SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) [ ]
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Mentor Funds
Mentor Institutional Trust
--------------------------------------------------------------
(Name of Registrants as Specified in Their Charters)
Mentor Funds
Mentor Institutional Trust
--------------------------------------------------------------------
(Name of Persons Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
August 1999
IMPORTANT NEWS
FOR SHAREHOLDERS OF MENTOR FUNDS AND
MENTOR INSTITUTIONAL TRUST
We encourage you to read the attached proxy statement in full; however, the
following questions and answers represent some typical concerns that
shareholders might have regarding this proxy.
Q: WHY IS MENTOR SENDING ME THIS PROXY?
Mutual funds are required to obtain shareholders' votes for certain types of
changes. As a shareholder, you have a right to vote on major policy decisions,
such as those included here.
Q: WHAT ARE THE ISSUES CONTAINED IN THIS PROXY?
There are several different proposals represented here and they are outlined in
the summary at the beginning of the proxy statement. Several of them apply to
all the funds, and others are fund-specific.
Q: HOW WILL THE BROAD-BASED PROPOSALS AFFECT ME AS A FUND
SHAREHOLDER?
The conversion of each fund into a series of a Delaware business trust will
provide both consistency across the fund family and flexibility compared to the
previous forms of organization. In addition, Delaware law offers certain
advantages for business trusts and some important protections for shareholders.
See Part I of the proxy statement for more information.
Changing the investment objective to nonfundamental for those funds where it is
now fundamental and changing certain fundamental restrictions to nonfundamental
gives each fund and its investment adviser greater flexibility to respond to
market, regulatory or industry changes. These reclassifications are not intended
to alter any fund's investment objective or any fund's investment approach.
Adopting standardized investment restrictions across all funds will help provide
operational efficiencies and make it easier to monitor compliance with these
restrictions. Standardized investment restrictions will also make it easier for
the funds and their investment advisers to respond quickly to market, regulatory
or
<PAGE>
industry developments. These changes will not substantially affect the way the
funds are currently managed.
Q: WHY IS MENTOR PROPOSING THESE CHANGES?
The portfolios, or funds, of Mentor Funds and Mentor Institutional Trust are
advised by affiliates of First Union National Bank ("FUNB"). Other investment
advisory affiliates of FUNB serve as investment advisers to the Evergreen family
of funds. The Evergreen Funds were converted into series of Delaware business
trusts beginning in December 1997 and their investment restrictions were
standardized and modernized at the same time. These proposals represent some
final steps we are undertaking to unify the Evergreen and Mentor fund families.
Shareholders can anticipate the following benefits:
o A comprehensive fund family with a
broad range of investment options.
o The elimination of any overlap or gaps in fund offerings.
o Uniformity of privileges associated with each fund, specifically
regarding letters of intent, rights of accumulation and
exchangeability, which will provide flexibility for investors to
exchange their shares into a broad range of investment vehicles as
their objectives change.
o An easily accessible
product line for both shareholders and investment professionals with a line of
investment choices from conservative to aggressive funds.
o A single location for fund information, whether you're looking up funds
in the newspaper or locating a Morningstar report on the Internet.
o Possible economies of scale that could result in cost savings as a
result of the smaller Mentor funds becoming part of the larger
Evergreen family of funds including possible reductions in fund general
expenses such as legal and accounting fees, custody fees and Trustees'
fees and expenses.
o The fund conversions are anticipated to be tax-free events. It is
expected that neither shareholders nor the funds will recognize income,
gain or loss in connection with the conversions provided substantially
all of the assets and liabilities of each fund are transferred to the
corresponding Evergreen fund.
Q. WHAT EFFECT WILL THE CONVERSIONS HAVE ON FEES AND EXPENSES?
Please see the discussion beginning on page 4 of the attached proxy statement
for a description of the conversions' effect on fees and expenses.
<PAGE>
Q: WHO WILL BE THE TRUSTEES OF THE FUNDS AFTER THE CONVERSIONS?
The Trustees of the funds will be the current Trustees of the Evergreen funds
and two current Trustees of the Mentor Funds and Mentor Institutional Trust.
Q: WHY IS THE MENTOR NAME BEING REPLACED BY EVERGREEN?
The names Mentor Funds and Mentor Institutional Trust are being replaced because
the funds are being converted into corresponding series of Evergreen funds.
Q: WHAT HAPPENS IF ONE OR MORE OF THE FUND CONVERSIONS ARE NOT
APPROVED BY SHAREHOLDERS?
If a fund conversion is not approved, the fund will continue as a Mentor
portfolio of Mentor Funds or Mentor Institutional Trust.
Q: HOW DO THE TRUSTEES OF MY FUND RECOMMEND THAT I VOTE?
The Boards of Trustees of Mentor Funds and Mentor Institutional Trust recommend
that you vote in favor or FOR all of the proposals on the enclosed proxy card.
Q: WHOM DO I CALL FOR MORE INFORMATION OR TO PLACE MY VOTE?
Please call Shareholder Communications Corporation at 1-800-645-7816 for
additional information. You can vote one of three ways:
Use the enclosed proxy card to record your vote of For, Against or
Abstain for each issue, then return the card in the postpaid envelope provided.
or
Call 1-800-690-6903 and record your vote by telephone. Please have your
proxy card at hand when you call and enter the 12 digit Control Number found on
the card, then follow the simple instructions.
or
Fax your completed and signed proxy card (both front and back sides) to
our proxy tabulator at 1-800-451-8683.
or
Visit website www.proxyvote.com or go to the Proxy Voting link on the
Evergreen Funds website at www.evergreen-funds.com. Enter the 12 digit
Control Number found on your proxy card, then follow the simple
instructions to record your vote via the Internet.
<PAGE>
Q: WHY ARE MULTIPLE CARDS ENCLOSED?
If you own shares of more than one fund, you will receive a proxy card for each
fund you own. Please sign, date and return or otherwise vote each proxy card you
receive.
<PAGE>
[Appropriate Mentor Funds/Mentor Institutional Trust Letterhead]
August 27, 1999
Dear Shareholder:
I am writing to shareholders of Mentor Funds and Mentor Institutional Trust to
inform you of a special shareholder meeting to be held on October 15, 1999.
Before that meeting I would like your vote on the important issues affecting
your fund as described in the attached proxy statement.
The proxy statement includes proposals relating to the conversion of certain
funds of Mentor Funds and Mentor Institutional Trust into series of Delaware
business trusts, the adoption of standardized investment restrictions for each
of the funds, and the reclassification of certain funds' investment objectives
from fundamental to nonfundamental. These proposals are intended to provide
consistency and increased flexibility throughout the Evergreen and Mentor fund
family. More specific information about all of the proposals is contained in the
proxy statement. The conversions into series of Evergreen Delaware business
trusts are currently expected to be completed in October 1999.
The Boards of Trustees have unanimously approved the proposals and recommend
that you vote FOR all of the proposals described within this document.
I realize that this proxy statement will take time to review, but your vote is
very important. Please familiarize yourself with the proposals presented. If you
attend the meeting, you may vote your shares in person. If you do not expect to
attend the meeting, either complete, date, sign and return your proxy card(s) in
the enclosed postage-paid envelope today or vote by calling toll-free
1-800-690-6903, 24 hours a day, or vote through the Internet. You may also FAX
your completed and signed proxy card (both front and back sides) to Management
Information Services, an ADP Company, our proxy tabulator, at 1-800-451-8683.
You may receive more than one proxy card if you own shares in more than one
fund. Please sign and return or otherwise vote each card you receive.
Instructions on how to complete the proxy card, vote by telephone or vote via
the Internet are included immediately after the Notice of Special Meeting.
If we do not receive your completed proxy card(s) after a few weeks, you may be
contacted by our proxy solicitor, Shareholder Communications Corporation. They
will remind you to vote your shares or will record your vote over the phone if
you choose to vote in that manner. You may call Shareholder Communications
Corporation directly at 1-800-645-7816, if you have any questions about the
proxy.
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<PAGE>
Thank you for taking this matter seriously and participating in this important
process.
Sincerely,
Paul F. Costello
President
Mentor Funds
Mentor Institutional Trust
o 901 East Byrd Street o Richmond, Virginia 23219 o
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<PAGE>
MENTOR FUNDS
MENTOR INSTITUTIONAL TRUST
901 East Byrd Street
Richmond, Virginia 23219
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NOTICE OF JOINT SPECIAL MEETING OF
SHAREHOLDERS To Be Held on October 15,
1999
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NOTICE IS HEREBY GIVEN that a Joint Special Meeting of Shareholders
(the "Meeting") of the following series (each a "Fund" and together, the
"Funds") of the following Mentor business trusts: Mentor Funds -- Mentor Growth
Portfolio, Mentor Perpetual Global Portfolio, Mentor Capital Growth Portfolio,
Mentor Balanced Portfolio, Mentor Quality Income Portfolio, and Mentor High
Income Portfolio, and Mentor Institutional Trust -- Mentor Fixed-Income
Portfolio and Mentor Perpetual International Portfolio will be held at the
offices of Mentor Funds and Mentor Institutional Trust, 901 East Byrd Street,
Richmond, Virginia 23219 on Friday, October 15, 1999 at 2:00 p.m., Eastern time,
for the following purposes:
1. To approve an Agreement and Plan of Conversion and Termination
(the "Conversion Plan") for each of the above-named Funds
providing for the conversion of each such Fund into a
corresponding series (a "Successor Fund") of one of several
Evergreen Delaware business trusts, and in connection therewith,
the acquisition by the Successor Fund of all of the assets of
each such Fund in exchange for shares of the Successor Fund, and
the assumption by the Successor Fund of all of the liabilities of
the Fund. Each Plan also provides for the distribution of such
shares of the Successor Fund to shareholders of the Fund in
liquidation and subsequent termination of the Fund.
2. For certain Mentor Funds only, to approve the reclassification of
each Fund's investment objective from fundamental to
nonfundamental.
3. To approve the adoption of standardized fundamental investment
restrictions by amending or reclassifying the current fundamental
investment restrictions of each Fund.
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<PAGE>
4. To transact any other business which may properly come before
the Meeting or any adjournments thereof.
The close of business on August 17, 1999 has been fixed as the record date for
the determination of shareholders of each Fund entitled to notice of and to vote
at the Meeting or any adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN WITHOUT
DELAY AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE, OR FOLLOW THE INSTRUCTIONS IMMEDIATELY AFTER THIS NOTICE RELATING TO
TELEPHONE OR INTERNET VOTING SO THAT THEIR SHARES MAY BE REPRESENTED AT THE
MEETING. YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY (OR PROXIES) WILL HELP TO
AVOID THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Boards of Trustees
Michael H. Koonce
Secretary
August 27, 1999
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<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
registration. For example:
<TABLE>
<CAPTION>
Registration Valid Signature
<S> <C>
Corporate Accounts
(1) ABC Corp. (1) ABC Corp.
(2) ABC Corp. (2) John Doe, Treasurer
(3) ABC Corp. (3) John Doe, Treasurer
c/o John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan (4) John Doe, Trustee
Trust Accounts
(1) ABC Trust (1) Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee (2) Jane B. Doe
u/t/d 12/28/78
Custodial or Estate Accounts
(1) John B. Smith, Cust. (1) John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith (2) John B. Smith, Jr., Executor
</TABLE>
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<PAGE>
INSTRUCTIONS FOR TELEPHONE VOTING
To vote by telephone follow the three easy steps below:
1. Call 1-800-690-6903.
2. Please have your Proxy Card at hand when you call.
3. Enter the twelve-digit "Control No." found on the card, then
follow the simple recorded instructions.
INSTRUCTIONS FOR INTERNET VOTING
To vote by Internet follow the three easy steps below:
1. Go to website www.proxyvote.com or to the "Proxy Voting" link on
www.evergreen-funds.com.
2. Please have your Proxy Card at hand.
3. Enter the twelve-digit "Control No." found on the card, then
follow the simple instructions.
INSTRUCTIONS FOR FAX VOTING
1. Complete your Proxy Card.
2. Fax your proxy card (both front and back sides) to Management
Information Services at 1-800-451-8683.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY OF PROPOSALS REQUIRING SHAREHOLDER VOTE.......................................................................2
PART I
PROPOSAL 1 - THE CONVERSION OF EACH FUND INTO A CORRESPONDING SERIES
OF AN EVERGREEN DELAWARE BUSINESS TRUST...............................................................................5
Selection of Delaware Business
Trust Form of Organization...................................................................................5
Description of the Conversions............................................................................. 7
The Successor Trusts..................................................................................... 14
Certain Comparative Information
About the Mentor Trusts and the
Successor Trusts......................................................................................... 16
Current and Successor Advisory
Agreements............................................................................................... 20
Administration Agreements................................................................................ 21
Current and Successor Distribution
Arrangements............................................................................................. 22
Names.................................................................................................... 22
Certain Votes to Be Taken
Prior to the Conversions................................................................................. 22
Investment Objectives and
Restrictions............................................................................................. 22
Federal Income Tax Consequences.......................................................................... 23
Appraisal Rights......................................................................................... 23
Recommendation of Trustees............................................................................... 24
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<PAGE>
Required Vote............................................................................................ 24
PART II
PROPOSAL 2 - RECLASSIFICATION AS NONFUNDAMENTAL OF THE INVESTMENT
OBJECTIVE OF THOSE FUNDS WHOSE INVESTMENT OBJECTIVE IS CURRENTLY
CLASSIFIED AS FUNDAMENTAL (CERTAIN MENTOR FUNDS ONLY)............................................................. 25
Reclassification of Fundamental
Investment Objectives as Nonfundamental.................................................................. 25
Recommendation of Trustees............................................................................... 26
Required Vote............................................................................................ 26
PROPOSAL 3 - CHANGES TO FUNDAMENTAL INVESTMENT RESTRICTIONS ...................................................... 26
Adoption of Standardized Investment
Restrictions (Proposals 3A -3H).......................................................................... 26
Reclassification of Fundamental
Restrictions as Nonfundamental (Proposal 3I)............................................................. 27
Recommendation of Trustees............................................................................... 28
Required Vote............................................................................................ 28
Proposal 3A - To Amend the
Fundamental Restriction Concerning
Diversification of Investments........................................................................... 28
Proposal 3B - To Amend the
Fundamental Restriction Concerning
Concentration of a Fund's Assets in a
Particular Industry...................................................................................... 29
Proposal 3C - To Amend the
Fundamental Restriction Concerning
the Issuance of Senior Securities........................................................................ 30
Proposal 3D - To Amend the
Fundamental Restriction Concerning
Borrowing................................................................................................ 31
-vi-
<PAGE>
Proposal 3E - To Amend the
Fundamental Restriction Concerning
Underwriting............................................................................................. 32
Proposal 3F - To Amend the
Fundamental Restriction Concerning
Investment in Real Estate................................................................................ 33
Proposal 3G - To Amend the
Fundamental Restriction Concerning
Commodities.............................................................................................. 34
Proposal 3H - To Amend the
Fundamental Restriction Concerning
Lending.................................................................................................. 34
Proposal 3I - Reclassification as
Nonfundamental of All Current
Fundamental Restrictions Other than
the Fundamental Restrictions
Described in the Foregoing Proposals
3A through 3H............................................................................................ 35
PART III
VOTING INFORMATION CONCERNING THE MEETING......................................................................... 36
ADDITIONAL INFORMATION............................................................................................ 38
Payment of Expenses...................................................................................... 38
Beneficial Ownership..................................................................................... 39
Annual and Semi-Annual Reports to
Shareholders............................................................................................. 39
OTHER BUSINESS.................................................................................................... 39
EXHIBIT A - FORM OF AGREEMENT AND PLAN OF
CONVERSION AND TERMINATION..........................................................................................A-1
EXHIBIT B - COMPARISON OF FEES AND EXPENSES
OF CLASS B SHARES OF MENTOR QUALITY INCOME
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<PAGE>
PORTFOLIO AND MENTOR HIGH INCOME PORTFOLIO
WITH PRO FORMA FEES AND EXPENSES OF THE
SUCCESSOR FUNDS OF CLASS C SHARES...................................................................................B-1
EXHIBIT C - MANAGEMENT OF THE
SUCCESSOR TRUSTS....................................................................................................C-1
EXHIBIT D - CURRENT FUNDAMENTAL
INVESTMENT RESTRICTIONS.............................................................................................D-1
EXHIBIT E - NUMBER OF SHARES OF EACH
CLASS OF EACH FUND OUTSTANDING AS OF
THE CLOSE OF BUSINESS ON AUGUST 17, 1999............................................................................E-1
EXHIBIT F - VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF...........................................................................................F-1
</TABLE>
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<PAGE>
MENTOR FUNDS
MENTOR INSTITUTIONAL TRUST
901 East Byrd Street
Richmond, Virginia 23219
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PROXY STATEMENT
Joint Special Meeting of Shareholders
October 15, 1999
------------------------------------------------
This proxy statement is furnished in connection with the solicitation
by the respective Boards of Trustees of Mentor Funds and Mentor Institutional
Trust (each a "Mentor Trust" and together, the "Mentor Trusts") for the joint
special meeting of shareholders to be held on Friday, October 15, 1999, at the
offices of Mentor Funds and Mentor Institutional Trust, 901 East Byrd Street,
Richmond, Virginia 23219 at 2:00 p.m., and any adjournments thereof (the
"Meeting"). A notice of the Meeting and a proxy card (or proxy cards if you are
a shareholder of more than one Fund) accompany this proxy statement.
Shareholders of record at the close of business on August 17, 1999 (the "Record
Date") are entitled to notice of, and to vote at, the Meeting. This proxy
statement and the accompanying Notice of Meeting and proxy card(s) are first
being mailed to shareholders on or about August 27, 1999.
The shares of the Mentor Trusts entitled to vote at the Meeting are
issued in one or more separate series representing one or more investment
portfolios, each of which is referred to herein as a "Fund." As used in this
proxy statement, each Mentor Trust's Board of Trustees is referred to as a
"Board."
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<PAGE>
SUMMARY OF PROPOSALS REQUIRING SHAREHOLDER VOTE
Proposal 1. Conversion of Each Fund
<TABLE>
<CAPTION>
Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
---------------------------- --------------------------------------------
Vote
----
<S> <C>
Approval of an Agreement and All Funds
Plan of Conversion and
Termination (the "Conversion
Plan") for each Fund providing
for the conversion of the Fund
into a corresponding series (a
"Successor Fund") of
an Evergreen Delaware
business trust, and
resulting in
the acquisition by
the Successor Fund of all of
the assets of the Fund in
exchange for shares of the
Successor Fund, and the
assumption by the Successor
Fund of all of the liabilities of
the Fund. Each Conversion
Plan also provides
that shares
of the Successor Fund will be
distributed to shareholders of
the Fund and
the
Fund then will be liquidated and
subsequently terminated.
</TABLE>
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<PAGE>
Proposal 2. Reclassification of Investment Objective of Certain Funds from
Fundamental to Nonfundamental
Matter Requiring Shareholder Funds For Which Shareholder Vote is
Required Vote Reclassification of the Mentor Funds - Mentor Growth
Portfolio Investment Objective of Certain Mentor Funds - Mentor
Perpetual Global Portfolio Funds from Fundamental to Mentor Funds -
Mentor Capital Growth Portfolio Nonfundamental Mentor Funds - Mentor
Balanced Portfolio
Mentor Funds - Mentor Quality Income Portfolio
Mentor Funds - Mentor High Income Portfolio
Proposal 3. Changes to Fundamental Investment Restrictions
Standardization of Fundamental Investment Restrictions (Proposals 3A-3H)
<TABLE>
<CAPTION>
Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
Vote
<S> <C> <C>
3A. Diversification of Investments All Funds
3B. Concentration of Fund's Assets All Funds
in a Particular Industry
3C. Issuance of Senior Securities All Funds
3D. Borrowing All Funds
3E. Underwriting All Funds
3F. Investment in Real Estate All Funds
3G. Commodities All Funds
3H. Lending All Funds
</TABLE>
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<PAGE>
Reclassification of Other Fundamental Restrictions of Certain Funds as
Nonfundamental (Proposal 3I)
<TABLE>
<CAPTION>
Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
Vote
<S> <C> <C>
3I. (See current fundamental All Funds (except Mentor High Income Portfolio)
restrictions shown by an "R"
in Exhibit D)
</TABLE>
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<PAGE>
PART I
PROPOSAL 1 - THE CONVERSION
OF EACH FUND INTO A CORRESPONDING SERIES OF AN EVERGREEN
DELAWARE BUSINESS TRUST
At the Meeting, the shareholders of each Fund will be asked to approve
an Agreement and Plan of Conversion and Termination (the "Conversion Plan") for
their Fund, which provides for the conversion (the "Conversion") of each Fund
into a corresponding series (each a "Successor Fund," and together, the
"Successor Funds") of one of several Evergreen Delaware business trusts (each a
"Successor Trust"). The Conversions are part of an overall restructuring of the
funds comprising Mentor Funds and Mentor Institutional Trust, each of which is
advised by an affiliate of First Union National Bank ("FUNB"). Other investment
adviser affiliates of FUNB serve as investment advisers to the Evergreen Funds.
The Evergreen Funds were reorganized into series of Delaware business trusts
beginning in December 1997 and it is into series of such Evergreen Delaware
business trusts that the Mentor Funds and the Funds of Mentor Institutional
Trust will be reorganized.
The restructuring into series of the Evergreen Delaware business trusts
involves, among other components, the Conversions, the reclassification of the
investment objectives of certain of the Mentor Funds from fundamental (i.e.,
changeable by shareholder vote only) to nonfundamental (i.e., changeable by vote
of the Trustees), the adoption of standardized fundamental investment
restrictions, and the reclassification of certain investment restrictions from
fundamental to nonfundamental. The reclassification of investment objectives,
the adoption of standardized investment restrictions and the reclassification of
certain investment restrictions from fundamental to nonfundamental are discussed
in Part II of this proxy statement. The overall restructuring also includes
several consolidations to combine certain other Mentor investment companies or
series portfolios of certain Mentor investment companies with series of certain
Evergreen investment companies having similar investment objectives and
policies. By forming a single family of mutual funds, the intended result of the
overall restructuring is to integrate and enhance the investment management and
operations of all the mutual funds in the Evergreen and Mentor families of funds
and to maximize the potential for greater operational efficiencies which could
result in possible economies of scale including a possible reduction in Fund
general expenses such as legal and accounting fees, custody fees and Trustees'
fees and expenses.
Selection of Delaware Business Trust Form of Organization
On July 13, 1999, the Board of each Mentor Trust unanimously approved
reorganizing the Funds as separate series of various Evergreen Delaware business
trusts.
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<PAGE>
Each Mentor Trust is currently organized as a Massachusetts business trust. The
Funds are proposed to be structured as series of Delaware business trusts. The
principal reason for reorganizing the Funds as series of Delaware business
trusts is the availability of certain advantages of Delaware law with respect to
business trusts. The Delaware Business Trust Act (the "Delaware Act") has been
specifically drafted to accommodate the unique governance needs of investment
companies and provides that its policy is to give maximum freedom of contract to
the trust instrument of a Delaware business trust.
Under the Delaware Act, a shareholder of a Delaware business trust is
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in Massachusetts. As a result,
Delaware law is generally considered to afford additional protection against
potential shareholder liability not available to shareholders of Massachusetts
business trusts under Massachusetts law. See "Certain Comparative Information
About the Mentor Trusts and the Successor Trusts -Shareholder Liability."
Similarly, Delaware law provides that, should a Delaware trust issue multiple
series of shares, each series will not be liable for the debts of another
series, another potential though remote risk in the case of other business
trusts, including those, such as Mentor Funds and Mentor Institutional Trust,
that are organized under Massachusetts law.
Delaware has obtained a favorable national reputation for its business
laws and business environment. The Delaware courts, which may be called upon to
interpret the Delaware Act, are among the nation's most highly respected and
have an expertise in corporate matters which in part grew out of the fact that
Delaware legal issues are concentrated in the Court of Chancery where there are
no juries and where judges issue written opinions explaining their decisions.
Accordingly, there is a well established body of precedent which may be relevant
in deciding issues pertaining to a Delaware business trust.
There are other advantages that may be afforded by a Delaware business
trust. Under Delaware law, the Successor Funds will have the flexibility to
respond to future business contingencies. For example, the Trustees of the
Delaware trusts will have the power to incorporate a Successor Trust, to merge
or consolidate it with another entity, to cause each series to become a separate
trust, and to change the Successor Trust's domicile without a shareholder vote.
This flexibility could help to assure that the Successor Trust operates under
the most advanced form of organization and could reduce the expense and
frequency of future shareholder meetings for non-investment related issues.
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<PAGE>
Description of the Conversions
The detailed terms and conditions of each Conversion are contained in a
Conversion Plan applicable to each Fund. The information in this proxy statement
with respect to each Conversion Plan is qualified in its entirety by reference
to, and made subject to, the complete text of the form of the Conversion Plan, a
copy of which is attached to this proxy statement as Exhibit A.
It is anticipated that each of the Funds will participate in the
Conversion and that the Conversion, if approved by the shareholders of each
Fund, will be effected contemporaneously as to each Fund. If shareholders of one
or more of the Funds do not approve the Conversion, that Fund will continue as
currently organized, but each other Fund that has received shareholder approval
may nevertheless implement the Conversion.
If the shareholders of a Fund approve the Conversion and the conditions
of the Conversion are satisfied, all of the assets and liabilities of that Fund
will be transferred to the corresponding Successor Fund and each shareholder of
the Fund will receive shares of the Successor Fund (the "New Shares"). The New
Shares of each Successor Fund will be issued to the corresponding Fund in
consideration of the transfer to the Successor Fund by the Fund of all assets
and liabilities of the Fund. Immediately thereafter, each Fund will liquidate
and distribute the New Shares to its shareholders. Holders of Class A and Class
B shares of the Funds will receive Class A and Class C New Shares of the
Successor Funds, respectively. Holders of Class Y shares of the Funds will
receive Class Y New Shares of the Successor Funds (with the exception of holders
of Class Y shares of Mentor Fixed-Income Portfolio who will receive
Institutional Class New Shares of the Successor Funds). Holders of Class E
shares of Mentor Perpetual International Portfolio will receive Class A New
Shares of the Successor Fund. The fees and expenses attributable to Class A,
Class C, Class Y, and Institutional Class New Shares differ from those
attributable to Class A, Class B, Class E and Class Y shares of the Funds. For
example, the distribution fees paid by Class C New Shares are substantially
higher than those paid by the Funds' Class B shares. The fees and expenses
applicable to the various classes of shares are described below. As a result of
the Conversion, each shareholder will receive, in exchange for his or her Fund
shares, New Shares with a total net asset value equal to the total net asset
value of the shareholder's Fund shares immediately prior to the consummation of
the Conversion.
Because the Conversion will be effected at net asset value without the
imposition of a sales charge, the New Shares acquired by shareholders pursuant
to the proposed Conversion will not be subject to any initial sales charge or
contingent deferred sales charge ("CDSC") as a result of the Conversion.
However, Class C shares acquired as a result of the Conversion would continue to
be subject to a CDSC upon subsequent redemption to the same extent as if
shareholders had continued to hold their shares of the Funds. The CDSC schedule
applicable to Class C New Shares received in the
-7-
<PAGE>
Conversion will be the CDSC schedule of Class B shares of the Funds in effect at
the time Class B shares of the Funds were originally purchased.
The following is a summary description of charges and fees for the
Class A, Class C, Class Y and Institutional Class New Shares of the Successor
Funds which will be received by shareholders in the Conversion.
Class A New Shares. Class A New Shares are sold at net asset value plus
an initial sales charge and, as indicated below, are subject to
distribution-related fees. The initial maximum sales charges applicable to
purchases of Class A New Shares for the Growth, Capital Growth, Balanced,
Perpetual Global and Perpetual International Portfolios is 5.75% and for the
Quality Income and High Income Portfolios is 4.75%. No initial sales charge will
be imposed on Class A New Shares received by shareholders in the Conversion.
Class C New Shares. Class C New Shares are sold without initial sales
charges and are subject to distribution-related and shareholder
servicing-related fees. Class C New Shares are subject to a 1% CDSC if such
shares are redeemed during the month of purchase and the 12-month period
following the month of purchase. No CDSC is imposed on amounts redeemed
thereafter. Class C New Shares incur higher distribution- related and
shareholder servicing-related fees than Class A New Shares, and do not convert
to any other class of shares. Class C New Shares received by shareholders in the
Conversion will be subject to the current Class B CDSC schedule applicable to
Mentor Funds and Mentor Institutional Trust, respectively.
THE FOLLOWING TABLES APPLY TO SHAREHOLDERS OF MENTOR QUALITY
INCOME PORTFOLIO AND MENTOR HIGH INCOME PORTFOLIO ONLY:
The following tables show the current fees and expenses of the Class B
shares of Mentor Funds' Quality Income Portfolio and High Income Portfolio, and
the pro forma fees and expenses of the corresponding Class C New Shares of the
Successor Funds. These tables are provided for these Funds and their Successor
Funds because overall expenses of the corresponding Successor Funds are expected
to be higher than those of the Mentor Funds since such Funds' Class B shares
currently pay shareholder servicing fees at an annual rate of 0.25% of average
daily net assets and Rule 12b-1 fees at an annual rate of 0.50% while the
Successor Funds pay combined Rule 12b-1 and shareholder servicing fees at an
annual rate of 1.00% of average daily net assets. Additional information
regarding applicable Rule 12b-1 Plans and Shareholder Servicing Plans may be
found in the prospectuses and statements of additional information of Mentor
Funds and Mentor Institutional Trust.
The amounts for Class B shares of Mentor Quality Income Portfolio and
of Mentor High Income Portfolio set forth in the following tables and in the
examples are based on
-8-
<PAGE>
the expenses of the Mentor Portfolios for the twelve month period ended March
31, 1999. The pro forma amounts for Class C shares of Evergreen Quality Income
Fund and of Evergreen High Income Fund are based on what the estimated combined
expenses of those Successor Funds would have been for the twelve month period
ended March 31, 1999.
The following tables show for Mentor Quality Income Portfolio and
Mentor High Income Portfolio, and for Evergreen Quality Income Fund pro forma
and Evergreen High Income Fund pro forma, assuming consummation of the
Conversion, the shareholder transaction expenses and annual fund operating
expenses associated with an investment in the Class B and Class C shares, as
applicable, of each Fund. Although the investment adviser may reduce or cease
these voluntary waivers and reimbursements at any time, it is expected that fee
waivers currently in effect will continue in effect for the forseeable future
after the Conversions.
-9-
<PAGE>
Comparison of Class B Shares
of Mentor Funds With Class C
Shares of Successor Funds Pro Forma
<TABLE>
<CAPTION>
SUCCESSOR FUNDS
MENTOR FUNDS PRO FORMA
Evergreen Evergreen
Shareholder Transaction Mentor Quality Mentor High Quality High Income
Expenses Income Portfolio Income Portfolio Income Fund Fund
Class B Class B Class C (4) Class C (4)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Load None None None None
Imposed on Purchases (as
a percentage of offering
price)
Contingent Deferred Sales 4.00% in the first 4.00% in the first 1.00% in the 1.00% in the
Charge (as a percentage year declining to year declining to first year and first year and
of original purchase price 1.00% in the 1.00% in the 0.00% 0.00%
or redemption proceeds, sixth year and sixth year and thereafter thereafter
whichever is lower) 0.00% thereafter 0.00% thereafter
(1) (1)
Annual Fund Operating
Expenses (as a
percentage of average
daily net assets)
Management Fee (2) 0.60% 0.70% 0.60% 0.70%
12b-1 Fees 0.50% 0.50% 1.00% 1.00%
Shareholder Servicing
Plan Fees 0.25% 0.25% None None
Other Expenses 0.37% 0.43% 0.37% 0.43%
----- ---- ----- -----
Annual Fund Operating 1.72% 1.88% 1.97% 2.13%
===== ===== ===== =====
Expenses (3)
</TABLE>
- -------------------
(1) Shares purchased as part of asset-allocation plans pursuant to the BL
Purchase Program are subject to a CDSC of 1% if the shares are redeemed
within one year of purchase.
-10-
<PAGE>
(2) After waivers, the management fee for the Class B shares of Mentor
Quality Income Portfolio and of Mentor High Income Portfolio was 0.43%
and 0.31% respectively. After waivers, the management fee for the Class
C shares of Evergreen Quality Income Fund pro forma and Evergreen High
Income Fund pro forma would have been 0.43% and 0.31%, respectively.
(3) After waivers, Annual Operating Expenses for the Class B shares of
Mentor Quality Income Portfolio and of Mentor High Income Portfolio
were 1.55% and 1.49%, respectively, for the twelve month period ended
March 31, 1999. After waivers, Annual Operating Expenses pro forma for
the Successor Funds would have been 1.80% and 1.74% for Evergreen
Quality Income Fund and Evergreen High Income Fund, respectively.
(4) Holders of Class C shares of the Successor Funds received in the
Conversion will be subject to the schedule of CDSCs currently
applicable to Class B shares of Mentor Quality Income Portfolio and of
Mentor High Income Portfolio, respectively.
Examples. The following tables show respectively for the Class B shares
of Mentor Quality Income Portfolio and Mentor High Income Portfolio and for the
Class C shares of Evergreen Quality Income Fund pro forma and Evergreen High
Income Fund pro forma, assuming consummation of the Conversion, examples of the
cumulative effect of shareholder transaction expenses and annual fund operating
expenses indicated above on a $10,000 investment for the periods specified,
assuming (i) a 5% annual return, and (ii) redemption at the end of such period.
The tables also show the effect if the shares are not redeemed. In the case of
Evergreen Quality Income Fund pro forma and Evergreen High Income Fund pro
forma, the examples for Class C shares reflect, as described in footnote 4
above, the CDSC schedule applicable to Class B shares of Mentor Quality Income
Portfolio and Mentor High Income Portfolio, respectively. All tables assume
reinvestment of dividends and Capital gain distributions.
<TABLE>
<CAPTION>
Mentor Quality Income Portfolio
One Year Three Years Five Years Ten Years
<S> <C> <C> <C> <C>
Class B $575 $842 $1,033 $2,030
(assuming redemption at
the end of the period)
-11-
<PAGE>
Class B
(assuming no redemption $175 $542 $933 $2,030
at the end of the period)
Evergreen Quality Income Fund Pro Forma
One Year Three Years Five Years Ten Years
Class C (assuming $600 $918 $1,162 $2,296
redemption at the end of
the period)
Class C (assuming no $200 $618 $1,062 $2,296
redemption at the end of
the period)
Mentor High Income Portfolio
One Year Three Years Five Years Ten Years
Class B $591 $891 $1,116 $2,201
(assuming redemption at
the end of the period)
Class B $191 $591 $1,016 $2,201
(assuming no redemption
at the end of the period)
</TABLE>
<TABLE>
<CAPTION>
Evergreen High Income Fund Pro Forma
One Year Three Years Five Years Ten Years
<S> <C> <C> <C> <C>
Class C (assuming $616 $967 $1,244 $2,462
redemption at the
end of the period)
Class C (assuming $216 $667 $1,144 $2,462
no redemption at
the end of the
period)
</TABLE>
-12-
<PAGE>
The purpose of the foregoing examples is to assist Mentor shareholders,
who currently hold Class B shares, in understanding the various costs and
expenses that an investor in the Successor Funds as a result of the Conversion
would bear directly and indirectly, as compared with the various direct and
indirect expenses currently borne by a shareholder of Class B shares in Mentor
Quality Income Portfolio and Mentor High Income Portfolio. These examples should
not be considered a representation of past or future expenses or annual return.
Actual expenses may be greater or less than those shown.
Class Y New Shares. Class Y New Shares are sold at net asset value
without any initial or deferred sales charge and are not subject to
distribution- related or shareholder servicing-related fees. Class Y New Shares
are only available to certain classes of investors. Shareholders who receive
Class Y New Shares in the Conversion and who wish to make subsequent purchases
of a Successor Fund will be able to purchase Class Y New Shares.
Institutional Class New Shares. Institutional Class New Shares are sold
at net asset value without any initial or deferred sales charge and are not
subject to distribution-related fees. Institutional Class shares are available
only to institutional investors. Shareholders who receive Institutional Class
New Shares in the Conversion and who wish to make subsequent purchases of a
Successor Fund's shares will be able to purchase Institutional Class New Shares.
Distribution-Related and Shareholder Servicing-Related Expenses. The
Successor Funds have adopted a Rule 12b-1 plan with respect to their Class A
shares under which the Class may pay for distribution-related expenses at an
annual rate which may not exceed 0.75% of average daily net assets attributable
to the Class. Payments with respect to Class A shares are currently limited to
0.25% of average daily net assets attributable to the Class. This amount may be
increased to the full plan rate for each Fund by the Trustees without
shareholder approval at any time, although there is no intention or expectation
that the rate at which payments are made under the plan will be increased.
Mentor Funds and Mentor Institutional Trust have adopted Shareholder
Servicing Plans with respect to their Class A shares under which the Class may
pay for shareholder servicing-related expenses at an annual rate of 0.25% of the
average daily net assets attributable to the Class.
Each of the Funds and the Successor Funds have also adopted a 12b-1
plan with respect to their Class B and Class C shares, respectively, under which
the Class may pay for distribution-related expenses at an annual rate which may
not exceed 1.00% of average daily net assets attributable to the Class with
respect to the Successor Funds, 0.75% with respect to Mentor Growth Portfolio,
Mentor
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<PAGE>
Capital Growth Portfolio, Mentor Balanced Portfolio, Mentor Perpetual Global
Portfolio and Mentor Perpetual International Portfolio, and 0.50% with respect
to Mentor Quality Income Portfolio and Mentor High Income Portfolio. Mentor
Funds and Mentor Institutional Trust have also adopted for their Class B shares
Shareholder Servicing Plans whereby the Funds may incur a fee for shareholder
services of up to 0.25% of average daily net assets attributable to the Class.
The Class C Rule 12b-1 plans of the Successor Funds provide that, of
the total 1.00% 12b-1 fee, up to 0.25% may be for payment in respect of
shareholder services. Consistent with the requirements of Rule 12b-1 and the
applicable rules of the National Association of Securities Dealers, Inc.,
following the Conversion the Successor Funds may make distribution-related and
shareholder servicing-related payments with respect to Fund shares sold prior to
the Conversion including payments to the Funds' former underwriter.
The Class Y and the Institutional Class of the Successor Funds do not
have a Rule 12b-1 Plan or a shareholder servicing plan.
It will not be necessary for holders of share certificates of a Fund to
exchange their certificates for new certificates following consummation of the
Conversion. Certificates for shares of a Fund issued prior to the Conversion
will represent outstanding shares of the corresponding Successor Fund after the
Conversion. Shareholders of a Fund who have not been issued certificates and
whose shares are held in an open account will automatically have those shares
designated as shares of the corresponding Successor Fund.
If approved by shareholders of a Fund, it is currently contemplated
that the Conversion will become effective as to that Fund on or about the close
of business on October 15, 1999. However, a Conversion may become effective at
another time and date should the Meeting be adjourned to a later date or should
any other
-14-
<PAGE>
condition to the Conversion not be satisfied at that time. Notwithstanding prior
shareholder approval, the Conversion Plan may be terminated as to any Fund at
any time prior to its implementation by the mutual agreement of the parties
thereto.
The Successor Trusts
Each Successor Trust was established pursuant to a substantially
identical Agreement and Declaration of Trust (each a "Master Trust Agreement")
under the laws of the State of Delaware. Each Successor Trust is organized as a
"series company" as that term is used in Rule 18f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). Each Successor Trust consists of
Successor Funds and other mutual funds of the same asset class.
The Board of Trustees of each Successor Trust is currently comprised of
individuals who do not serve as Trustees of the Mentor Trusts. Accordingly,
different Trustees will have ultimate responsibility for the oversight and
management of the Successor Funds subsequent to the Conversions. It is
anticipated that subsequent to the Conversion, two current Mentor Trustees,
Arnold H. Dreyfuss and Louis W. Moelchert, Jr., will be nominated and elected as
Trustees of the Successor Trusts. Information with respect to the current
Trustees of each Successor Trust, including compensation received, is set forth
in Exhibit B.
Each Successor Trust is authorized to issue shares divisible into an
indefinite number of different series. The interests of investors in the various
series of a Successor Trust will be separate and distinct. All consideration
received for the sales of shares of a particular series of a Successor Trust,
all assets in which such consideration is invested, and all income, earnings and
profits derived from such investments will be allocated to that series. The
Master Trust Agreement of each Successor Trust provides that the Board of
Trustees of the Successor Trust may: (i) establish one or more additional series
thereof; (ii) issue the shares of any series in any number of classes; (iii)
issue shares of a series to different groups of investors; and (iv) convert a
series into a pooled fund structure, without any further action by the
shareholders of the Successor Trust.
The Master Trust Agreement of each Successor Trust provides for
shareholder voting only for the following matters: (a) the election or removal
of Trustees as provided in the Master Trust Agreement; and (b) with respect to
such additional matters relating to the Successor Trust as may be required by
(i) applicable law, (ii) any by-laws adopted by the Trustees, or (iii) as the
Trustees may consider necessary or desirable. Certain of the foregoing matters
will involve separate votes of one or more of the affected series (or affected
classes of a series)
-15-
<PAGE>
of the Successor Trust, while others will require a vote of the Successor
Trust's shareholders as a whole.
All shares of all series vote together as a single class for the
election or removal of Trustees of the Successor Trust with each share having
one vote for each dollar of net asset value applicable to such share, regardless
of series. See "Certain Comparative Information About the Mentor Trusts and the
Successor Trusts - Voting Rights" below.
As required by the 1940 Act, shareholders of each series of the
Successor Trusts, voting separately, will have the power to vote at special
meetings for, among other things, changes in fundamental investment restrictions
applicable to such series, approval of any new or amended investment advisory
agreement, approval of any new or amended Rule 12b-1 plan and certain other
matters that affect the shareholders of that series. If, at any time, less than
a majority of the Trustees holding office has been elected by the shareholders,
the Trustees then in office will call a shareholders' meeting for the purpose of
electing Trustees of the Successor Trust.
Certain Comparative Information About the Mentor Trusts and the Successor Trusts
As a Delaware business trust, each Successor Trust's operations will be
governed by the Master Trust Agreement and By-laws, and applicable Delaware law,
rather than by the applicable Massachusetts trust document of each Mentor Trust.
The organizational documents of each Mentor Trust are its Declaration of Trust
and its By-Laws. As discussed below, certain of the differences between the
Mentor Trusts and the Successor Trusts derive from provisions of each Successor
Trust's Master Trust Agreement and By-laws. Shareholders entitled to vote at the
Meeting may obtain a copy of a Successor Trust's Master Trust Agreement and
By-laws, without charge, by calling Shareholder Communications Corporation at
1-800-645-7816.
Capitalization. The beneficial interests in each Successor Trust are
issued as transferable shares of beneficial interest, $.001 par value per share.
Each Master Trust Agreement permits the Trustees to issue an unlimited number of
shares and to divide such shares into an unlimited number of series or classes
thereof, all without shareholder approval. Each share of a series of a Successor
Trust represents an equal proportionate interest in the assets and liabilities
belonging to that series (or class) as declared by the Board of Trustees. Each
Mentor Trust is authorized to divide its shares into an unlimited number of
series, and the Trustees are empowered to establish other classes. Each Mentor
Trust has the authority to issue an unlimited number of transferable shares of
beneficial interest, without par value, of each series and class.
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<PAGE>
Amendments to Governing Instrument. Generally, the provisions of the
Master Trust Agreement of a Successor Trust may be amended without shareholder
approval so long as such amendment is not in contravention of applicable law, by
an instrument in writing signed by a majority of the then Trustees of the
Successor Trust (or by an officer of the Successor Trust pursuant to the vote of
a majority of such Trustees). Under the Master Trust Agreement of the Successor
Trust, except as provided by applicable law, a quorum is more than 25% of the
shares entitled to vote. The quorum requirements of the Mentor Trusts are more
than 50% of the total number of outstanding shares of all series and classes
entitled to vote, with respect to Mentor Funds, and more than 30% of the total
number of outstanding shares of all series and classes entitled to vote, with
respect to Mentor Institutional Trust. The affirmative vote of a majority of the
shares of all series and classes then outstanding and entitled to vote is
generally required to amend the Declaration of Trust applicable to each Mentor
Trust (unless any larger vote may be required by applicable governing documents
or other law), except that the Declarations of Trust may be amended by the
Trustees of the Mentor Trusts without the vote of shareholders in certain
limited circumstances.
Voting Rights. Mentor Funds' Declaration of Trust and the Successor
Trusts' Master Trust Agreements provide that a Trustee may be removed at any
special meeting of shareholders by a vote of two-thirds of the outstanding
shares. The Declaration of Trust of Mentor Funds further provides that special
meetings of shareholders shall be called by the Trustees upon the written
request of shareholders representing 10% of the outstanding shares of all series
and classes entitled to vote. Mentor Institutional Trust's Declaration of Trust
provides that a Trustee may be removed at any meeting called for the purpose by
vote of holders of two-thirds of the outstanding shares. The Declaration of
Trust and By-laws of Mentor Institutional Trust further provide that a meeting
of the shareholders for a purpose requiring action by shareholders as provided
in the Declaration of Trust or By-laws shall be called by the Trustees upon the
written request of shareholders representing 10% of the outstanding shares of
all series and classes entitled to vote. For both Mentor Trusts, if the
Secretary fails to call the meeting or give notice for a specified period
following the shareholders' written request, then the shareholders representing
10% of the outstanding shares may call such meeting by giving notice thereof.
The By-laws of each Successor Trust provide that, to the extent required by the
1940 Act, meetings of the shareholders for the purpose of voting on the removal
of any Trustee shall be called promptly by the Trustees upon the written request
of shareholders holding at least 10% of the outstanding shares of the Successor
Trust entitled to vote. Like each Mentor Trust, a Successor Trust will not be
required to hold annual meetings of its shareholders and, at this time, does not
intend to do so. Under Mentor Institutional Trust's By-laws, the record date for
determining shareholders who are entitled to notice of, and to vote at, a
shareholders' meeting may not be more than 90 days preceding the scheduled
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<PAGE>
meeting date. Under Mentor Funds' Declarations of Trust, the record date may not
be more than 60 days preceding the scheduled meeting date. Under the By-laws of
each Successor Trust, the record date may not be more than 90 days nor less than
10 days preceding the scheduled meeting date.
Each Master Trust Agreement of each Evergreen Trust provides for
shareholder voting in certain circumstances. See "The Successor Trusts" above.
Shareholders of the Mentor Trusts have the power to vote with respect to the
election of Trustees, the removal of Trustees, the approval or termination of
any investment advisory or management agreement, and certain amendments to the
Declaration of Trust, to the same extent as the shareholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should be brought or maintained derivatively or as a class action on behalf of
the Mentor Trust, and as required by law or as the Trustees may consider
desirable.
The Master Trust Agreement of each Successor Trust provides that a
majority of the shares voted at a meeting at which a quorum is present shall
decide any questions and that a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by the Master Trust Agreement or the By-laws of the
Successor Trust. Similar requirements apply to each Mentor Trust. Shareholders
of the Successor Trusts are not required to approve the termination of the
Successor Trust.
Under each Master Trust Agreement, each share of a Successor Fund is
entitled to one vote for each dollar of net asset value applicable to such
share. Under the current Declarations of Trust of each Mentor Trust, each whole
share of beneficial interest is entitled to one vote, and each fractional share
is entitled to a proportionate fractional vote. Under each Mentor Trust's
Declaration of Trust or applicable law, except with respect to matters as to
which a particular series or class is affected, all shares of each series or
class shall vote as a single class. Generally, each Declaration of Trust further
provides that, where required by law or applicable regulation, certain matters
will be voted on separately by each fund. In all other matters, all funds vote
together as a group. Over time, the net asset values of funds in a Mentor Trust
have changed in relation to one another and are expected to continue to do so in
the future. Because of the divergence in net asset values, a given dollar
investment in a fund with a lower net asset value will purchase more shares, and
under each Mentor Trust's current voting provisions, have more votes, than the
same investment in a fund with a higher net asset value. Under the Master Trust
Agreement of each Successor Trust, voting power is related to the dollar value
of the shareholders' investments rather than to the number of shares held. As a
consequence of changing from share voting to dollar voting, shareholders with a
larger investment will have an increased influence in management of the Funds.
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<PAGE>
Shareholder Liability. Under Delaware law, shareholders of a Delaware
business trust are entitled to the same limitation of personal liability
extended to stockholders of Delaware corporations. No similar statutory
authority limiting business trust shareholder liability exists under
Massachusetts law or under the laws of any other state. As a result, to the
extent that a Successor Trust or a shareholder is subject to the jurisdiction of
courts in those states, the courts may not apply Delaware law, and may thereby
subject shareholders of a Delaware trust to liability. To guard against this
risk, the Master Trust Agreement: (a) provides that any written obligation of
the Successor Trust may contain a statement that such obligation may only be
enforced against the assets of the Successor Trust; however, the omission of
such a disclaimer will not operate to create personal liability for any
shareholder; and (b) provides for indemnification out of trust property of any
shareholder held personally liable for the obligations of the Successor Trust.
Accordingly, the risk of a shareholder of the Successor Trust incurring
financial loss beyond that shareholder's investment because of shareholder
liability is limited to circumstances in which: (i) a court refuses to apply
Delaware law; (ii) no contractual limitation of liability was in effect; and
(iii) the Successor Trust itself would be unable to meet its obligations. In
view of Delaware law, the nature of the Successor Trust's business, and the
nature of its assets, the risk of personal liability to a shareholder of a
Successor Trust is remote.
Shareholders of the Mentor Trusts as shareholders of Massachusetts
business trusts may, under certain circumstances, be held personally liable
under the applicable state law for the obligations of the Mentor Trusts.
However, the Declaration of Trust of each Mentor Trust contains an express
disclaimer of shareholder liability and requires that notice of such disclaimer
be given in each agreement entered into or executed by the Mentor Trust or the
Trustees of the Trust. Each Declaration of Trust also provides for shareholder
indemnification out of the assets of the Fund in which the shareholder holds
shares.
Liability and Indemnification of Trustees. Under the Master Trust
Agreement of each Successor Trust, a Trustee is liable to the Successor Trust
and its shareholders only for such Trustee's own willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
the office of Trustee or the discharge of the duties of a Trustee. Trustees and
officers of a Successor Trust are entitled to be indemnified for the expenses of
litigation against them except with respect to any matter as to which it has
been determined that such person (i) did not act in good faith in the reasonable
belief that his or her action was in or not opposed to the best interests of the
Successor Trust; or (ii) had acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of his or her duties; and (iii) for a criminal
proceeding, had reasonable cause to believe that his or her conduct was
unlawful, such determination to be based upon the outcome of a court action or
administrative proceeding or a reasonable
-19-
<PAGE>
determination, following a review of the facts, by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding, or (b) an independent legal counsel in a
written opinion. A Successor Trust may also advance money to any Trustee or
officer involved in a proceeding discussed above provided that the Trustee or
officer undertakes to repay the Successor Trust if his or her conduct is later
determined to preclude indemnification and certain other conditions are met. It
is currently the view of the staff of the Securities and Exchange Commission
("SEC") that to the extent that any provisions such as those described above are
inconsistent with the 1940 Act, the provisions of the 1940 Act may preempt the
foregoing provisions.
The Declaration of Trust of each Mentor Trust generally provides that
its Trustees shall not be liable to the Trust or its shareholders, except for
the Trustees' acts of willful misfeasance, bad faith, gross negligence, or
reckless disregard of duties involved in the conduct of their office. The Mentor
Trusts' Declarations of Trust generally also provide that Trustees and officers
of the Mentor Trusts will be indemnified against liability and expenses of
litigation against them unless their conduct constituted willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office.
Right of Inspection. The By-laws of the Successor Trust provide that no
shareholder of the Successor Trust shall have any right to inspect any account
or book or document of the Successor Trust except as conferred by law or
otherwise by the Trustees or by resolution of the shareholders. The Declaration
of Trust and By-laws of Mentor Institutional Trust provide for shareholder
access to shareholder lists but are silent with respect to the right of
inspection of any of the Trust's other documents. The By-laws of Mentor Funds
provide that the Trustees may from time to time determine what rights, if any,
shareholders have to inspect the Mentor Funds' books and records.
The foregoing is only a summary of certain of the differences between
the governing instruments and laws generally applicable to a Mentor Trust and a
Successor Trust. It is not a complete list of differences. Shareholders should
refer directly to the provisions of the governing instruments and applicable law
for more complete information.
Current and Successor Advisory Agreements
As a result of the Conversions, each Successor Fund will be subject to
a new investment advisory agreement (the "Successor Advisory Agreement") between
the Successor Trust on behalf of the Successor Fund and the current investment
adviser of the corresponding Fund of the Mentor Trusts. Since, with certain
exceptions, each Fund currently receives substantially identical services, each
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<PAGE>
Successor Advisory Agreement has been standardized with the fee schedules being
the only variant. The current investment advisory agreement of each Fund (the
"Current Advisory Agreement") is similar in many respects to the Successor
Advisory Agreement. Most importantly, the rate at which fees are required to be
paid by each Fund for investment advisory services, as a percentage of average
daily net assets, will remain the same for each Successor Fund.
The following summarizes certain aspects of the Current Advisory
Agreement and the Successor Advisory Agreement for each Fund of the Mentor
Trusts.
Brokerage Transactions. The Successor Advisory Agreement sets forth
specific terms as to brokerage transactions and the investment adviser's use of
broker-dealers. For example, the investment adviser will be obligated to use its
best efforts to seek to execute portfolio transactions at prices which, under
the circumstances, result in total costs or proceeds being most favorable to the
Successor Funds. In assessing the best overall terms available for any
transaction, the investment adviser will consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer,
research services provided and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis. The Successor
Advisory Agreement also incorporates the provisions of Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), which permits an
investment adviser to have its client, including an investment company, pay more
than the lowest available commission for executing a securities trade in return
for research services and products. The Current Advisory Agreement of each of
the Funds (with the exception of Mentor Capital Growth Portfolio and Mentor
Quality Income Portfolio) specifies similar standards to be used in the
selection of brokers and the same standard as Section 28(e) with respect to
investment advisers and the payment of commissions. The Current Advisory
Agreement for Mentor Capital Growth Portfolio and Mentor Quality Income
Portfolio permits the investment advisers to authorize investment subadvisers to
execute portfolio transactions and select brokers pursuant to the provisions of
Section 28(e) of the 1934 Act.
Liability. Each Successor Advisory Agreement and the Current Advisory
Agreement provide that the investment adviser shall have no liability in
connection with rendering services thereunder, other than liabilities resulting
from the adviser's willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties.
Amendments. The Current Advisory Agreement of the Funds (except for Mentor
Capital Growth Portfolio and Mentor Quality Income Portfolio) provides that all
changes must be approved by a majority of the shares of the Fund. The Current
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Advisory Agreement for Mentor Capital Growth Portfolio and Mentor Quality Income
Portfolio states that all amendments must be approved in accordance with
applicable law. Each Successor Advisory Agreement provides that only amendments
of substance require shareholder approval.
Administration Agreements
Evergreen Investment Services, Inc. ("EIS"), located at 200 Berkeley
Street, Boston, Massachusetts 02116, currently serves as administrator to the
Funds, and would serve as administrator to the Successor Funds following the
Conversions. The Successor Funds would pay fees to EIS for administrative
services at the same rates as the corresponding Funds do now. It is anticipated
that no material change will occur in the Funds' administrative fees or
arrangements as a result of the Conversions.
Current and Successor Distribution Arrangements
Mentor Distributors, LLC, located at 3435 Stelzer Road, Columbus, Ohio
43219, is the principal distributor for Mentor Funds and for Mentor
Institutional Trust. Mentor Distributors, LLC is a wholly-owned subsidiary of
BISYS Fund Services, Inc. ("BISYS") of the same address.
After the Conversions, Evergreen Distributor, Inc. ("EDI"), an
affiliate of BISYS located at 125 West 55th Street, New York, New York 10019,
will serve as principal underwriter for the Successor Funds. EDI currently
serves as distributor to the current series of the Evergreen Delaware business
trusts. Except for increased distribution-related and shareholder
servicing-related fees payable by the Class C shares of the Successor Funds as
opposed to the fees paid by the Class B shares of the Funds, it is anticipated
that no material change will occur in the Funds' distribution agreement or the
Funds' aggregate amount payable under the Funds' distribution-related and
shareholder servicing-related expenses as a result of the Conversions.
Names
At the time of their Conversion into the Successor Funds, the name of
each Fund of Mentor Funds and the name of each Fund of Mentor Institutional
Trust will change by deletion of "Mentor" and "Portfolio" and their replacement
respectively with "Evergreen"and "Fund" (with the exception of Mentor Balanced
Portfolio which will be called Evergreen Capital Balanced Fund and Mentor
Fixed-Income Portfolio which will be called Evergreen Select Fixed Income Fund
II).
Certain Votes to be Taken Prior to the Conversions
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Prior to the Conversions, EDI will own a single outstanding share of
each Successor Fund. The purpose of the issuance by each Successor Fund of this
nominal share prior to the effective time of the Conversion is to enable the
Successor Trusts to eliminate the need to incur the additional expense by the
Successor Trusts of having to hold separate meetings of shareholders of the
Successor Funds in order to comply with certain shareholder approval
requirements of the 1940 Act. EDI will vote on various organizational matters
including the approval of the investment advisory contracts, the selection of
auditors and the election of Trustees.
Investment Objectives and Restrictions
Each Successor Fund will have the same investment objective(s) as the
corresponding Fund except that, if Proposal 2 in this proxy statement is
approved by shareholders, the applicable Successor Fund's investment
objective(s) will not be considered fundamental. As a result, that Successor
Fund's investment objective(s) could be changed by its Trustees without
shareholder approval, after prior notice to shareholders. The investment
restrictions of each Fund are proposed to be changed as described in Part II
below.
Except as described in Part II below, the investment advisers do not
presently intend to change in any material way for the Successor Funds the
investment strategy or operations currently employed for the Funds of the Mentor
Funds and Mentor Institutional Trust.
Federal Income Tax Consequences
It is anticipated that the transactions contemplated by the Conversions
will be tax-free. Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W.,
Washington, D.C. 20036, counsel to the Successor Funds, has informed the Board
of Trustees of each Mentor Trust and of the Successor Trusts that if all of the
assets and liabilities of a Fund are transferred to the corresponding Successor
Fund, it will issue an opinion that the Conversion will not give rise to the
recognition of income, gain or loss to the Fund, the Successor Fund, or
shareholders of the Fund for federal income tax purposes pursuant to sections
361, 1032(a) and 354(a)(1), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code"). Such opinion will be based upon customary
representations of the Mentor Trust and the Successor Trust and certain
customary assumptions. The receipt of such an opinion is a condition to the
consummation of each Conversion.
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A shareholder's adjusted basis for tax purposes in shares of a
Successor Fund after the Conversion will be the same as the shareholder's
adjusted basis for tax purposes in the shares of the Fund immediately before the
Conversion. The holding period for the shares of the Successor Fund received in
the Conversion will include a shareholder's holding period for shares of the
Fund (provided that the shares of the Fund were held as capital assets on the
date of the Conversion). Shareholders should consult their own tax advisers with
respect to the state and local tax consequences of the proposed transaction.
Appraisal Rights
Neither the Mentor Trusts' Declarations of Trust nor Massachusetts law
grants shareholders of Mentor Funds or Mentor Institutional Trust any rights in
the nature of appraisal or dissenters' rights with respect to any action upon
which such shareholders may be entitled to vote. However, the right of mutual
fund shareholders to redeem their shares is not affected by the proposed
Conversions. A shareholder may at any time redeem his or her shares if he or she
does not want to continue as a shareholder in a Fund if the Conversion is
approved. The procedures for the redemption of shares are set out in each Fund's
prospectus and statement of additional information.
Recommendation of Trustees
In evaluating the Conversion Plans, each Board of Trustees reviewed the
potential benefits associated with each proposed Conversion. In this regard, the
Trustees of each Mentor Trust considered: (i) the potential disadvantages which
apply to operating the Funds under their current form of organization; (ii) the
advantages which apply to operating the Successor Funds as series of Delaware
business trusts; (iii) the advantages of operating under the Master Trust
Agreements under Delaware law; (iv) the possible economies of scale (including a
reduction in Fund general expenses, such as legal and accounting fees, custody
fees and Trustees' fees and expenses) that could result in cost savings as a
result of the smaller Mentor family of funds becoming part of the larger
Evergreen family of funds; (v) the fact that there will essentially be no change
in the investment advisory management of the Funds' portfolio securities; and
(vi) the expected federal income tax consequences to the Funds, the Successor
Funds and shareholders of Mentor Funds and Mentor Institutional Trust resulting
from the proposed Conversion, and the likelihood that no recognition of income,
gain or loss for federal income tax purposes will occur as a result thereof.
At the meetings of the Boards called for the purpose on July 13, 1999,
the Board of Trustees of each Mentor Trust voted to approve the proposed Plans
of
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Conversion for each Mentor Trust's respective Funds and determined that
participation in the Conversion is in the best interests of each Fund and that
the interests of existing shareholders will not be diluted as a result of the
Conversion.
Required Vote
The affirmative vote of a majority of votes cast (for Mentor
Institutional Trust) and a majority of the votes cast and entitled to vote (for
Mentor Funds) is required to approve the Conversion.
THE TRUSTEES OF THE MENTOR TRUSTS RECOMMEND THAT THE
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 1.
PART II
PROPOSAL 2 - RECLASSIFICATION AS NONFUNDAMENTAL OF THE
INVESTMENT OBJECTIVE OF THOSE FUNDS WHOSE INVESTMENT OBJECTIVE IS
CURRENTLY CLASSIFIED AS FUNDAMENTAL (CERTAIN MENTOR FUNDS ONLY)
Reclassification of Fundamental Investment Objectives as Nonfundamental
Under the 1940 Act, a Fund's investment objective is not required to be
classified as fundamental. A fundamental investment objective may be changed
only by vote of a Fund's shareholders. In order to provide each Fund with
enhanced investment management flexibility to respond to market, industry or
regulatory changes, the Trustees of Mentor Funds have approved the
reclassification from fundamental to nonfundamental of the investment objectives
of those Funds named above under "Summary of Proposals Requiring Shareholder
Votes - Proposal 2." A nonfundamental investment objective may be changed at any
time by the Trustees without approval by a Fund's shareholders.
For a complete description of the investment objective of your Mentor
Fund, please consult your Fund's prospectuses and Exhibit C hereto. The
reclassification of a Fund's investment objective from fundamental to
nonfundamental will not alter the Fund's investment objective. If at any time in
the future, the Trustees of a Successor Trust approve a material change in a
Successor Fund's nonfundamental investment objective, shareholders of such
Successor Fund will be given notice of such change prior to its implementation;
however, if such a change were to occur, shareholders would not be asked to
approve such change. For those Funds whose current investment objective is not
formally classified as fundamental, the current policy is not to change such
Funds' investment objectives
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without first obtaining shareholder approval. It is expected that after the
Conversions, the Trustees of the Successor Trust will not continue to abide by
such policy. Accordingly, after the Conversions, in the unlikely event that the
Trustees of a Successor Trust determined to change the investment objective of a
Successor Fund, while shareholders would be given advance notice of such a
change, shareholder approval prior to such change would not be necessary.
If the reclassification of any Fund's investment objective from
fundamental to nonfundamental is not approved by shareholders of a particular
Fund, such Fund's investment objective will remain fundamental and shareholder
approval (and its attendant costs and delays) will continue to be required prior
to any change in investment objective.
Recommendation of Trustees
The Trustees of Mentor Funds have considered the enhanced management
flexibility to respond to market, industry or regulatory changes that would
result if each applicable Mentor Fund's fundamental investment objective were
reclassified as nonfundamental.
At the meetings of the Trustees called for the purpose on July 13,
1999, the Trustees of Mentor Funds voted to approve the reclassification of the
investment objective of each of the above-named Funds currently classified as
fundamental to nonfundamental.
Required Vote
The affirmative vote of the holders of a "majority of the outstanding
voting securities of a Fund" is required to approve the reclassification of a
Fund's investment objective from fundamental to nonfundamental. The term
"majority of the outstanding voting securities" of a Fund, as defined in the
1940 Act, means the affirmative vote of the lesser of: (1) 67% or more of the
voting securities of the Fund present at the Meeting, if the holders of more
than 50% of the outstanding voting securities of such Fund are present or
represented by proxy at the Meeting; or (2) more than 50% of the outstanding
voting securities of the Fund ("Majority Vote") .
THE TRUSTEES OF MENTOR FUNDS RECOMMEND THAT THE SHAREHOLDERS
VOTE TO APPROVE PROPOSAL 2.
PROPOSAL 3 - CHANGES TO FUNDAMENTAL
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INVESTMENT RESTRICTIONS
Summary
Adoption of Standardized Investment Restrictions (Proposals 3A-3H)
The primary purpose of Proposals 3A through 3H below is to revise and
standardize the fundamental investment restrictions (the "Restrictions") of the
Funds of Mentor Funds and Mentor Institutional Trust. The Trustees have reviewed
the investment advisers' analysis of the fundamental and nonfundamental
investment restrictions of the various funds offered by the Mentor and Evergreen
families of mutual funds and, where practicable and appropriate to a Fund's
investment objective and policies, the Trustees are submitting the proposed
adoption of standardized Restrictions to shareholders.
It is not anticipated that any of the changes will substantially affect
the way the Funds are currently managed. These proposals are being presented to
shareholders for approval because it is believed that increased standardization
will help to promote operational efficiencies and facilitate monitoring of
compliance with the Restrictions by making it easier to monitor the Funds'
investments. Because the proposed standardized fundamental Restrictions in
general are phrased relatively more broadly than the Funds' current fundamental
Restrictions, the Funds and their investment advisers are expected to be able to
respond more expeditiously to market, industry or regulatory developments. Set
forth below, as sub-sections of this Proposal, are general descriptions of each
of the proposed changes. You will be given the option to approve all, some, or
none of the proposed changes on the proxy card enclosed with this proxy
statement.
A listing of the current fundamental Restrictions of each Fund is set
forth in Exhibit C. The first page of Exhibit C contains an index to assist you
in locating the page at which your Fund's current fundamental Restrictions are
described. Those fundamental Restrictions that you are being requested to vote
to standardize are shown in Exhibit C by an "S", which stands for "To be
Standardized." If a particular change is not approved by shareholders of a Fund,
the current fundamental Restriction will remain in place.
Because of the variety of ways in which the various Funds' current
fundamental Restrictions are expressed as well as differences among the
fundamental Restrictions themselves, the discussions below are general. To
compare your Fund's current fundamental Restriction to the proposed changed
fundamental Restriction, please refer to Exhibit C.
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If approved by shareholders, the revised fundamental Restrictions
described in Proposals 3A through 3H will remain fundamental and, as such,
cannot be changed without a further shareholder vote. If a proposed standardized
fundamental Restriction is not approved by shareholders of a particular Fund,
the current Restriction will remain fundamental and shareholder approval (and
its attendant costs and delays) will continue to be required prior to any change
in the Restriction.
Reclassification of Fundamental Restrictions as Nonfundamental (Proposal 3I)
The reclassification from fundamental to nonfundamental of certain of
the Funds' other current fundamental Restrictions will enhance the ability of
the Funds to achieve their respective investment objectives because they and
their investment advisers will have greater investment management flexibility to
respond to changed market, industry or regulatory conditions without the delay
and expense of the solicitation of shareholder approval.
Recommendation of Trustees
The Trustees of Mentor Funds and the Trustees of Mentor Institutional
Trust have reviewed the potential benefits associated with the proposed
standardization of the Funds' fundamental Restrictions (Proposals 3A through 3H
below) as well as the potential benefits associated with the reclassification of
certain of the Funds' other fundamental Restrictions to nonfundamental (Proposal
3I).
At the meetings of the Trustees called for the purpose on July 13,
1999, the Trustees of Mentor Funds and the Trustees of Mentor Institutional
Trust voted to approve the proposed standardization of the Funds' fundamental
Restrictions (Proposals 3A through 3H below) and the reclassification from
fundamental to nonfundamental of certain of the Funds' other fundamental
Restrictions (Proposal 3I below).
Required Vote
Approval to standardize the language of the Funds' fundamental
Restrictions, (Proposals 3A through 3H) and to approve the reclassification of
fundamental Restrictions to nonfundamental (Proposal 3I) requires a Majority
Vote of a Fund.
THE TRUSTEES OF THE MENTOR TRUSTS RECOMMEND THAT THE
SHAREHOLDERS VOTE TO APPROVE PROPOSAL 3.
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Proposal 3A: To Amend The Fundamental Restriction Concerning
Diversification of Investments
The current fundamental Restriction of each of the Funds concerning
diversification of investments provides generally that a Fund cannot purchase
the securities of an issuer if the purchase would cause more than 5% of the
Fund's total assets taken at market value to be invested in the securities of
such issuer, except United States government securities, or if the purchase
would cause more than 10% of the outstanding voting securities of any one issuer
to be held in the Fund's portfolio. All of the Funds (except for Mentor Growth
Portfolio) apply the 5% of assets test to 75% of their total assets and the 10%
of outstanding voting securities test to 100% of their total assets. The Funds
express this Restriction in a variety of ways. It is proposed that shareholders
approve new language standardizing these Restrictions including the percentage
of total assets to which the Restriction is applied.
Each of the Funds has elected to be a "diversified" open-end management
investment company under the 1940 Act, which requires the 5% of assets and 10%
of outstanding voting securities tests described above to apply to 75% of the
total assets of the Fund. As mentioned above, the current policy of the Funds is
for the 10% voting securities of an issuer test to be applied to 100% of the
Funds' assets, rather than to 75% of their assets. The current policy of Mentor
Growth Portfolio is even more restrictive than required by the 1940 Act, since
such Fund applies both of the foregoing tests to 100% of its assets, rather than
to just 75% of its assets. The primary purpose of the proposed change with
respect to the Funds is to allow the Funds to invest in accordance with the less
restrictive limits contained in the 1940 Act for diversified investment
companies. The proposed change would allow a Fund the flexibility to purchase
larger amounts of issuers' securities when its investment adviser deems an
opportunity attractive. The new policy would allow the investment policies of
the Funds to conform with the definition of "diversified" as it appears in the
1940 Act.
The amendment of the fundamental Restriction also will allow the Funds
to respond more quickly to any changes of the 1940 Act standard as well as to
other legal, regulatory, and market developments without the delay or expense of
a shareholder vote. The amendment of the fundamental Restriction would also
standardize the Restrictions across the Evergreen and Mentor families of funds.
Adoption of this change is not expected to materially affect the operation of
the Funds.
No Fund is changing its current classification as a diversified fund.
As proposed, each Fund's fundamental Restriction regarding diversification will
be replaced with the following fundamental Restriction:
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"The Fund may not make any investment inconsistent
with the Fund's classification as a diversified
investment company under the Investment Company Act
of 1940."
Proposal 3B: To Amend the Fundamental Restriction Concerning
Concentration of a Fund's Assets in a Particular Industry
Each Fund currently has a fundamental Restriction concerning the
concentration of investments in a particular industry. The staff of the SEC
takes the position that a mutual fund "concentrates" its investments in a
particular industry if more than 25% of the mutual fund's assets exclusive of
cash and U.S. government obligations are invested in the securities of issuers
in such industry. The Restrictions generally embody the SEC staff interpretation
by stating that a Fund will not concentrate its investments in a particular
industry by investing more than 25% of its assets, exclusive of cash and U.S.
government obligations, in securities of issuers in any one industry.
Shareholders of the Funds are being asked to approve an amendment of
the foregoing fundamental Restriction. As proposed, each Fund's current
fundamental Restriction regarding concentration of the Fund's assets in a
particular industry will be replaced by the following fundamental Restriction:
"The Fund may not concentrate its
investments in the securities of issuers
primarily engaged in any particular
industry (other than securities issued
or guaranteed by the U.S. government
or its agencies or instrumentalities)."
The primary purpose of the proposed amendment is to adopt insofar as
possible a standardized Restriction regarding concentration for those funds in
the Evergreen and Mentor families of mutual funds that do not concentrate their
investments. If in the future the staff of the SEC changed its interpretation on
concentration in an industry, the Funds would be able to comply and avoid the
expense of a shareholder vote. Adoption of this change is not expected to
materially affect the operation of the Funds.
Proposal 3C: To Amend The Fundamental Restriction Concerning the
Issuance of Senior Securities
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The Funds' current fundamental Restrictions regarding the issuance of
senior securities generally state that a Fund shall not issue any senior
security or state the criteria under which a security is deemed not to be a
senior security.
It is proposed that shareholders approve replacing the Funds' current
fundamental Restrictions concerning the issuance of senior securities with the
following fundamental Restriction governing the issuance of senior securities:
"Except as permitted under the
Investment Company Act of 1940,
the Fund may not issue senior securities."
The primary purpose of this proposed change is to standardize the
Funds' fundamental Restrictions regarding senior securities.
The proposed fundamental Restriction clarifies that the Funds may issue
senior securities to the full extent permitted under the 1940 Act. Although the
definition of a "senior security" involves complex statutory and regulatory
concepts, a senior security is generally an obligation of a Fund which has a
claim to the Fund's assets or earnings that takes precedence over the claims of
the Fund's shareholders. The 1940 Act generally prohibits open-end investment
companies (i.e. mutual funds) from issuing any senior securities; however, under
current SEC staff interpretations, mutual funds are permitted to engage in
certain types of transactions that might be considered "senior securities" as
long as certain conditions are satisfied. For example, a transaction that
obligates a Fund to pay money at a future date (e.g., the purchase of securities
to be settled on a date that is farther away than the normal settlement period)
may be considered a "senior security." A mutual fund is permitted to enter into
this type of transaction if it maintains a segregated account containing liquid
securities in an amount equal to its obligation to pay cash for the securities
at a future date. The Funds would engage in transactions that could be
considered to involve "senior securities" only in accordance with applicable
regulatory requirements under the 1940 Act.
Adoption of the proposed fundamental Restriction concerning senior
securities is not expected to materially affect the operation of the Funds.
However, adoption of a standardized fundamental Restriction will facilitate the
Funds' investment advisers' investment compliance efforts and will allow the
Funds to respond to legal, regulatory and market developments which may make the
use of permissible senior securities advantageous to the Funds and their
shareholders.
Proposal 3D: To Amend The Fundamental Restriction Concerning Borrowing
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Some of the Funds' current fundamental Restrictions concerning
borrowing state that a Fund shall not borrow money except in an amount not in
excess of 5% of the total assets of the Fund, and then only for emergency and
extraordinary purposes, which shall not prohibit escrow and collateral
arrangements in connection with investment in financial futures contracts and
related options. Most of the Funds have more broad borrowing authority allowing
them to borrow in accordance with the 1940 Act provisions described below. When
reviewing your Fund's policies on borrowings as set forth in Exhibit C, you
should also review your Fund's policies on the issuance of senior securities
since the topics are interrelated.
In general, under the 1940 Act, a Fund may not borrow money, except
that (i) the Fund may borrow from banks (as defined in the 1940 Act) or enter
into reverse repurchase agreements, in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) the Fund may borrow up to an additional 5%
of its total assets for temporary purposes, and (iii) the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities.
It is proposed that shareholders approve replacing the Funds' current
fundamental Restrictions regarding borrowing with the following fundamental
Restriction:
"The Fund may not borrow money,
except to the extent permitted by
applicable law."
Currently, certain funds of Mentor Funds and Mentor Institutional Trust
may use leverage. The corresponding Successor Fund to each of these Funds will
continue to have the ability to leverage subsequent to the Conversion. While the
other Funds have no current intention to use leverage, the flexibility to do so
may be beneficial to a Fund at a future date. The primary purpose of the
proposed change to the fundamental Restriction concerning borrowing is to
standardize the Restriction.
Adoption of the proposed Restriction is not currently expected to
materially affect the operations of the Funds. However, as noted above, some of
the Funds' current Restrictions restrict borrowing to a lower percentage of
total assets than the 33 1/3% permitted under the 1940 Act. The proposed
Restriction therefore would allow a Fund to purchase a security while borrowings
representing more than 5% of total assets are outstanding. However, under the
current policies of the Successor Trusts, which may be changed without
shareholder approval, no Fund will purchase any security while borrowings of 5%
or more of total assets are outstanding.
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Proposal 3E: To Amend The Fundamental Restriction Concerning
Underwriting
Each Fund is currently subject to a fundamental Restriction concerning
underwriting. The Restrictions generally provide that a Fund shall not
underwrite any securities except to the extent that it may be deemed to be an
underwriter under certain federal securities laws. It is proposed that
shareholders approve replacing the current fundamental Restriction with the
following fundamental Restriction concerning underwriting:
"The Fund may not underwrite securities of other
issuers, except insofar as the Fund may technically
be deemed an underwriter in connection with the
disposition of its portfolio securities."
The primary purpose of the proposed change is to standardize the Funds'
fundamental Restrictions regarding underwriting. While the proposed change will
have no current impact on the Funds, adoption of the proposed standardized
fundamental Restriction will advance the goals of standardization.
Proposal 3F: To Amend The Fundamental Restriction Concerning Investment
in Real Estate
The Funds currently have a fundamental Restriction concerning the
purchase of real estate. In general, the Restrictions state that a Fund shall
not purchase or sell real estate. Most of the Funds state that this Restriction
does not include the purchase and sale of securities which are secured by real
estate and securities of companies that invest in or deal in real estate.
Certain of the Funds, however, do not specifically address investment in
securities of issuers that invest or deal in real estate; in the opinion of
management, this Restriction for those Funds does not currently preclude
investment in securities of issuers that deal in real estate.
Shareholders are being asked to approve an amended Restriction similar
to those described above. As proposed, the Funds' current fundamental
Restrictions will be replaced by the following fundamental Restriction:
"The Fund may not purchase or sell real estate,
except that, to the extent permitted by applicable
law, the Fund may invest in (a) securities directly
or indirectly secured by real estate, or (b)
securities issued by issuers that invest in real
estate."
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The primary purpose of the proposed amendment is to clarify the types
of securities in which the Funds are authorized to invest and to standardize the
Funds' fundamental Restrictions concerning real estate.
To the extent that a Fund buys securities and instruments of companies
in the real estate business, the Fund's performance will be affected by the
condition of the real estate market. This industry is sensitive to factors such
as changes in real estate values and property taxes, overbuilding, variations in
rental income, and interest rates. Performance could also be affected by the
structure, cash flow, and management skill of real estate companies.
While the proposed change will have no current impact on the Funds,
adoption of the proposed standardized fundamental Restriction will advance the
goals of standardization.
Proposal 3G: To Amend The Fundamental Investment Restriction Concerning
Commodities
The Funds currently are subject to various fundamental Restrictions
that generally provide that a Fund shall not purchase or sell commodities or
commodity contracts, except that certain Funds may buy or sell financial futures
contracts and related options.
It is proposed that shareholders approve replacing the current
fundamental Restrictions with the following fundamental Restriction concerning
commodities:
"The Fund may not purchase or sell commodities or
contracts on commodities except to the extent that
the Fund may engage in financial futures contracts
and related options and currency contracts and
related options and may otherwise do so in accordance
with applicable law without registering as a
commodity pool operator under the Commodity Exchange
Act."
The proposed amendment is intended to allow the Funds where appropriate
to have the flexibility to invest in futures contracts and related options,
including financial futures such as interest rate and stock index futures (S&P
500, etc.). Certain Funds currently have the ability to invest in financial
futures. Under the proposed amendment, these types of futures may be used for
hedging or for investment purposes . Although the use of these types of futures
for such purposes is intended to increase a Fund's investment returns,
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these practices could, if they do not perform as expected by the investment
adviser, reduce returns or increase volatility.
If the proposed amendment is approved, the investment advisers will
determine the appropriateness of investment in futures contracts (including
financial futures) and related options on a Fund-by-Fund basis.
While the proposed change will have no material impact on the operation of the
Funds, adoption of the proposed fundamental Restriction will advance the goals
of standardization.
Proposal 3H: To Amend The Fundamental Investment Restriction Concerning
Lending
The Funds' current fundamental Restrictions concerning lending state
generally that a Fund shall not lend its portfolio securities except under
certain percentage and other limitations. In general, it is the Funds' current
policy that such loans must be secured continuously by U.S. government
securities, cash or cash collateral maintained on a current basis in an amount
at least equal to the market value of the securities loaned. During the
existence of the loan, a Fund must continue to receive the equivalent of the
interest and dividends paid by the issuer on the securities loaned and interest
on the investment of the collateral; the Fund must have the right to call the
loan and obtain the securities loaned at any time on reasonable notice,
including the right to call the loan to enable the Fund to vote the securities.
It is proposed that shareholders approve replacing the current
fundamental Restrictions with the following amended fundamental Restrictions
concerning lending:
"The Fund may not make loans to other persons, except
that the Fund may lend its portfolio securities in
accordance with applicable law. The acquisition of
investment securities or other investments shall not
be deemed to be the making of a loan."
The proposed Restriction would permit all the Funds to lend their
portfolio securities. Gains or losses in the market value of a loaned security
will affect a Fund and its shareholders. When a Fund lends its securities, it
runs the risk that it will not be able to retrieve the securities on a timely
basis, possibly losing the opportunity to sell the securities at a desirable
price. Also, if the borrower files for bankruptcy or becomes insolvent, the
Fund's ability to dispose of the securities
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may be delayed. The proposal is not expected materially to affect the current
operations of the Funds.
The adoption of the standardized fundamental Restriction will advance
the goals of standardization.
Proposal 3I: Reclassification as Nonfundamental of All Current Fundamental
Restrictions Other than the Fundamental Restrictions Described
in the
Foregoing Proposals 3A through 3H
Like all mutual funds, when the Funds were established the Trustees
adopted certain investment Restrictions that would govern the efforts of the
Funds' investment advisers in seeking the Funds' respective investment
objectives. Some of these Restrictions were designated as fundamental and, as
such, may not be changed unless the change has first been approved by the
Trustees and then by the shareholders of the relevant Fund. Many of the Funds'
investment restrictions were required to be classified as fundamental under the
securities laws of various states. Since October 1996, such state securities
laws and regulations regarding fundamental investment restrictions have been
preempted by federal law and no longer apply.
The Funds' fundamental Restrictions were established to reflect certain
regulatory, business or industry conditions as they existed at the time a Fund
was established. Many such conditions no longer exist. The 1940 Act requires
only that the Restrictions discussed in Proposals 3A through 3H above be
classified as fundamental. As a result, this Proposal 3I proposes to reclassify
as nonfundamental all current fundamental Restrictions of certain Funds other
than the fundamental Restrictions discussed in the foregoing Proposals 3A
through 3H.
Nonfundamental Restrictions may be changed or eliminated by the
Trustees at any time without approval of the Fund's shareholders. The current
fundamental Restrictions proposed to be reclassified as nonfundamental are shown
in Exhibit C by an "R", which stands for "To be Reclassified." You will find the
page in which your Fund's Restrictions are described in the index at the
beginning of Exhibit C.
None of the proposed changes will materially alter the way in which any
fund is currently managed. Indeed, the Trustees believe that approval of the
reclassification of fundamental Restrictions to nonfundamental Restrictions will
enhance the ability of the Funds to achieve their respective investment
objectives because the Funds and their investment advisers will have greater
investment management flexibility to respond to changed market, industry or
regulatory conditions without the delay and expense of the solicitation of
shareholder approval.
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PART III
VOTING INFORMATION CONCERNING THE MEETING
Only shareholders of record as of the close of business on the Record
Date will be entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. The holders of more than fifty percent, in the case of
Mentor Funds, and thirty percent, in the case of Mentor Institutional Trust, of
the total number of outstanding shares entitled to vote at the Meeting present
in person or represented by proxy will constitute a quorum for the Meeting for
each of the Funds of Mentor Funds and each of the Funds of Mentor Institutional
Trust.
If the enclosed form of proxy is properly executed and returned in time
to be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted FOR each proposal listed thereon and FOR any
other matters deemed appropriate. Proxies that reflect abstentions and "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 the persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) will be counted as shares that are present
and entitled to vote for purposes of determining the presence of a quorum, but
will have no effect on the outcome of the vote to approve any proposal requiring
a vote based on the percentage of shares actually voted. A proxy may be revoked
at any time on or before the Meeting by written notice to the Secretary of the
appropriate Mentor Trust, 901 East Byrd Street, Richmond, Virginia 23219. Unless
revoked, all valid proxies will be voted in accordance with the specifications
thereon or, in the absence of such specifications, FOR approval of the
Conversion Plan and the Conversion contemplated thereby described in Part I of
this proxy statement and FOR the proposals described in Part II of this proxy
statement.
Approval of the Conversion Plan (Proposal 1) requires the affirmative
vote of a majority of the votes cast (for Mentor Institutional Trust) and a
majority of the votes cast and entitled to vote (for Mentor Funds), with all
classes voting together as a single class at the Meeting at which a quorum of a
Fund's shares is present.
Pursuant to the 1940 Act, the affirmative vote of the holders of a
majority of the outstanding voting securities of a Fund is required to approve
the reclassification of the Fund's investment objective from fundamental to
nonfundamental (proposal 2) and to approve the adoption of standardized
fundamental investment restrictions (proposals 3A to 3I). Under the 1940 Act,
the affirmative vote of a "majority of the outstanding voting securities" of a
Fund is defined as the lesser of (a) 67% or more of the voting securities of the
Fund
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present or represented by proxy at the Meeting, if the holders of more than 50%
of the outstanding voting securities of the Fund are present or represented by
proxy, or (b) more than 50% of the outstanding voting securities of the Fund.
Each full share outstanding is entitled to one vote and each fractional
share outstanding is entitled to a proportionate share of one vote. The number
of shares of each class of each Fund outstanding as of the close of business on
August 17, 1999 is set forth in Exhibit D.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, e-mail or personal solicitations
conducted by officers and employees of Mentor or FUNB, their affiliates or other
representatives of the Funds (who will not be paid for their solicitation
activities). Shareholder Communications Corporation ("SCC") and its agents have
been engaged by the Funds to assist in soliciting proxies. If you wish to
participate in the Meeting, you may submit the proxy card included with this
proxy statement, vote by fax, vote by telephone, vote by Internet or attend in
person. Any proxy given by you is revocable.
In the event that sufficient votes to approve a proposal are not
received by October 15, 1999, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
For Mentor Funds, any such adjournment will require an affirmative vote of a
plurality of the votes cast on the question in person or by proxy at the session
of the Meeting to be adjourned. For Mentor Institutional Trust, any number of
votes less than the quorum requirement is sufficient for adjournment. The
persons named as proxies will vote upon such adjournment after consideration of
all circumstances which may bear upon a decision to adjourn the Meeting.
No Fund is required or intends to hold annual or any other periodic
meeting of shareholders except as may be required by the 1940 Act. If the
Conversion is not approved by shareholders of a Fund, the next meeting of the
shareholders of such Fund will be held at such time as the Board may determine
or as may be legally required. If any change proposed in Part II of this proxy
statement is not approved by shareholders of a Fund, the current Restriction,
limitation or policy will remain in place as to such Fund. Shareholders wishing
to submit proposals for consideration for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to the
Secretary of the Mentor Trust at the address set
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forth on the cover of this proxy statement such that they will be received by
the Fund in a reasonable period of time prior to any such meeting.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise each Fund whether other persons are beneficial owners of shares
for which proxies are being solicited and, if so, the number of copies of this
proxy statement needed to supply copies to the beneficial owners of the
respective shares.
ADDITIONAL INFORMATION
Payment of Expenses
Mentor Funds and Mentor Institutional Trust will pay the expenses of
the preparation, printing and mailing to the Funds' shareholders of the proxy
card, accompanying notice of meeting and this proxy statement and any
supplementary solicitation of shareholders. It is expected that the cost of
retaining SCC to assist in the proxy solicitation process will not exceed
$184,000, which cost will be allocated among the Funds pro rata based on their
respective net assets.
Beneficial Ownership
Exhibit E contains information about the beneficial ownership by
shareholders of five percent or more of each Fund's outstanding shares, as of
August 17, 1999. On that date, the existing Trustees and officers of each Fund,
together as a group, beneficially owned less than one percent of the Fund's
outstanding shares.
The term "beneficial ownership" is as defined under Section 13(d) of
the 1934 Act. The information as to beneficial ownership is based on statements
furnished to each Fund by the existing Trustees, officers of such Mentor Trust,
and/or on records of the Funds' transfer agent.
Annual and Semi-Annual Reports to Shareholders
Each of the Funds will furnish, without charge, a copy of its most
recent annual report (and most recent semi-annual report succeeding the annual
report, if any) to a shareholder of the Fund upon request. Any such request
should be directed to Mentor Service Company, Inc. at 901 East Byrd Street,
Richmond, Virginia 23219 or 1-800-645-7816.
OTHER BUSINESS
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The Boards do not intend to present any other business at the Meeting.
If, however, any other matters are properly brought before the Meeting, the
persons named in the accompanying proxy card(s) will vote thereon in accordance
with their judgment.
EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS APPROVAL OF
EACH PROPOSAL AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL
BE VOTED IN FAVOR OF APPROVAL OF THE PROPOSALS.
August 27, 1999
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EXHIBIT A
[FORM OF AGREEMENT AND PLAN OF CONVERSION AND TERMINATION]
AGREEMENT AND PLAN OF CONVERSION AND TERMINATION dated August 10, 1999
(the "Agreement"), between [Mentor Funds or Mentor Institutional Trust], a
Massachusetts business trust having its principal office at 901 East Byrd
Street, Richmond, Virginia 23219 (the "Original Trust") on behalf of its
___________ Fund (the "Original Fund"), one of the Original Trust's series
portfolios, and Evergreen ____________ Trust, a Delaware business trust having
its principal office at 200 Berkeley Street, Boston, Massachusetts 02116 (the
"Successor Trust") on behalf of its ________ Fund (the "Successor Fund"), one of
the Successor Trust's series portfolios.
WHEREAS, the Board of Trustees of the Original Trust and the Board of
Trustees of the Successor Trust have respectively determined that it is in the
best interests of the Original Fund and the Successor Fund, respectively, that
the assets of the Original Fund be acquired by the Successor Fund pursuant to
this Agreement and in accordance with, respectively, the applicable laws of the
Commonwealth of Massachusetts and the State of Delaware; and
WHEREAS, the parties desire to enter into a plan of exchange which
would constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"):
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
1. PLAN OF EXCHANGE.
(a) Subject to the terms and conditions set forth herein, on
the Exchange Date (as defined herein), the Original Fund shall assign, transfer
and convey the assets, including all securities and cash held by the Original
Fund (subject to the liabilities of the Original Fund) to the Successor Fund and
the Successor Fund shall acquire all of the assets of the Original Fund (subject
to the liabilities of the Original Fund) in exchange for full and fractional
shares of beneficial interest of the Successor Fund, $.001 par value per share
(the "Successor Fund Shares"), to be issued by the Successor Trust on behalf of
the Successor Fund, having, in the case of the Successor Fund, an aggregate net
asset value equal to the value of the net assets of the Original Fund acquired.
The value of the assets of the Original Fund and the net asset value per share
of the Successor Fund
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Shares shall be determined as of the Valuation Date (as defined herein) in
accordance with the procedures for determining the value of the Original Fund's
assets set forth in the Successor Fund's Declaration of Trust and the
then-current prospectus and statement of additional information for the
Successor Fund that forms a part of the Successor Fund's Registration Statement
on Form N-1A (the "Registration Statement"). In lieu of delivering certificates
for the Successor Fund Shares, the Successor Trust shall credit the Successor
Fund Shares to the Original Fund's account on the share record books of the
Successor Trust and shall deliver a confirmation thereof to the Original Fund.
The Original Fund shall then deliver written instructions to the Successor
Trust's transfer agent to establish accounts for the shareholders on the share
record books relating to the Original Fund. [The following language applies to
all funds except Mentor Fixed-Income and Mentor Perpetual International: Holders
of Class A shares, Class B shares and Class Y shares of the Original Fund shall
receive in the transaction described above, Class A shares, Class C shares and
Class Y shares, respectively, of the Successor Fund.] [For Mentor Fixed-Income
Portfolio: Holders of Class Y shares of the Original Fund shall receive in the
transaction described above, Institutional Class shares of the Successor Fund.]
[For Mentor Perpetual International: Holders of Class A shares, Class B shares,
Class E shares and Class Y shares of the Original Fund shall receive in the
transaction described above, Class A shares, Class C shares, Class A shares and
Class Y shares, respectively, of the Successor Fund.] Successor Fund Shares of
each such class shall have the same aggregate net asset value as the aggregate
net asset value of the corresponding class of the Original Fund.
(b) Delivery of the assets of the Original Fund shall be made not later
than the next business day following the Valuation Date (the "Exchange Date").
Assets transferred shall be delivered to State Street Bank and Trust Company,
the Successor Trust's custodian (the "Custodian"), for the account of the
Successor Trust and the Successor Fund, with all securities not in bearer or
book entry form duly endorsed, or accompanied by duly executed separate
assignments or stock powers, in proper form for transfer, with signatures
guaranteed, and with all necessary stock transfer stamps, sufficient to transfer
good and marketable title thereto (including all accrued interest and dividends
and rights pertaining thereto) to the Custodian for the account of the Successor
Trust and the Successor Fund free and clear of all liens, encumbrances, rights,
restrictions and claims. All cash delivered shall be in the form of immediately
available funds payable to the order of the Custodian for the account of the
Successor Trust and the Successor Fund. All assets delivered to the Custodian as
provided herein shall be allocated by the Successor Trust to the Successor Fund.
(c) The Original Fund will pay or cause to be paid to the Successor
Trust any interest received on or after the Exchange Date with respect to assets
transferred from the Original Fund to the Successor Fund hereunder and to the
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Successor Trust any distributions, rights or other assets received by the
Original Fund after the Exchange Date as distributions on or with respect to the
securities transferred from the Original Fund to the Successor Fund hereunder
and the Successor Trust shall allocate any such distributions, rights or other
assets to the Successor Fund. All such assets shall be deemed included in assets
transferred to the Successor Fund on the Exchange Date and shall not be
separately valued.
(d) The Valuation Date shall be October 15, 1999, or such earlier or
later date as may be mutually agreed upon by the parties.
(e) As soon as practicable after the Exchange Date, the Original Fund
shall distribute all of the Successor Fund Shares received by it among the
shareholders of the Original Fund in proportion to the number of shares each
such shareholder holds in the Original Fund and, upon the effecting of such a
distribution on behalf of the Fund, the Original Fund will dissolve and
terminate. After the Exchange Date, the Original Fund shall not conduct any
business except in connection with its dissolution and termination.
2. THE ORIGINAL TRUST'S REPRESENTATIONS AND WARRANTIES. The Original Trust
represents and warrants to and agrees with the Successor Trust as follows:
(a) The Original Trust is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has power to own all of its properties and assets and, subject
to the approval of its shareholders as contemplated hereby, to carry out this
Agreement on behalf of the Original Fund.
(b) The Original Trust is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company, and such registration has not been revoked or rescinded and is in full
force and effect.
(c) On the Exchange Date, the Original Trust will have full right,
power and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.
(d) The current prospectuses and statement of additional information of
the Original Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act and the rules and regulations of the Securities and Exchange Commission
(the "Commission") thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to
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make the statements therein, in light of the circumstances under which they were
made, not misleading.
(e) The Original Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of the Original Trust's Declaration of Trust or
By-Laws or of any material agreement, indenture, instrument, contract, lease, or
other undertaking to which the Original Trust or the Original Fund is a party or
by which it is bound.
(f) Except as otherwise disclosed in writing to and accepted by the
Successor Fund, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or to its knowledge
threatened against the Original Trust or the Original Fund or any of its or
their properties or assets, which, if adversely determined, would materially and
adversely affect their financial condition, the conduct of their business, or
the ability of the Original Trust or the Original Fund to carry out the
transactions contemplated by this Agreement. The Original Trust and the Original
Fund know of no facts that might form the basis for the institution of such
proceedings and are not parties to or subject to the provisions of any order,
decree, or judgment of any court or governmental body that materially and
adversely affects their business or their ability to consummate the transactions
herein contemplated.
(g) At the Exchange Date, there has not been any material adverse
change in the Original Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Original Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Successor Trust. For the purposes of this subparagraph (h), a
decline in the net asset value of the Original Fund shall not constitute a
material adverse change.
(h) At the Exchange Date, all federal and other tax returns and reports
of the Original Fund required by law to have been filed by such dates shall have
been filed, and all federal and other taxes shown due on said returns and
reports shall have been paid, or provision shall have been made for the payment
thereof. To the best of the Original Trust's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation, the Original Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has distributed in each such year all net
investment income and realized capital gains required to so qualify.
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(j) All issued and outstanding shares of the Original Fund are, and at
the Exchange Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Original Fund. All of the issued and outstanding
shares of the Original Fund will, at the time of the Exchange Date, be held by
the persons and in the amounts set forth in the records of the transfer agent.
The Original Fund does not have outstanding any options, warrants, or other
rights to subscribe for or purchase any of the Original Fund shares, nor is
there outstanding any security convertible into any of the Original Fund shares.
(k) At the Exchange Date, the Original Trust will have good and
marketable title to the Original Fund's assets to be transferred to the
Successor Fund pursuant to Section 1 and full right, power, and authority to
sell, assign, transfer, and deliver such assets hereunder, and, upon delivery
and payment for such assets, the Successor Trust will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the 1933 Act, other
than as disclosed to the Successor Trust and accepted by the Successor Trust.
(l) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary action on the part of the Original Fund
and, subject to the approval of the shareholders of the Original Trust on behalf
of the Original Fund, this Agreement constitutes a valid and binding obligation
of the Original Trust on behalf of the Original Fund, enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(m) The information furnished by the Original Fund for use in no-action
letters, applications for orders, registration statements, proxy materials, and
other documents that may be necessary in connection with the transactions
contemplated hereby is accurate and complete in all material respects and
complies in all material respects with federal securities and other laws and
regulations thereunder applicable thereto.
3. THE SUCCESSOR TRUST'S REPRESENTATIONS AND WARRANTIES. The Successor
Trust represents and warrants to and agrees with the Original Trust as follows:
(a) The Successor Trust is a business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
power to carry on its business as it is now being conducted and to carry out
this Agreement on behalf of the Successor Fund.
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(b) The Successor Trust is registered as an open-end management
investment company and adopts the Registration Statement of the Original Trust
and the Original Fund, for purposes of the 1933 Act.
(c) At the Exchange Date, the Successor Fund Shares to be issued to the
Original Fund will have been duly authorized and, when issued and delivered
pursuant to this Agreement, will be legally and validly issued and will be fully
paid and non-assessable by the Successor Trust. No Successor Trust or Successor
Fund shareholder will have any preemptive right of subscription or purchase in
respect thereof.
(d) The current prospectuses and statement of additional information of
the Successor Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(e) The Successor Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Successor
Trust's Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Successor Trust
is a party or by which it is bound.
(f) Except as otherwise disclosed in writing to the Original Trust and
accepted by the Original Trust, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Successor Trust or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition and the conduct of its business or the
ability of the Successor Trust to carry out the transactions contemplated by
this Agreement. The Successor Trust knows of no facts that might form the basis
for the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
that materially and adversely affects its business or its ability to consummate
the transactions contemplated herein.
(g) The Successor Fund has no known liabilities of a material amount,
contingent or otherwise.
(h) At the Exchange Date, there has not been any material adverse
change in the Successor Fund's financial condition, assets, liabilities, or
business other than
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changes occurring in the ordinary course of business, or any incurrence by the
Successor Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Original Trust. For the purposes of this subparagraph (h), a decline in the net
asset value of the Successor Fund shall not constitute a material adverse
change.
(i) At the Exchange Date, all federal and other tax returns and reports
of the Successor Fund required by law then to be filed by such date shall have
been filed, and all federal and other taxes shown due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof. To the best of the Successor Trust's knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Successor Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has distributed in each such year all net
investment income and realized capital gains required to so qualify.
(k) All issued and outstanding Successor Fund Shares are, and at the
Exchange Date will be, duly and validly issued and outstanding, fully paid and
non-assessable. The Successor Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Successor Fund
Shares, nor is there outstanding any security convertible into any Successor
Fund Shares.
(l) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary action on the part of the Successor Trust,
and this Agreement constitutes a valid and binding obligation of the Successor
Trust enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights and to general equity principles.
(m) The Successor Fund Shares to be issued and delivered to the
Original Trust, for the account of the Original Fund shareholders, pursuant to
the terms of this Agreement will, at the Exchange Date, have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Successor Fund Shares, and will be fully paid and non-assessable.
(n) The information furnished by the Successor Trust for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and other
laws and regulations applicable thereto.
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4. THE SUCCESSOR TRUST'S CONDITIONS PRECEDENT. The
obligations of the Successor Trust hereunder shall be subject to the following
conditions:
(a) The Original Trust shall have furnished to the Successor Trust a
statement of the Original Fund's assets, including a list of securities owned by
the Original Fund with their respective tax costs and values determined as
provided in Section 1 hereof, all as of the Exchange Date.
(b) As of the Exchange Date, all representations and warranties of the
Original Trust on behalf of the Original Fund made in this Agreement shall be
true and correct as if made at and as of such date, and the Original Trust on
behalf of the Original Fund shall have complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such date.
(c) For the Original Trust, a vote approving this Agreement and the
transactions and exchange contemplated hereby shall have been duly adopted by
the shareholders of the Original Fund.
5. THE ORIGINAL TRUST'S CONDITIONS PRECEDENT. The obligations of the
Original Trust hereunder shall be subject to the following conditions:
(a) that as of the Exchange Date all representations and warranties of
the Successor Trust made in the Agreement shall be true and correct as if made
at and as of such date, and that the Successor Trust shall have complied with
all of the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such date.
(b) The Original Trust shall have received on the Exchange Date an
opinion from Sullivan & Worcester LLP, counsel to the Successor Trust, dated as
of the Exchange Date, in a form reasonably satisfactory to the Original Trust,
covering the following points:
(i) The Successor Fund is a separate investment series of a
Delaware business trust duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.
(ii) The Successor Fund is a separate investment series of a
Delaware business trust registered as an investment company under the 1940 Act,
and, to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
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(iii) This Agreement has been duly authorized, executed, and
delivered by the Successor Trust and, assuming due authorization, execution and
delivery of this Agreement by the Original Trust, is a valid and binding
obligation of the Successor Trust enforceable against the Successor Trust in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and to general equity principles.
(iv) The Successor Fund Shares to be issued and delivered to
the Original Trust on behalf of the Original Fund shareholders as provided by
this Agreement are duly authorized and upon such delivery will be legally issued
and outstanding and fully paid and non-assessable, and no shareholder of the
Successor Fund has any preemptive rights in respect thereof.
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the State of Delaware is required for consummation by the Successor
Trust of the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the Securities Exchange Act of 1934, as amended and the 1940
Act, and as may be required under state securities laws.
(vi) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in a
violation of the Successor Trust's Declaration of Trust or By-Laws or any
provision of any material agreement, indenture, instrument, contract, lease or
other undertaking (in each case known to such counsel) to which the Successor
Trust is a party or by which it or any of its properties may be bound or to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which the
Successor Trust is a party or by which it is bound.
(vii) Only insofar as they relate to the Successor Trust and
the Successor Fund, the descriptions in the proxy materials of statutes, legal
and governmental proceedings and material contracts, if any, are accurate and
fairly present the information required to be shown.
(viii) Such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to the Successor Trust and the
Successor Fund, existing on or before the effective date of the proxy materials
or the Exchange Date required to be described in the proxy materials which are
not described or filed as required.
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(ix) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Successor Trust
or any of its properties or assets and the Successor Trust is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business, other
than as previously disclosed in the proxy materials.
Such opinion shall contain such assumptions and limitations as shall be in the
opinion of Sullivan & Worcester LLP appropriate to render the opinions expressed
therein.
6. THE SUCCESSOR TRUST'S AND THE ORIGINAL TRUST'S CONDITIONS PRECEDENT.
The obligations of both the Successor Trust and the Original Trust hereunder as
to the Successor Fund and the Original Fund respectively, shall be subject to
the following conditions:
(a) The receipt of such authority, including "no-action" letters and
orders from the Commission or state securities commissions, as may be necessary
to permit the parties to carry out the transaction contemplated by this
Agreement shall have been received.
(b) The Successor Trust's adoption of the Registration Statement on
Form N-1A under the 1933 Act shall have become effective, and any post-effective
amendments to such Registration Statement as are determined by the Trustees of
the Successor Trust to be necessary and appropriate, shall have been filed with
the Commission and shall have become effective.
(c) The Commission shall not have issued an unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted nor threatened to institute
any proceeding seeking to enjoin consummation of the reorganization transactions
contemplated hereby under Section 25(c) of the 1940 Act and no other action,
suit or other proceeding shall be threatened or pending before any court or
governmental agency which seeks to restrain or prohibit, or obtain damages or
other relief in connection with, this Agreement or the transactions contemplated
herein.
(d) All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky securities authorities,
including any necessary "no-action" positions of and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order, or
A-10
<PAGE>
permit would not involve a risk of a material adverse effect on the assets or
properties of the Successor Fund or the Original Fund, provided that either
party hereto may for itself waive any of such conditions.
(e) The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Successor Trust and the Original Trust
substantially to the effect that for federal income tax purposes:
(i) The transfer of all of the Original Fund assets in
exchange for the Successor Fund Shares and the assumption by the Successor Fund
of all the liabilities of the Original Fund followed by the distribution of the
Successor Fund Shares to the Original Fund shareholders in dissolution and
liquidation of the Original Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(F) of the Code and the Successor Fund and the
Original Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(ii) No gain or loss will be recognized by the Successor Fund
upon the receipt of the assets of the Original Fund solely in exchange for the
Successor Fund Shares and the assumption by the Successor Fund of the
liabilities of the Original Fund.
(iii) No gain or loss will be recognized by the Original Fund
upon the transfer of the Original Fund assets to the Successor Fund in exchange
for the Successor Fund Shares and the assumption by the Successor Fund of the
liabilities of the Original Fund or upon the distribution (whether actual or
constructive) of the Successor Fund Shares to Original Fund shareholders in
exchange for their shares of the Original Fund.
(iv) No gain or loss will be recognized by the Original Fund
shareholders upon the exchange of their Original Fund shares for the Successor
Fund Shares in liquidation of the Original Fund.
(v) The aggregate tax basis for the Successor Fund Shares
received by each Original Fund shareholder pursuant to the transactions
contemplated by this Agreement will be the same as the aggregate tax basis of
the Original Fund shares held by such shareholder immediately prior to the
transactions contemplated by this Agreement, and the holding period of the
Successor Fund Shares to be received by each Original Fund shareholder will
include the period during which the Original Fund shares exchanged therefor were
held by such shareholder (provided the Original Fund shares were held as capital
assets on the date of the transactions contemplated by this Agreement).
A-11
<PAGE>
(vi) The tax basis of the Original Fund assets acquired by the
Successor Fund will be the same as the tax basis of such assets to the Original
Fund immediately prior to the transactions contemplated by this Agreement, and
the holding period of the assets of the Original Fund in the hands of the
Successor Fund will include the period during which those assets were held by
the Original Fund.
Notwithstanding anything herein to the contrary, neither the Successor
Fund nor the Original Fund may waive the conditions set forth in Section 6.
Provided, however, that at any time prior to the Exchange Date, any of
the foregoing conditions in this Section 6 may be waived by the parties if, in
the judgment of the parties, such waiver will not have a material adverse effect
on the benefits intended under the Agreement to the shareholders of the Original
Fund.
7. INDEMNIFICATION. The Successor Trust hereby agrees with the Original
Trust and each Trustee of the Original Trust: (i) to indemnify each Trustee of
the Original Trust against all liabilities and expenses referred to in the
indemnification provisions of the Original Trust's organizational documents, to
the extent provided therein, incurred by any Trustee of the Original Trust; and
(ii) in addition to the indemnification provided in (i) above, to indemnify each
Trustee of the Original Trust against all liabilities and expenses and pay the
same as they arise and become due, without any exception, limitation or
requirement of approval by any person, and without any right to require
repayment thereof by any such Trustee (unless such Trustee has had the same
repaid to him or her) based upon any subsequent or final disposition or findings
made in connection therewith or otherwise, if such action, suit or other
proceeding involves such Trustee's participation in authorizing or permitting or
acquiescing in, directly or indirectly, by action or inaction, the making of any
distribution in any manner of all or any assets of the Original Fund without
making provision for the payment of any liabilities of any kind, fixed or
contingent, of the Original Fund, which liabilities were not actually and
consciously personally known to such Trustee to exist at the time of such
Trustee's participation in so authorizing or permitting or acquiescing in the
making of any such distribution.
8. TERMINATION OF AGREEMENT. As to the Original Fund and the
corresponding Successor Fund, this Agreement and the transactions contemplated
hereby may be terminated and abandoned by resolution of the Board of Trustees of
the Original Trust or the Board of Trustees of the Successor Trust, at any time
prior to the Exchange Date (and notwithstanding any vote of the shareholders of
the Original Fund) if circumstances should develop that, in the opinion of
either the
A-12
<PAGE>
Board of Trustees of the Original Trust or the Board of Trustees of the
Successor Trust, make proceeding with this Agreement inadvisable.
As to the Original Fund and the Successor Fund, if this Agreement is
terminated and the exchange contemplated hereby is abandoned pursuant to the
provisions of this Section 8, this Agreement shall become void and have no
effect, without any liability on the part of any party hereto or the Trustees,
officers or shareholders of the Successor Trust or the Trustees, officers or
shareholders of the Original Trust, in respect of this Agreement.
9. WAIVER AND AMENDMENTS. At any time prior to the Exchange Date, any
of the conditions set forth in Section 4 may be waived by the Board of Trustees
of the Successor Trust, and any of the conditions set forth in Section 5 may be
waived by the Board of Trustees of the Original Trust, if, in the judgment of
the waiving party, such waiver will not have a material adverse effect on the
benefits intended under this Agreement to the shareholders of the Original Fund
or the shareholders of the Successor Fund, as the case may be. In addition,
prior to the Exchange Date, any provision of this Agreement may be amended or
modified by the Board of Trustees of the Original Trust and the Board of
Trustees of the Successor Trust in such manner as may be mutually agreed upon in
writing by such Trustees if such amendment or modification would not have a
material adverse effect upon the benefits intended under this Agreement and
would be consistent with the best interests of shareholders.
10. NO SURVIVAL OF REPRESENTATIONS. None of the representations
and warranties included or provided for herein shall survive consummation of the
transactions contemplated hereby.
11. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to
principles of conflict of laws; provided, however, that the due authorization,
execution and delivery of this Agreement, in the case of the Original Trust,
shall be governed and construed in accordance with the laws of the Commonwealth
of Massachusetts without giving effect to principles of conflict of laws.
12. CAPACITY OF TRUSTEES, ETC. With respect to both the Original Trust
and the Successor Trust, the names used herein refer respectively to the Trust
created and, as the case may be, the Trustees, as trustees but not individually
or personally, acting from time to time under organizational documents filed in
Massachusetts in the case of the Original Trust and Delaware, in the case of the
Successor Trust, which are hereby referred to and are also on file at the
principal offices of the Original Trust or, as the case may be, the Successor
Trust. The obligations of the Original Trust or of the Successor Trust entered
into in the
A-13
<PAGE>
name or on behalf thereof by any of the Trustees, representatives or agents of
the Original Trust or the Successor Trust, as the case may be, are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Original Trust or, as the case
may be, the Successor Trust personally, but bind only the trust property, and
all persons dealing with any Original Fund of the Original Trust or any
Successor Fund of the Successor Trust must look solely to the trust property
belonging to such Original Fund or, as the case may be, Successor Fund for the
enforcement of any claims against the Original Fund or, as the case may be,
Successor Fund.
13. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
A-14
<PAGE>
IN WITNESS WHEREOF, the Original Trust and the Successor Trust have
caused this Agreement and Plan of Conversion and Termination to be executed as
of the date above first written.
[Original Trust on behalf of]
[Original Fund]
ATTEST:_______________________ By:___________________________
Title:
[Successor Trust]
on behalf of
[Successor Fund]
ATTEST:_______________________ By:___________________________
Title:
A-15
<PAGE>
EXHIBIT B
B-1
<PAGE>
B-2
<PAGE>
B-3
<PAGE>
MANAGEMENT OF THE SUCCESSOR TRUSTS
Each Successor Trust is supervised by a Board of Trustees that is
responsible for representing the interests of the shareholders. The Trustees
meet periodically throughout the year to oversee the Successor Funds'
activities, reviewing, among other things, each Successor Fund's performance and
its contractual arrangements with various service providers. Each Trustee is
paid a fee for his or her services.
Each Successor Trust has an Executive Committee which consists of the
Chairman of the Board, James Howell, and Messrs. Scofield and Salton, each of
whom is an Independent Trustee. The Executive Committee recommends Trustees to
fill vacancies, prepares the agenda for Board meetings and acts on routine
matters between scheduled Board meetings.
Set forth below are the Trustees and officers of each Successor Trust
and their principal occupations and affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley
B-4
<PAGE>
Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of each of
the other Trusts in the Evergreen Fund complex.
<TABLE>
<CAPTION>
Position with
Name Trust Principal Occupations for Last Five Years
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction
(DOB: 2/2/28) consultant; and President of Centrum
Equities (real estate development) and
Centrum Properties, Inc. (real estate
development).
Charles A. Austin III Trustee Investment Counselor to Appleton
(DOB: 10/23/34) Partners, Inc. (investment
advice); former
Director,
Executive Vice
President and
Treasurer,
State Street
Research &
Management
Company
(investment
advice);
Director, The
Andover
Companies
(Insurance);
and Trustee,
Arthritis
Foundation of
New England.
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the
(DOB: 10/12/38) Finance Committee, Cambridge College;
Chairman
Emeritus and
Director,
American
Institute of
Food and Wine;
Chairman and
President,
Oldways
Preservation
and Exchange
Trust
(education);
former Chairman
of the Board,
Director, and
Executive Vice
President, The
London Harness
Company
(leather goods
purveyor);
former Managing
Partner,
Roscommon
Capital Corp.;
former Chief
Executive
Officer,
Gifford Gifts
of Fine Foods;
former
Chairman,
Gifford,
Drescher &
Associates
(environmental
consulting).
James S. Howell Chairman of Former Chairman of the Distribution
(DOB: 8/13/24) the Board of Committee, Foundation for the Carolinas;
Trustees and former Vice President of Lance Inc.
(food manufacturing).
B-5
<PAGE>
Leroy Keith, Jr. Trustee Chairman of the Board and Chief
(DOB: 2/14/39) Executive Officer, Carson Products
Company
(manufacturing);
Director of
Phoenix Total
Return Fund and
Equifax, Inc.
(worldwide
information
management);
Trustee of
Phoenix Series
Fund, Phoenix
Multi-Portfolio
Fund, and The
Phoenix Big
Edge Series
Fund; and
former
President,
Morehouse
College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto,
(DOB: 7/14/39) Inc. (steel producer).
Thomas L. McVerry Trustee Former Vice President and Director of
(DOB: 8/2/39) Rexham Corporation (manufacturing); and
former Director of Carolina Cooperative
Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt
(DOB: 8/26/55) Pettit, P.A.
David M. Richardson Trustee Vice Chair and former Executive Vice
(DOB: 9/14/41) President, DHR International, Inc.
(executive recruitment); former Senior
Vice President, Boyden International Inc.
(executive recruitment); and Director,
Commerce and Industry Association of
New Jersey, 411 International, Inc.
(communications), and J&M Cumming
Paper Co.
Russell A. Salton, III, MD Trustee Medical Director, U.S. Health Care/Aetna
(DOB: 6/2/47) Health Services; former Managed Health
Care Consultant; and former
President, Primary Physician Care.
Michael S. Scofield Vice Attorney, Law Offices of Michael S.
(DOB: 2/20/43) Chairman of Scofield.
the Board of
Trustees
B-6
<PAGE>
Richard J. Shima Trustee Former Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance agency);
Executive
Consultant,
Drake Beam
Morin, Inc.
(executive
outplacement);
Director of
Connecticut
Natural Gas
Corporation,
Hartford
Hospital, Old
State House
Association,
Middlesex
Mutual
Assurance
Company
(property
casualty
insurance), and
Enhance
Financial
Services, Inc.
(financial
guaranty
insurance);
Chairman, Board
of Trustees,
Hartford
Graduate
Center;
Trustee,
Greater
Hartford YMCA;
former
Director, Vice
Chairman and
Chief
Investment
Officer, The
Travelers
Corporation;
former Trustee,
Kingswood-
Oxford School;
and former
Managing
Director and
Consultant,
Russell Miller,
Inc.
(investment
banking
specializing in
the insurance
industry).
Anthony J. Fischer* President and Vice President/Client Services, BISYS
(DOB: 2/20/59) Treasurer Fund Services.
Nimish S. Bhatt** Vice President Vice President, Tax,
(DOB: 6/6/63) and Assistant BISYS Fund Services; Assistant Vice
Treasurer President,
Evergreen Asset
Management
Corp./First
Union Bank;
former Senior
Tax
Consulting/Acting
Manager,
Investment
Companies
Group,
PricewaterhouseCoopers
LLP, New York.
Bryan Haft** Vice President Team Leader, Fund Administration, BISYS
(DOB: 1/23/65 Fund Services.
Michael H. Koonce Secretary Senior Vice President and Assistant
(DOB: 4/20/60) General Counsel, First Union Corporation;
former Senior Vice President and General
Counsel, Colonial Management
Associates, Inc.
</TABLE>
* Address: BISYS, 90 Park Avenue, 10th Floor, New York New York 10016
**Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
Trustee Compensation
B-7
<PAGE>
Listed below is the Trustee compensation paid by the nine Successor
Trusts in the Evergreen Fund Complex for the twelve months ended April 30, 1999.
The Trustees do not receive pension or retirement benefits from the Funds.
Trustee Total Compensation from
the Successor Trusts
Paid to Trustees*
Laurence B. Ashkin $75,000
Charles A. Austin, III $75,000
K. Dun Gifford $72,500
James S. Howell $97,500
Leroy Keith, Jr. $72,500
Gerald M. McDonnell $75,000
Thomas L. McVerry $86,000
William Walt Pettit $72,500
David M. Richardson $71,875
Russell A. Salton, III, MD $77,500
Michael S. Scofield $77,500
Richard J. Shima $72,500
*Certain Trustees have elected to defer all or part of their total compensation
for the twelve months ended April 30, 1999. The amounts listed below will be
payable in later years to the respective Trustees:
Charles A. Austin, III $11,250
James S. Howell $77,600
Gerald M. McDonnell $75,000
Thomas L. McVerry $86,000
William Walt Pettit $72,500
Russell A. Salton, III, MD $77,000
Michael S. Scofield $11,250
B-8
<PAGE>
EXHIBIT C
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
INDEX
<TABLE>
<CAPTION>
Page C-
<S> <C>
I. Mentor Funds
Mentor Growth Portfolio................................................................. 2
Mentor Perpetual Global Portfolio....................................................... 7
Mentor Capital Growth Portfolio......................................................... 11
Mentor Balanced Portfolio............................................................... 15
Mentor Quality Income Portfolio......................................................... 19
Mentor High Income Portfolio............................................................ 22
II. Mentor Institutional Trust
Mentor Fixed-Income Portfolio........................................................... 26
Mentor Perpetual International Portfolio................................................ 28
</TABLE>
C-1
<PAGE>
MENTOR FUNDS
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR GROWTH PORTFOLIO
<S> <C> <C>
1. Investment Objective The Growth Portfolio's investment objective is
(R) long-term capital growth. Although the
Portfolio may receive current
income from dividends,
interest, and other sources,
income is only an incidental
consideration.
2. Diversification The Portfolio may not purchase any security if
(S) as a result the Portfolio would then hold more
than 10% of any class of
securities of an issuer
(taking all common stock
issues of an issuer as a
single class, all preferred
stock issues as a single
class, and all debt issues as
a single class) or more than
10% of the outstanding voting
securities of an issuer.
The Portfolio may not purchase
any security (other than
obligations of the U.S.
Government, its agencies or
instrumentalities) if as a
result: more than 5% of the
Portfolio's total assets
(taken at current value) would
then be invested in securities
of a single issuer.
3. Concentration The Portfolio may not purchase any security
(S) (other than obligation of the U.S. Government,
its agencies or instrumentalities) if as a result:
more than 25% of the Portfolio's total assets
(taken at current value) would be invested in a
single industry.
C-2
<PAGE>
4. Issuing Senior Securities The Portfolio may not issue any securities
(S) which are senior to the
Portfolio's shares as
described herein and in the
relevant prospectus.
5. Borrowing (Including The Portfolio may not borrow money or pledge
Reverse Repurchase its assets except that the Portfolio may borrow
Agreements) from banks for temporary or emergency
(S) purposes (including the meeting of redemption
requests which might otherwise
require the untimely
disposition of securities) in
amounts not exceeding 10%
(taken at the lower of cost or
market value) of its total
assets (not including the
amount borrowed) and pledge
its assets to secure such
borrowings; provided that the
Portfolio will not purchase
additional portfolio
securities when such
borrowings exceed 5% of its
total assets. (Collateral or
margin arrangements with
respect to options, futures
contracts, or other financial
instruments are not considered
to be pledges.)
6. Underwriting Securities of The Portfolio may not act as underwriter of
Other Issuers securities of other issuers except to the extent
(S) that, in connection with the disposition of
portfolio securities, it may be deemed to be an
underwriter under certain federal securities
laws.
7. Real Estate The Portfolio may not purchase or sell real estate or
(S) interests in real estate, including real
estate mortgage loans,
although it may purchase and
sell securities which are
secured by real estate and
securities of companies that
invest or deal in real estate.
(For purposes of this
restriction, investments by a
Portfolio in mortgage-backed
securities and other
securities representing
interests in mortgage pools
shall not constitute the
purchase or sale of real
estate or interests in real
estate or real estate mortgage
loans.)
C-3
<PAGE>
8. Commodities The Portfolio may not purchase or sell
(S) commodities or commodity contracts, except
that the Portfolio may purchase or sell financial
futures contracts, options on financial futures
contracts, and futures contracts, forward
contracts, and options with respect to foreign
currencies, and may enter into swap
transactions.
9. Loans to Others The Portfolio may not make loans, except
(S) through (i) repurchase agreements (repurchase
agreements with a maturity of
longer than 7 days together
with other illiquid assets
being limited to 10% of the
Portfolio's assets,) and (ii)
loans of portfolio securities
(limited to 33% of the
Portfolio's total assets).
10. Short Sales The Portfolio may not make short sales of
(R) securities or maintain a short position, unless at
all times when a short
position is open, it owns an
equal amount of such
securities or securities
convertible into or
exchangeable, without payment
of any further consideration,
for securities of the same
issue as, and equal in amount
to, the securities sold short
("short sale
against-the-box"), and unless
not more than 25% of the
Portfolio's net assets (taken
at current value) is held as
collateral for such sales at
any one time.
11. Margin Purchases The Portfolio may not purchase securities on
(R) margin (but the Portfolio may obtain such
short-term credits as may be
necessary for the clearance of
transactions). (Margin
payments in connection with
transactions in futures
contracts, options, and other
financial instruments are not
considered to constitute the
purchase of securities on
margin for this purpose.)
12. Pledging See "Borrowing."
(R)
C-4
<PAGE>
13. Restricted Securities The Portfolio may not purchase any security
(R) restricted as to disposition
under federal securities laws
if as a result more than 5% of
the Portfolio's total assets
(taken at current value) would
be invested in restricted
securities.
14. Unseasoned Issuers The Portfolio may not purchase any security if
(R) as a result the Portfolio would then have more
than 5% of its total assets
(taken at current value)
invested in securities of
companies (including
predecessors) less than three
years old.
15. Illiquid Securities The Portfolio may not invest in equity securities
(R) for which market quotations are not readily
available.
16. Officers' and Directors' The Portfolio may not invest in securities of any
Ownership of Shares issuer if, to the knowledge of the Trust, any
(R) officer or Trustee of the Trust or of Mentor
Investment Advisors, LLC as
the case may be, owns more
than 1/2 of 1% of the
outstanding securities of such
issuer, and such officers and
Trustees who own more than 1/2
of 1% own in the aggregate
more than 5% of the
outstanding securities of such
issuer.
17. Control or Management The Portfolio may not make investments for the
(R) purpose of exercising control or management.
18. Joint Trading The Portfolio may not participate on a joint or a
(R) joint and several basis in any trading account in
securities.
19. Other Investment The Portfolio may not invest in securities of
Companies other registered investment companies, except (R) by
purchases in the open market involving only
customary brokerage
commissions and as a result of
which not more than 5% of its
total assets (taken at current
value) would be invested in
such securities, or except as
part of a merger,
consolidation or other
acquisition.
C-5
<PAGE>
20. Oil, Gas and Minerals The Portfolio may not invest in interests in oil,
(R) gas or other mineral exploration or development
programs or leases, although
it may invest in the common
stocks of companies that
invest in or sponsor such
programs.
21. Foreign Securities The Portfolio may not purchase foreign
(R) securities or currencies except foreign
securities which are American
Depositary Receipts listed on
exchanges or otherwise traded
in the United States and
certificates of deposit,
bankers' acceptances and other
obligations of foreign banks
and foreign branches of U.S.
banks if, giving effect to
such purchase, such
obligations would constitute
less than 10% of the Trust's
total assets (at current
value).
22. Warrants The Portfolio may not purchase warrants if as a
(R) result the Portfolio would then have more than
5% of its total assets (taken
at current value) invested in
warrants.
</TABLE>
C-6
<PAGE>
MENTOR FUNDS
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR PERPETUAL GLOBAL PORTFOLIO
<S> <C> <C>
1. Investment Objective The investment objective of the Global Portfolio
(R) is to seek long-term growth of
capital through a diversified
portfolio of marketable
securities made up primarily
of equity securities,
including common stocks,
preferred stocks, securities
convertible into common
stocks, and warrants.
2. Diversification With respect to 75% of the value of its
(S) respective total assets, the Portfolio will not
purchase securities issued by
any one issuer (other than
cash or securities issued or
guaranteed by the government
of the United States or its
agencies or instrumentalities
and repurchase agreements
collateralized by such
securities), if as a result
more than 5% of the value of
its total assets would be
invested in the securities of
that issuer. The Portfolio
will not acquire more than 10%
of the outstanding voting
securities of any one issuer.
3. Concentration The Portfolio will not invest 25% or more of
(S) the value of its respective total assets in any
one industry (other than securities issued by
the U.S. Government, its agencies or
instrumentalities).
4. Issuing Senior Securities See "Borrowing."
(S)
C-7
<PAGE>
5. Borrowing (Including The Portfolio will not issue senior securities
Reverse Repurchase except that the Portfolio may borrow money
Agreements) directly or through reverse repurchase
(S) 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
the Portfolio may enter into
futures contracts. The
Portfolio 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 Portfolio
will not purchase any
securities while any
borrowings in excess of 5% of
its total assets are
outstanding. Notwithstanding
this restriction, the
Portfolios may enter into
when- issued and delayed
delivery transactions.
6. Underwriting Securities of The Portfolio will not underwrite any issue of
Other Issuers securities, except as the Portfolio may be
(S) deemed to be an underwriter under the
Securities Act of 1933 in
connection with the sale of
securities in accordance with
its investment objective,
policies, and limitations.
7. Real Estate The Portfolio will not purchase or sell real estate,
(S) including limited partnership interests,
although the Portfolio may
invest in securities of
issuers whose business
involves the purchase or sale
of real estate in securities
which are secured by real
estate or interests in real
estate.
8. Commodities The Portfolio will not invest in commodities,
(S) except to the extent that the Portfolio may
engage in transactions involving futures
contracts or options on futures contracts.
C-8
<PAGE>
9. Loans to Others The Portfolio will not lend any of its respective
(S) assets except portfolio securities up to one-
third of the value of total assets. This shall not
prevent the Portfolio from purchasing or holding
U.S. government obligations, money market
instruments, variable amount demand master
notes, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering
into repurchase agreements, or engaging in
other transactions where permitted by the
Portfolio's investment objective, policies and
limitations or Declaration of Trust.
10. Short Sales See "Margin Purchases."
(R)
11. Margin Purchases The Portfolio will not sell any securities short or
(R) purchase any securities on margin, but may
obtain such short-term credits
as are necessary for clearance
of purchases and sales of
securities. The deposit or
payment by the Portfolio or
initial or variation margin in
connection with futures
contracts or related options
transactions is not considered
the purchase of a security on
margin.
C-9
<PAGE>
Topic MENTOR PERPETUAL GLOBAL PORTFOLIO
12. Pledging The Portfolio will not mortgage, pledge, or
(R) hypothecate any assets, except to secure
permitted borrowings. In these cases the
Portfolio 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 the Portfolio's assets.
Margin deposits for the purchase and sale of
futures contracts and related options are not
deemed to be a pledge.
13. Restricted Securities The Portfolio will not invest more than 10% of
(R) the value of its net assets in restricted
securities.
</TABLE>
C-10
<PAGE>
MENTOR FUNDS
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR CAPITAL GROWTH PORTFOLIO
<S> <C> <C>
1. Investment Objective The investment objective of the Capital Growth
(R) Portfolio is to provide
long-term appreciation of
capital.
2. Diversification With respect to 75% of the value of its
(S) respective total assets, the Portfolio will not
purchase securities issued by
any one issuer (other than
cash or securities issued or
guaranteed by the government
of the United States or its
agencies or instrumentalities
and repurchase agreements
collateralized by such
securities), if as a result
more than 5% of the value of
its total assets would be
invested in the securities of
that issuer. The Portfolio
will not acquire more than 10%
of the outstanding voting
securities of any one issuer.
3. Concentration The Portfolio will not invest 25% or more of
(S) the value of its respective total assets in any
one industry (other than securities issued by
the U.S. Government, its agencies or
instrumentalities).
4. Issuing Senior Securities See "Borrowing."
(S)
C-11
<PAGE>
5. Borrowing (Including The Portfolio will not issue senior securities
Reverse Repurchase except that the Portfolio may borrow money
Agreements) directly or through reverse repurchase
(S) 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
the Portfolio may enter into
futures contracts. The
Portfolio 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 Portfolio
will not purchase any
securities while any
borrowings in excess of 5% of
its total assets are
outstanding. Notwithstanding
this restriction, the
Portfolio may enter into when-
issued and delayed delivery
transactions.
6. Underwriting Securities of The Portfolio will not underwrite any issue of
Other Issuers securities, except as the Portfolio may be
(S) deemed to be an underwriter under the
Securities Act of 1933 in
connection with the sale of
securities in accordance with
its investment objective,
policies, and limitations.
7. Real Estate The Portfolio will not purchase or sell real estate,
(S) including limited partnership interests,
although the Portfolio may
invest in securities of
issuers whose business
involves the purchase or sale
of real estate in securities
which are secured by real
estate or interests in real
estate.
8. Commodities The Portfolio will not invest in commodities,
(S) except to the extent that the Portfolio may
engage in transactions involving futures
contracts.
C-12
<PAGE>
9. Loans to Others The Portfolio will not lend any of their
(S) respective assets except portfolio securities up
to one-third of the value of total assets. This
shall not prevent the Portfolio from purchasing
or holding U.S. government obligations, money
market instruments, variable amount demand
master notes, bonds, debentures, notes,
certificates of indebtedness, or other debt
securities, entering into repurchase agreements,
or engaging in other transactions where
permitted by the Portfolio's investment
objective, policies and limitations or Declaration
of Trust.
10. Short Sales See "Margin Purchases."
(R)
11. Margin Purchases The Portfolio will not sell any securities short or
(R) purchase any securities on margin, but may
obtain such short-term credits
as are necessary for clearance
of purchases and sales of
securities. The deposit or
payment by the Portfolio or
initial or variation margin in
connection with futures
contracts or related options
transactions is not considered
the purchase of a security on
margin.
C-13
<PAGE>
12. Pledging The Portfolio will not mortgage, pledge, or
(R) hypothecate any assets, except to secure
permitted borrowings. In these cases the
Portfolio 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 the Portfolio's assets.
Margin deposits for the purchase and sale of
futures contracts and related options are not
deemed to be a pledge.
13. Restricted Securities The Portfolio will not invest more than 10% of
(R) the value of its net assets in restricted
securities.
</TABLE>
C-14
<PAGE>
MENTOR FUNDS
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR BALANCED PORTFOLIO
<S> <C> (C)
1. Investment Objective Mentor Balanced Portfolio's
(R) investment objective is to
seek capital growth and
current income.
2. Diversification The Portfolio may not purchase any security
(S) (other than obligations of the U.S. Government,
its agencies or
instrumentalities) if as a
result: (i) more than 5% of
the Portfolio's total assets
(taken at current value) would
then be invested in securities
of a single issuer; provided
that the restriction shall
apply only as to 75% of such
Portfolio's total assets.
3. Concentration The Portfolio may not purchase any security
(S) (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result:
more than 25% of the Portfolio's total assets
(taken at current value) would be invested in a
single industry.
4. Issuing Senior Securities The Portfolio may not issue any securities
(S) which are senior to the Portfolio's shares as
described herein and in the relevant prospectus,
except that the Portfolio may borrow money to
the extent contemplated by the restriction on
borrowing below. (See "Borrowing.")
C-15
<PAGE>
5. Borrowing (Including The Portfolio may not borrow more than 33
Reverse Repurchase 1/3% of the value of its total assets less all
Agreements) liabilities and indebtedness (other than such
(S) borrowings) not represented by senior
securities.
6. Underwriting Securities of The Portfolio may not act as underwriter of
Other Issuers securities of other issuers except to the extent
(S) that, in connection with the disposition of
portfolio securities, it may be deemed to be an
underwriter under certain federal securities
laws.
7. Real Estate The Portfolio may not purchase or sell real estate or
(S) interests in real estate, including real
estate mortgage loans,
although it may purchase and
sell securities which are
secured by real estate and
securities of companies that
invest or deal in real estate
(or real estate or limited
partnership interests). (For
purposes of this restriction,
investments by the Portfolio
in mortgage-backed securities
and other securities
representing interests in
mortgage pools shall not
constitute the purchase or
sale of real estate or
interests in real estate or
real estate mortgage loans.)
8. Commodities The Portfolio may not purchase or sell
(S) commodities or commodity contracts, except
that the Portfolio may
purchase or sell financial
futures contracts, options on
financial futures contracts,
and futures contracts, forward
contracts, and options with
respect to foreign currencies,
and may enter into swap
transactions.
C-16
<PAGE>
9. Loans to Others The Portfolio may not make loans, except by
(S) purchase of debt obligations in which the
Portfolio may invest consistent with its
investment policies, by entering into repurchase
agreements with respect to not more than 25%
of its total assets (taken at current value), or
through the lending of its portfolio securities
with respect to not more than 25% of its total
assets.
10. Short Sales The Portfolio may not make short sales of
(R) securities or maintain a short position, unless at
all times when a short
position is open, it owns an
equal amount of such
securities or securities
convertible into or
exchangeable, without payment
of any further consideration,
for securities of the same
issue as, and equal in amount
to, the securities sold short
("short sale
against-the-box"), and unless
not more than 25% of the
Portfolio's net assets (taken
at current value) is held as
collateral for such sales at
any one time.
11. Margin Purchases The Portfolio may not purchase securities on
(R) margin (but the Portfolio may obtain such
short-term credits as may be
necessary for the clearance of
transactions). (Margin
payments in connection with
transactions in futures
contracts, options, and other
financial instruments are not
considered to constitute the
purchase of securities on
margin for this purpose.)
12. Unseasoned Issuers The Portfolio may not purchase any security if
(R) as a result the Portfolio would then have more
than 5% of its total assets
(taken at current value)
invested in securities of
companies (including
predecessors) less than three
years old.
C-17
<PAGE>
13. Officers' and Directors' The Portfolio may not invest in securities of any
Ownership of Shares issuer if, to the knowledge of the Trust, any
(R) officer or Trustee of the Trust or of Mentor
Investment Advisors, LLC as
the case may be, owns more
than 1/2 of 1% of the
outstanding securities of such
issuer, and such officers and
Trustees who own more than 1/2
of 1% own in the aggregate
more than 5% of the
outstanding securities of such
issuer.
14. Control or Management The Portfolio may not make investments for the
(R) purpose of exercising control or management.
15. Oil, Gas and Minerals The Portfolio may not invest in interests in oil,
(R) gas or other mineral exploration or development
programs or leases, although
it may invest in the common
stocks of companies that
invest in or sponsor such
programs.
</TABLE>
C-18
<PAGE>
MENTOR FUNDS
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR QUALITY INCOME PORTFOLIO
<S> <C> <C>
1. Investment Objective The Quality Income Portfolio's investment
(R) objective is to seek high current income
consistent with what Mentor Advisors believes
to be prudent risk.
2. Diversification With respect to 75% of the value of its
(S) respective total assets, the Portfolio will not
purchase securities issued by
any one issuer (other than
cash or securities issued or
guaranteed by the government
of the United States or its
agencies or instrumentalities
and repurchase agreements
collateralized by such
securities), if as a result
more than 5% of the value of
its total assets would be
invested in the securities of
that issuer. The Portfolio
will not acquire more than 10%
of the outstanding voting
securities of any one issuer.
3. Concentration The Portfolio will not invest 25% or more of
(S) the value of its respective total assets in any
one industry (other than securities issued by
the U.S. government, its agencies or
instrumentalities).
4. Issuing Senior Securities The Portfolio will not issue any class of
(S) securities which are senior to the Portfolio's
shares except that the Portfolio may borrow
money as contemplated by the restriction on
borrowing below. See "Borrowing" below.
C-19
<PAGE>
5. Borrowing (Including The Portfolio will not borrow more than 33
Reverse Repurchase 1/3% of the value of its total assets less all
Agreements) liabilities and indebtedness (other than such
(S) borrowings).
During the period any reverse
repurchase agreements are
outstanding, the 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 Portfolio may
enter into when- issued and
delayed delivery transactions.
6. Underwriting Securities of The Portfolio will not underwrite any issue of
Other Issuers securities, except as the Portfolio may be
(S) deemed to be an underwriter under the
Securities Act of 1933 in
connection with the sale of
securities in accordance with
its investment objective,
policies, and limitations.
7. Real Estate The Portfolio will not purchase or sell real estate,
(S) including limited partnership interests,
although the Portfolio may
invest in securities of
issuers whose business
involves the purchase or sale
of real estate in securities
which are secured by real
estate or interests in real
estate.
8. Commodities The Portfolio will not invest in commodities,
(S) except to the extent that the Portfolio may
engage in transactions involving futures
contracts or options on futures contracts.
C-20
<PAGE>
9. Loans to Others The Portfolio will not lend any of its respective
(S) assets except portfolio securities up to one-
third of the value of total assets. This shall not
prevent the Portfolio from purchasing or holding
U.S. government obligations, money market
instruments , variable amount demand master
notes, bonds, debentures, notes, certificates of
indebtedness, or other debt securities, entering
into repurchase agreements, or engaging in
other transactions where permitted by the
Portfolio's investment objective, policies and
limitations or Declaration of Trust.
10. Short Sales See "Margin Purchases."
(R)
11. Margin Purchases The Portfolio will not sell any securities short or
(R) purchase any securities on margin, but may
obtain such short-term credits
as are necessary for clearance
of purchases and sales of
securities. The deposit or
payment by the Portfolio or
initial or variation margin in
connection with futures
contracts or related options
transactions is not considered
the purchase of a security on
margin.
12. Restricted Securities The Portfolio will not invest more than 15% of
(R) the value of its net assets in restricted
securities.
</TABLE>
C-21
<PAGE>
MENTOR FUNDS
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR HIGH INCOME PORTFOLIO
<S> <C> <C>
1. Investment Objective The Portfolio's investment objective is to seek
(R) high current income. Capital
growth is a secondary
objective when consistent with
the objective of seeking high
current income.
2. Diversification The Portfolio may not purchase any security
(S) (other than U.S. Government securities) if as a
result: as to 75% of such
Portfolio's total assets, more
than 5% of the Portfolio's
total assets (taken at current
value) would then be invested
in securities of a single
issuer.
The Portfolio may not acquire
more than 10% of the voting
securities of any issuer.
3. Concentration The Portfolio may not purchase any security (other
(S) than U.S. Government securities) if as a
result: more than 25% of the Portfolio's total
assets would be invested in a single industry.
4. Issuing Senior Securities The Portfolio may not issue any class of
(S) securities which is senior to the Portfolio's
shares of beneficial interest, except as
contemplated by the restriction on borrowing
below. (See "Borrowing.")
5. Borrowing (Including The Portfolio may not borrow more than 33
Reverse Repurchase 1/3% of the value of its total assets less all
Agreements) liabilities and indebtedness (other than such
(S) borrowings)
C-22
<PAGE>
6. Underwriting Securities of The Portfolio may not act as underwriter of
Other Issuers securities of other issuers except to the extent
(S) that, in connection with the disposition of
portfolio securities, it may be deemed to be an
underwriter under certain federal securities
laws.
7. Real Estate The Portfolio may not purchase or sell real
(S) estate or interests in real estate, including real
estate mortgage loans,
although it may purchase and
sell securities which are
secured by real estate and
securities of companies that
invest or deal in real estate
or real estate limited
partnership interests. (For
purposes of this restriction,
investments by a Portfolio in
mortgage-backed securities and
other securities representing
interests in mortgage pools
shall not constitute the
purchase or sale of real
estate or interests in real
estate or real estate mortgage
loans.)
8. Commodities The Portfolio may not purchase or sell
(S) commodities or commodity contacts, except
that a Portfolio may purchase
or sell financial futures
contacts, options on futures
contracts, and futures
contracts, forward contracts,
and options with respect to
foreign currencies, and may
enter into swap transactions.
9. Loans to Others The Portfolio may not make loans, except by
(S) purchase of debt obligations in which the
Portfolio may invest
consistent with its investment
policies, by entering into
repurchase agreements, or by
lending its portfolio
securities.
</TABLE>
C-23
<PAGE>
MENTOR INSTITUTIONAL TRUST
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR FIXED-INCOME PORTFOLIO
<S> <C> <C>
1. Diversification The Portfolio may not purchase any security (other than
(S) U.S. Government securities) if as a result as to 75% of
the Portfolio's total assets, more
than 5% of the Portfolio's total
assets (taken at current value)
would then be invested in securities
of a single issuer. The Portfolio
may not acquire more than 10% of the
voting securities of any issuer.
2. Concentration The Portfolio may not purchase any security other than
(S) U.S. Government securities) if as a result more than 25%
of the Portfolio's total assets would be invested in a
single industry.
3. Issuing Senior The Portfolio may not issue any class of securities
Securities which is senior to the Portfolio's shares of beneficial
(S) interest.
4. Borrowing The Portfolio may not borrow money in excess of 5% of
(S) the value (taken at the lower of cost or current value) of
its total assets (not including the
amount borrowed) at the time the
borrowing is made, and then only
from banks as a temporary measure to
facilitate the meeting of redemption
requests (not for leverage) which
might otherwise require the untimely
disposition of portfolio investments
or for extraordinary or emergency
purposes.
C-24
<PAGE>
5. Underwriting The Portfolio may not act as underwriter of securities
Securities of Other of other issuers except to the extent that, in
Issuers connection with the disposition of portfolio securities, it
(S) may be deemed to be an underwriter under certain federal
securities laws.
6. Real Estate The Portfolio may not purchase or sell real estate or
(S) interests in real estate, including real estate mortgage
loans, although it may purchase and
sell securities which are secured by
real estate or real estate limited
partnership interests. (For purposes
of this restriction, investments by
the Portfolio in mortgage-backed
securities and other securities
representing interests in mortgage
pools shall not constitute the
purchase or sale of real estate or
interests in real estate or real
estate mortgage loans.)
7. Commodities The Portfolio may not purchase or sell commodities or
(S) commodity contracts, except that the Portfolio may
purchase or sell financial futures
contracts, options on futures
contracts, and futures contracts,
forward contracts, and options with
respect to foreign currencies, and
may enter into swap transactions.
8. Loans to Others The Portfolio may not make loans, except by purchase
(S) of debt obligations in which the Portfolio may invest
consistent with its investment policies or by entering into
repurchase agreements.
9. Margin Purchases The Portfolio may not purchase or sell securities on
(R) margin (but the Portfolio may obtain such short-term
credits as may be necessary for the
clearance of transactions). (Margin
payments in connection with
transactions in futures contracts,
options, and other financial
instruments are not considered to
constitute the purchase of
securities on margin for this
purpose.)
10. Pledging The Portfolio may not pledge, hypothecate, mortgage, or
(R) otherwise encumber its assets in excess of 15% of its
total assets (taken at current
value) and then only to secure
borrowings permitted by these
investment restrictions.
</TABLE>
MENTOR INSTITUTIONAL TRUST
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
"S": Fundamental Restriction to be Standardized
"R": Fundamental Restriction to be Reclassified as
Nonfundamental
<TABLE>
<CAPTION>
Topic MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
<S> <C> <C>
1. Diversification The Portfolio may not purchase any security (other than
(S) U.S. Government securities) if as a result as to 75% of
the Portfolio's total assets, more than 5% of the
Portfolio's total assets (taken at current value) would
then be invested in securities of a single issuer. The
Portfolio may not acquire more than 10% of the voting
securities of any issuer.
2. Concentration The Portfolio may not purchase any security other than
(S) U.S. Government securities) if as a result more than 25%
of the Portfolio's total assets would be invested in a
single industry.
3. Issuing Senior The Portfolio may not issue any class of securities
Securities which is senior to the Portfolio's shares of beneficial
(S) interest.
4. Borrowing The Portfolio may not borrow more than 33% of the
(S) value of its total assets less all liabilities and
indebtedness (other than such borrowings) not
represented by senior securities.
C-25
<PAGE>
5. Underwriting The Portfolio may not act as underwriter of securities of
Securities of Other other issuers except to the extent that, in connection
Issuers with the disposition of portfolio securities, it may be
(S) deemed to be an underwriter under certain federal
securities laws.
6. Real Estate The Portfolio may not purchase or sell real estate or
(S) interests in real estate, including real estate mortgage
loans, although it may purchase and
sell securities which are secured by
real estate or real estate limited
partnership interests. (For purposes
of this restriction, investments by
the Portfolio in mortgage-backed
securities and other securities
representing interests in mortgage
pools shall not constitute the
purchase or sale of real estate or
interests in real estate or real
estate mortgage loans.)
7. Commodities The Portfolio may not purchase or sell commodities or
(S) commodity contracts, except that the Portfolio may
purchase or sell financial futures
contracts, options on futures
contracts, and futures contracts,
forward contracts, and options with
respect to foreign currencies, and
may enter into swap transactions.
8. Loans to Others The Portfolio may not make loans, except by purchase
(S) of debt obligations in which the Portfolio may invest
consistent with its investment policies or by entering into
repurchase agreements.
9. Margin Purchases The Portfolio may not purchase or sell securities
(R) on margin (but the Portfolio may obtain such short-term
credits as may be necessary for the
clearance of transactions). (Margin
payments in connection with
transactions in futures contracts,
options, and other financial
instruments are not considered to
constitute the purchase of
securities on margin for this
purpose.)
10. Pledging The Portfolio may pledge, hypothecate, mortgage, or
(R) otherwise encumber its assets.
</TABLE>
C-26
<PAGE>
EXHIBIT D
NUMBER OF SHARES OF EACH CLASS OF EACH FUND
OUTSTANDING AS OF THE CLOSE OF BUSINESS ON
AUGUST 17, 1999
I. Mentor Funds
Mentor Growth Portfolio
Class A............................6,308,120
Class B............................22,643,980
Class Y............................2,781,604
Mentor Perpetual Global Portfolio
Class A............................4,009,608
Class B............................5,824,559
Class Y............................58
Mentor Capital Growth Portfolio
Class A............................12,149,699
Class B............................11,135,803
Class Y............................54
Mentor Balanced Portfolio
Class A............................9,372,092
Class B............................14,530,369
Class Y............................13,188
Mentor Quality Income Portfolio
Class A............................8,013,449
Class B............................7,953,970
Class Y............................79
Mentor High Income Portfolio
Class A............................14,450,743
Class B............................10,538,345
Class Y............................ --
D-1
<PAGE>
II. Mentor Institutional Trust
Mentor Fixed-Income Portfolio
Class Y............................6,334,393
Mentor Perpetual International
Class A............................5,036,858
Class B............................3,190,113
Class E............................ 149,920
Class Y............................ 354,076
D-2
<PAGE>
EXHIBIT E
VOTING SECURITIES OF
PRINCIPAL HOLDERS
As of August 17, 1999 (the Record Date), the Trustees and Officers of each Fund
owned as a group less than 1% of the outstanding voting securities of any Fund.
As of the Record Date, the following shareholders were known to the Mentor
Trusts to own beneficially 5% or more of the shares of a Fund:
MENTOR FUNDS
E-1
<PAGE>
<TABLE>
<CAPTION>
Percent of
Outstanding
Shares of
Name of Fund Name and Address of Record Owner Class Shares Owned Classes
<S> <C> <C> <C> <C>
Growth Portfolio First Union National Bank Y 2,042,067.992 93.60%
Attn. Kay Lavender
1525 W. W.T. Harris Blvd.
Charlotte, NC 28262-8522
Perpetual Global Chase Manhattan Bank as Trustee A 240,277.6550 5.99%
Portfolio for Everen Capital Corp. (401(k))
& ESOP Plan
Attn. Dan Lift
4 New York Plaza, Fl. 2
New York, NY 10004-2413
First Clearing Corporation A 214,480.01 5.35%
A/C 6639-0459
MCV Phys Global Acct.
Carl Gattuso, Exec. Director
1001 E. Broad St., Ste. 330
Richmond, VA 23219-1990
Balanced Portfolio First Clearing Corporation Y 1,586.3012 12.03%
A/C 3413-9912
Gerald William Gaffney
7814 Fitzgerald Ct.
Richmond, VA 23228-6340
John G. Davenport Y 11,478.71 87.03%
c/o Mentor Investment Group
P.O. Box 1357
Richmond, VA 23211
Quality Income Everen Securities, Inc. A 756,552 9.37%
Portfolio A/C 3650-2633
Health Plan of San Mateo
111 East Kilbourn Avenue
Milwaukee, WI 53202-6611
</TABLE>
E-2
<PAGE>
MENTOR INSTITUTIONAL TRUST
<TABLE>
<CAPTION>
Percent of
Outstandi
ng Shares
Name of Fund Name and Address of Record Class Shares Owned of Classes
Owner
<S> <C> <C> <C> <C>
Perpetual Key Trust Co., TTEE E 149,461.552 99.69%
International RPM INC. V/A DTD 11-26-87
Portfolio Charlotte, NC 28262-8522
First Clearing Corporation Y 41,827.675 11.81%
A/C 2254-7301
The Gladys & Franklin Clark
Foundation #1
809 Richmond Road
Richmond, VA
Stanley Picheny Y 99,665.266 28.15%
322 Central Park West
New York, NY 10025-7629
Arthur Millman Y 193,660.347 54.69%
Madeline Millman JT WROS
P.O. Box 567
Isle of Palms, SC 29451-
0567
</TABLE>
E-3
<PAGE>
MENTOR FUNDS
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please detach at perforation before mailing.
JOINT SPECIAL MEETING OF SHAREHOLDERS - OCTOBER 15, 1999
The undersigned hereby appoints Paul F. Costello, Gordon Forrester, Michael H.
Koonce and Maureen E. Towle and each of them, attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the Fund
referenced below (the "Fund"), which the undersigned is entitled to vote at a
Meeting of Shareholders of the Fund to be held at the offices of Mentor Funds
and Mentor Institutional Trust at 901 East Byrd Street, Richmond, Virginia 23219
on October 15, 1999, at 2:00 p.m. and any adjournments thereof (the "Meeting").
The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement, and hereby instructs said attorneys and proxies to vote said shares
as indicated hereon. Unless indicated to the contrary, this proxy shall be
deemed to grant authority to vote "FOR" all proposals relating to the Fund. In
their discretion, the proxies are authorized to vote upon such other matters as
may properly come before the Meeting. A majority of the proxies present and
acting at the meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the powers and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
NOTE: PLEASE SIGN EXACTLY
AS YOUR NAMES APPEAR ON
THIS PROXY. If joint
owners, EITHER may sign
this Proxy. When signing as
attorney, executor,
administrator, trustee,
guardian, or custodian for
a minor, please give your
full title. When signing on
behalf of a corporation or
as a partner for a
partnership, please give
the full corporate or
partnership name and your
full title.
Date: , 1999
Signature(s)
Title(s), if applicable
-4-
<PAGE>
MENTOR FUNDS
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. PLEASE
INDICATE YOUR VOTE BY PLACING AN "x" IN THE APPROPRIATE BOX BELOW. THIS
PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION,
THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C> <C>
1. To approve the proposed Agreement and Plan [ ] [ ] [ ]
of Conversion into the Successor Fund of
the Successor Trust
2. For Mentor Growth Portfolio, Mentor Balanced [ ] [ ] [ ]
Portfolio, Mentor Quality Income Portfolio,
Mentor Perpetual Global Portfolio, Mentor Capital
Growth Portfolio, and Mentor High Income Portfolio,
to approve the proposed change of the Fund's
investment objective from fundamental to
nonfundamental
For Against Abstain
All All All
3. To approve the proposed changes to the Fund's [ ] [ ] [ ]
fundamental investment restrictions
[ ] To vote against or to abstain from voting on one or
more of the proposed changes to the specific
fundamental investment restrictions, but to approve
all others, check the box to the left and
indicate the
number(s) of the
investment restriction(s)
you do not want to change in the appropriate
box below. Please see Exhibit C of
the proxy
-5-
<PAGE>
statement to determine which sub-proposal topics are
applicable to your Fund.
</TABLE>
If you choose to vote differently on individual restrictions
you must mail in your proxy card. If you choose to vote the
same on all restrictions pertaining to your Fund, telephone
and Internet voting are available.
3A. Diversification
3B. Concentration
3C. Senior securities
3D. Borrowing
3E. Underwriting
3F. Real estate
3G. Commodities
3H. Lending
3I. To reclassify as nonfundamental
certain fundamental restrictions that
are no longer required to be
fundamental: To vote against a
3I(i). Short sales particular proposed
3I(ii). Margin purchases change applicable to your
3I(iii). Pledging Fund, write the number(s)
3I(iv). Restricted securities in the box below.
3I(v). Unseasoned issuers _______________________
3I(vi). Illiquid securities /_____________________/
3I(vii). Officers' and directors' ownership
of securities To abstain from voting on
3I(viii). Control or management a particular proposed
3I(ix). Joint trading change applicable to your
3I(x). Other investment companies Fund, write the number(s)
3I(xi). Oil, gas and minerals in the box below.
3I(xii). Foreign securities _______________________
3I(xiii). Warrants /_____________________/
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C> <C>
4. To transact any other business that may [ ] [ ] [ ]
properly come before the meeting or any
adjournment thereof.
</TABLE>
-6-
<PAGE>
MENTOR INSTITUTIONAL TRUST
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please detach at perforation before mailing.
JOINT SPECIAL MEETING OF SHAREHOLDERS - OCTOBER 15, 1999
The undersigned hereby appoints Paul F. Costello, Gordon Forrester, Michael H.
Koonce and Maureen E. Towle and each of them, attorneys and proxies for the
undersigned, with full powers of substitution and revocation, to represent the
undersigned and to vote on behalf of the undersigned all shares of the Fund
referenced below (the "Fund"), which the undersigned is entitled to vote at a
Meeting of Shareholders of the Fund to be held at the offices of Mentor Funds
and Mentor Institutional Trust at 901 East Byrd Street, Richmond, Virginia 23219
on October 15, 1999, at 2:00 p.m. and any adjournments thereof (the "Meeting").
The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement, and hereby instructs said attorneys and proxies to vote said shares
as indicated hereon. Unless indicated to the contrary, this proxy shall be
deemed to grant authority to vote "FOR" all proposals relating to the Fund. In
their discretion, the proxies are authorized to vote upon such other matters as
may properly come before the Meeting. A majority of the proxies present and
acting at the meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the powers and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.
NOTE: PLEASE SIGN EXACTLY
AS YOUR NAMES APPEAR ON
THIS PROXY. If joint
owners, EITHER may sign
this Proxy. When signing as
attorney, executor,
administrator, trustee,
guardian, or custodian for
a minor, please give your
full title. When signing on
behalf of a corporation or
as a partner for a
partnership, please give
the full corporate or
partnership name and your
full title.
Date: , 1999
Signature(s)
-7-
<PAGE>
Title(s), if applicable
-8-
<PAGE>
MENTOR INSTITUTIONAL TRUST
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. PLEASE
INDICATE YOUR VOTE BY PLACING AN "x" IN THE APPROPRIATE BOX BELOW.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY
SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C> <C>
1. To approve the proposed Agreement and Plan [ ] [ ] [ ]
of Conversion and Termination into the
Successor Fund of the Successor Trust
For Against Abstain
All All All
2. To approve the proposed changes to the Fund's [ ] [ ] [ ]
fundamental investment restrictions
[ ] To vote against
or to abstain from voting
on one or more of the proposed changes to
the specific fundamental
investment
restrictions, but to approve all others, check
the box to the left and
indicate the
number(s) of the
investment restriction(s) you do not want to change
in the appropriate box below. Please see Exhibit C of
the proxy statement to determine which sub- proposal
topics are applicable to your Fund.
</TABLE>
If you choose to vote differently on individual
restrictions you must mail in your proxy card.
If you choose to vote the same on all restrictions
-2-
<PAGE>
pertaining to your Fund, telephone and Internet
voting are available.
3A. Diversification
3B. Concentration
3C. Senior securities
3D. Borrowing
3E. Underwriting
3F. Real estate
3G. Commodities
3H. Lending
3I. To reclassify as nonfundamental
certain fundamental restrictions that
are no longer required to be
fundamental: To vote against a
3I(i). Margin purchases particular proposed
3I(ii). Pledging change applicable to your
Fund, write the
number(s) in the
box below.
-----------------------
/---------------------/
To abstain from
voting on a
particular
proposed change
applicable to
your Fund, write
the number(s) in
the box below.
-----------------------
/---------------------/
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C> <C>
3. To transact any other business that may [ ] [ ] [ ]
properly come before the meeting or any
adjournment thereof.
</TABLE>
-3-
<PAGE>
