0.75% $183,636
Quality Income Portfolio 0.50% $298,041
Short-Duration Income Portfolio 0.30% $70,827
Municipal Income Portfolio 0.50% $190,043
Balanced Portfolio 0.75% --
($25,766)
Institutional Money Market Portfolio 0.00% --
U.S. Government Money Market Portfolio 0.00% --
Cash Resource Trust
Money Market Fund 0.38% $8,221,000
U.S. Government Money Market Fund 0.38% $9,126,000
Tax-Exempt Money Market Fund 0.33% $2,039,000
California Tax-Exempt Money Market Fund 0.33% $181,000
New York Tax-Exempt Money Market 0.38% $19,000
Fund ($6,000)
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<PAGE>
- --------------------------
(1) Amounts shown as paid are net of amounts waived or reimbursed. Amounts shown
in parentheses reflect fees waived or reimbursed by Mentor Distributors.
Mentor Distributors will not, due to limitations imposed by applicable
banking laws, continue to serve as the principal underwriter of the any of the
Funds' shares following the Merger. Mentor Distributors will, however, will
likely continue to provide marketing support to the Funds, including contact
with financial intermediaries to recommend the Funds and primary responsibility
for the development of marketing plans and the preparation of advertising and
sales literature for the Funds. As a result, Mentor Distributors will likely
continue to receive, either directly from the Funds or from the Funds' principal
underwriter, a substantial portion of any amounts paid by the Funds under their
Distribution Plans.
It is expected that the Boards of Trustees will select a new principal
underwriter for each of the Funds, which will be responsible for effecting sales
of shares of the Funds, either on a principal or agency basis, and ensuring
compliance with applicable laws. Any such principal underwriter would also
likely be compensated out of amounts paid by the Funds under the Plans.
Implementation of these arrangements would not result in any increase in the
amounts paid by the Funds under the Plans.
Shareholder Servicing Plans. Each of the Portfolios comprising Mentor
Funds and the Perpetual International Portfolio of Mentor Institutional Trust
has adopted a Shareholder
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<PAGE>
Servicing Plan ("Service Plan") with Mentor Distributors. The Service Plan
contemplates that Mentor Distributors will enter into shareholder service
agreements with financial institutions whose customers own shares of the
Portfolios, pursuant to which the financial institutions will provide
administrative support services to their customers. In return for providing
those support services, a financial institution may receive payments from Mentor
Distributors at a rate not exceeding 0.25% of the average daily net assets of
the Class A or Class B shares of the particular Portfolio or Portfolios (and, in
the case of the International Portfolio, the Class E shares) owned by the
financial institution's customers.
During fiscal year 1996, the Portfolios paid shareholder service fees
to Mentor Distributors under the Service Plan as follows:
Table 3
Amount of
Shareholder
Fund Service Fees(1)
Growth Portfolio $826,239
Capital Growth Portfolio $227,668
Strategy Portfolio $672,756
Income and Growth Portfolio $191,882
Perpetual Global Portfolio $83,771
Quality Income Portfolio $206,477
Municipal Income Portfolio $143,660
Short-Duration Income Portfolio $69,200
Balanced Portfolio --
($8,589)
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<PAGE>
Amount of
Shareholder
Fund Service Fees(1)
Perpetual International Portfolio --
- -----------------------
(1) Amounts shown as paid are net of amounts waived or reimbursed. Amounts
shown in parentheses reflect fees waived or reimbursed by Mentor
Distributors.
Contingent Deferred Sales Charges. Mentor Distributors receives
contingent deferred sales charges in connection with redemption of certain
shares of each of the Funds comprising Mentor Funds and the Perpetual
International Portfolio of Mentor Institutional Trust within a specified period
following the initial purchase. During the most recently competed fiscal year
for which figures are available, Mentor Distributors received contingent
deferred sales charges in the following amounts:
Table 4
Amount of
Contingent
Deferred Sales
Fund Charges
Growth Portfolio $182,754
Capital Growth Portfolio $13,725
Strategy Portfolio $511,034
Income and Growth Portfolio $10,261
Perpetual Global Portfolio $12,547
Quality Income Portfolio $15,091
Municipal Income Portfolio $7,099
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<PAGE>
Amount of
Contingent
Deferred Sales
Fund Charges
Short-Duration Income Portfolio $44,511
Balanced Portfolio --
Perpetual International Portfolio --
Ownership of Mentor Advisors and Mentor Perpetual. Mentor Group
owns 99% of the outstanding shares of Mentor Advisors; Wheat First owns
the remaining 1%. Wheat First also owns a 79.8% interest in Mentor Group,
which, together with its 1% direct interest in Mentor Advisors, gives
Wheat First an 80% economic interest in Mentor Advisors. EVEREN Securities
Holdings, Inc. owns the 20.2% of the outstanding shares of Mentor Group
not owned by Wheat First and may increase its ownership based principally
on the amount of Mentor Group's revenues derived from assets from assets
attributable to clients of EVEREN Securities Holdings, Inc. and its affiliates.
EVEREN Securities, Inc. is an affiliate of EVEREN Securities Holdings, Inc.
Mentor Perpetual is owned equally by Mentor Advisors and Perpetual plc,
a diversified financial services holding company.
Wheat First is located at 901 East Byrd Street, Richmond, Virginia
23219; EVEREN Securities Holdings, Inc. is located at 77 West Wacker Drive,
Chicago, Illinois 60601; and Perpetual plc is located at 48 Hart Street,
Henley-on-Thames, Oxfordshire RG92A2, England.
Principal Executive Officer and Directors of Mentor Advisors and Mentor
Perpetual. The names and principal occupations of the principal executive
officer and each director of Mentor Advisors is set forth below:
Name Position Principal Occupation
- ---- -------- --------------------
Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.
Paul F. Costello Managing Director Managing Director,
Mentor Investment
Group, LLC.
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Name Position Principal Occupation
- ---- -------- --------------------
John G. Davenport Managing Director Managing Director,
Mentor Investment
Group, LLC.
P. Michael Jones Managing Director Managing Director,
Mentor Investment
Group, LLC.
R. Preston Nuttall Managing Director Managing Director,
Mentor Investment
Group, LLC.
Theodore W. Price Managing Director Managing Director,
Mentor Investment
Group, LLC.
Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.
Karen H. Wimbish Managing Director Managing Director,
Mentor Investment
Group, LLC.
In the case of Mentor Perpetual, the names and principal occupations of the
principal executive officer and each director are:
Name Position Principal Occupation
- ---- -------- --------------------
Scott A. McGlashan President Director, Perpetual
Portfolio Management
Limited.
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<PAGE>
Name Position Principal Occupation
- ---- -------- --------------------
Martyn Arbib Director Chairman, Perpetual
Portfolio Management
Limited.
Roger C. Cornick Director Deputy Chairman -
Marketing, Perpetual
Portfolio Management
Limited.
Paul F. Costello Director Managing Director,
Mentor Investment
Group, LLC.
Daniel J. Ludeman Director Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.
David S. Mossop Director Director, Perpetual
Portfolio Management
Limited.
Peter J. Quinn, Jr. Director Managing Director,
Mentor Investment
Group, LLC.
Roderick A. Smyth Managing Director Managing Director,
Mentor Investment
Group, LLC.
In addition to their positions with Mentor Advisors and Mentor
Perpetual, Messrs. Ludeman and Costello are also Chairman and Trustee, and
President, respectively, of each of
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<PAGE>
the Trusts. Mr. Quinn is also a Trustee of Mentor Funds and Cash Resource
Trust.
The address of each of the above named individuals is 901 East Byrd
Street, Richmond, Virginia 23219, except that the address of Messrs. McGlashan,
Arbib, and Mossop is 48 Hart Street, Henley-on-Thames, Oxfordshire RG92A2,
England.
Section 15(f). The Trusts have been informed by Mentor Advisors, Mentor
Perpetual, and First Union that they intend to comply with Section 15(f) of the
1940 Act. Section 15(f) provides a non-exclusive "safe harbor" for an investment
adviser or any affiliated persons to receive any amount or benefit in connection
with a change in control of the investment adviser as long as two conditions are
met. First, for a period of three years after the change of control, at least
75% of the trustees of the investment company must not be interested persons of
the adviser or the predecessor adviser. Second, an "unfair burden" must not be
imposed on the investment company as a result of the transaction or any express
or implied terms, conditions, or understandings applicable thereto. The term
"unfair burden" is defined in Section 15(f) to include any arrangement during
the two-year period after the transaction whereby the investment adviser, or any
interested person of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from, or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). The Trusts have been advised that none of Mentor Advisors,
Mentor Perpetual, and First Union, and their affiliates, is aware of any express
or implied term, condition, arrangement or understanding which would impose an
"unfair burden" on the Trusts as a result of the Merger. First Union has
undertaken to pay all costs and expenses of the Meeting.
Required vote. Shareholders of each Fund will vote separately on the
New Agreement with respect to that Fund. In addition, shareholders of the
Municipal Income and Income and Growth Portfolios will vote separately as to the
new sub-advisory agreements proposed in respect of those Portfolios. As provided
in the 1940 Act, approval of the New Agreement (or any sub- advisory agreement)
as to a Fund requires the affirmative vote of a "majority of the outstanding
voting securities" of the Fund, which for this purpose means the affirmative
vote of the lesser of (i) more than 50% of the outstanding shares of the Fund
and (ii) 67% or more of the shares of the Fund present at the Meeting if more
than 50% of the outstanding shares are present at the Meeting in person or by
proxy. If the shareholders of a Fund do not approve the New
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<PAGE>
Agreement (or any sub-advisory agreement), the Trustees will take such further
action with respect to that Fund as they may deem to be in the interests of the
shareholders of that Fund.
The Trustees unanimously recommend that shareholders of each of the
Funds vote to approve the New Agreement and any applicable sub-advisory
agreement.
II. APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS --
ACQUISITION OF ADDITIONAL INTEREST IN MENTOR GROUP BY
EVEREN SECURITIES HOLDINGS, INC. (ALL FUNDS OTHER THAN
MENTOR PERPETUAL GLOBAL PORTFOLIO AND MENTOR PERPETUAL
INTERNATIONAL PORTFOLIO)
EVEREN Securities Holdings, Inc. ("EVEREN") may from time to time in
the future acquire an additional interest in Mentor Group. For the reasons
stated below, that acquisition might be seen to result in a change of control of
Mentor Group, and so to result in the termination of the investment advisory and
sub-advisory agreements to which Mentor Advisors is a party. The Trustees are
recommending that shareholders approve new investment advisory and sub-advisory
agreements at the Meeting, to take effect upon the occurrence of any such change
of control of Mentor Group.
Possible change of control; need for shareholder approval. Wheat First
owns 79.8% of the outstanding interest in Mentor Group. EVEREN owns the
remaining 20.2%. EVEREN acquired its interest in Mentor Group in connection with
Mentor Group's organization in 1996. Wheat First also owns a 1% interest in
Mentor Advisors, which, together with Wheat First's 79.8% interest in Mentor
Group, gives Wheat First an 80% economic interest in Mentor Advisors.
By agreement between Wheat First and EVEREN, EVEREN has the right to
acquire from Wheat First an additional interest in Mentor Group. (That
transaction is referred to herein as the "Final Acquisition".) The amount of
that interest will be calculated based on the amount of Mentor Group's revenues
attributable to EVEREN during the period immediately prior to the Final
Acquisition. The amount of EVEREN's interest in Mentor Group may not, however,
exceed 50%. The Final Acquisition would occur not later than March 31, 1999.
It is also possible, in light of the continuing relationship between
Wheat First and EVEREN and EVEREN's success to date in the distribution of the
Funds' shares, that EVEREN will, by agreement with Wheat First, receive an
additional interest in Mentor Group prior to the Final Acquisition.
If, as a result of any acquisition of additional interest in Mentor
Group, EVEREN's interest in Mentor Group exceeds 25%, the acquisition may be
deemed to result in a "change of control" of Mentor Group, and, as a result, of
Mentor Advisors. Any such change of control would, in turn, result in an
"assignment", as defined in the 1940 Act, of the investment advisory and
sub-advisory agreements in effect at the time to which Mentor Advisors is a
party, resulting in their automatic termination.
The Boards of Trustees are recommending that shareholders of the Funds
for which Mentor Advisors serves as investment adviser approve new investment
advisory agreements between the Funds and Mentor Advisors. The Boards of
Trustees are also recommending that shareholders of the Income and Growth
Portfolio and Municipal Income Portfolio approve new sub-advisory agreements
with Wellington Management and Van Kampen, respectively.
Each of the new agreements would be substantially identical to the
existing agreements and to the New Agreements, except as to their effective and
termination dates.
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<PAGE>
Management of Mentor Group. Mentor Group is a limited liability company
organized under the laws of the Commonwealth of Virginia. It is managed by a
Management Committee consisting of members nominated by Wheat First and members
nominated by EVEREN. Under the Operating Agreement pursuant to which Mentor
Group was organized, Wheat First currently is entitled to nominate a majority of
the members of the Management Committee, and, so long as EVEREN's interest
remains below 45%, will continue to have that right.
The Operating Agreement provides that the Management Committee acts by
the vote of a majority of the members of the Committee. It also provides that,
at any time when EVEREN owns 40% or more of the outstanding shares of Mentor
Group, then the Management Committee may only vote to admit any additional
member to Mentor Group, or to merge or consolidate with any corporation or other
entity, or sell, lease, transfer, distribute, or otherwise dispose of all or
substantially all of its assets, with the vote of a majority of the members of
the Committee nominated by Wheat and the vote of a majority of the members of
the Committee nominated by EVEREN.
The effect of a possible change of control of Mentor Group. At any time
when EVEREN's interest in Mentor Group is less than 45%, it will be entitled to
nominate only a minority of the members of the Management Committee; Wheat
First's nominees to the Management Committee would continue to constitute a
majority of its members. Accordingly, Mentor Advisors has advised the Boards of
Trustees that it does not expect that EVEREN's holding any interest less than
45% would result in any material change in the management or control of Mentor
Group. Mentor Advisors has also advised the Boards of Trustees that EVEREN's
owning additional interest in Mentor Group would not reduce the quality of
services now provided to any of the Funds, or have any effect on Mentor
Advisors' ability to fulfill its obligations to the Funds under the investment
advisory agreements. In any event, no new investment advisory or sub-advisory
agreement would be implemented unless the Board of Trustees of the Trust in
question, including a majority of the disinterested Trustees, had approved the
agreement, under the specific facts and circumstances then prevailing.
Shareholders are not being asked to vote on any investment advisory or
sub-advisory agreement to be implemented following an acquisition by EVEREN of
an interest in Mentor Group if, after the acquisition, EVEREN would be permitted
to nominate a number of members of the Management Committee equal to the number
Wheat First is permitted to nominate.
EVEREN Securities Holdings, Inc. EVEREN is a wholly owned subsidiary of
EVEREN Capital Corporation. EVEREN Capital Corporation, through its
subsidiaries, is a full-service securities brokerage firm that provides a broad
range of investment services and products primarily to individuals and also to
institutions, corporations, and municipalities. It also engages in capital
markets, asset management, and clearing activities. At December 31, 1996, EVEREN
Capital Corporation, through its subsidiaries, held over $40 billion of customer
assets in approximately 500,000 client accounts.
EVEREN Capital Corporation is a public company whose common stock is traded
on the New York Stock Exchange. The EVEREN Capital Corporation 401(k) and
Employee Stock Ownership Plan ("KSOP") owns approximately 62% of EVEREN Capital
Corporation. EVEREN Capital Corporation's employees and directors, through the
KSOP and otherwise, own in excess of 70% of the outstanding common stock of
EVEREN Capital Corporation.
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<PAGE>
Required vote. Shareholders of each Fund will vote separately on the
new investment advisory agreement with respect to that Fund. In addition,
shareholders of the Municipal Income and Income and Growth Portfolios will vote
separately as to the new sub-advisory agreements proposed in respect of those
Portfolios. As provided in the 1940 Act, approval of the new investment advisory
agreement (or any sub-advisory agreement) as to a Fund requires the affirmative
vote of a "majority of the outstanding voting securities" of the Fund, which for
this purpose means the affirmative vote of the lesser of (i) more than 50% of
the outstanding shares of the Fund and (ii) 67% or more of the shares of the
Fund present at the Meeting if more than 50% of the outstanding shares are
present at the Meeting in person or by proxy. If the shareholders of a Fund do
not approve the new investment advisory agreement (or any sub-advisory
agreement), the Trustees will take such further action with respect to that Fund
as they may deem to be in the interests of the shareholders of that Fund.
The Trustees unanimously recommend that shareholders of each of the
Funds vote to approve the new investment advisory agreement and any applicable
sub-advisory agreement.
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<PAGE>
III. MISCELLANEOUS
Ownership of Shares. As of November , 1997, the number of shares
outstanding of each Fund was as follows: Mentor Growth Portfolio-- ;
Mentor Capital Growth Portfolio-- ; Mentor Strategy Portfolio--
; Mentor Income and Growth Portfolio-- ; Mentor Perpetual
Global Portfolio-- ; Mentor Quality Income Portfolio-- ,
Mentor Municipal Income Portfolio-- ; Mentor Short-Duration Income
Portfolio-- , Mentor Balanced Portfolio-- ; Mentor
Institutional Money Market Portfolio-- ; Mentor Institutional U.S.
Government Money Market Portfolio-- ; Mentor U.S. Government
Cash Management Portfolio-- ; Mentor Intermediate Duration
Portfolio-- ; Mentor Fixed-Income Portfolio-- ; Cash Resource
Money Market Fund-- ; Cash Resource U.S. Government Money Market
Fund-- ; Cash Resource Tax-Exempt Money Market Fund-- ;
Cash Resource California Tax-Exempt Money Market Fund-- ; and Cash
Resource New York Tax-Exempt Money Market Fund-- . Each share
is entitled to one vote, with fractional shares voting proportionally.
The following persons are known to the Trusts to have owned of record or
beneficially (within the meaning of Rule 13d-3 under the 1934 Act), as of
November , 1997, 5% or more of the outstanding shares of the following Funds.
Amount and Nature
of Benenficial Percentage of
Shareholder Ownership Fund Shares
---------- ----------------- -----------
SNAP FUND
- ------------------------ -------------- ------------
The table below shows the shares of the Trusts held as of November ,
1997 by (i) each nominee and current Trustee of the Trusts and the President
of each Trust and (ii) all Trustees and officers of the Trusts as a group.
Unless otherwise noted, each of the shareholders named below has to the
knowledge of the Trusts sole investment power and sole voting power with
respect to the shares of the Trusts beneficially owned.
Ownership of Shares of the
Name Trusts as of 11/ /97 Percent of Shares
---- ---------------------------- -----------------
- -----------
All Trustees and officers as a
group
None of these holdings, individually or in the aggregate, represent 1% or
more of the outstanding shares of any Fund or Trust.
Other business. The Trustees know of no other business to be brought
before the Meeting. However, if any other matters properly come before the
Meeting, it is the Trustees' intention that proxies which do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of proxy.
Solicitation of proxies. The costs of solicitation of proxies will be
borne by First Union. Solicitation of proxies by personal interview, mail,
telephone, and telegraph may be made by officers and Trustees of the Trusts (who
will receive no compensation therefor in addition to their regular salaries). In
addition, the firm of __________________, Inc. has been retained by Mentor Group
to assist in the solicitation of proxies at a cost to First Union which is not
expected to exceed $_______.
The Trusts may also arrange to have votes recorded by telephone. The
telephone voting procedure is designated to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions, and to confirm that their instructions have
been properly recorded. The Trusts have been advised by counsel that these
procedures are consistent with the requirements of applicable law. If these
procedures were subject to a successful legal challenge, such votes would not be
counted at the Meeting. The Trusts are unaware of any such challenge at this
time. Shareholders would be called at the phone number the Trusts (or a
shareholder's financial institution) has in its records for their accounts, and
would be asked for their Social Security number or other identifying
information. The shareholders would then be given an opportunity to authorize
proxies to vote their shares at the Meeting in accordance with their
instructions. To ensure that the shareholders' instructions have been recorded
correctly, they will also receive a confirmation of their instructions in the
mail. A special toll-free number will be available in case the information
contained in the confirmation is incorrect.
-30-
<PAGE>
Adjournment. In the event that sufficient votes in favor of any of the
proposals set forth in the Notice of the Meeting are not received by the time
scheduled for the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting with respect to those proposals for a period or
periods of not more than 60 days in the aggregate to permit further solicitation
of proxies with respect to those proposals. In addition, if, in the judgment of
the persons named as proxies, subsequent developments make it advisable to defer
action on one or more proposals, but not all proposals, the persons named as
proxies may propose one or more adjournments of the Meeting with respect to
those proposals for a reasonable time in order to defer action on such proposals
as they deem advisable. Any such adjournments will require the affirmative vote
of a majority of the votes cast on the question in person or by proxy at the
session of the Meeting to be adjourned, as required by each Trust's Agreement
and Declaration of Trust and By-laws. The persons named as proxies will vote in
favor of such adjournment with respect to a proposal those proxies which they
are entitled to vote in favor of the proposal. They will vote against any such
adjournment those proxies which have been instructed to vote against such
proposal, and they will vote to abstain any such proxies which they are required
to abstain from voting on such proposal. The costs of any such additional
solicitation and of any adjourned session will be borne by First Union. Any
proposals for which sufficient favorable votes have been received by the time of
the Meeting may be acted upon and considered final regardless of whether the
Meeting is adjourned to permit additional solicitation with respect to any other
proposal.
Tabulation of votes. Votes cast by proxy or in person at the Meeting
will be counted by persons appointed by the Trusts to act as tellers for the
Meeting. The tellers will count the total number of votes cast "for" approval of
each proposal for purposes of determining whether sufficient affirmative votes
have been cast. The tellers will count shares represented by proxies that
withhold authority to vote or that reflect abstentions or "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or persons entitled to vote and (ii)
the broker or nominee does not have the discretionary voting power on a
particular matter) as shares that are present and entitled to vote on the matter
for purposes of determining the presence of a quorum. Abstentions and broker
non-votes will have the effect of negative votes on the proposal to approve the
New Agreements.
Date for receipt of shareholders' proposals for subsequent meetings of
shareholders. The Trusts' Agreements and Declarations of Trust do not provide
for annual meetings of shareholders, and the Trusts do not currently intend to
hold such a meeting in 1998. Shareholder
-31-
<PAGE>
proposals for inclusion in the Trusts' proxy statements for any subsequent
meetings must be received by the Trusts a reasonable period of time prior to any
such meeting.
-32-
<PAGE>
Exhibit A-1
[Mentor Capital Growth Portfolio, Mentor Quality Income Portfolio, Mentor
Municipal Income Portfolio, and Mentor Income and Growth Portfolio]
MENTOR FUNDS
MANAGEMENT AGREEMENT
, 1997
Mentor Investment Advisors, LLC
901 East Byrd Street
Richmond, Virginia 23219
Dear Sirs:
Mentor Funds (the "Trust"), a Massachusetts business trust, confirms
its agreement with Mentor Investment Advisors, LLC (the "Adviser") with respect
to the Adviser's serving as investment adviser of the Trust as set forth below.
Section 1. Investment Description; Appointment
The Trust desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the investment objectives,
policies and limitations specified in the prospectus (the "Prospectus") and in
the statement of additional information (the "Statement of Additional
Information") filed with the Securities and Exchange Commission (the "SEC") as
part of the Trust's Registration Statement on Form N-1A, as amended from time to
time (the "Registration Statement"). Copies of the Trust's Prospectus and the
Statement of Additional Information have been or will be submitted to the
Adviser. The Trust desires to employ and hereby appoints the Adviser to act as
its investment manager. The Adviser accepts the appointment and agrees to
furnish the services described in Section 2 of this Agreement for the
compensation set forth in Section 6 of, and Appendix I to, this Agreement.
Section 2. Services as Adviser; Appointment of Sub-Advisers
(a) Subject to the supervision and direction of the Trust's Board of
Trustees, the Adviser shall provide such services reasonably requested by the
Trust, including but not limited to the following:
A1-1
<PAGE>
(i) monitoring and supervising the services provided to the
Trust by its administrator (the "Administrator") pursuant to a separate
agreement between the Trust and the Administrator, a copy of which has been or
will be submitted to the Adviser; and
(ii) providing to the Trust investment management evaluation
services principally by performing initial due diligence on prospective
investment advisers ("Sub- Advisers") for each existing series of its capital
stock and any series or class which the Trust may offer from time to time in the
future (each, a "Portfolio"), thereafter monitoring and supervising Sub-Adviser
performance through quantitative and qualitative analysis as well as periodic
in-person, telephonic and written consultations with Sub-Advisers and
considering and approving investments and use of certain investment strategies
when the Trust requests review and consideration of such matters by the Adviser.
The Adviser will be responsible for communicating performance expectations and
evaluations to Sub-Advisers and ultimately recommending to the Board of Trustees
of the Trust whether Sub-Advisers' contracts should be renewed, modified or
terminated. The Adviser will provide written reports to the Board of Trustees
regarding the results of its evaluation and monitoring functions; and
(iii) conducting all operations of the Trust except those
operations contracted to the Sub-Advisers, custodian, transfer agent and
administrator.
(b) The Adviser will, at its own expense, maintain sufficient staff,
employ or retain sufficient personnel, and consult with any other persons that
it determines may be necessary or useful to the performance of its obligations
under this Agreement.
Section 3. Brokerage
The Adviser is authorized to permit the Sub-Advisers to execute
portfolio transactions for the Trust. In executing transactions and selecting
brokers or dealers, each Sub-Adviser will seek the best overall terms available.
In assessing the best overall terms available for any portfolio transaction, the
Sub-Adviser will consider all factors it deems relevant including, but not
limited to, the breadth of the market in the security or commodity interest, the
price of the security or commodity interest, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and on a continuing basis. In selecting
brokers or dealers to execute a particular transaction and in evaluating the
best overall terms available, the Adviser shall have the right to request of the
Sub-Advisers in writing that transactions giving rise to brokerage commissions
shall be executed by brokers and dealers that provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) to the Trust and/or other accounts over which the Sub-Adviser or an
affiliate exercises investment discretion. In addition, subject to the above and
the applicable Rules of Fair Practice of the National Association of Securities
Dealers, Inc., the Trust shall have the right to request that such transactions
be executed by brokers and dealers by or through whom sales of shares of the
Trust are made.
A1-2
<PAGE>
Section 4. Information Provided to the Trust
The Adviser will keep the Trust informed of developments materially
affecting the Sub- Advisers and the Portfolios and, in addition to providing the
Trust with whatever statistical or other information the Trust may reasonably
request with respect to its investments, the Adviser will, on its own
initiative, furnish the Trust from time to time with whatever information the
Adviser believes is appropriate for this purpose.
Section 5. Standard of Care
The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Adviser against any liability to the
Trust or to holders of the Trust's shares of beneficial interest to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement.
Section 6. Compensation
(a) In consideration of services rendered pursuant to this Agreement,
each of the Trust's Portfolios will accrue daily and pay monthly a fee at the
annual rate applied to the value of that Portfolio's average daily net assets as
set forth in the schedule attached hereto as Appendix I. From time to time the
Adviser may agree to reimburse the Trust additional expenses or waive a portion
or all of its fee, in the sole discretion of the Adviser.
(b) The fee for the period from the commencement of investment
operations to the end of the month during which investment operations commence
will be prorated according to the proportion that such period bears to the full
monthly period, and will be payable that month. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and will be payable upon the date of termination of this
Agreement.
(c) For the purpose of determining fees payable to the Adviser under
this Agreement, the value of the Trust's net assets will be computed in the
manner described in the Trust's current Prospectus and/or Statement of
Additional Information.
Section 7. Costs and Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement, including the payment of salaries of all
officers and employees who are employed by it and the Trust as well as the
payment of the fees of the Sub-Advisers.
A1-3
<PAGE>
Section 8. Reimbursement to the Trust
From time to time the Adviser may agree to reimburse the Trust
additional expenses or waive a portion or all of its fee payable pursuant to
Section 6, in the sole discretion of the Adviser. If, in any fiscal year of the
Trust, the aggregate expenses of the Trust (including fees pursuant to this
agreement and the Trust's Administration Agreement with the Administrator, but
excluding interest, taxes, brokerage fees, and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense limitation
imposed by any state having jurisdiction over the Trust, the Adviser will
reimburse the Trust to the extent required by state law in the same proportion
as its fees bear to the combined fees paid by the Trust for investment
management and administration. The Adviser's expense reimbursement obligation
will be limited to the amount of its fees received pursuant to this Agreement.
Such expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
Section 9. Service to Other Companies or Accounts
The Trust understands that the Adviser and the Sub-Advisers may act as
investment managers or advisers to fiduciary and other managed accounts,
including other investment companies, and the Trust has no objection to the
Adviser's and Sub-Advisers' so acting, provided that whenever the Trust and one
or more other accounts advised by any Sub-Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each account or company.
The Trust recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for the Trust. In addition, the Trust
understands and acknowledges that the persons employed by the Adviser to assist
in the performance of the Adviser's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Adviser or any affiliate of the
Adviser to engage in and devote time and attention to other businesses or to
render services of any kind or nature.
Section 10. Term of Agreement
(a) This Agreement shall become effective upon its execution and shall
continue for an initial period of two years and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Trust's Board of Trustees or
(ii) a vote of a "majority" of the Trust's outstanding voting securities (as
defined in the Investment Company Act of 1940, as amended (the "Act")), provided
that in either event the continuance is also approved by a majority of Trustees
who are not "interested persons" (as defined in the Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval.
(b) This Agreement is terminable, without penalty, on 60 days' written
notice, by the Trust's Trustees or by vote of holders of a majority of the
Trust's outstanding voting securities, or upon 60 days' written notice, by the
Adviser.
A1-4
<PAGE>
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act or in rules adopted under the Act).
Section 11. Amendments
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
Section 12. Limitations of Liability of Trustees, Officers,
Employees, Agents and Shareholders of the Trust
The Adviser is expressly put on notice of the limitation of liability
as set forth in the Declaration of Trust and agrees that the obligations assumed
by the Trust pursuant to this Agreement shall be limited in any case to the
Trust and its assets and that the Adviser shall not seek satisfaction of any
such obligations from the shareholders of the Trust, the Trustees, officers,
employees or agents of the Trust, or any of them.
Section 13. Miscellaneous
(a) This Agreement shall be governed by the laws of the Commonwealth of
Virginia, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Investment Advisers Act of 1940, as amended, or
rules or orders of the Securities and Exchange Commission thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
A1-5
<PAGE>
(d) Nothing herein shall be construed as constituting the Adviser as
an agent of the Trust.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
MENTOR FUNDS
By:_____________________________
Name:
Title:
Accepted:
MENTOR INVESTMENT ADVISORS, LLC
By:_____________________________________
Name:
Title:
A1-6
<PAGE>
APPENDIX I
ADVISER'S RATE OF
FEE IN ACCORDANCE
WITH SECTION 6 OF
MENTOR FUNDS THE AGREEMENT
- ------------ -----------------
Mentor Capital Growth Portfolio .80%
Mentor Quality Income Portfolio .60%
Mentor Municipal Income Portfolio .60%
Mentor Income & Growth Portfolio .75%
MENTOR FUNDS
By:__________________________
Name:
Title:
Accepted:
MENTOR INVESTMENT ADVISORS
By:______________________________________
Name:
Title:
A1-7
<PAGE>
Exhibit A-2
[Mentor Balanced Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Management Contract dated as of , 1997 between MENTOR
FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the MENTOR
BALANCED PORTFOLIO, and MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited
liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for the series of shares of beneficial interest of the
Trust designated for such purpose by the Trustees (the "Portfolio"), will
determine what investments shall be purchased, held, sold, or exchanged by
each of the Funds and what portion, if any, of the assets of a Portfolio
shall be held uninvested and shall, on behalf of each Portfolio, make
changes in the Portfolio's investments. In the performance of its duties,
the Manager will comply with the provisions of the Agreement and Declaration
of Trust and Bylaws of the Trust and each Portfolio's stated investment
objectives, policies, and restrictions, and will use its best efforts to
safeguard and promote the welfare of the Trust and to comply with other
policies which the Trustees may from time to time determine and shall
exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Trust as provided in Section 1(d), will furnish all necessary investment and
related management facilities, including, salaries of personnel, required
for it to execute its duties faithfully. The Manager will pay the
compensation, if any, of certain officers of the Trust carrying out the
investment management and related duties provided for by this Contract.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for each Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers
or dealers and the placing of such orders, the Manager shall give primary
consideration to securing for each Portfolio the most
A2-1
<PAGE>
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In doing so, the Manager, bearing in mind the
Trust's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices
and trends, the reputation, experience, and financial stability of the
broker or dealer involved, and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the Trustees of
the Trust may determine, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Portfolio to pay a
broker or dealer that provides brokerage and research services to the
Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission that another broker or
dealer would have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that particular transaction
or the Manager's overall responsibilities with respect to the Portfolio and
to other clients of the Manager as to which the Manager exercises investment
discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national
securities exchange to effect any transaction on the exchange for the
account of each Portfolio which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and each
Portfolio hereby consents to the retention of compensation for such
transactions in accordance with Rule 11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Trust not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee
of, or be otherwise interested in, the Manager, and in any person controlled
by or under common control with the Manager, and that the Manager and any
person controlled by or under common control with the Manager may have an
interest in the Trust. It is also understood that the Manager and any person
controlled by or under common control with the Manager have and may have
advisory, management, service, or other contracts with other organizations
and persons, and may have other interests and business.
A2-2
<PAGE>
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any
consultants retained by the Manager, each Portfolio shall pay the Manager,
as promptly as possible after the last day of each month, a fee, calculated
daily, of 0.75 of 1% annually of the Portfolio's average daily net assets.
The first payment of the fee shall be made as promptly as possible at the
end of the month next succeeding the effective date of this Agreement in
respect of the Portfolio, and shall constitute a full payment of the fee due
the Manager for all services prior to that date. If this Agreement is
terminated as of any date not the last day of a month, such fee shall be
paid as promptly as possible after such date of termination, shall be based
on the average daily net assets of the Portfolio in that period from the
beginning of such month to such date of termination, and shall be that
proportion of such average daily net assets as the number of business days
in such period bears to the number of business days in such month. The
average daily net assets of the Portfolio shall in all cases be based only
on business days and be computed as of the time of the regular close of
business of the New York Stock Exchange, or such other time as may be
determined by the Trustees. Each such payment shall be accompanied by a
report of the Trust prepared either by the Trust or by a reputable firm of
independent accountants which shall show the amount properly payable to the
Manager under this Agreement and the detailed computation thereof.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment be approved at a meeting by the affirmative
vote of a majority of the outstanding shares of the Portfolio, and by the
vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract as to
one or more Funds or as to the Trust as a whole by not more than sixty days
nor less than thirty days written notice delivered or mailed by registered
mail, postage prepaid, to the other party, or
A2-3
<PAGE>
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of any Portfolio,
and (ii) a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Manager, by vote cast in person at a meeting
called for the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Contract, then this
Contract shall automatically terminate at the close of business on ,
1999 or the expiration of one year from the effective date of the last such
continuance, whichever is later.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the affected Portfolio.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of a Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67%
or more of the shares of the Portfolio present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Portfolio entitled to vote at such meeting are
present in person or by proxy, or (b) of the holders of more than 50% of the
outstanding shares of the Portfolio entitled to vote at such meeting,
whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act; the
term "specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange Act of
1934, as amended, and the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and
duties hereunder, the Manager shall not be subject to any liability to the
Trust or to any shareholder of the Trust for any act or omission in the
course of, or connected with, rendering services hereunder.
A2-4
<PAGE>
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees,
officers, or shareholders of the Trust but are binding only upon the assets
and property of the Trust.
IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by
its President or Vice President thereunto duly authorized, all as of the day
and year first above written.
MENTOR FUNDS
on behalf of Mentor Balanced Portfolio
By:____________________________
Title:
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
Title:
A2-5
<PAGE>
Exhibit A-3
[Mentor Growth Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, made this __th day
of , 1997 by and between MENTOR FUNDS, a Massachusetts business trust
(the "Trust"), and MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited liability
company (the "Adviser").
RECITALS OF THE PARTIES
A. The Trust is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940 (the "1940 Act") and
has registered the shares of beneficial interest of Mentor Growth Portfolio, a
series of shares of beneficial interest of the Trust (the "Portfolio"), for sale
to the public under the Securities Act of 1933 and various state securities
laws; and
B. The Trust, on behalf of the Portfolio, wishes to retain the Adviser
to provide investment advisory and management services to the Portfolio; and
C. The Adviser is willing to furnish such services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and mutual covenants
herein contained, it is agreed as follows:
1. Information Furnished. The Trust, on behalf of the Portfolio, shall
at all times keep the Adviser fully informed with regard to the securities owned
by the Portfolio, its funds available, or to become available, for investment,
and generally as to its investments and investment program. It shall furnish the
Adviser with such other documents and information with regard to its investments
and investment program as the Trustees may from time to time reasonably request.
2. Research, Purchase, Sale, etc. of Securities.
(a) Subject to the direction and control of the Trustees of
the Trust, the Adviser shall regularly provide the Portfolio with investment
research, investment advice, and investment management and supervision and shall
furnish a continuous investment program
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for the Portfolio's portfolio of securities consistent with the Portfolio's
investment goals and policies. The Adviser shall determine from time to time
what securities will be purchased, retained or sold by the Portfolio, and shall
implement those decisions, all subject to the supervision and direction of the
Trustees, the provisions of the Agreement and Declaration of Trust and Bylaws of
the Trust, the 1940 Act, the applicable rules and regulations of the Securities
and Exchange Commission, and other applicable federal and state law, as well as
the investment goals and policies of the Portfolio.
(b) The Trust, on behalf of the Portfolio, hereby authorizes
any entity or person associated with the Adviser which is a member of a national
securities exchange to effect any transaction on the exchange for the account of
the Portfolio which is permitted by Section 11(a) of the Securities Exchange Act
of 1934 and Rule 11a2-2(T) thereunder, and the Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
3. Management Policies. In providing investment management services to
the Portfolio, the Adviser shall give primary consideration to securing the most
favorable price and efficient execution. In so doing, the Adviser may consider
the financial responsibility, research and investment information and other
services provided by brokers or dealers 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. The Portfolio recognizes that it is desirable that the Adviser have
access to supplemental investment and market research and security and economic
analyses provided by brokers and that such brokers may execute brokerage
transactions at a higher cost to the Portfolio than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Adviser is authorized to pay higher
brokerage commissions for the purchase and sale of securities for the Portfolio
to brokers who provide such research and analyses, subject to review by the
Trustees from time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such brokers may be
useful to the Adviser in connection with its services to other clients.
4. Aggregation of Orders. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of the Portfolio as
well as other clients, the Adviser, to the extent permitted by applicable laws
and regulations, may aggregate the securities 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 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 Portfolio and to such other clients.
5. Nonexclusive Agreement.
(a) The Trust understands that the Adviser now acts and will
continue to act as investment adviser to various fiduciary or other managed
accounts, and the Portfolio has no
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objection to the Adviser's so acting. In addition, it is understood that the
persons employed by the Adviser to assist in the performance of its duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the Adviser or any
affiliate of the Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
(b) The Trust understands that from time to time hereafter the
Adviser may act as investment adviser to one or more other investment companies,
and the Trust has no objection to the Adviser's so acting, provided that when
two or more companies managed by the Adviser have available funds for investment
in money market instruments, available money market investments will be
allocated in accordance with a formula believed to be equitable to each company.
It is recognized that in some cases this procedure may adversely affect the size
of the position obtainable for the Portfolio.
6. Expenses.
(a) The Adviser shall maintain all books and records with
respect to the Portfolio's securities transactions and keep the Portfolio's
books of account in accordance with all applicable federal and state laws and
regulations. 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.
(b) The Adviser shall bear the cost of rendering the
investment management services to be performed by it under this Agreement, and
shall, at its own expense, pay the compensation of the officers and employees,
if any, of the Trust who are employees of the Adviser.
(c) Other than as herein specifically indicated, the Adviser
shall not be responsible for the Portfolio's expenses. Specifically, the Adviser
will not be responsible, except to the extent of the reasonable compensation of
employees of the Trust whose services may be used by the Adviser hereunder, for
any of the following expenses of the Portfolio, which expenses shall be borne by
the Portfolio: interest, taxes, governmental fees or membership dues; brokerage
commissions or charges, if any; fees of custodians, transfer agents, registrars
or other agents; expense of preparing share certificates; expenses relating to
the redemption or repurchase of the Portfolio's shares; expenses of registering
and qualifying Portfolio shares for sale under applicable federal and state law;
expenses of preparing, setting in print, printing and distributing prospectuses,
reports, notices and dividends to Portfolio shareholders; cost of stationery;
costs of shareholders' and other meetings of the Portfolio; traveling expenses
of officers, Trustees and employees of the Trust, if any; fees of the Trust's
independent Trustees and salaries of any officers or employees who are not
affiliated with the Adviser; and the Portfolio's pro rata portion of premiums on
any fidelity bond and other insurance covering the Trust and its officers and
Trustees.
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(d) If, in any fiscal year, the Portfolio's total operating
expenses, exclusive of taxes, interest, brokerage fees, distribution fees and
extraordinary expenses (to the extent permitted by applicable state securities
laws and regulations), exceed the lowest applicable annual expense limitation
established pursuant to statute or regulation of any jurisdiction in which
shares of the Portfolio are offered for sale, the Adviser will reimburse (or
assume expenses of) the Portfolio for the amount of such excess. Such expense
reimbursement (or assumption), will be estimated, reconciled and paid (or
assumed) on a monthly basis.
7. Salaries. No Trustee, officer or employee of the Trust shall receive
from the Trust any salary or other compensation as such Trustee, officer or
employee while he is at the same time a Trustee, officer or employee of the
Adviser or any affiliated company of the Adviser. This paragraph shall not apply
to Trustees, executive committee members, consultants and other persons who are
not regular members of the Adviser's or any affiliated company's staff.
8. Compensation of Adviser. As compensation for the services performed
and the facilities furnished and expenses assumed by the Adviser, including the
services of any consultants retained by the Adviser, the Portfolio shall pay the
Adviser, as promptly as possible after the last day of each month, a fee,
calculated daily, of .70 of 1% annually of the Portfolio's average daily net
assets. The first payment of the fee shall be made as promptly as possible at
the end of the month next succeeding the effective date of this Agreement, and
shall constitute a full payment of the fee due the Adviser for all services
prior to that date. If this Agreement is terminated as of any date not the last
day of a month, such fee shall be paid as promptly as possible after such date
of termination, shall be based on the average daily net assets of the Portfolio
in that period from the beginning of such month to such date of termination, and
shall be that proportion of such average daily net assets as the number of
business days in such period bears to the number of business days in such month.
The average daily net assets of the Portfolio shall in all cases be based only
on business days and be computed as of the time of the regular close of business
of the New York Stock Exchange, or such other time as may be determined by the
Trustees. Each such payment shall be accompanied by a report of the Trust
prepared either by the Trust or by a reputable firm of independent accountants
which shall show the amount properly payable to the Adviser under this Agreement
and the detailed computation thereof.
9. Responsibility of Adviser. The Adviser assumes no responsibility
under this Agreement other than to render the services called for hereunder, in
good faith, and shall not be responsible for any action of the Trustees in
following or declining to follow any advice or recommendation of the Adviser;
provided, however, that nothing in this Agreement shall protect the Adviser
against any liability to the Portfolio or its shareholders to which it would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties hereunder.
10. Limitation of Employment. Nothing in this Agreement shall limit or
restrict the right of any director, officer, or employee of the Adviser who may
also be a Trustee, officer,
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or employee of the Trust, to engage in any other business or to devote his time
and attention in part to the management or other aspects of any other business
whether of a similar nature or a dissimilar nature, nor to limit or restrict the
right of the Adviser to engage in any other business or to render services of
any kind, including investment advisory and management services, to any other
corporation, firm, individual or association.
11. Definitions. As used in this Agreement, the terms "securities," and
"net assets," shall have the meanings ascribed or attributed to them in the
Registration Statement of the Trust on Form N-1A; and the terms "assignment,"
"interested person," and "majority of the outstanding voting securities" shall
have the meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
12. Term. Subject to the provisions of paragraphs 13 and 14 below, this
Agreement will remain in effect for two years from the date of its execution and
from year to year thereafter, provided that the Adviser does not notify the
Trust in writing at least sixty (60) days prior to the expiration date in any
year that it does not wish continuance of the Agreement for an additional year.
13. Termination. This Agreement shall terminate automatically in the
event of its assignment by the Adviser and shall not be assignable by the
Portfolio without the consent of the Adviser. This Agreement may also be
terminated at any time, without the payment of any penalty, by the Trustees or
by vote of a majority of the outstanding voting securities of the Portfolio by
sixty (60) days' written notice addressed to the Adviser at its principal place
of business.
14. Approval of Trustees. This Agreement shall be submitted for
approval to the Trustees annually and shall continue in effect only so long as
specifically approved annually by vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of such parties, cast in person
at a meeting called for that purpose, and either by vote of the holders of a
majority of the outstanding voting securities of the Portfolio or by majority
vote of the Trustees.
15. Agreement and Declaration of Trust. A copy of the Agreement and
Declaration of Trust of the Trust is on file with the Secretary of Sate of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers, or shareholders of the Trust but are binding only
upon the assets and property of the Trust.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
MENTOR FUNDS
on behalf of Mentor Growth
Portfolio
By:____________________________
Title:
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
Title:
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Exhibit A-4
[Mentor Perpetual Global Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Investment Advisory and Management Agreement dated as of ,
1997 between MENTOR FUNDS, a Massachusetts business trust (the "Trust"), and
MENTOR PERPETUAL ADVISORS, LLC, a Virginia limited liability company (the
"Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for Mentor Perpetual Global Portfolio (the "Portfolio"), will
determine what investments shall be purchased, held, sold, or exchanged by the
Portfolio and what portion, if any, of the assets of the Portfolio shall be held
uninvested and shall make changes in the Portfolio's investments. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust and Bylaws of the Portfolio and the
Portfolio's stated investment objectives, policies, and restrictions, and will
use its best efforts to safeguard and promote the welfare of the Portfolio and
to comply with other policies which the Trustees may from time to time determine
and shall exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Portfolio as provided in Section 1(e), will furnish all necessary investment and
related management facilities, including salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Agreement.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for the Portfolio the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
doing so, the Manager, bearing in mind the Portfolio's best interests at all
times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction
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taking into account market prices and trends, the reputation, experience, and
financial stability of the broker or dealer involved, and the quality of service
rendered by the broker or dealer in other transactions. Subject to such policies
as the Trustees of the Trust may determine, the Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Portfolio to pay a broker or
dealer that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission that another broker or dealer would have charged for
effecting that transaction, if the Manager determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall responsibilities
with respect to the Portfolio and to other clients of the Manager as to which
the Manager exercises investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and the Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Portfolio. It is also understood that the Manager and any person controlled
by or under common control with the Manager have and may have advisory,
management, service, or other agreements with other organizations and persons,
and may have other interests and business.
3. COMPENSATION TO BE PAID BY THE PORTFOLIO TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, of 1.10%
annually of the Portfolio's average daily net assets up to $75 million, and
1.00% annually of the Portfolio's average daily net assets over $75 million. The
first payment of the fee shall be made as promptly as possible at the end of the
month next succeeding the effective date of this Agreement, and shall constitute
a full payment of the fee
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due the Manager for all services prior to that date. If this Agreement is
terminated as of any date that is not the last day of a month, such fee shall be
paid as promptly as possible after such date of termination, shall be based on
the average daily net assets of the Portfolio in that period from the beginning
of such month to such date of termination, and shall be that proportion of such
average daily net assets as the number of business days in such period bears to
the number of business days in such month. The average daily net assets of the
Portfolio shall in all cases be based only on business days and be computed as
of the time of the regular close of business of the New York Stock Exchange, or
such other time as may be determined by the Trustees. Each such payment shall be
accompanied by a report of the Trust prepared either by the Trust or by a
reputable firm of independent accountants which shall show the amount properly
payable to the Manager under this Agreement and the detailed computation
thereof.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Portfolio, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Agreement by not
more than sixty days nor less than thirty days written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of the Portfolio, and
(ii) a majority of the Trustees of the Trust who are not interested persons of
the Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Agreement, then this Agreement shall
automatically terminate at the close of business on , 1999 or the
expiration of one year from the effective date of the last such continuance,
whichever is later.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Portfolio.
Termination of this Agreement pursuant to this Section 5 will be
without the payment of any penalty.
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6. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67% or
more of the shares of the Portfolio present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
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IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR PERPETUAL ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by its
President or Vice President thereunto duly authorized, all as of the day and
year first above written.
MENTOR FUNDS
on behalf of Mentor Perpetual Global Portfolio
By:_____________________________________
MENTOR PERPETUAL ADVISORS, LLC
By:______________________________________
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Exhibit A-5
[Mentor Short-Duration Income Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Management Contract dated as of , 1997 between MENTOR
FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the MENTOR
SHORT-DURATION INCOME PORTFOLIO, and MENTOR INVESTMENT ADVISORS, LLC, a Virginia
limited liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for the series of shares of beneficial interest of the Trust
designated for such purpose by the Trustees (the "Portfolio"), will determine
what investments shall be purchased, held, sold, or exchanged by each of the
Funds and what portion, if any, of the assets of a Portfolio shall be held
uninvested and shall, on behalf of each Portfolio, make changes in the
Portfolio's investments. In the performance of its duties, the Manager will
comply with the provisions of the Agreement and Declaration of Trust and Bylaws
of the Trust and each Portfolio's stated investment objectives, policies, and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Trust and to comply with other policies which the Trustees may from time
to time determine and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Trust as provided in Section 1(d), will furnish all necessary investment and
related management facilities, including, salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Contract.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for each Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for each Portfolio the most
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favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In doing so, the Manager, bearing in mind the
Trust's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience, and financial stability of the broker or dealer
involved, and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the Trust may
determine, the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Contract or otherwise solely by reason of its
having caused the Portfolio to pay a broker or dealer that provides brokerage
and research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the
Portfolio and to other clients of the Manager as to which the Manager exercises
investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of each
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and each Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Trust not expressly assumed by the Manager pursuant to this Section 1 other
than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and any person controlled by
or under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
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3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, each Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, of 0.50 of
1% annually of the Portfolio's average daily net assets. The first payment of
the fee shall be made as promptly as possible at the end of the month next
succeeding the effective date of this Agreement in respect of the Portfolio, and
shall constitute a full payment of the fee due the Manager for all services
prior to that date. If this Agreement is terminated as of any date not the last
day of a month, such fee shall be paid as promptly as possible after such date
of termination, shall be based on the average daily net assets of the Portfolio
in that period from the beginning of such month to such date of termination, and
shall be that proportion of such average daily net assets as the number of
business days in such period bears to the number of business days in such month.
The average daily net assets of the Portfolio shall in all cases be based only
on business days and be computed as of the time of the regular close of business
of the New York Stock Exchange, or such other time as may be determined by the
Trustees. Each such payment shall be accompanied by a report of the Trust
prepared either by the Trust or by a reputable firm of independent accountants
which shall show the amount properly payable to the Manager under this Agreement
and the detailed computation thereof.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Portfolio, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract as to
one or more Funds or as to the Trust as a whole by not more than sixty days nor
less than thirty days written notice delivered or mailed by registered mail,
postage prepaid, to the other party, or
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<PAGE>
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of any Portfolio, and
(ii) a majority of the Trustees of the Trust who are not interested persons of
the Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate at the close of business on , 1999 or the
expiration of one year from the effective date of the last such continuance,
whichever is later.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the affected Portfolio.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of a Portfolio means the affirmative vote, at a duly
called and held meeting of such shareholders, (a) of the holders of 67% or more
of the shares of the Portfolio present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of the Portfolio entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
A5-4
<PAGE>
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by its
President or Vice President thereunto duly authorized, all as of the day and
year first above written.
MENTOR FUNDS
on behalf of Mentor Short-Duration Income
Portfolio
By:____________________________
Title:
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
Title:
A5-5
<PAGE>
Exhibit A-6
[Mentor Strategy Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Management Contract dated as of , 1997 between MENTOR
FUNDS, a Massachusetts business trust (the "Trust"), on behalf of the MENTOR
STRATEGY PORTFOLIO, and MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited
liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for the series of shares of beneficial interest of the Trust
designated for such purpose by the Trustees (the "Portfolio"), will determine
what investments shall be purchased, held, sold, or exchanged by each of the
Funds and what portion, if any, of the assets of a Portfolio shall be held
uninvested and shall, on behalf of each Portfolio, make changes in the
Portfolio's investments. In the performance of its duties, the Manager will
comply with the provisions of the Agreement and Declaration of Trust and Bylaws
of the Trust and each Portfolio's stated investment objectives, policies, and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Trust and to comply with other policies which the Trustees may from time
to time determine and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Trust as provided in Section 1(d), will furnish all necessary investment and
related management facilities, including, salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Contract.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for each Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for each Portfolio the most
A6-1
<PAGE>
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In doing so, the Manager, bearing in mind the
Trust's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience, and financial stability of the broker or dealer
involved, and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the Trust may
determine, the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Contract or otherwise solely by reason of its
having caused the Portfolio to pay a broker or dealer that provides brokerage
and research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the
Portfolio and to other clients of the Manager as to which the Manager exercises
investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of each
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and each Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Trust not expressly assumed by the Manager pursuant to this Section 1 other
than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and any person controlled by
or under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
A6-2
<PAGE>
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, each Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, of 0.85 of
1% annually of the Portfolio's average daily net assets. The first payment of
the fee shall be made as promptly as possible at the end of the month next
succeeding the effective date of this Agreement in respect of the Portfolio, and
shall constitute a full payment of the fee due the Manager for all services
prior to that date. If this Agreement is terminated as of any date not the last
day of a month, such fee shall be paid as promptly as possible after such date
of termination, shall be based on the average daily net assets of the Portfolio
in that period from the beginning of such month to such date of termination, and
shall be that proportion of such average daily net assets as the number of
business days in such period bears to the number of business days in such month.
The average daily net assets of the Portfolio shall in all cases be based only
on business days and be computed as of the time of the regular close of business
of the New York Stock Exchange, or such other time as may be determined by the
Trustees. Each such payment shall be accompanied by a report of the Trust
prepared either by the Trust or by a reputable firm of independent accountants
which shall show the amount properly payable to the Manager under this Agreement
and the detailed computation thereof.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Portfolio, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract as to
one or more Funds or as to the Trust as a whole by not more than sixty days nor
less than thirty days written notice delivered or mailed by registered mail,
postage prepaid, to the other party, or
A6-3
<PAGE>
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of any Portfolio, and
(ii) a majority of the Trustees of the Trust who are not interested persons of
the Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate at the close of business on , 1999 or the
expiration of one year from the effective date of the last such continuance,
whichever is later.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the affected Portfolio.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of a Portfolio means the affirmative vote, at a duly
called and held meeting of such shareholders, (a) of the holders of 67% or more
of the shares of the Portfolio present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of the Portfolio entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
A6-4
<PAGE>
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by its
President or Vice President thereunto duly authorized, all as of the day and
year first above written.
MENTOR FUNDS
on behalf of the Mentor Strategy Portfolio
By:____________________________
Title:
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
Title:
A6-5
<PAGE>
Exhibit A-7
[Mentor Institutional Money Market Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Investment Advisory and Management Agreement dated as of ,
1997 between MENTOR FUNDS, a Massachusetts business trust (the "Trust"), and
MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the
"Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Mentor Institutional Money Market Portfolio, a series
of the Trust (the "Portfolio"), will determine what investments shall be
purchased, held, sold, or exchanged by the Portfolio and what portion, if any,
of the assets of the Portfolio shall be held uninvested and shall make changes
in the Portfolio's investments. In the performance of its duties, the Manager
will comply with the provisions of the Agreement and Declaration of Trust and
Bylaws of the Portfolio and the Portfolio's stated investment objectives,
policies, and restrictions, and will use its best efforts to safeguard and
promote the welfare of the Portfolio and to comply with other policies which the
Trustees may from time to time determine and shall exercise the same care and
diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Portfolio as provided in Section 1(e), will furnish all necessary investment and
related management facilities, including salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Agreement.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for the Portfolio the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
doing so, the Manager, bearing in mind the Portfolio's best interests at all
times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature
A7-1
<PAGE>
of the market for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience, and financial stability of the broker or dealer involved, and the
quality of service rendered by the broker or dealer in other transactions.
Subject to such policies as the Trustees of the Trust may determine, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having caused the
Portfolio to pay a broker or dealer that provides brokerage and research
services to the Manager an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission that another broker
or dealer would have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Manager's overall responsibilities with respect to the Portfolio and to other
clients of the Manager as to which the Manager exercises investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and the Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Portfolio. It is also understood that the Manager and any person controlled
by or under common control with the Manager have and may have advisory,
management, service, or other agreements with other organizations and persons,
and may have other interests and business.
3. COMPENSATION TO BE PAID BY THE PORTFOLIO TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, at the
following annual rates (as a percentage of the Portfolio's average daily net
assets): 0.22% of the first $500 million; 0.20% of the next $500 million; 0.175%
of the next $1 billion; 0.16% of the next $1 billion; 0.15% of any amounts over
$3 billion. The
A7-2
<PAGE>
first payment of the fee shall be made as promptly as possible at the end of the
month next succeeding the effective date of this Agreement, and shall constitute
a full payment of the fee due the Manager for all services prior to that date.
If this Agreement is terminated as of any date that is not the last day of a
month, such fee shall be paid as promptly as possible after such date of
termination, shall be based on the average daily net assets of the Portfolio in
that period from the beginning of such month to such date of termination, and
shall be that proportion of such average daily net assets as the number of
business days in such period bears to the number of business days in such month.
The average daily net assets of the Portfolio shall in all cases be based only
on business days and be computed as of the time of the regular close of business
of the New York Stock Exchange, or such other time as may be determined by the
Trustees. Each such payment shall be accompanied by a report of the Trust
prepared either by the Trust or by a reputable firm of independent accountants
which shall show the amount properly payable to the Manager under this Agreement
and the detailed computation thereof.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Portfolio, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on , 1999 (unless terminated automatically as set forth in
Section 4), and shall continue for successive one-year periods thereafter, if
approved in accordance with Section 6, until terminated by either party hereto
at any time by not more than sixty days nor less than thirty days written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
Such action by the Trust with respect to termination may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. ANNUAL APPROVAL.
For additional terms after the initial term of this Contract, this
Contract shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as specifically approved annually by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager, by vote cast in person at a meeting called
A7-3
<PAGE>
for the purpose of voting on such approval.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67% or
more of the shares of the Portfolio present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
8. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
A7-4
<PAGE>
IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by its
President or Vice President thereunto duly authorized, all as of the day and
year first above written.
MENTOR FUNDS
on behalf of Mentor Institutional Money
Market Portfolio
By:_____________________________________
MENTOR INVESTMENT ADVISORS, LLC
By:______________________________________
A7-5
<PAGE>
Exhibit A-8
[Mentor Institutional U.S. Government Money Market Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Investment Advisory and Management Agreement dated as of ,
1997 between MENTOR FUNDS, a Massachusetts business trust (the "Trust"), and
MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the
"Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Mentor Institutional U.S. Government Money Market
Portfolio, a series of the Trust (the "Portfolio"), will determine what
investments shall be purchased, held, sold, or exchanged by the Portfolio and
what portion, if any, of the assets of the Portfolio shall be held uninvested
and shall make changes in the Portfolio's investments. In the performance of its
duties, the Manager will comply with the provisions of the Agreement and
Declaration of Trust and Bylaws of the Portfolio and the Portfolio's stated
investment objectives, policies, and restrictions, and will use its best efforts
to safeguard and promote the welfare of the Portfolio and to comply with other
policies which the Trustees may from time to time determine and shall exercise
the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Portfolio as provided in Section 1(e), will furnish all necessary investment and
related management facilities, including salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Agreement.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for the Portfolio the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
doing so, the
A8-1
<PAGE>
Manager, bearing in mind the Portfolio's best interests at all times, shall
consider all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security,
the amount of the commission, the timing of the transaction taking into account
market prices and trends, the reputation, experience, and financial stability of
the broker or dealer involved, and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the Trustees of the
Trust may determine, the Manager shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Portfolio to pay a broker or dealer that
provides brokerage and research services to the Manager an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission that another broker or dealer would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Portfolio and to other clients of the Manager as to which the Manager
exercises investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and the Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Portfolio. It is also understood that the Manager and any person controlled
by or under common control with the Manager have and may have advisory,
management, service, or other agreements with other organizations and persons,
and may have other interests and business.
3. COMPENSATION TO BE PAID BY THE PORTFOLIO TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, at the
following annual rates (as a percentage of the Portfolio's average
A8-2
<PAGE>
daily net assets): 0.22% of the first $500 million; 0.20% of the next $500
million; 0.175% of the next $1 billion; 0.16% of the next $1 billion; 0.15% of
any amounts over $3 billion. The first payment of the fee shall be made as
promptly as possible at the end of the month next succeeding the effective date
of this Agreement, and shall constitute a full payment of the fee due the
Manager for all services prior to that date. If this Agreement is terminated as
of any date that is not the last day of a month, such fee shall be paid as
promptly as possible after such date of termination, shall be based on the
average daily net assets of the Portfolio in that period from the beginning of
such month to such date of termination, and shall be that proportion of such
average daily net assets as the number of business days in such period bears to
the number of business days in such month. The average daily net assets of the
Portfolio shall in all cases be based only on business days and be computed as
of the time of the regular close of business of the New York Stock Exchange, or
such other time as may be determined by the Trustees. Each such payment shall be
accompanied by a report of the Trust prepared either by the Trust or by a
reputable firm of independent accountants which shall show the amount properly
payable to the Manager under this Agreement and the detailed computation
thereof.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Portfolio, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on , 1999 (unless terminated automatically as set forth in
Section 4), and shall continue for successive one-year periods thereafter, if
approved in accordance with Section 6, until terminated by either party hereto
at any time by not more than sixty days nor less than thirty days written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
Such action by the Trust with respect to termination may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. ANNUAL APPROVAL.
For additional terms after the initial term of this Contract, this
Contract shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as
A8-3
<PAGE>
specifically approved annually by vote of a majority of the Trustees of the
Trust who are not interested persons of the Trust or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on such approval.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67% or
more of the shares of the Portfolio present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
8. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of Mentor
Institutional Trust (the "Trust") is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust for the Fund as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers, or shareholders of the Fund but are binding
only upon the assets and property of the Fund.
A8-4
<PAGE>
IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by its
President or Vice President thereunto duly authorized, all as of the day and
year first above written.
MENTOR FUNDS
on behalf of Mentor Institutional U.S. Government Money
Market Portfolio
By:_____________________________________
MENTOR INVESTMENT ADVISORS, LLC
By:______________________________________
A8-5
<PAGE>
Exhibit A-9
[Mentor Fixed-Income Portfolio, Mentor Intermediate Duration Portfolio, and
Mentor U.S. Government Cash Management Portfolio]
MENTOR INSTITUTIONAL TRUST
MANAGEMENT CONTRACT
This Management Contract dated as of , 1997 between MENTOR
INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"), and MENTOR
INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for each of the series of shares of beneficial interest of
the Trust designated for such purpose by the Trustees (each, a "Portfolio"),
will determine what investments shall be purchased, held, sold, or exchanged by
each of the Portfolios and what portion, if any, of the assets of a Portfolio
shall be held uninvested and shall, on behalf of each Portfolio, make changes in
the Portfolio's investments. In the performance of its duties, the Manager will
comply with the provisions of the Agreement and Declaration of Trust and Bylaws
of the Trust and each Portfolio's stated investment objectives, policies, and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Trust and to comply with other policies which the Trustees may from time
to time determine and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, will furnish (i) all necessary
investment and related management facilities, including, salaries of personnel,
required for it to execute its duties faithfully, (ii) suitable office space for
the Trust, and (iii) administrative facilities, including bookkeeping, clerical
personnel, and equipment necessary for the efficient performance of its
obligations. The Manager will pay the compensation, if any, of certain officers
of the Trust.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for each Portfolio's account with
brokers or dealers selected by the
A9-1
<PAGE>
Manager. In the selection of such brokers or dealers and the placing of such
orders, the Manager shall give primary consideration to securing for each
Portfolio the most favorable price and execution available, except to the extent
it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In doing so, the Manager, bearing in mind
the Trust's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience, and financial stability of the broker or dealer
involved, and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the Trust may
determine, the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Contract or otherwise solely by reason of its
having caused a Portfolio to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manger determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the
Portfolio and to other clients of the Manager as to which the Manager exercises
investment discretion.
(d) The Trust, on behalf of the Portfolios, hereby authorizes any
entity or person associated with the Manager which is a member of a national
securities exchange to effect any transaction on the exchange for the account of
each Portfolio which is permitted by Section 11(a) of the Securities Exchange
Act of 1934 and Rule 11a2-2(T) thereunder, and each Portfolio hereby consents to
the retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and any person controlled by
or under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
A9-2
<PAGE>
3. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the affected Portfolio, and by the vote,
cast in person at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
4. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 3) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract as to
one or more Portfolios or as to the Trust as a whole by not more than sixty days
nor less than thirty days written notice delivered or mailed by registered mail,
postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of any Portfolio, and
(ii) a majority of the Trustees of the Trust who are not interested persons of
the Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate (as to the Trust as a whole or as to the affected
Portfolio, as the case may be) at the close of business on , 1999 or the
expiration of one year from the effective date of the last such continuance,
whichever is later.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the affected Portfolio.
Termination of this Contract pursuant to this Section 4 will be without
the payment of any penalty.
5. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of a Portfolio means the affirmative vote, at a duly
called and held meeting of such shareholders, (a) of the holders of 67% or more
of the shares of the Portfolio present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of the Portfolio entitled to vote at such meeting are present in person or
A9-3
<PAGE>
by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended and the Rules and
Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
6. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act of omission in the course of, or
connected with, rendering services hereunder.
7. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust, but are binding only upon the assets and property of
the Trust.
A9-4
<PAGE>
IN WITNESS WHEREOF, MENTOR INSTITUTIONAL TRUST and MENTOR INVESTMENT
ADVISORS, LLC, have each caused this instrument to be signed in duplicate in its
behalf by its president or Vice President thereunto duly authorized, all as of
the day and year first above written. This document is executed by each of the
parties hereto under seal. This Agreement shall be governed and construed in
accordance with the laws (other than conflict of laws rules) of The Commonwealth
of Massachusetts.
MENTOR INSTITUTIONAL TRUST
By: _______________________________
MENTOR INVESTMENT ADVISORS, LLC
By: _______________________________
A9-5
<PAGE>
Exhibit A-10
[SNAP Fund]
MENTOR INSTITUTIONAL TRUST
MANAGEMENT CONTRACT
This Management Contract dated as of , 1997 between MENTOR
INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"), on behalf of
SNAP Fund (the "Fund"), a series of shares of beneficial interest of Trust, and
MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the
"Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Fund, will determine what investments shall be
purchased, held, sold, or exchanged by the Fund and what portion, if any, of the
assets of the Fund shall be held uninvested and shall, on behalf of the Fund,
make changes in the Fund's investments. In the performance of its duties, the
Manager will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and the Fund's stated investment objectives,
policies, and restrictions, and will use its best efforts to safeguard and
promote the welfare of the Trust and to comply with other policies which the
Trustees may from time to time determine and shall exercise the same care and
diligence expected of the Trustees.
(b) The Manager, at its expense, will furnish (i) all necessary
investment and related management facilities, including, salaries of personnel,
required for it to execute its duties faithfully, (ii) suitable office space for
the Trust, and (iii) administrative facilities, including bookkeeping, clerical
personnel, and equipment necessary for the efficient performance of its
obligations. The Manager will pay the compensation, if any, of certain officers
of the Trust.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Fund's account with brokers
or dealers selected by the Manager. In the selection of such brokers or dealers
and the placing of such orders, the Manager shall give primary consideration to
securing for the Fund the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In doing so, the Manager,
bearing in mind the Trust's best interests at all times, shall consider all
factors it deems relevant,
A10-1
<PAGE>
including, by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the timing
of the transaction taking into account market prices and trends, the reputation,
experience, and financial stability of the broker or dealer involved, and the
quality of service rendered by the broker or dealer in other transactions.
Subject to such policies as the Trustees of the Trust may determine, the Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its having caused the
Fund to pay a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission that another broker or dealer
would have charged for effecting that transaction, if the Manager determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of the Manager as
to which the Manager exercises investment discretion.
(d) The Trust, on behalf of the Fund, hereby authorizes any entity or
person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the Fund
which is permitted by Section 11(a) of the Securities Exchange Act of 1934 and
Rule 11a2-2(T) thereunder, and the Fund hereby consents to the retention of
compensation for such transactions in accordance with Rule 11a2- 2(T)(2)(iv).
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and any person controlled by
or under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Fund shall pay the Manager, promptly (but in any
event within three business days) after the last day of each calendar month, a
fee, calculated daily, at an annual rate as follows: for the first $500 million
of assets under management, .09% of the average daily net assets in the Fund;
for the next $250 million under management, .08% of the average daily net assets
in the Fund; for the next $250 million under management, .07% of the average
daily net assets in the Fund; for the next $250 million under management, .06%
of the average daily net assets in the
A10-2
<PAGE>
Fund; and for any amounts over $1.25 billion under management, .05% of the
average daily net assets in the Fund.
If this Contract is terminated as of any date not the last day of a
calendar month, the fee payable to the Manager shall be paid promptly (but in
any event within three business days) after such date of termination.
The average daily net assets of the Fund shall in all cases be based
only on business days and be computed as of the time of the regular close of
business of the New York Stock Exchange, or such other time as may be determined
by the Board of Directors. Each such payment shall be accompanied by a report of
the Fund prepared either by the Fund or by a reputable firm of independent
accountants which shall show the amount properly payable to the Manager under
this Contract and the detailed computation thereof.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of the
Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on , 1999 (unless terminated automatically as set forth in
Section 4), and shall continue for successive one-year periods thereafter, if
approved in accordance with Section 6, until terminated by either party hereto
at any time by not more than sixty days nor less than thirty days written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
Such action by the Trust with respect to termination may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. ANNUAL APPROVAL.
For additional terms after the initial term of this Contract, this
Contract shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as specifically approved annually by vote of a
majority of the Trustees of the Trust who are not
A10-3
<PAGE>
interested persons of the Trust or of the Manager, by vote cast in person at a
meeting called for the purpose of voting on such approval.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of such shareholders, (a) of the holders of 67% or more
of the shares of the Fund present (in person or by proxy) and entitled to vote
at such meeting, if the holders of more than 50% of the outstanding shares of
the Fund entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
8. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
A10-4
<PAGE>
IN WITNESS WHEREOF, MENTOR INSTITUTIONAL TRUST and MENTOR INVESTMENT
ADVISORS, LLC, have each caused this instrument to be signed in duplicate in its
behalf by its President or Vice President thereunto duly authorized, all as of
the day and year first above written. This document is executed by each of the
parties hereto under seal. This Agreement shall be governed and construed in
accordance with the laws (other than conflict of laws rules) of The Commonwealth
of Massachusetts.
MENTOR INSTITUTIONAL TRUST
On behalf of SNAP Fund
By:____________________________
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
A10-5
<PAGE>
Exhibit A-11
[Mentor Perpetual International Portfolio]
MENTOR INSTITUTIONAL TRUST
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Investment Advisory and Management Agreement dated as of
, 1997 between MENTOR INSTITUTIONAL TRUST, a Massachusetts business
trust (the "Trust"), and MENTOR PERPETUAL ADVISORS, LLC, a Virginia limited
liability company (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for Mentor Perpetual International Portfolio (the
"Portfolio"), will determine what investments shall be purchased, held, sold, or
exchanged by the Portfolio and what portion, if any, of the assets of the
Portfolio shall be held uninvested and shall make changes in the Portfolio's
investments. In the performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and Bylaws of the Portfolio
and the Portfolio's stated investment objectives, policies, and restrictions,
and will use its best efforts to safeguard and promote the welfare of the
Portfolio and to comply with other policies which the Trustees may from time to
time determine and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Portfolio as provided in Section 1(e), will furnish all necessary investment and
related management facilities, including salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Agreement.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for the Portfolio the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
doing so, the Manager, bearing in mind the Portfolio's best interests at all
times, shall consider all factors it
A11-1
<PAGE>
deems relevant, including, by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience, and financial stability of the broker or
dealer involved, and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust may
determine, the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Portfolio to pay a broker or dealer that provides brokerage
and research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the
Portfolio and to other clients of the Manager as to which the Manager exercises
investment discretion.
(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and the Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).
(e) The Manager shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Portfolio. It is also understood that the Manager and any person controlled
by or under common control with the Manager have and may have advisory,
management, service, or other agreements with other organizations and persons,
and may have other interests and business.
3. COMPENSATION TO BE PAID BY THE PORTFOLIO TO THE MANAGER.
As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, of 1.00%
annually of the Portfolio's average daily net assets. The first payment of the
fee shall be made as promptly as possible at the end of the month next
A11-2
<PAGE>
succeeding the effective date of this Agreement, and shall constitute a full
payment of the fee due the Manager for all services prior to that date. If this
Agreement is terminated as of any date that is not the last day of a month, such
fee shall be paid as promptly as possible after such date of termination, shall
be based on the average daily net assets of the Portfolio in that period from
the beginning of such month to such date of termination, and shall be that
proportion of such average daily net assets as the number of business days in
such period bears to the number of business days in such month. The average
daily net assets of the Portfolio shall in all cases be based only on business
days and be computed as of the time of the regular close of business of the New
York Stock Exchange, or such other time as may be determined by the Trustees.
Each such payment shall be accompanied by a report of the Trust prepared either
by the Trust or by a reputable firm of independent accountants which shall show
the amount properly payable to the Manager under this Agreement and the detailed
computation thereof.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Portfolio, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on , 1999 (unless terminated automatically as set forth in
Section 4), and shall continue for successive one-year periods thereafter, if
approved in accordance with Section 6, until terminated by either party hereto
at any time by not more than sixty days nor less than thirty days written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
Such action by the Trust with respect to termination may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. ANNUAL APPROVAL.
For additional terms after the initial term of this Contract, this
Contract shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as specifically approved annually by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval.
A11-3
<PAGE>
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67% or
more of the shares of the Portfolio present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
8. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
A11-4
<PAGE>
IN WITNESS WHEREOF, MENTOR INSTITUTIONAL TRUST and MENTOR PERPETUAL
ADVISORS, LLC, have each caused this instrument to be signed in duplicate in its
behalf by its President or Vice President thereunto duly authorized, all as of
the day and year first above written.
MENTOR INSTITUTIONAL TRUST
on behalf of Mentor Perpetual International Portfolio
By:_____________________________________
MENTOR PERPETUAL ADVISORS, LLC
By:______________________________________
A11-5
<PAGE>
Exhibit A-12
[Cash Resource Money Market Fund, Cash Resource U.S. Government Money Market
Fund, Cash Resource Tax-Exempt Money Market Fund, Cash Resource California
Tax-Exempt Money Market Fund, and Cash Resource New York Tax- Exempt Money
Market Fund]
CASH RESOURCE TRUST
MANAGEMENT CONTRACT
This Management Contract dated as of , 1997 between CASH
RESOURCE TRUST, a Massachusetts business trust (the "Trust"), and MENTOR
INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.
(a) The Manager, at its expense, will furnish continuously an
investment program for each of the series of shares of beneficial interest of
the Trust (each, a "Fund"), will determine what investments shall be purchased,
held, sold, or exchanged by each of the Funds and what portion, if any, of the
assets of a Fund shall be held uninvested and shall, on behalf of each Fund,
make changes in the Fund's investments. In the performance of its duties, the
Manager will comply with the provisions of the Agreement and Declaration of
Trust and Bylaws of the Trust and each Fund's stated investment objectives,
policies, and restrictions, and will use its best efforts to safeguard and
promote the welfare of the Trust and to comply with other policies which the
Trustees may from time to time determine and shall exercise the same care and
diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is paid by the
Trust as provided in Section 1(d), will furnish all necessary investment and
related management facilities, including, salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Contract.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for each Fund's account with brokers
or dealers selected by the
A12-1
<PAGE>
Manager. In the selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for each Fund the most
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for a Fund the
most favorable price and execution available, the Manager, bearing in mind the
Trust's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience, and financial stability of the broker or dealer
involved, and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the Trust may
determine, the Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Contract or otherwise solely by reason of its
having caused a Fund to pay a broker or dealer that provides brokerage and
research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission that
another broker or dealer would have charged for effecting that transaction, if
the Manager determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Manager's overall responsibilities with respect to the Fund
and to other clients of the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases or sales of
portfolio investments for the Trust's account, neither the Manager nor any
officer, director, employee, or agent of the Manager shall act as a principal or
receive any commission other than as provided in Section 3.
(d) The Manager shall not be obligated to pay any expenses of or for
the Trust not expressly assumed by the Manager pursuant to this Section 1 other
than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust. It is also understood that the Manager and any person controlled by
or under common control with the Manager have and may have advisory, management,
service, or other contracts with other organizations and persons, and may have
other interests and business.
A12-2
<PAGE>
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust will pay to the Manager as compensation for the Manager's
services rendered, for the facilities furnished and for the expenses borne by
the Manager pursuant to Section 1, a fee in respect of each of the Funds,
computed and paid monthly at the following annual rates (based on the assets of
each Fund taken separately): 0.22% of the first $500 million of the Fund's
average net assets; 0.20% of the next $500 million; 0.175% of the next $1
billion; 0.16% of the next $1 billion; and 0.15% of any amounts over $3 billion.
Such average net asset value shall be determined by taking an average
of all of the determinations of such net asset value during such month at the
close of business on each business day during such month which this Contract is
in effect. Such fees shall be payable for each month within 7 days after the
close of such month and shall commence accruing as of the date of the initial
issuance of shares of the Trust to the public.
The fees payable by the Trust to the Manager pursuant to this Section 3
shall be reduced by any commissions, fees, brokerage, or similar payments
received by the Manager or any affiliated person of the Manager in connection
with the purchase and sale of portfolio investments of the Trust, less any
direct expenses approved by the Trustees incurred by the Manager or any
affiliate of the Manager in connection with obtaining such payments.
In the event that expenses of any Fund for any fiscal year should
exceed the expense limitation on investment company expenses imposed by any
statute or regulatory authority of any jurisdiction in which shares of that Fund
are qualified for offer or sale, the compensation due the Manager for such
fiscal year shall be reduced by the amount of such excess by a reduction or
refund thereof. In the event that the expenses of any Fund exceed any expense
limitation which the Manager may, by written notice to the Trust, voluntarily
declare to be effective subject to such terms and conditions as the Manager may
prescribe in such notice, the compensation due the Manager shall be reduced,
and, if necessary, the Manager shall assume expenses of that Fund, to the extent
required by such expense limitation.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
A12-3
<PAGE>
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment be approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the affected Fund, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of Cambridge or the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this Contract as to
one or more Funds or as to the Trust as a whole by not more than sixty days nor
less than thirty days written notice delivered or mailed by registered mail,
postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of any Fund, and (ii) a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at least
annually the continuance of this Contract, then this Contract shall
automatically terminate (as to the Trust as a whole or as to the affected Fund,
as the case may be) at the close of business on , 1999 or the expiration
of one year from the effective date of the last such continuance, whichever is
later.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the affected Fund.
Termination of this Contract pursuant to this Section 5 will be without
the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of a Fund means the affirmative vote, at a duly
called and held meeting of such shareholders, (a) of the holders of 67% or more
of the shares of the Fund present (in person or by proxy) and entitled to vote
at such meeting, if the holders
A12-4
<PAGE>
of more than 50% of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders of more than
50% of the outstanding shares of the Fund entitled to vote at such meeting,
whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.
A12-5
<PAGE>
IN WITNESS WHEREOF, CASH RESOURCE TRUST and MENTOR INVESTMENT ADVISORS,
LLC have each caused this instrument to be signed in duplicate in its behalf by
its President or Vice President thereunto duly authorized, all as of the day and
year first above written.
CASH RESOURCE TRUST
By:____________________________
MENTOR INVESTMENT ADVISORS, LLC
By:____________________________
A12-6
<PAGE>
Exhibit B-1
[Mentor Municipal Income Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AGREEMENT
, 1997
Van Kampen American Capital Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Dear Sirs:
Under an agreement (the "Management Agreement") between Mentor Funds, a
Massachusetts business trust (the "Trust"), and Mentor Investment Advisors, LLC,
a Virginia limited liability company, (the "Adviser"), the Adviser serves as the
Trust's investment adviser and has the responsibility of evaluating,
recommending, supervising and compensating investment advisors to each series of
the Trust.
The Adviser hereby confirms its agreement with Van Kampen American
Capital Management, Inc. (the "Sub-Adviser") and the Trust with respect to the
Sub-Adviser's serving as the sub-adviser of the Mentor Municipal Income
Portfolio (the "Portfolio"), a series of the Trust, as follows:
Section 1. Investment Description; Appointment
(a) The Trust desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the prospectus (the
"Prospectus") and in the statement of additional information (the "Statement of
Additional Information") filed with the Securities and Exchange Commission (the
"SEC") as part of the Trust's Registration Statement on Form N-1A, as amended
from time to time (the "Registration Statement"). The Adviser has herewith
furnished the Sub-Adviser copies of the Trust's Prospectus, Statement of
Additional Information, Declaration of Trust and By-Laws as currently in effect
and agrees during the continuance of the Agreement to furnish the Sub-Adviser
copies of any amendments or supplements thereto before or at the time the
amendments or supplements become effective. The Sub-Adviser will be entitled to
rely on all such documents furnished to it by the Adviser or the Trust.
B1-1
<PAGE>
(b) The Adviser, with the approval of the Trust, hereby appoints the
Sub-Adviser to act as investment adviser to the Portfolio for the periods and on
the terms set forth in this Agreement. The Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the compensation herein
provided.
Section 2. Portfolio Management Duties
(a) Subject to the supervision of the Adviser and the Trust's Board of
Trustees, the Sub-Adviser will (i) manage the Portfolio's assets in accordance
with the Portfolio's investment objectives, policies and limitations as stated
in the Trust's Prospectus and Statement of Additional Information; (ii) make
investment decisions for the Portfolio; and (iii) place orders to purchase and
sell securities (and where appropriate) commodity futures contracts for the
Portfolio.
(b) The Sub-Adviser will keep the Trust and the Adviser informed of
developments materially affecting the Portfolio and shall, on the Sub-Adviser's
own initiative and as reasonably requested by the Adviser or the Trust, furnish
to the Trust and the Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.
(c) The Sub-Adviser agrees that, in the performance of the duties
required of it by this Agreement, it will comply with the Investment Company Act
of 1940, as amended (the "Act"), and all rules and regulations thereunder, all
applicable federal and state laws and regulations and with any applicable
procedures adopted by the Trust's Board of Trustees and identified in writing to
the Sub-Adviser. The Adviser will provide to the Sub-Adviser any specific
procedures that must be followed in the performance of Sub-Adviser's duties
hereunder by reason of the affiliation of other sub-advisers or service
providers with the Trust.
Section 3. Brokerage
(a) The Sub-Adviser agrees that it will place orders pursuant to its
investment determinations for the Portfolio either directly with the issuer or
with brokers or dealers selected by the Sub-Adviser in accordance with the
standards specified in paragraphs (b) and (c) of this Section 3. Until notified
to the contrary by the Adviser, the Sub-Adviser may place orders for the
Portfolio with affiliates of the Adviser in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of
the Act and Rule 17e-1 thereunder and other applicable laws and regulations. The
Sub-Adviser will identify to the Adviser in writing any brokers or dealers which
are affiliates of the Sub- Adviser. The Adviser will identify to the Sub-Adviser
in writing any brokers and dealers
B1-2
<PAGE>
which are affiliates of the Adviser and will forward to each Sub-Adviser
information provided by the other Sub-Advisers with respect to affiliated
broker-dealers of such Sub-Advisers.
(b) In placing orders with brokers and dealers, the Sub-Adviser will
seek the best overall terms available. In assessing the best overall terms
available for any portfolio transaction, the Sub-Adviser will consider all
factors it deems relevant including, but not limited to, the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and on a continuing basis.
(c) Subject to the requirements of subsections (a) and (b) above, in
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Adviser shall have the right to
request in writing that transactions giving rise to brokerage commissions shall
be executed by brokers and dealers that provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Trust or will be of value to the Trust in the management of its
assets or the Adviser's performance of its management services provided to the
Trust. In addition, subject to the requirements of subsections (a) and (b) above
and the applicable Rules of Fair Practice of the National Association of
Securities Dealers, Inc., the Trust shall have the right to request that such
transactions be executed by brokers and dealers by or through whom sales of
shares of the Trust are made.
Section 4. Information Provided to the Adviser and the Trust
(a) The Sub-Adviser agrees that it will make available to the Adviser
and the Trust promptly upon their request copies of all of its records with
respect to the Portfolio to assist the Adviser and the Trust in monitoring
compliance with the Act and the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), as well as other applicable laws. The Sub- Adviser will furnish
the Trust's Board of Trustees with respect to the Portfolio such periodic and
special reports as the Adviser and the Board of Trustees may reasonably request.
(b) The Sub-Adviser agrees that it will immediately notify the Adviser
and the Trust in the event that the Sub-Adviser or any of its affiliates: (i)
becomes subject to a statutory disqualification that prevents the Sub-Adviser
from serving as investment advisor pursuant to this Agreement; or (ii) if it is
or expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority. The Sub-Adviser has provided
the information about itself set forth in the Registration Statement and
acknowledges that, as of the date hereof, it is true and correct and contains no
material misstatement or omission, and the Sub-Adviser further agrees to notify
the Adviser immediately of, (i) any material fact known to the Sub-Adviser
respecting or relating to the Sub-Adviser that is not contained in the
Prospectus or Statement of Additional Information of the Trust, or any amendment
or supplement thereto, if the omission of such would make such document
misleading, (ii) any statement contained therein relating to the Sub-Adviser
that
B1-3
<PAGE>
becomes untrue in any material respect, or (iii) any material change in the
investment objective and policies of the mutual fund advised by the Sub-Adviser
and identified in the Prospectus as being a model for the Portfolio.
(c) The Sub-Adviser represents that it is an investment adviser
registered under the Advisers Act and other applicable laws and that the
statements contained in the Sub-Adviser's registration under the Advisers Act on
Form ADV, as of the date hereof, are true and correct and do not omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. The Sub-Adviser agrees to maintain the
completeness and accuracy of its registration on Form ADV in accordance with all
legal requirements relating to that Form. The Sub-Adviser acknowledges that it
is an "investment advisor" to the Portfolio within the meaning of the Act and
the Advisers Act.
Section 5. Books and Records
In compliance with the requirements of Rule 31a-3 under the Act, the
Sub-Adviser hereby agrees that all records that it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to the Trust
copies of any such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the Act the
records with respect to the Sub-Adviser's duties hereunder required to be
maintained by Rule 31a-1 under the Act and to preserve the records required by
Rule 204-2 under the Advisers Act for the period specified in that Rule.
Section 6. Compensation
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee that is computed daily and paid
monthly at the annual rate set forth in Appendix I to this Agreement (the
"Portfolio Advisory Fee"). From time to time the Sub-Adviser may agree to
reimburse the Trust additional expenses or waive a portion or all of its fee, in
the sole discretion of the Sub-Adviser.
(b) The Portfolio Advisory Fee for the period from the date that the
Portfolio commences investment operations to the end of the month during which
the Portfolio commences investment operations shall be prorated according to the
proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
(c) For the purposes of determining fees payable to the Sub-Adviser,
the value of the Trust's net assets shall be computed at the times and in the
manner specified in the Trust's Prospectus and/or the Statement of Additional
Information.
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<PAGE>
Section 7. Costs and Expenses
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it, but not including expenses to be paid by
the Trust or the Adviser such as brokerage fees and commissions and custodian
charges. The Trust shall assume and pay any expenses for services rendered by a
custodian for the safekeeping of the Trust's securities or other property, for
keeping its books of account, for any other charges of the custodian, and for
calculating the net asset value of the Trust as provided in the prospectus of
the Trust. The Sub-Adviser shall not be required to pay and the Trust (or the
Adviser) shall assume and pay the charges and expenses of the Trust's
operations, including compensation of the trustees, charges and expenses of
independent auditors, of legal counsel, of any transfer or dividend disbursing
agent, and of any registrar of the Trust, costs of acquiring and disposing of
portfolio securities, interest, if any, on obligations incurred by the Trust,
costs of share certificates and of reports, membership dues in the Investment
Company Institute or any similar organization, costs of reports and notices to
shareholders, other like miscellaneous expenses and all taxes and fees payable
to federal, state or other governmental agencies on account of the registration
of securities issued by the Trust, filing of trust documents or otherwise.
Section 8. Standard of Care
The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Adviser or the Trust in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Sub-Adviser against any liability to the Adviser or the Trust to which the
Sub-Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Sub-Adviser's reckless disregard of its obligations and duties
under this Agreement.
Section 9. Services to Other Companies or Accounts
(a) Except as otherwise agreed between the Adviser and the Sub-Adviser,
it is understood that the services of the Sub-Adviser are not exclusive, and
nothing in this Agreement shall prevent the Sub-Adviser from providing similar
services to other investment companies (whether or not their investment
objectives and policies are similar to those of the Trust) or from engaging in
other activities.
(b) When the Sub-Adviser recommends the purchase or sale of a security
for other investment companies and other clients, and at the same time the
Sub-Adviser recommends the purchase or sale of the same security for the Trust,
it is understood that in light of its fiduciary
B1-5
<PAGE>
duty to the Trust, such transactions will be executed on a basis that it is fair
and equitable to the Trust.
(c) The Trust and the Adviser understand and acknowledge that the
persons employed by the Sub-Adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service; nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-Adviser or any affiliate of the Sub-Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
except as otherwise agreed between the Adviser and the Sub-Adviser.
Section 10. Duration and Termination
(a) The Trust represents that this Agreement has been approved by the
Trust's Board of Trustees and shareholders pursuant to Section 15 of the Act.
This Agreement shall become effective on the date hereof and shall continue for
two years from that date, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically approved at
least annually by (i) the Trust's Board of Trustees or (ii) a vote of a majority
of the Portfolio's outstanding voting securities (as defined in the Act),
provided that the continuance is also approved by a majority of the Trustees who
are not "interested persons" (as defined in the Act) of the Trust, by vote cast
in person at a meeting called for the purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated (i)
by the Adviser at any time without penalty, upon 60 days' written notice to the
Sub-Adviser and the Trust, (ii) at any time without penalty by the Trust, upon
the vote of a majority of the Trust's Trustees or by vote of the majority of the
Trust's outstanding voting securities, upon 60 days' written notice to the
Sub-Adviser and the Adviser, or (iii) by the Sub-Adviser at any time without
penalty, upon 60 days' written notice to the Adviser and the Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act).
Section 11. Amendments
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
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<PAGE>
Section 12. Limitations of Liability of Trustees, Officers, Employees, Agents
and Shareholders of the Trust
The Sub-Adviser is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be limited in
any case to the Trust and its assets and that the Sub-Adviser shall not seek
satisfaction of any such obligations from the shareholders of the Trust, the
Trustees, officers, employees or agents of the Trust, or any of them.
Section 13. Miscellaneous
(a) This Agreement shall be governed by the laws of the Commonwealth of
Virginia, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act, or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent of the Trust or the Adviser.
B1-7
<PAGE>
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
MENTOR INVESTMENT ADVISORS, LLC
By:_________________________
Name:
Title:
MENTOR FUNDS
By:__________________________
Name:
Title:
Accepted:
VAN KAMPEN AMERICAN CAPITAL MANAGEMENT, INC.
By:_________________________
Name:
Title:
B1-8
<PAGE>
APPENDIX I
The Adviser pays the Sub-Adviser an annual fee not to exceed the following
percentage of Portfolio assets as follows:
SUB-ADVISER'S RATE
OF FEE IN
ACCORDANCE WITH
SECTION 6 OF THE
THE MENTOR FUNDS AGREEMENT
- ---------------- ---------------------------
Mentor Municipal Income Portfolio .25% of average net assets
of the Portfolio from $0 to
$60 million; .20% of
average net assets of the
Portfolio over $60 million
B1-9
<PAGE>
Exhibit B-2
[Mentor Income and Growth Portfolio]
MENTOR FUNDS
INVESTMENT ADVISORY AGREEMENT
, 1997
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Dear Sirs:
Under an agreement (the "Management Agreement") between Mentor Funds, a
Massachusetts business trust (the "Trust"), and Mentor Investment Advisors, LLC,
a Virginia limited liability company (the "Adviser"), the Adviser serves as the
Trust's investment adviser and has the responsibility of evaluating,
recommending, supervising and compensating investment sub-advisers to each
series of the Trust.
The Adviser hereby confirms its agreement with Wellington Management
Company, LLP (the "Sub-Adviser") and the Trust with respect to the Sub-Adviser's
serving as the investment sub-adviser of the Mentor Income & Growth Portfolio
(the "Portfolio"), a series of the Trust, as follows:
Section 1. Investment Description; Appointment
(a) The Trust desires to employ the Portfolio's capital by investing
and reinvesting in investments of the kind and in accordance with the investment
objectives, policies and limitations specified in the prospectus (the
"Prospectus") and in the statement of additional information (the "Statement of
Additional Information") filed with the Securities and Exchange Commission (the
"SEC") as part of the Trust's Registration Statement on Form N-1A, as amended
from time to time (the "Registration Statement"). The Adviser has herewith
furnished the Sub-adviser copies of the Trust's Prospectus, Statement of
Additional Information, Declaration of Trust and By-Laws as currently in effect
and agrees during the continuance of the Agreement to furnish the Sub-Adviser
copies of any amendments or supplements thereto before or at the time the
amendments or supplements become effective. The Sub-Adviser will be entitled to
rely on all such documents furnished to it by the Adviser or the Trust.
B2-1
<PAGE>
(b) The Adviser, with the approval of the Trust, hereby appoints the
Sub-Adviser to act as investment sub-adviser to the Portfolio for the periods
and on the terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
Section 2. Portfolio Management Duties
(a) Subject to the supervision of the Adviser and the Trust's Board of
Trustees, the Sub-Adviser will (i) manage the Portfolio's assets in accordance
with the Portfolio's investment objectives, policies and limitations as stated
in the Trust's Prospectus and Statement of Additional Information; (ii) make
investment decisions for the Portfolio; and (iii) place orders to purchase and
sell securities (and where appropriate) commodity futures contracts for the
Portfolio.
(b) The Sub-Adviser will keep the Trust and the Adviser informed of
developments materially affecting the Portfolio and shall, on the Sub-Adviser's
own initiative and as reasonably requested by the Adviser or the Trust, furnish
to the Trust and the Adviser from time to time whatever information the Adviser
reasonably believes appropriate for this purpose.
(c) The Sub-Adviser agrees that, in the performance of the duties
required of it by this Agreement, it will comply with the Investment Company Act
of 1940, as amended (the "Act"), and all rules and regulations thereunder, all
applicable federal and state laws and regulations and with any applicable
procedures adopted by the Trust's Board of Trustees and identified in writing to
the Sub-Adviser. The Adviser will provide to the Sub-Adviser any specific
procedures that must be followed in the performance of the Sub-Adviser's duties
hereunder by reason of the affiliation of other sub-advisers or service
providers with the Trust.
Section 3. Brokerage
(a) The Sub-Adviser agrees that it will place orders pursuant to its
investment determinations for the Portfolio either directly with the issuer or
with brokers or dealers selected by the Sub-Adviser in accordance with the
standards specified in paragraphs (b) and (c) of this Section 3. Until notified
to the contrary by the Adviser, the Sub-Adviser may place orders for the
Portfolio with affiliates of the Adviser in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, Section 17(e) of
the Act of 1934 and Rule 17e-1 thereunder and other applicable laws and
regulations. The Sub-Adviser will identify to the Adviser in writing any brokers
and dealers which are affiliates of the Sub- Adviser. The Adviser will identify
to the Sub-Adviser in writing any brokers and dealers which are affiliates of
the Adviser and will forward to each Sub-Adviser information provided by the
other Sub-Advisers with respect to affiliated broker-dealers of such
Sub-Advisers.
B2-2
<PAGE>
(b) In placing orders with brokers and dealers, the Sub-Adviser will
give primary consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and other services
provided by brokers and dealers who may effect or be a party to any such
transaction or other transactions to which the Sub-Adviser's other clients may
be a party.
(c) It is understood that it is desirable for the Portfolio that the
Sub-Adviser have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the portfolio than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for the Portfolio with such brokers,
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 provided by such brokers may be useful to the Sub-Adviser in
connection with the Sub-Adviser's services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Portfolio
and to such other clients.
(d) Subject to the requirements of subsections (a), (b) and (c) above,
in selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, the Adviser shall have the right to
request in writing that transactions giving rise to brokerage commissions shall
be executed by brokers and dealers that provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Trust or will be of value to the Trust in the management of its
assets or the Adviser's performance of its management services provided to the
Trust. In addition, subject to the requirements of subsections (a), (b) and (c)
above and the applicable Rules of Fair Practice of the National Association of
Securities Dealers, Inc., the Trust shall have the right to request that such
transactions be executed by brokers and dealers by or through whom sales of
shares of the Trust are made.
Section 4. Information Provided to the Adviser and the Trust
(a) The Sub-Adviser agrees that it will make available to the Adviser
and the Trust promptly upon their request copies of all of its investment
records and ledgers with respect to the Portfolio to assist the Adviser and the
Trust in monitoring compliance with the Act and the
B2-3
<PAGE>
Investment Advisers Act of 1940, as amended (the "Advisers Act"), as well as
other applicable laws. The Sub-Adviser will furnish the Trust's Board of
Trustees with respect to the Portfolio such periodic and special reports as the
Adviser and the Board of Trustees may reasonably request.
(b) The Sub-Adviser agrees that it will immediately notify the Adviser
and the Trust in the event that the Sub-Adviser or any of its affiliates: (i)
becomes subject to a statutory disqualification that prevents the Sub-Adviser
from serving as investment sub-adviser pursuant to this Agreement, or (ii) is or
expects to become the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority. The Sub-Adviser has provided
the information about itself set forth in the Registration Statement and
acknowledges that, as of the date hereof, it is true and correct and contains no
material misstatement or omission, and the Sub-Adviser further agrees to notify
the Adviser immediately of: (i) any material fact known to the Sub-Adviser
respecting or relating to the Sub-Adviser that is not contained in the
Prospectus or Statement of Additional Information of the Trust, or any amendment
or supplement thereto, if the omission of such would make such document
misleading; or (ii) any statement contained therein that becomes untrue in any
material respect.
(c) The Sub-Adviser represents that it is an investment adviser
registered under the Advisers Act and other applicable laws and that the
statements contained in the Sub-Adviser's registration under the Advisers Act on
Form ADV, as of the date hereof, are true and correct and do not omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. The Sub-Adviser agrees to maintain the
completeness and accuracy of its registration on Form ADV in accordance with all
legal requirements relating to that Form. The Sub-Adviser acknowledges that it
is an "investment adviser" to the Portfolio within the meaning of the Act and
the Advisers Act.
Section 5. Books and Records
In compliance with the requirements of Rule 31a-3 under the Act, the
Sub-Adviser hereby agrees that all records that it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to the Trust
copies of any such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the Act the
records with respect to the Sub-Adviser's duties hereunder required to be
maintained by Rule 31a-1 under the Act and to preserve the records required by
Rule 204-2 under the Advisers Act for the period specified in that Rule.
Section 6. Compensation
(a) In consideration of services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser a fee that is computed daily and paid
monthly at the annual rate set forth in Appendix I to this Agreement (the
"Portfolio Sub-Advisory Fee"). From time to time
B2-4
<PAGE>
the Sub-Adviser may agree to reimburse the Trust additional expenses or waive a
portion or all of its fee, in the sole discretion of the Sub-Adviser.
(b) The Portfolio Sub-Advisory Fee for the period from the date that
the Portfolio commences investment operations to the end of the month during
which the Portfolio commences investment operations shall be prorated according
to the portion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
(c) For the purposes of determining fees payable to the Sub-Adviser,
the value of the Trust's net assets shall be computed at the times and in the
manner specified in the Trust's Prospectus and/or the Statement of Additional
Information.
Section 7. Costs and Expenses
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it and its staff in connection with the performance of its
services under this Agreement, including the payment of salaries of all officers
and employees who are employed by it, but not including expenses to be paid by
the Trust or the Adviser such as brokerage fees and commissions and custodian
charges. The Trust shall assume and pay any expenses for services rendered by a
custodian for the safekeeping of the Trust's securities or other property, for
keeping its books of account, for any other charges of the custodian, and for
calculating the net asset value of the Trust as provided in the Trust's
Prospectus. The Sub-Adviser shall not be required to pay and the Trust (or the
Adviser) shall assume and pay the charges and expenses of the Trust's
operations, including compensation of the trustees, charges and expenses of
independent auditors, of legal counsel, of any transfer or dividend disbursing
agent, and of any registrar of the Trust, costs of acquiring and disposing of
portfolio securities, interest, if any, on obligations incurred by the Trust,
costs of share certificates and of reports, membership dues in the Investment
Company Institute or any similar organization, costs of reports and notices to
shareholders, other like miscellaneous expenses and all taxes and fees payable
to federal, state or other governmental agencies on account of the registration
of securities issued by the Trust, filing of trust documents or otherwise.
Section 8. Standard of Care
The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Adviser or the Trust in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Sub-Adviser against any liability to the Adviser or the Trust to which the
Sub-Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross
B2-5
<PAGE>
negligence on its part in the performance of its duties or by reason of the
Sub-Adviser's reckless disregard of its obligations and duties under this
Agreement.
Section 9. Services to Other Companies or Accounts
(a) Except as otherwise agreed between the Adviser and the Sub-Adviser,
it is understood that the services of the Sub-Adviser are not exclusive, and
nothing in this Agreement shall prevent the Sub-Adviser from providing similar
services to other investment companies (whether or not their investment
objectives and policies are similar to those of the Trust) or from engaging in
other activities.
(b) When the Sub-Adviser recommends the purchase or sale of a security
for other investment companies and other clients, and at the same time the
Sub-Adviser recommends the purchase or sale of the same security for the Trust,
it is understood that in light of its fiduciary duty to the Trust, such
transactions will be executed on a basis that it is fair and equitable to the
Trust.
(c) The Trust and the Adviser understand and acknowledge that the
persons employed by the Sub-Adviser to assist in the performance of its duties
under this Agreement will not devote their full time to that service; nothing
contained in this Agreement will be deemed to limit or restrict the right of the
Sub-Adviser or any affiliate of the Sub-Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature,
except as otherwise agreed between the adviser and the Sub-Adviser.
Section 10. Duration and Termination
(a) The Trust represents that this Agreement has been approved by the
Trust's Board of Trustees and shareholders pursuant to Section 15 of the Act.
This Agreement shall become effective on the date hereof and shall continue for
two years from that date, such continuance, to the extent required by the Act,
being subject to approval of this Agreement by the Trust's shareholders at the
first meeting of such shareholders following such date, and thereafter shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by (i) the Trust's Board of Trustees
or (ii) a vote of a majority of the Portfolio's outstanding voting securities
(as defined in the Act), provided that the continuance is also approved by a
majority of the Trustees who are not "interested persons" (as defined in the
Act) of the Trust, by vote cast in person at a meeting called for the purpose of
voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be terminated (i)
by the Adviser at any time without penalty, upon 60 days' written notice to the
Sub-Adviser and the Trust, (ii) at any time without penalty by the Trust, upon
the vote of a majority of the Trust's outstanding voting securities, or by vote
of the majority of the Trust's outstanding voting securities, upon 60 days'
written notice to the Sub-Adviser and the Adviser, (iii) by the Sub- Adviser at
any time without penalty, upon 60 days' written notice to the Adviser and the
Trust.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act and in rules adopted under the Act).
B2-6
<PAGE>
Section 11. Amendments
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved in
accordance with applicable law.
Section 12. Limitations of Liability of Trustees, Officers, Employees,
Agents and Shareholders of the Trust
The Sub-Adviser is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be limited in
any case to the Trust and its assets and that the Sub-Adviser shall not seek
satisfaction of any such obligations from the shareholders of the Trust, the
Trustees, officers, employees or agents of the Trust, or any of them.
Section 13. Reference to the Sub-Adviser
During the terms of this Agreement, the Trust and the Adviser agree to
furnish the Sub-Adviser at its principal office, prior to the use thereof, all
prospectuses, proxy statements, reports to stockholders, sales literature or
other materials prepared for distribution to stockholders of the Portfolio, the
Trust or the public that refer to the Sub-Adviser or its clients in any way and
not to use material if the Sub-Adviser reasonably objects in writing within five
business days (or such other period as may be mutually agreed) after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. The Trust and the Adviser agree to use their
reasonably best efforts to ensure that materials prepared by their employees or
agents or their affiliates that refer to the Sub-Adviser or its clients in any
way are consistent with those materials previously approved by the Sub-Adviser
as referenced in the first sentence of this paragraph. Sales literature may be
furnished to the Sub-Adviser by first-class or overnight mail, facsimile
transmission equipment or hand delivery.
Section 14. Miscellaneous
(a) This Agreement shall be governed by the laws of the Commonwealth of
Virginia, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act, or rules or orders of the SEC
thereunder.
B2-7
<PAGE>
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors.
(d) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent of the Trust or the Adviser.
(e) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
(f) Any notice, advice or report to be given pursuant to this Agreement
shall be delivered or mailed.
To the Adviser at:
Mentor Investment Advisors, LLC
901 East Byrd Street
Richmond, Virginia 23219
To the Sub-Adviser at:
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
To the Trust or the Portfolio at:
Mentor Funds
901 East Byrd Street
Richmond, Virginia 23219
(g) Where the effect of a requirement of the 1940 Act reflected in any
provision of his Agreement is altered by a rule, regulation or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
B2-8
<PAGE>
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
MENTOR INVESTMENT ADVISORS, LLC
By: _____________________________
Name:
Title:
MENTOR FUNDS
By: _____________________________
Name:
Title:
Accepted:
WELLINGTON MANAGEMENT COMPANY, LLP
By: ___________________________________
Name:
Title:
B2-9
<PAGE>
APPENDIX I
The Adviser pays the Sub-Adviser an annual fee not to exceed the
following percentage of Portfolio assets as follows:
- --------------------------------------------------------------------------------
| | Sub-Adviser's Rate of Fee in |
| Level of Portfolio Assets | Accordance with Section 6 of the Agreement|
- --------------------------------------------------------------------------------
| Up to and including $50 million | 0.325% |
- --------------------------------------------------------------------------------
| In excess of $50 million up to | 0.275% |
| and including $200 million | |
- --------------------------------------------------------------------------------
| In excess of $200 million up to | 0.225% |
| and including $50 million | |
- --------------------------------------------------------------------------------
| In excess of $500 million | 0.200% |
- --------------------------------------------------------------------------------
B2-10
<PAGE>
Exhibit C
Information relating to investment companies similar to the Portfolios
for which Van Kampen or Wellington Management provides investment
advisory services.
Fund Net Assets Fee Schedule
---- ---------- ------------
Van Kampen
Sierra Trust Fund, $___________(1) .20% of average net assets
National Municipal Fund up to $150 million; .15%
of average net assets over
$150 million.(2)
- --------------------------
(1) As of August 29, 1996.
(2) Pursuant to investment sub-advisory agreements in respect of the National
Municipal Fund and the California Municipal Fund, another series of the
Sierra Trust Funds sub-advised by Van Kampen American Capital Management,
Inc., when the combined average daily net assets of the Funds (the
"Combined Assets") exceed $750 million, Van Kampen American Capital
Management, Inc., will be paid a fee with respect to each Fund in
proportion to each Fund's average net assets at the following annual rate:
.15% of the Combined Assets up to $1 billion, and .125% of the Combined
Assets over $1 billion.
<PAGE>
Exhibit D
Information relating to investment companies similar to the Income and
Growth Portfolio for which Wellington Management provides investment
advisory services.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Net Assets Schedule of Sub-Advisory Fees
9/30/97
Fund ($mm) Fund Manager
Net Assets Annual
Rate
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Hartford Advisers (a) 7,865 HL Advisers, Inc. First 50mm 0.325%
Next 100mm 0.250%
Next 350mm 0.200%
Over 500mm 0.150%
Horace Mann Balanced (a) 382 Horace Mann First 100mm 0.325%
Investors, Inc. Next 100mm 0.275%
Next 300mm 0.225%
Over 500mm 0.200%
Vanguard/Wellington 2,787 The Vanguard Group First 1,000mm 0.100%
Next 2,000mm 0.050%
Next 7,000mm 0.040%
Over 10,000mm 0.030%
+/- incentive fee
</TABLE>
(a) An underlying fund wrapped by a variable annuity.
<PAGE>
MENTOR FAMILY OF FUNDS
Mentor Quality Income Portfolio
-----------------------------------
Supplemental Notice of Meeting of Shareholders
-----------------------------------
This Supplemental Notice relates to the Meeting of Shareholders of
Mentor Funds to be held at 901 East Byrd Street, Richmond, Virginia, on Tuesday,
December 16, 1997, at 9:00 a.m., Eastern Standard Time. The Meeting will be held
for the following purpose, in addition to those purposes stated in the Notice of
Meeting:
- To approve an amendment to fundamental investment restrictions
of Mentor Quality Income Portfolio to permit the Portfolio to
borrow money to invest in additional securities.
By order of the Trustees
John M. Ivan
Secretary
November 18, 1997
<PAGE>
Mentor Family of Funds
901 East Byrd Street
Richmond, Virginia 23219
-----------------------------------
Supplement to Proxy Statement
-----------------------------------
This Supplement is intended to accompany the Proxy Statement dated
November 18, 1997 (the "Proxy Statement") relating to the Meeting of
Shareholders of the Mentor Family of Funds (the "Meeting") to be held at 901
East Byrd Street, Richmond, Virginia, on December 22, 1997, at 9:00 a.m.,
Eastern Standard Time, and at any adjournment thereof. This Supplement is first
being made available to shareholders on or about November 18, 1997.
This Supplement describes a proposal to be presented to shareholders of
Mentor Quality Income Portfolio, a series of shares of Mentor Funds, at the
Meeting. It should be read as a supplement to and in conjunction with the Proxy
Statement. Capitalized terms not defined in this Supplement are used with the
meanings ascribed to them in the Proxy Statement.
APPROVAL OF AN AMENDMENT TO FUNDAMENTAL INVESTMENT RESTRICTIONS
OF MENTOR QUALITY INCOME PORTFOLIO TO PERMIT THE PORTFOLIO TO
BORROW MONEY TO INVEST IN ADDITIONAL SECURITIES.
At the recommendation of Mentor Advisors, the Board of Trustees of
Mentor Funds has approved a proposal that the Quality Income Portfolio of Mentor
Funds be permitted to borrow money to invest in additional securities. Mentor
Advisors would borrow money for the Quality Income Portfolio only if it believed
that such borrowing offered the potential for high current income consistent
with what Mentor Advisors believes to be prudent risk. Implementation of the
proposal requires an amendment to two of the Trust's fundamental investment
restrictions applicable to the Quality Income Portfolio, as described below.
The technique of borrowing money to invest in additional securities is
known as "leverage". Leverage increases a fund's market exposure and risk. When
a fund has borrowed money for leverage and its investments increase or decrease
in value, its net asset value will normally increase or decrease more than if it
had not borrowed money for this purpose. The interest that a fund must pay on
borrowed money will reduce its net investment income, and may also either offset
any potential capital gains or increase any losses.
Mentor Advisors currently intends to use leverage in order to adjust
the Quality Income Portfolio's dollar-weighted average duration. The Portfolio
would not always borrow money for investment and the extent to which the
Portfolio borrows money, and the amount it borrows, will depend on market
conditions and interest rates. Successful use of leverage depends on Mentor
Advisors' ability to predict market movements correctly. Under the proposed
amendment to the Portfolio's investment restrictions, the Portfolio would be
permitted to borrow money from a bank or
<PAGE>
enter into reverse repurchase agreements, which have the same effect as if it
had borrowed money.
Certain of the Quality Income Portfolio's fundamental investment
restrictions may be read to prohibit the Portfolio's borrowing money to invest
in additional securities. They read, in relevant part, as follows:
"The Portfolios will not issue senior securities except that a
Portfolio (other than the Municipal Income Portfolio) may borrow money
directly or through reverse repurchase agreements in amounts of up to
one-third of the value of its net assets, including the amount
borrowed; and except to the extent that a Portfolio may enter into
futures contracts. The Municipal Income Portfolio may borrow money from
banks for temporary purposes in amounts of up to 5% of its total
assets. The Portfolios will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the Portfolio by enabling it to meet redemption requests
when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Portfolios will not purchase any
securities while any borrowings in excess of 5% of its total assets are
outstanding. During the period any reverse repurchase agreements are
outstanding, the Quality Income Portfolio will restrict the purchase of
portfolio securities to money market instruments maturing on or before
the expiration date of the reverse repurchase agreements, but only to
the extent necessary to assure completion of the reverse repurchase
agreements. Notwithstanding this restriction, the Portfolios may enter
into when-issued and delayed delivery transactions.
. . .
"The Portfolios will not mortgage, pledge, or hypothecate any assets,
except to secure permitted borrowings. In these cases the Portfolios
may pledge assets having a value of 10% of assets taken at cost. For
purposes of this restriction, (a) the deposit of assets in escrow in
connection with the writing of covered put or call options and the
purchase of securities on a when-issued basis; and (b) collateral
arrangements with respect to (i) the purchase and sale of stock options
(and options on stock indexes) and (ii) initial or variation margin for
futures contracts, will not be deemed to be pledges of a Portfolio's
assets. Margin deposits for the purchase and sale of futures contracts
and related options are not deemed to be a pledge."
The Board of Trustees has approved new restrictions applicable to the Quality
Income Portfolio, which would replace the restrictions quoted above. The new
restrictions read as follows:
"[The Quality Income Portfolio will not] Issue any securities which are
senior to the Portfolio's shares as described herein and in the
relevant prospectus, except that each of the Portfolios other than the
Growth Portfolio and the Strategy Portfolio may borrow money to the
extent contemplated by Restriction 4 below.
. . .
"[The Quality Income Portfolio will not] Borrow more than 33 1/3% of
the value of its total assets less all liabilities and indebtedness
(other than such borrowings) not represented by senior securities."
Mentor Advisors believes that the proposed changes will allow it to use the full
array of investment
<PAGE>
techniques available to it to manage the Quality Income Portfolio, and for that
reason has the potential to be of substantial benefit to the Portfolio and its
shareholders.
Required Vote. Shareholders of the Quality Income Portfolio will vote
separately to approve or disapprove the proposed amendment to the investment
restrictions applicable to the Portfolio. The vote necessary to approve the
amendment is the lesser of (i) 67% of the shares of the Portfolio represented at
the meeting, if more than 50% of the shares of the Portfolio are represented at
the Meeting, and (ii) more than 50% of the outstanding shares of the Portfolio.
The Trustees unanimously recommend that you vote "FOR" this proposal.
<PAGE>
Form of Proxy
[NAME OF FUND (ALL FUNDS OTHER THAN MENTOR QUALITY INCOME PORTFOLIO, MENTOR
MUNICIPAL INCOME PORTFOLIO, AND MENTOR INCOME AND GROWTH PORTFOLIO)]
[NAME OF TRUST]
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR MEETING OF SHAREHOLDERS
DECEMBER 22, 1997
The undersigned hereby appoints Daniel J. Ludeman, Paul F. Costello, and Peter
J. Quinn, Jr., and each of them separately, proxies, with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Meeting of Shareholders of the Trust, on December 22, 1997 at 9:00
a.m., Eastern Standard Time, and at any adjournments thereof, all of the shares
of [Name of Fund] which the undersigned would be entitled to vote if personally
present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. The Board of Trustees recommends a vote FOR each
proposal.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ] KEEP THIS
PORTION FOR
YOUR RECORDS
DETACH AND
RETURN THIS
PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
[NAME OF FUND]
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C>
1. Proposal to approve new investment advisory agreement for the Fund to take effect upon the merger of Wheat [ ] [ ] [ ]
First Butcher Singer, Inc. with First Union Corporation.
2. Proposal to approve new investment advisory agreement for the Fund to [ ] [ ] [ ]
take effect upon the acquisition of additional interest in Mentor
Investment Group, LLC by EVEREN Securities Holdings, Inc.
</TABLE>
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------- ---------- ------------------------ -----------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
<PAGE>
Form of Proxy
MENTOR QUALITY INCOME PORTFOLIO
MENTOR FUNDS
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR MEETING OF SHAREHOLDERS
DECEMBER 22, 1997
The undersigned hereby appoints Daniel J. Ludeman, Paul F. Costello, and Peter
J. Quinn, Jr., and each of them separately, proxies, with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Meeting of Shareholders of the Trusts, on December 22, 1997 at
9:00 a.m., Eastern Standard Time, and at any adjournments thereof, all of the
shares of Mentor Quality Income Portfolio which the undersigned would be
entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, AND 3. The Board of Trustees recommends a vote FOR each
proposal.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ] KEEP THIS
PORTION FOR
YOUR RECORDS
DETACH AND
RETURN THIS
PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
MENTOR QUALITY INCOME PORTFOLIO
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C>
1. Proposal to approve new investment advisory agreement for the Portfolio to take effect upon the merger of [ ] [ ] [ ]
Wheat First Butcher Singer, Inc. with First Union Corporation.
2. Proposal to approve new investment advisory agreement for the Portfolio [ ] [ ] [ ]
to take effect upon the acquisition of additional interest in
Mentor Investment Group, LLC by EVEREN Securities Holdings, Inc.
3. Proposal to amend fundamental investment restrictions of the Portfolio to permit it to borrow money to [ ] [ ] [ ]
invest in additional securities.
</TABLE>
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------- ------------ ------------------------- -------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
<PAGE>
Form of Proxy
MENTOR MUNICIPAL INCOME PORTFOLIO
MENTOR FUNDS
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR MEETING OF SHAREHOLDERS
DECEMBER 22, 1997
The undersigned hereby appoints Daniel J. Ludeman, Paul F. Costello, and Peter
J. Quinn, Jr., and each of them separately, proxies, with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Meeting of Shareholders of the Trust, on December 22, 1997 at 9:00
a.m., Eastern Standard Time, and at any adjournments thereof, all of the shares
of Mentor Municipal Income Portfolio which the undersigned would be entitled to
vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Board of Trustees recommends a
vote FOR each proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ] KEEP THIS
PORTION FOR
YOUR RECORDS
DETACH AND
RETURN THIS
PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
MENTOR MUNICIPAL INCOME PORTFOLIO
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C>
1. Proposal to approve new investment advisory agreement for the Portfolio to take effect upon the merger of [ ] [ ] [ ]
Wheat First Butcher Singer, Inc. with First Union Corporation.
a. Proposal to approve new sub-advisory agreement with Van Kampen American Capital [ ] [ ] [ ]
Management, Inc.
2. Proposal to approve new investment advisory agreement for the Portfolio [ ] [ ] [ ]
to take effect upon the acquisition of additional interest in
Mentor Investment Group, LLC by EVEREN Securities Holdings, Inc.
</TABLE>
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------- ----------- --------------------------- ---------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
<PAGE>
Form of Proxy
MENTOR INCOME AND GROWTH PORTFOLIO
MENTOR FUNDS
PROXY SOLICITED BY THE BOARD OF TRUSTEES
PROXY FOR MEETING OF SHAREHOLDERS
DECEMBER 22, 1997
The undersigned hereby appoints Daniel J. Ludeman, Paul F. Costello, and Peter
J. Quinn, Jr., and each of them separately, proxies, with power of substitution
to each, and hereby authorizes them to represent and to vote, as designated
below, at the Meeting of Shareholders of the Trust, on December 22, 1997 at 9:00
a.m., Eastern Standard Time, and at any adjournments thereof, all of the shares
of Mentor Income and Growth Portfolio which the undersigned would be entitled to
vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Meeting. The Board of Trustees recommends a
vote FOR each proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ] KEEP THIS
PORTION FOR
YOUR RECORDS
DETACH AND
RETURN THIS
PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
MENTOR INCOME AND GROWTH FUND
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C>
1. Proposal to approve new investment advisory agreement for the Portfolio to take effect upon the merger of [ ] [ ] [ ]
Wheat First Butcher Singer, Inc. with First Union Corporation.
a. Proposal to approve new sub-advisory agreement with Wellington Management Company, LLP [ ] [ ] [ ]
2. Proposal to approve new investment advisory agreement for the Portfolio to take effect upon the [ ] [ ] [ ]
acquisition of additional interest in Mentor Investment Group, LLC by EVEREN Securities Holding,
Inc.
</TABLE>
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------- --------- --------------------------- -----------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
<PAGE>
[Letterhead of Broker Dealer Firm]
Enclosed you will find proxy materials for a meeting of shareholders of Cash
Resource Trust, part of the Mentor Family of Funds. Cash Resource Trust is the
money market investment in which cash balances in your account with [Name of
Broker Dealer Firm] are invested.
The proposals to be considered at the meeting relate to the upcoming merger of
Wheat First Butcher Singer with First Union Corporation. In short, shareholders
are being asked to approve new investment advisory contracts between each of the
Funds comprising Cash Resource Trust and Mentor Investment Advisors, the manager
of each of the Funds. Mentor Investment Advisors is an affiliate of Wheat First
Butcher Singer.
Please read the enclosed materials carefully. We look forward to being able to
make Cash Resource Trust available to clients of [Name of Broker Dealer Firm].
Sincerely,
