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As filed with the Securities and Exchange Commission on March 19, 1996
Registration No. 33-44964
Investment Company Act File No. 811-6526
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ___ ___
Post-Effective Amendment No. 25 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 27 X
(Check appropriate box or boxes)
THE COVENTRY GROUP
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(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
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(Address of Principal Executive Offices)
Registrant's Telephone Number: (614) 470-8000
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Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
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(Name and Address of Agent for Service)
Copies to:
Walter B. Grimm
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to [ ] on ( ) pursuant to paragraph
paragraph (b), or (b), or
[ ] 75 days after filing pursuant to [ ] on ( ) pursuant to paragraph
paragraph (a), or (a), of Rule 485.
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* Registrant has registered an indefinite number of shares of all series then
existing or subsequently established under the Securities Act of 1933
pursuant to Rule 24f-2 under the Investment Company Act of 1940, which it
expressly reaffirms. Registrant filed the notice required by Rule 24f-2
with respect to its fiscal year ended March 31, 1995, on May 25, 1995.
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CROSS REFERENCE SHEET
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The enclosed materials relate only to the Ernst Global Asset Allocation Fund,
the Ernst Global Smaller Companies Fund and the Ernst Australia-New Zealand
Fixed Income Fund, each of which are separate investment series of the Coventry
Group (the "Group"). Information relating to the AMCORE Vintage U.S.
Government Obligations Fund, AMCORE Vintage Fixed Income Fund, AMCORE Vintage
Intermediate Tax-Free Fund, AMCORE Vintage Equity Fund, AMCORE Vintage Balanced
Fund, AMCORE Vintage Aggressive Growth Fund and AMCORE Vintage Fixed Total
Return Fund is contained in Post-Effective Amendment No. 16, filed on June 1,
1995. Information relating to The Shelby Fund and to Brenton U.S. Government
Money Market Fund, Brenton Intermediate U.S. Government Securities Fund,
Brenton Intermediate Tax-Free Fund, and Brenton Value Equity Fund is contained
in Post-Effective Amendment No. 18, filed on July 31, 1995. Information
related to the Ernst Asia Fund and the Ernst Global Natural Resources Fund is
contained in Post-Effective Amendment No. 21, filed on October 27, 1995.
Part A
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I. Prospectus for Registrant's Ernst Global Asset Allocation Fund
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Form N-1A Part A Item Prospectus Caption
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1. Cover page.................. Cover Page
2. Synopsis.................... Fee Table
3. Condensed Financial
Information................. Inapplicable
4. General Description of
Registrant.................. Investment Objective and
Policies; Investment
Restrictions; General
Information - Description
of the Group and Its
Shares
5. Management of the Fund...... Management of the Group
5A. Management's Discussion of
Fund Performance............ To be Provided in
Registrant's Annual
Report to Shareholders
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6. Capital Stock and Other
Securities.................. How to Purchase and Redeem Shares; Dividends
and Taxes; General Information - Description
of the Group and Its Shares; General
Information - Miscellaneous
7. Purchase of Securities
Being Offered............... Valuation of Shares; How to Purchase and
Redeem Shares
8. Redemption or Repurchase.... How to Purchase and Redeem Shares
9. Pending Legal Proceedings... Inapplicable
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II. Combined Prospectus for Registrant's Ernst Global Asset Allocation Fund,
Ernst Global Smaller Companies Fund and Ernst Australia-New Zealand Fixed
Income Fund
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Form N-1A Part A Item Prospectus Caption
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1. Cover page.................. Cover Page
2. Synopsis.................... Fee Table
3. Condensed Financial
Information................. Inapplicable
4. General Description of
Registrant.................. Investment Objective and Policies;
Investment Restrictions; General
Information - Description of the Group and
Its Shares
5. Management of the Fund...... Management of the Group
5A. Management's Discussion of
Fund Performance............ To be Provided in Registrant's Annual
Report to Shareholders
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6. Capital Stock and Other
Securities.................. How to Purchase and Redeem Shares;
Dividends and Taxes; General
Information - Description of the Group
and Its Shares; General Information -
Miscellaneous
7. Purchase of Securities
Being Offered............... Valuation of Shares; How to Purchase and
Redeem Shares
8. Redemption or Repurchase.... How to Purchase and Redeem Shares
9. Pending Legal Proceedings... Inapplicable
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Part B
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Statement of Additional
Form N-1A Part B Item Information Caption
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10. Cover Page.................. Cover Page
11. Table of Contents.......... Table of Contents
12. General Information and
History..................... The Coventry Group; Additional Information
13. Investment Objectives and
Policies.................... Investment Objective and Policies
14. Management of the Fund...... Management of the Group - Trustees and
Officers
15. Control Persons and Principal
Holders of Securities....... Additional Information - Description of
Shares
16. Investment Advisory and other
Services.................... Management of the Group
17. Brokerage Allocation........ Management of the Group - Portfolio
Transactions
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18. Capital Stock and other
Securities.................. Additional Information - Description of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered............... Additional Purchase and Redemption Information
20. Tax Status.................. Additional Information - Additional Tax Information
21. Underwriters................ Management of the Group - Distributor
22. Calculation of Performance
Data........................ Additional Information
23. Financial Statements........ Financial Statements
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ERNST WORLD FUNDS
WORLD
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST & COMPANY
INVESTMENT ADVISER
PROSPECTUS DATED MARCH 19, 1996
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................................................................... 2
Fee Table............................................................................. 3
Investment Objective and Policies..................................................... 4
Investment Techniques................................................................. 5
Management of the Group............................................................... 10
Investment Restrictions............................................................... 12
Valuation of Shares................................................................... 12
How to Purchase and Redeem Shares..................................................... 13
Dividends and Taxes................................................................... 21
Expenses and Certain Fund Services.................................................... 22
General Information................................................................... 24
</TABLE>
INVESTMENT ADVISER
Ernst & Company
One Battery Park Plaza
New York, New York 10004
SUB-INVESTMENT ADVISER
National Mutual Funds
Management (Global), Ltd.
447 Collins Street
Melbourne, Australia 3000
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
AUDITORS
Coopers & Lybrand, L.L.P.
100 East Broad Street
Columbus, Ohio 43215
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE GROUP
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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THE ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
For current purchase, redemption and
performance
information, call (800) 672-4797.
TDD/TTY call (800) 300-8893
The ERNST WORLD FUNDS are a family of mutual funds with each Fund having a
separately managed portfolio of assets. The Fund offered by this Prospectus is
the ERNST GLOBAL ASSET ALLOCATION FUND (the "Global Asset Allocation Fund" or
the "Fund"). The Fund is a diversified mutual fund. The Fund has been developed
for investors who seek higher levels of capital stability available from
investing globally in a mix of equity, debt and money market securities and
is particularly intended for investors who are willing to invest on a
longer term basis. The Fund is intended for investors who seek the potential
benefits in international securities markets and who can accept the risks
inherent in those markets.
The Fund is advised by Ernst & Company ("Ernst" or the "Adviser"), an
institutional, securities investment firm with its principal offices in New
York, New York. Ernst, founded in 1924, is a member firm of the New York Stock
Exchange and of all principal U.S. securities exchanges. The Fund also utilizes
the services of National Mutual Funds Management (Global) Ltd., Melbourne,
Australia as sub-investment adviser.
The investment objective of the Global Asset Allocation Fund is long-term
capital appreciation. It seeks this objective by investing primarily in equity
securities of U.S. and foreign companies, debt securities issued by both private
issuers and governments and in money market instruments.
The Fund is an investment series of The Coventry Group (the "Group"), an
open-end management investment company consisting of several separate investment
series. BISYS Fund Services, Limited Partnership, Columbus, Ohio (the
"Distributor") acts as the Fund's administrator and distributor. BISYS Fund
Services Ohio, Inc., Columbus, Ohio, an affiliate of the Distributor, acts as
the Fund's transfer agent (the "Transfer Agent") and performs certain accounting
services for the Fund.
Additional information about the Fund, contained in a Statement of Additional
Information dated February 5, 1996, has been filed with the Securities and
Exchange Commission (the "Commission") and is available upon request without
charge by writing to the Fund at its address or by calling the Fund at the
telephone number shown above. The Statement of Additional Information is
incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION AND THE SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENTS IN THE FUND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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The date of this Prospectus is March 19, 1996
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PROSPECTUS SUMMARY
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The Fund........................... Ernst Global Asset Allocation Fund (the "Global Asset
Allocation Fund" or the "Fund") is a separate investment
portfolio of The Coventry Group (the "Group"), an
open-end, management investment company organized as a
Massachusetts business trust.
Shares Offered..................... Shares of beneficial interest ("Shares") of the Fund.
Offering Price..................... The public offering price of the Global Asset Allocation
Fund is equal to the net asset value per Share plus a
sales charge equal to 5.50% of the public offering price
(5.82% of the amount invested), reduced on investments
of $50,000 or more.
Minimum Purchase................... $1,000 minimum for the initial investment with a $50
minimum for subsequent investments. (See "HOW TO
PURCHASE AND REDEEM SHARES -- Purchases of Shares and
Auto Invest Plan" for a discussion of lower minimum
purchase amounts).
Investment Objective and The Global Asset Allocation Fund seeks long-term capital
Policies......................... appreciation. Under normal market conditions, the Fund
will invest primarily in equity securities of U.S. and
foreign companies, debt securities issued by both
private issuers and governments and in money market
instruments.
Risks and Special Considerations... The Fund invests substantial amounts of its assets in
securities of issuers located outside of the United
States. The risks of such investments include, among
others, currency fluctuations, possible price volatility
and reduced liquidity, different financial, accounting
and regulatory standards, possible withholding taxes and
expropriation. (See Risk Factors and Special
Considerations)
Investment Adviser................. Ernst & Company, New York, New York.
Sub-Investment Adviser............. National Mutual Funds Management (Global) Ltd.,
Melbourne, Australia.
Dividends.......................... The Global Asset Allocation Fund intends to declare
dividends from net investment income quarterly and pay
such dividends quarterly. The Fund will distribute net
realized capital gains, if any, at least once annually.
All such dividends shall be paid in additional full and
fractional shares of the Fund unless a shareholder
elects to take dividends in cash.
Distributor........................ BISYS Fund Services, Limited Partnership, Columbus,
Ohio.
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FEE TABLE
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Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... 5.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)............................................................ 0%
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)........................................ 0%
Redemption Fees (as a percentage of amount redeemed, if applicable)1........ 0%
Exchange Fee................................................................ $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................................................. 1.10%
12b-1 Fees.................................................................. 0.25%
Other Expenses3............................................................. 1.07%
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Total Fund Operating Expenses............................................... 2.42%
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EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
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1 YEAR 3 YEARS
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$ 78 $ 126
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The purpose of the above table is to assist a potential purchaser of the
Fund's Shares in understanding the various costs and expenses that an investor
in the Fund will bear directly or indirectly. Ernst and the Administrator may
voluntarily waive or reduce a portion of the fees payable to them which may
result in lower total operating expenses. See "MANAGEMENT OF THE GROUP" and
"GENERAL INFORMATION" for a more complete discussion of the Shareholder
transaction expenses and annual operating expenses for the Fund. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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1 A wire redemption charge of $15.00 is deducted from the amount of a wire
redemption payment made at the request of a shareholder.
2 As a result of expenses payable in connection with the Fund's Distribution and
Shareholder Service Plan, it is possible that long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers.
3 "Other Expenses" for the Fund are based on estimated amounts for the current
fiscal year.
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described below.
There is no assurance that the Fund will be successful in achieving its
investment objective. The investment objective of the Fund is a fundamental
policy and, as such, may not be changed without a vote of the holders of a
majority of the outstanding Shares of the Fund (as described in the Statement of
Additional Information). The other policies of the Fund may be changed without a
vote of the holders of a majority of Shares unless (1) the policy is expressly
deemed to be a fundamental policy of the Fund or (2) the policy is expressly
deemed to be changeable only by such majority vote.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia
("NMFM") serves as sub-investment adviser for the Fund. NMFM will manage the
Fund from its offices in Melbourne, Australia, and will coordinate a global team
of regionally based investment professionals in Australia, Japan, Hong Kong, New
Zealand, the United States and Europe.
The investment objective of the Fund is to seek long-term capital
appreciation. Under normal market conditions, the Fund will invest primarily
(i.e., not less than 65% of its total assets) in equity securities of U.S. and
foreign companies, debt securities issued by both private issuers and
governments and in money market instruments. The Fund will normally invest at
least 65% of its total assets in at least three different countries around the
world.
While the Fund has been developed for investors who seek long-term capital
appreciation, it has been designed for investors who also wish a level of
capital stability greater than that which would be realized by a fund which
invests solely in global equity markets. Accordingly, the Fund will normally
invest in a mix of equity, debt and money market securities. The Adviser and
NMFM believe that portfolios so invested can over the long term provide capital
appreciation and lower levels of volatility than traditional equity funds.
The Fund is not limited geographically but will invest primarily in the
principal securities markets in North America, Europe and the United Kingdom,
Asia and Japan, and Australasia. Like other global funds, this Fund will be
exposed to the risks of international investing (See Risk Factors and Special
Considerations). The Fund's investments in equity securities will be primarily
in larger capitalization companies in the principal securities market for that
company. It intends also to limit its investment in debt securities of private
issuers to those rated investment grade (rated A or better) by a nationally
recognized statistical rating organization or judged by NMFM to be of comparable
quality. Money market securities include repurchase agreements, commercial
paper, certificates of deposit, bankers acceptances and other liquid, short-term
debt securities.
Although the Fund is not restricted to any particular mix of equity, debt
and money market instruments, it will normally invest at least 10% of its total
assets in equity securities and at least 20% of its total assets in debt
securities or money market instruments. It will not invest more than 70% of its
total assets in equity securities or in debt securities at any one time. For
temporary, defensive purposes, the Fund may invest up to 100% of its assets in
debt securities of corporate and governmental issuers rated in the three highest
rating categories by a recognized rating service or determined to be of
comparable quality by NMFM and in liquid short-term money market instruments.
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The Fund intends to use various hedging techniques to hedge against
currency exchange rate risks. If the value of a currency in which the Fund has
invested a portion of its assets, should fall in value relative to the dollar,
the value of the Fund's invested assets, expressed in dollars, will also fall.
As a general policy, NMFM will attempt to hedge all foreign currency exposures
so that the Fund will not be exposed to the risk of foreign currency
fluctuations relative to the U.S. dollar. The Adviser may deviate from this
policy for temporary defensive purposes where the use of hedging techniques
appears particularly ill advised. (See "Foreign Currency Transactions"). In
addition to using forward foreign currency exchange contracts, the Fund may also
use foreign currency futures and options for foreign currency hedging purposes.
The Fund may also use futures and options contracts to facilitate efficient
cash management, portfolio restructuring and hedging purposes. The Fund will not
use such contracts to leverage its assets and these contracts will, in
accordance with applicable regulatory requirements, be covered by appropriate
assets or segregated accounts (see Futures Contracts; Call and Put Options).
NMFM uses a global investment process in managing the Fund which involves
an ongoing review of global economic developments, changes in economies and
securities markets in countries in which the Fund may invest, as well as
possible changes in currency values. NMFM relies upon its regional offices to
assist in these reviews. In part because of the periodic need to allocate and
reallocate assets among the asset classes of the Fund, it is anticipated that
the Fund's portfolio turnover rate may be approximately, but is not expected to
exceed, 100% (see Expenses and Portfolio Transactions and Foreign Investment
Risk).
INVESTMENT TECHNIQUES
The following investments and investment techniques are available to the
Fund. When an investment limitation is expressed in terms of a percentage of the
Fund's assets, that limitation will apply at the time the investment is made.
The Fund is not required to sell assets as a result of subsequent market changes
in asset values.
EQUITY SECURITIES
Equity securities include but are not limited to common and preferred
stock, debt securities convertible into common stock (sometimes referred to as
"convertible debentures"), common stock purchase warrants, closed-end country
funds listed on a securities exchange, American Depositary Receipts, European
Depositary Receipts and Global Depositary Receipts.
DEBT SECURITIES
Debt securities are securities issued by companies and governments in
various forms such as bonds, notes and debentures, and the fixed income
valuation of securities convertible into stock and convertible stock. The issuer
receives an amount of money which it promises to repay at a particular time
(typically the maturity date of the security). The issuer promises to pay
interest at stated intervals in either a fixed or variable amount. Debt
securities issued by governments and private issuers often receive ratings from
recognized rating agencies.
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DEPOSITARY RECEIPTS
American Depositary Receipts ("ADRs") are Depositary Receipts typically
issued by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs") are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risk of other
investments in foreign securities, as discussed below.
FOREIGN CURRENCY TRANSACTIONS
Forward Foreign Currency Exchange Contracts are used in order to protect
against the adverse effect that future changes in foreign currency exchange
rates may have on an investment portfolio or on its investment activities that
are undertaken in foreign currencies. Many of the foreign securities in which
the Fund invests will be denominated in foreign currencies. Changes in foreign
exchange rates will affect the value of securities denominated or quoted in
foreign currencies. Exchange rate movements can be large and can endure for
extended periods of time, affecting either favorably or unfavorably the value of
the Fund's assets.
Contracts to purchase foreign currencies are used to protect against an
anticipated rise in the U.S. dollar price of securities it intends to purchase.
Contracts to sell foreign currencies are used to protect against the decline in
value of its foreign currency-denominated portfolio securities due to a decline
in the value of the foreign currencies relative to the U.S. dollar. The Fund may
use one currency (or a basket of currencies) to hedge against adverse changes in
the value of another currency (or a basket of currencies) when exchange rates
between the two currencies are correlated. Contracts to sell foreign currency
would limit any potential gain which might be realized by the Fund if the value
of the hedged currency increases. Foreign currency transactions may include
forward foreign currency contracts, currency exchange transactions on a spot
(i.e., cash) basis, put and call options on foreign currencies, and foreign
exchange futures contracts. No assurance can be given that these techniques will
be successful if used.
FUTURES CONTRACTS
The Fund may enter into contracts for the future delivery of securities and
futures contracts based on a specific security, class of securities or an index.
The Fund may also purchase or sell options on any such futures contracts and
engage in related closing transactions. A futures contract on a securities index
is an agreement obligating either party to pay, and entitling the other party to
receive, while the contract is
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outstanding, cash payments based on the level of a specified securities index.
The Fund may engage in such futures contracts for hedging purposes, for example,
to manage its cash position through exposure to particular markets or securities
through the purchase of financial futures contracts and to a more limited extent
for general trading and investment purposes. When interest rates are expected to
fall or market values are expected to rise, the Fund, through the purchase of
such contracts, can attempt to secure better rates or prices for the Fund than
might later be available in the market when it effects anticipated purchases.
Aggregate initial margin deposits for futures contracts for other than
"bona fide hedging" purposes, as defined in applicable rules of the Commodity
Futures Trading Commission, may not exceed 5% of the Fund's total assets, and
the value of securities that are the subject of such futures and options on all
such futures contracts may not exceed the market value of the Fund's total
assets.
GOVERNMENT OBLIGATIONS
The Fund may invest in government obligations of the U.S. Government, as
well as, government obligations of foreign countries. The types of U.S.
Government Obligations invested in by the Fund will include obligations issued
or guaranteed as to payment of principal and interest by the full faith and
credit of the U.S. Treasury, such as Treasury bills, notes, bonds and
certificates of indebtedness, and obligations issued or guaranteed by the
agencies or instrumentalities of the U.S. Government, but not supported by such
full faith and credit. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as the Government National Mortgage Association and
the Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations. The Fund may also invest in
obligations issued or guaranteed by foreign governments or their agencies and
instrumentalities.
MONEY MARKET INSTRUMENTS
The Fund may invest in U.S. and foreign money market instruments. Money
market instruments consist of: repurchase agreements, certificates of deposit,
time deposits and bankers acceptances; commercial paper rated in one of the two
highest rating categories by at least one recognized rating organization or
deemed to be of comparable quality by the Fund's sub-adviser and money market
mutual funds.
CALL AND PUT OPTIONS
The Fund may purchase call options or write (sell) call options on
securities or on security indexes. The Fund is not required to own the
underlying security or the securities in the index. A call option gives the
purchaser of the option the right to buy, and obligates the seller of the option
to sell, the underlying security or group of securities at the stated exercise
price at any time prior to the expiration date of the option, regardless of the
market price of the security. When the Fund writes a covered call option (i.e.,
an option where the Fund owns the underlying security) and such option is
exercised, it will forgo the appreciation, if any, on the underlying security in
excess of the exercise price. In order to close out a call option it has
written, the Fund may enter into a "closing purchase transaction" -- the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously wrote on any
particular securities. When a portfolio security subject to a call option is
sold, the Fund may effect a closing purchase transaction to close out any
existing call option on that security. If the Fund is unable to effect a closing
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<PAGE> 15
purchase transaction, it will not be able to sell the underlying security until
the option expires or the Fund delivers the underlying security upon exercise.
If the Fund writes an uncovered call, it will segregate assets equal to the
market value of the underlying security or securities index, using highly liquid
instruments. The Fund will not permit the underlying value of the portfolio
securities subject to such options to exceed 50% of its total assets.
The Fund may also purchase and sell puts. The Fund, when it acquires a put,
would have the right to sell or redeem a specified security at a certain time or
within a certain period of time at a specified price. The security is sold to a
third party or redeemed by the issuer as provided contractually. The put may be
an independent feature or may be combined with a reset feature that is designed
to reduce downward price volatility as interest rates rise by enabling the
holder to liquidate the investment prior to maturity. The Fund may acquire put
options to facilitate portfolio liquidity, shorten the maturity of the
underlying security, or to permit the investment of funds at a more favorable
rate of return. The price of a put option or putable security may be higher than
the price which otherwise would be paid for the security without such put
feature, thereby increasing the security's cost and reducing its yield. The time
remaining to the put date will apply for purposes of determining the maximum
maturity of such securities. When the Fund acquires a put for a security or
group of securities it does not own or when it writes a put, it will segregate
highly liquid assets equal in value to its obligation under the put agreement.
The call and put options discussed above, which are traded on exchanges and
over-the-counter, may also be referred to as derivatives. Derivatives generally
are instruments whose value is derived from or related to the value of some
other instrument or index. While exchange traded options in the U.S. are
generally liquid, over-the-counter options are generally illiquid.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed-delivery
basis. The Fund will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield and thereby involve a risk that the yield
obtained in the transaction will be less than those available in the market when
delivery takes place. The Fund will generally not pay for such securities or
start earning interest on them until they are received. When the Fund agrees to
purchase such securities, however, the Fund's custodian will set aside cash or
liquid securities equal to the amount of the commitment in a separate account.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in the value based upon changes in the general level of
interest rates. In when-issued and delayed-delivery transactions, the Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause the Fund to miss a price or yield considered to be advantageous.
The Fund's commitments to purchase when-issued securities will not exceed
25% of the value of its respective total assets, absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objectives.
8
<PAGE> 16
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements to earn income. A repurchase
agreement is an agreement whereby the Fund purchases securities and the seller
agrees to repurchase the securities within a particular time at a specified
price. Such price will exceed the original purchase price, the difference being
income to the Fund, and will be unrelated to any interest rate on the purchased
security. The Fund's Custodian will maintain the custody of the purchased
securities for the duration of the agreement. The value of the purchased
securities, including any accrued interest, will at all times exceed the value
of the repurchase agreement. In the event of the bankruptcy of the seller or the
failure of the seller to repurchase the securities as agreed, the Fund could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. The
Trustees have reviewed and approved certain sellers who they believe to be
creditworthy and have authorized the Fund to enter into repurchase agreements
with such sellers.
OTHER INVESTMENT POLICIES
The Fund may invest up to 5% of its total assets in another investment
company, not to exceed 10% of the value of its total assets in the securities of
other investment companies. The Fund will incur additional expenses due to the
duplication of expenses as a result of investing in other mutual funds.
Additional restrictions on the Fund's investments in the securities of other
mutual funds are contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Foreign Investment Risk
Investment in foreign securities is subject to special risks that differ in
some respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income and
other taxes, possible seizure, nationalization, or expropriation of foreign
investments or deposits, currency blockage, less stringent disclosure
requirements, the possible establishment of exchange controls, or the adoption
of other foreign governmental restrictions. Additional risks include the
difficulty in obtaining or enforcing a court judgment abroad, restrictions on
foreign investment in other jurisdictions, reduced levels of governmental
regulation of certain foreign securities markets, difficulties in effecting
repatriation of capital invested abroad, difficulties in transaction
settlements, different accounting and financial standards and the possibility of
price volatility and reduced liquidity in certain foreign markets. For
additional information regarding the special risks associated with investments
in foreign securities, see "Foreign Investments" in the Statement of Additional
Information.
Brokerage commissions, custodial services and other costs relating to
investments in foreign countries are generally more expensive than the United
States. Foreign securities markets have different clearance and settlement
systems. In certain markets, settlements can be delayed, resulting in temporary
periods when the Fund may not be fully invested, difficulty in disposing of
securities or difficulty in achieving attractive investment opportunities. In
addition, different business practices and different levels of government
supervision and regulation may cause increased risk of loss due to lost, stolen
or counterfeit securities.
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<PAGE> 17
Because of its specialized investment techniques and its emphasis on
foreign securities, the Fund should be considered as a vehicle for
diversification of investments and not as a balanced investment program.
Currency Risks
Since significant portions of the Fund will be invested in currencies other
than the U.S. Dollar, changes in the exchange rate of the U.S. Dollar against
other currencies will affect the U.S. Dollar value of the Fund. Currency
exchange rates are determined by forces of supply and demand on the foreign
exchange markets. These forces are in turn affected by international balance of
payments and other economic, political and financial conditions, government
intervention, speculation and other factors. The Fund's net asset value will be
reported, and distributions from the Fund will be made, in U.S. dollars.
Therefore, the Fund's reported net asset value and distributions would be
adversely affected by depreciation of foreign currencies relative to the U.S.
Dollar.
Other Considerations
The Adviser and the Sub-Adviser began managing for the first time other
U.S. registered mutual funds in 1995; however, the Adviser and the Sub-Adviser
have extensive prior experience in providing investment advisory services to
large institutional clients, high net worth individuals and, in the case of the
Sub-Adviser, to several mutual funds organized outside of the United States in
such markets as Hong Kong, Australia, New Zealand and Luxembourg.
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of the Group's funds. There are
currently five Trustees, of whom two are "interested persons" of the Group
within the meaning of that term under the 1940 Act. The Group is managed by the
Trustees in accordance with the laws of Massachusetts governing business trusts.
The Trustees, in turn, elect the officers of the Group to supervise actively its
day-to-day operations.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. However, no
officer or employee of BISYS Fund Services or BISYS Fund Services Ohio, Inc.
receives any compensation from the Group for acting as a Trustee of the Group.
The officers of the Group (see the Statement of Additional Information) receive
no compensation directly from the Group for performing the duties of their
offices. BISYS Fund Services receives fees from the Fund for acting as
administrator. BISYS Fund Services Ohio, Inc. receives fees from the Fund for
acting as Transfer Agent and for providing certain fund accounting services.
INVESTMENT ADVISER AND SUB-INVESTMENT ADVISER
Ernst & Company
Ernst & Company, New York, New York (the "Adviser" or "Ernst") serves as
investment adviser to the Fund. Ernst is a securities investment firm that was
founded in 1924. Ernst has been a member of the New
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<PAGE> 18
York Stock Exchange for over 65 years and is a member of each of the major U.S.
stock exchanges. Ernst acts as a specialist on the New York and American Stock
Exchanges and is also a market maker in the over-the-counter markets. It is an
institutionally oriented broker-dealer firm that serves numerous institutional
and individual accounts through its correspondent broker-dealer firms. Ernst is
registered as an investment adviser with the Commission and with sixteen states
and currently manages approximately $40 million in a general securities managed
account program, $1 million in a U.S. domestic bank equities managed account
program and $9 million in The Ernst Bank Equity Fund, L.P., a limited
partnership that invests in U.S. domestic bank equities.
Subject to the general supervision of the Group's Board of Trustees and in
accordance with the Fund's investment objective and restrictions, Ernst oversees
and supervises management of the investments of the Fund. Ernst will review the
performance of the Sub-Adviser who will be fully responsible for the selection
of the Fund's portfolio investments. For the services provided and expenses
assumed pursuant to its investment advisory agreement with the Group, Ernst
receives a fee computed daily and paid monthly, at the annual rate of one and
one tenth of one percent (1.10%) of the Fund's average daily net assets. Ernst
in turn pays the Sub-Adviser seven tenths of one percent (0.70%) of the average
daily net assets of the Fund. The investment advisory fees paid by the Fund are
higher than those paid by most other investment companies that invest in
domestic U.S. securities, but they are not necessarily higher than the fees paid
by those investment companies with an investment objective similar to that of
the Fund. Ernst may periodically waive all or a portion of its advisory fee
which will cause the yield of the Fund to be higher than it would otherwise be
in the absence of such a waiver.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia ("NMFM")
NMFM of Melbourne, Australia serves as sub-adviser to the Fund. NMFM is
part of the worldwide AXA Group of Companies which provide insurance and
investment services in locations throughout the world. NMFM is a subsidiary of
National Mutual Holdings, the parent company of the National Mutual Group of
Companies, which have been involved in the provision of insurance and investment
services for in excess of 125 years. NMFM, through NMFM and its affiliated
companies now manage over $15 billion in assets. NMFM has access to global money
management resources through affiliates in the United Kingdom, Japan, Hong Kong,
New Zealand and the United States. NMFM's staff includes 150 investment
professionals.
The Fund is managed on a day to day basis by Richard Greenfield, Investment
Director of National Mutual Funds Management (Global) Limited. Mr. Greenfield
has held this position since December 1995. Prior to this he held the positions
of Managing Director for Australia, Chief Investment Manager for Australia and
Head of the Research and Strategy Group. He has been with NMFM Group since 1986
and prior to this was a Partner/Principal for an international firm of
consulting actuaries.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership ("BISYS Fund Services") is the
administrator for the Fund and also acts as the Fund's principal underwriter and
distributor (the "Administrator" or the "Distributor," as the context
indicates). BISYS Fund Services is wholly-owned by The BISYS Group, Inc., 150
Clove Road, Little Falls, New Jersey 07424, a publicly owned company engaged in
information processing, loan servicing
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<PAGE> 19
and 401(k) administration and recordkeeping services to and through banking and
other financial organizations.
The Administrator generally assists in all aspects of the Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Fund, the Administrator receives a fee computed daily and paid periodically,
calculated at an annual rate of seventeen one-hundredths of one percent (0.17%)
of the Fund's first $500 million in average daily net assets. This fee is
reduced on a sliding scale to 0.05% of assets in excess of $1 billion. The
Administrator is entitled to a minimum fee of $25,000 per year from the Fund.
The Administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of the Fund to be higher than it would otherwise
be in the absence of such a waiver.
The Distributor acts as agent for the Fund in the distribution of its
Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions, some of which
that may be changed only by a vote of a majority of the outstanding Shares of
the Fund (as defined in the Statement of Additional Information). The following
are three of the Fund's investment restrictions which may only be changed by a
majority vote of the outstanding shares of the Fund:
The Fund will not:
1. Purchase securities while borrowings in excess of 5% of its total assets
are outstanding.
2. Make loans, except that the Fund may purchase or hold debt securities
and other investments and enter into repurchase agreements in accordance with
its investment objective and policies.
3. Invest in excess of 25% of its total assets in issuers in a particular
industry or group of industries.
In addition to the above investment restrictions, the Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Fund's Statement of Additional
Information.
Any of these investment restrictions, as well as other investment policies,
that may limit the Fund's investment to a specified percentage of Fund assets
apply only at the time of investment. The Fund is not required to sell portfolio
investments which have appreciated in value relative to other assets in order to
comply with investment limitations.
VALUATION OF SHARES
The net asset value of the Fund is determined and its Shares are priced as
of the close of regular trading on the New York Stock Exchange ("NYSE")
(generally 4:00 p.m. Eastern Time) on each Business Day ("Valuation Time"). As
used herein, a "Business Day" constitutes any day on which the NYSE is open for
trading, and any other day except days on which there are not sufficient changes
in the value of the Fund's portfolio securities that the Fund's net asset value
might be materially affected and days during which no
12
<PAGE> 20
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, the NYSE is closed on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets of the Fund less the liabilities charged to the Fund by the number of its
outstanding Shares. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the scheduled closing time of the NYSE, if that is earlier,
and that value is then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, Eastern time, on the day the value of the
foreign security is determined. If no sale is reported at that time, the mean
between the current bid and asked price is used. Occasionally, events which
affect the values of such securities and such exchange rates may occur between
the times at which they are determined and the close of the NYSE, and will
therefore not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.
The securities in the Fund will be valued at market value. If market
quotations are not available, the securities will be valued by a method which
the Board of Trustees believes accurately reflects fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Fund are sold on a continuous basis by the Group's
Distributor, BISYS Fund Services. The principal office of the Distributor is
3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, contact
the Fund at (800) 672-4797.
PURCHASES OF SHARES
Shares of the Fund are continuously offered and may be purchased directly
either by mail, by telephone or by electronic transfer. Shares may also be
purchased through a broker-dealer who has established a dealer agreement with
the Distributor. The minimum investment is generally $1,000 for the initial
purchase of Shares ($250 in the case of an Ernst World IRA) and $50 for
subsequent purchases. For purchases that are made in connection with 401(k)
plans, 403(b) plans and other similar plans or payroll deduction plans, the
minimum investment amount for initial and subsequent purchases is $50. (But, see
"HOW TO PURCHASE AND REDEEM SHARES -- Auto Invest Plan" below for minimum
investment requirements under the Auto Invest Plan).
Purchasers of Shares of the Fund will pay the sum of the next calculated
net asset value per Share after the Distributor's receipt of an order to
purchase Shares in good form plus a sales charge, when applicable ("public
offering price") (see "HOW TO PURCHASE AND REDEEM SHARES" below).
In the case of orders for the purchase of Shares placed through a
broker-dealer, the public offering price will be the net asset value as so
determined plus any applicable sales charge, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Fund by the Valuation Time.
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<PAGE> 21
The broker-dealer is responsible for transmitting such orders promptly. If the
broker-dealer fails to do so, the investor's right to that day's closing price
must be settled between the investor and the broker-dealer. If the broker-dealer
receives the order after the Valuation Time for that day, the price will be
based on the net asset value determined as of the Valuation Time for the next
Business Day.
Purchases By Mail
To purchase Shares of the Fund, complete an Account Application and return
it along with a check (or other negotiable bank draft or money order) in at
least the minimum initial purchase amount, made payable to Ernst Global Asset
Allocation Fund to:
Ernst World Funds
Dept. L-1636
Columbus, Ohio 43260-1636
An Account Application form can be obtained by calling your broker or the
Fund at (800) 672-4797. Subsequent purchases of Shares of the Fund may be made
at any time by mailing a check payable to the Fund, to the above address.
Purchases by Telephone
Shares of the Fund may be purchased by calling your broker or the Fund at
(800) 672-4797, if your Account Application, in good form, has been previously
received by the Distributor. Payment for Shares ordered by telephone is made by
electronic transfer to the Fund's custodian. Prior to wiring funds and in order
to ensure that wire orders are invested promptly, investors must call the Fund
at the number above to obtain instructions regarding the bank account number to
which the funds should be wired and other pertinent information.
Other Information Regarding Purchases
Purchases of Shares in the Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") based upon the public offering price. In the
case of an order for the purchase of Shares placed through a broker-dealer, it
is the responsibility of the broker-dealer to transmit the order to the
Distributor promptly.
The Group reserves the right to reject any order for the purchase of the
Fund's Shares in whole or in part including purchases made with foreign and
third party checks.
Every Shareholder of record will receive a confirmation of each transaction
in his or her account, which will also show the total number of Shares of the
Fund owned by the Shareholder. Shareholders may rely on these statements in lieu
of certificates. Certificates representing Shares of the Fund will not be
issued.
SALES CHARGES
The Public Offering Price of Shares of the Fund equals the sum of the net
asset value per Share plus a sales load in accordance with the table below.
BISYS Fund Services receives this sales charge as Distributor and reallows a
portion of it as dealer discounts and brokerage commissions. However, the
Distributor, in its sole discretion, may pay certain dealers all or part of the
portion of the sales charge it receives. A broker or
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<PAGE> 22
dealer who receives a reallowance in excess of 90% of the sales charge may be
deemed to be an "underwriter" for purposes of the Securities Act of 1933.
<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS AS
% OF NET % OF PUBLIC % OF PUBLIC
AMOUNT OFFERING OFFERING
AMOUNT OF PURCHASE INVESTED PRICE PRICE
- --------------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000............................ 5.82% 5.50% 4.90%
$50,000 but less than $100,000............... 4.71 4.50 4.00
$100,000 but less than $250,000.............. 3.36 3.25 2.85
$250,000 but less than $500,000.............. 2.30 2.25 2.00
$500,000 but less than $1,000,000............ 1.01 1.00 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers.
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which includes the
combination of any of the following: (i) an individual, his or her spouse and
children under the age of 21; (ii) a trustee or other fiduciary of a single
trust estate or single fiduciary account; and (iii) businesses owned as sole
proprietorships (or partnerships), provided that such organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company. In order to qualify
for a lower sales charge, all orders from a Purchaser will have to be placed
through a single investment dealer and identified at the time of purchase as
originating from the same Purchaser, although such orders may be placed into
more than one account which identifies the Purchasers.
The Distributor, at its expense, will also provide additional compensation
to broker-dealers, financial consultants and financial institutions in
connection with sales of Shares of the Fund. Such compensation will include
financial assistance to such entities in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
Shares. Compensation will include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Compensation
will also include the following types of non-cash compensation offered through
sales contests: (1) vacation trips, including the provision of travel
arrangements and lodging at luxury resorts at exotic locations, (2) tickets for
entertainment events (such as concerts, cruises and sporting events), and (3)
merchandise (such as clothing, trophies and clocks). Dealers may not use sales
of Shares to qualify for this compensation to the extent such may be prohibited
by the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc.
15
<PAGE> 23
The Distributor or the Adviser, at its expense, may also provide additional
compensation to certain broker-dealers, financial consultants and financial
institutions in connection with sales of Shares of the Fund, which compensation,
payable in amounts not to exceed 0.20% of the average daily net assets of
shareholders with whom such persons have relationships, is paid in connection
with various services provided to such shareholders.
SALES CHARGE WAIVERS
The following classes of investors may purchase Shares of the Fund with no
sales charge:
(1) existing Shareholders of the Fund upon the automatic reinvestment of
dividend and capital gains distributions;
(2) Trustees of the Group, officers, directors, employees and retired
employees of (a) the Adviser, the Sub-Adviser and their affiliates and
(b) the Distributor and its affiliates, and spouses and children under
the age of 21 of each of the foregoing;
(3) employees (and their spouses and children under the age of 21) of any
broker-dealer with whom the Distributor enters into a dealer agreement
to sell Shares of the Fund;
(4) investors for whom an investment dealer or one of their affiliates acts
in a fiduciary, advisory, custodial, agency or similar capacity and for
whom purchases are made through such accounts or with proceeds from
liquidations of such accounts; and
(5) purchases made on behalf of other investment companies distributed by
any affiliate of BISYS Group, Inc.
Each investor described in paragraphs (2) and (3) above must so identify
himself/herself at the time of purchase. The Distributor may change or eliminate
the foregoing waivers at any time. The Distributor may also periodically waive
all or a portion of the sales charge for all investors with respect to the Fund.
In addition, the Distributor may waive the sales charge for the purchase of the
Fund's shares with the proceeds from the recent redemption of shares of another
non-money market front-end load mutual fund (but not funds subject to a
contingent deferred sales load). The purchase must be made within 60 days of the
redemption, and the Distributor must be notified in writing by the investor, or
by his financial institution, at the time the purchase is made. A copy of the
investor's account statement showing such redemption must accompany such notice.
LETTERS OF INTENT
Any Purchaser may obtain a reduced sales charge by means of a written
Letter of Intent which expresses the Purchaser's intention to purchase Shares at
a specified total public offering price within a 13-month period.
A Letter of Intent is not a binding obligation upon the Purchaser to
purchase the full dollar amount indicated. The minimum initial investment under
a Letter of Intent is 5% of such dollar amount. Shares purchased with the first
5% of such amount will be held in escrow (while remaining registered in the name
of the investor) to secure payment of the higher sales charge applicable to the
Shares actually purchased if the full dollar amount indicated is not purchased,
and such escrowed Shares will be involuntarily redeemed to pay the additional
sales charge, if necessary. Dividends on escrowed Shares, whether paid in cash
or reinvested in additional Shares, are not subject to escrow. The escrowed
Shares will not be available for disposal by the
16
<PAGE> 24
Purchaser until all purchases pursuant to the Letter of Intent have been made or
the higher sales charge has been paid. When the full amount indicated by the
Letter of Intent has been purchased, the escrow will be released. A Letter of
Intent may include purchases of Shares made not more than 30 days prior to the
date the Purchaser signs a Letter of Intent; however, the 13-month period during
which the Letter of Intent is in effect will begin on the date of the earliest
purchase to be included. A Purchaser as defined above may combine purchases made
in several capacities for purposes of obtaining reduced sales charges by means
of a written Letter of Intent. In order to accomplish this, however, a Purchaser
must designate on the account application the accounts that are to be combined
for this purpose.
If a Purchaser qualifies for a further reduced sales charge because he or
she either has purchased more than the dollar amount indicated on the Letter of
Intent or has entered into a Letter of Intent which includes Shares purchased
prior to the date of the Letter of Intent, the difference in the sales charge
will be used to purchase additional Shares of the Fund on behalf of the
Purchaser; thus the total purchases (included in the Letter of Intent) will
reflect the applicable reduced sales charge of the Letter of Intent.
For Purchasers who purchase more than the dollar amount indicated on the
Letter of Intent or enter into a Letter of Intent that includes Shares purchased
prior to the date of the Letter of Intent and qualify for a reduced sales
charge, such additional Shares will be purchased at the conclusion of the
13-month period and in the form of additional Shares, credited to the
Purchaser's account at the then current public offering price applicable to a
single purchase of the total amount of the purchases.
For further information about Letters of Intent, interested investors
should contact the Fund at (800) 672-4797. This program, however, may be
modified or eliminated at any time or from time to time without notice.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Shares of the Ernst World Funds or by combining a current purchase
of Shares of a Fund with prior purchases of Shares of another Ernst World Fund.
The applicable sales charge is based on the sum of (i) the Purchaser's current
purchase of shares of a Fund plus (ii) the then-current net asset value of all
Shares held by the Purchaser in the other Ernst World Funds. To receive the
applicable public offering price pursuant to the right of accumulation,
Shareholders must provide the Transfer Agent or the Distributor with sufficient
information at the time of purchase to permit confirmation of qualification.
Accumulation privileges may be amended or terminated without notice at any time
by the Distributor.
ERNST WORLD INDIVIDUAL RETIREMENT ACCOUNT ("ERNST WORLD IRA")
An Ernst World IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Ernst World IRA contributions may be tax-deductible and earnings are
tax-deferred. The tax deductibility of Ernst World IRA contributions is
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
All Ernst World IRA distribution requests must be made in writing to the
Distributor. Any additional deposits to an Ernst World IRA must designate the
type and year of the contribution.
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<PAGE> 25
For more information on an Ernst World IRA, including the forms required to
open an Ernst World IRA, call your broker or the Fund at (800) 672-4797.
Shareholders are advised to consult a tax adviser on IRA contribution and
withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Shareholders of the Fund to make regular
monthly or quarterly purchases of Shares through automatic deductions from their
bank accounts (which must be with a domestic member of the Automatic Clearing
House). With Shareholder authorization, the Transfer Agent will deduct the
amount specified from the Shareholder's bank account which will automatically be
invested in Shares at the public offering price on the dates of the deduction.
The required minimum initial investment when opening an account using the Auto
Invest Plan is $50; the minimum amount for subsequent investments in the Fund is
$50. To participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Account Application which can be requested by calling
(800) 672-4797. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Distributor.
EXCHANGE PRIVILEGE
The Fund offers an exchange program whereby Shareholders are entitled to
exchange their Shares for Shares of another Ernst World Fund. Such exchanges
will be executed on the basis of the relative net asset values of the Shares
exchanged. The Shares exchanged must have a current value that equals or exceeds
the minimum investment that is required (either the minimum amount required for
initial or subsequent investments as the case may be) for the Fund whose Shares
are being acquired. Share exchanges will only be permitted where the Shares to
be acquired may legally be sold in the investor's state of residence and are
limited to five per year. An exchange is considered to be a sale of Shares for
federal income tax purposes on which a Shareholder may realize a taxable gain or
loss. A Shareholder may make an exchange request by calling your broker or the
Fund at (800) 672-4797 or by providing written instructions to the Fund. An
investor should consult the Fund for further information regarding exchanges.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. If a Shareholder is unable to contact the Fund by
telephone, a Shareholder may also mail the exchange request to the Fund at the
address listed under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption By Mail."
The Fund reserves the right to modify or terminate the exchange privilege
described above at any time and to reject any exchange request. If an exchange
request in good order is received by the Distributor by the Valuation Time, on
any Business Day, the exchange usually will occur on that day. Any Shareholder
who wishes to make an exchange should obtain and review the current prospectus
of the Fund in which he or she wishes to invest before making the exchange.
Shareholders wishing to make use of the Fund's exchange program must so indicate
on the Account Application.
REDEMPTION OF SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions will be effected at the net
asset value per share next determined after receipt of a redemption request in
good order. Redemptions may ordinarily be requested by mail or by telephone.
18
<PAGE> 26
REDEMPTION BY MAIL
A written request for redemption must be received by the Fund in order to
honor the request. The Fund's address is: 3435 Stelzer Road, Columbus, Ohio
43219. The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The
Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the Shareholder(s) of record and (2) the
redemption check is mailed to the Shareholder(s) at the address of record or the
proceeds are either mailed or wired to a commercial bank account previously
designated on the Account Application. There is no charge for having redemption
requests mailed to a designated bank account.
If the Group receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Group cannot
execute the order. In such cases, the Group will request the missing information
and process the order on the day such information is received.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option
on the Account Application. The Shareholder may have the proceeds mailed to his
or her address of record or mailed or sent electronically to a commercial bank
account previously designated on the Account Application. Electronic payment
requests may be made by the Shareholder by telephone to the Fund at (800)
672-4797. For a wire redemption, the then-current wire redemption charge may be
deducted from the proceeds of a wire redemption. This charge, if applied, is
presently $15.00 for each wire redemption. It is not necessary for Shareholders
to confirm telephone redemption requests in writing. During periods of
significant economic or market change, telephone redemptions may be difficult to
complete. If a Shareholder is unable to contact the Fund by telephone, a
Shareholder may also mail the redemption request to the Distributor at the
address listed above under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption by
Mail." Neither the Distributor, the Transfer Agent, Ernst nor the Group will be
liable for any losses, damages, expense or cost arising out of any telephone
transaction (including exchanges and redemptions) effected in accordance with
the Fund's telephone transaction procedures, upon instructions reasonably
believed to be genuine. The Fund will employ procedures designed to provide
reasonable assurance that instructions by telephone are genuine; if these
procedures are not followed, the Fund or its service contractors may be liable
for any losses due to unauthorized or fraudulent instructions. These procedures
include recording all phone conversations, sending confirmations to shareholders
within 72 hours of the telephone transaction, verification of account name and
account number or tax identification number, and sending redemption proceeds
only to the address of record or to a previously authorized bank account.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of the Fund to make regular
monthly or quarterly redemptions of Shares. With Shareholder authorization, the
Transfer Agent will automatically redeem Shares
19
<PAGE> 27
at the net asset value on the dates of the withdrawal and have a check in the
amount specified mailed to the Shareholder. The required minimum account balance
is $10,000 and the required minimum withdrawal is $100. To participate in the
Auto Withdrawal Plan, Shareholders should call (800) 672-4797 for more
information. Purchases of additional Shares concurrent with withdrawals may be
disadvantageous to certain Shareholders because of tax liabilities. For a
Shareholder to change the Auto Withdrawal instructions the request must be made
in writing to the Distributor.
DIRECTED DIVIDEND OPTION
A Shareholder may elect to have all income dividends and capital gains
distributions from one Fund paid by check or reinvested in another Ernst World
Fund (provided the other Fund is maintained at the minimum required balance).
The Directed Dividend Option may be modified or terminated at any time
after notice to participating Shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the Shareholder at any time by
writing the Distributor. The Directed Dividend Option is not available to
participants in an Ernst World IRA.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made in accordance
with the applicable settlement requirements after receipt by the Distributor of
the request for redemption. However, to the greatest extent possible, the Fund
will attempt to honor requests from Shareholders for next day payments if
received by the Distributor before the Valuation Time on a Business Day or if
the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Fund or the Shareholders of the Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, the Fund may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Fund may delay the
forwarding of proceeds until payment has been collected for the purchase of such
Shares, which delay may be for up to 10 days or more. The Fund intends to pay
cash for all Shares redeemed, but under abnormal conditions which make payment
in cash unwise, the Fund may make payment wholly or partly in portfolio
securities at their then-current market value equal to the redemption price. In
such cases, an investor may incur brokerage costs in converting such securities
to cash.
Due to the relatively high cost of handling small investments, the Fund
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder (but not
as a result of a decrease in the market price of such Shares), the account of
such Shareholder has a value of less than $500. Before the Fund exercises their
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Matters Affecting
Redemption" in the Statement of Additional Information for examples of when the
Group may, under
20
<PAGE> 28
applicable law and regulation, suspend the right of redemption if it appears
appropriate to do so in light of the Group's responsibilities under the 1940
Act.
DIVIDENDS AND TAXES
DIVIDENDS
The Fund intends to declare its net investment income quarterly as a
dividend to Shareholders at the close of business on the day of declaration, and
generally will pay such dividends quarterly. The Fund also intends to distribute
its capital gains, if any, at least annually, normally in December of each year.
A Shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of the Fund at net asset
value as of the date of payment, unless the Shareholder elects to receive
dividends or distributions in cash. Such election must be made on the Account
Application; any change in such election must be made in writing to the Fund at
3435 Stelzer Road, Columbus, Ohio 43219, and will become effective with respect
to dividends and distributions having record dates after its receipt by the
Transfer Agent.
FEDERAL TAXES
The Fund intends to elect to be treated and to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 (the "Code"). A regulated investment company generally is not subject to
Federal income tax on income and gains distributed in a timely manner to its
shareholders. Earnings of the Fund not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of this tax, the Fund intends
to comply with this distribution requirement.
The Fund intends to distribute substantially all of its net investment
income and realized capital gains to Shareholders. Distributions will be taxed
as ordinary income in the hands of shareholders, except to the extent they are
designated as capital gain dividends or are from sources other than net
investment income or net realized capital gains. Capital gain dividends are
treated as long-term capital gains in the hands of shareholders, regardless of
how long the shareholder has held the Fund's shares. Distributions that are not
from the Fund's net investment income or net realized capital gain may be
characterized as a return of capital to shareholders, reducing the shareholder's
basis in its shares, and amounts so distributed in excess of such basis
generally will be characterized as capital gain. Distributions declared in
October, November or December to Shareholders of record on a date in such month
and paid during the following January will be treated as having been received by
Shareholders on December 31 in the year such distributions were declared, rather
than the calendar year in which the distributions are actually received. The
Fund will inform Shareholders each year of the amount and nature of such income
or gains. Sales or other dispositions of Fund shares generally will give rise to
taxable gain or loss.
Shareholders who purchase shares of the Fund in the period prior to the
declaration of a dividend by the Fund, will receive a portion of his or her
investment back as taxable income or capital gain as a result of the dividend
distribution.
The Fund may be subject to certain taxes imposed by the countries in which
it invests or operates. If the Fund qualifies as a regulated investment company
and if more than 50% of the value of the total assets of the
21
<PAGE> 29
Fund at the close of the taxable year consists of stocks or securities of
foreign corporations, the Fund may elect, for U.S. federal income tax purposes,
to treat any foreign taxes paid by the Fund that qualify as income or similar
taxes under United States income tax principals as having been paid by the
Fund's shareholders. For any year for which the Fund makes such an election,
each shareholder will be required to include in its gross income an amount equal
to its allocable share of such taxes paid by the Fund and the shareholders will
be entitled, subject to tax law limitations, to credit their portions of these
amounts against their U.S. federal income tax liability, if any, or to deduct
their portions from their U.S. taxable income, if any. No deduction for foreign
taxes may be claimed by individuals who do not itemize deductions. In any year
in which it elects to "pass through" foreign taxes to shareholders, the Fund
will so notify shareholders.
A more detailed description of tax consequences to Shareholders is
contained in the Statement of Additional Information under the heading "Tax
Status."
STATE AND LOCAL TAXES
The Group is organized as a Massachusetts business trust and, under current
law, neither the Group nor the Fund is liable for any income or franchise tax in
the Commonwealth of Massachusetts as long as each Fund within the Group
qualifies as a regulated investment company under the Code.
Distributions from the Fund may be subject to state and local taxes.
Distributions of the Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisers regarding the possible exclusion for state and local income tax
purposes of the portion of dividends paid by the Fund which is attributable to
interest from obligations of the U.S. Government and its agencies, authorities
and instrumentalities, and the particular tax consequences to them of an
investment in the Fund, including the application of state and local tax laws.
EXPENSES AND CERTAIN FUND SERVICES
EXPENSES AND PORTFOLIO TRANSACTIONS
Ernst and the Administrator each bear all expenses in connection with the
performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund.
The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Fund's Adviser or Sub-Adviser effects
transactions with those brokers and dealers whom they provide the most favorable
prices and are capable of providing efficient executions. If the adviser
believes such price and executions are obtainable from more than one broker or
dealer, it may give consideration to placing portfolio transactions with those
brokers and dealers who also furnish research and other services to the adviser.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investments;
wire services; and appraisals or evaluations of portfolio securities. Such
information may be useful to the advisers in serving both the Fund and other
clients and, conversely,
22
<PAGE> 30
supplemental information obtained by the placement of business of other clients
may be useful to the advisers in carrying out its obligations to the Fund.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commission charged by other broker-dealers in
recognition of their research or execution services. In order to cause the Fund
to pay such higher commissions, the adviser must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage and/or
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or the adviser's overall responsibilities to the Fund.
In reaching this determination, the adviser will not attempt to place a specific
dollar value on the brokerage and/or research services provided, or to determine
what portion of the compensation should be related to those services.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which the Fund is
authorized to pay or reimburse BISYS Fund Services, as Distributor, a periodic
amount calculated at an annual rate not to exceed twenty-five one hundredths of
one percent (0.25%) of the average daily net assets of the Fund. Such amount may
be used to pay banks, broker-dealers and other institutions for administrative
and shareholder services and other similar services, including distribution
services (each such bank, broker-dealer and other institution is hereafter
referred to as a "Participating Organization"), pursuant to an agreement between
BISYS Fund Services and the Participating Organization. Under the Plan, a
Participating Organization may include BISYS Fund Services, its subsidiaries and
its affiliates.
CUSTODIAN
The Bank of California, N.A., through its Mitsubishi Global Custody
Division (the "Custodian") serves as custodian for the Fund. Pursuant to the
Custodian Agreement with the Group, the Custodian receives an annual asset-based
fee from the Fund for such services plus, under certain circumstances, fixed
fees charged for certain portfolio transactions and out-of-pocket expenses.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services Ohio" or the "Transfer
Agent"), 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Fund's transfer
agent pursuant to a Transfer Agency Agreement for the Fund and receives a fee
for such services. BISYS Fund Services Ohio also provides certain accounting
services for the Fund pursuant to a Fund Accounting Agreement and receives a fee
for such services. See "MANAGEMENT OF THE COMPANY -- Transfer Agency and Fund
Accounting Services" in the Statement of Additional Information for further
information.
While BISYS Fund Services Ohio is a distinct legal entity from BISYS Fund
Services (the Fund's Administrator and Distributor), BISYS Fund Services Ohio is
considered to be an affiliated person of BISYS Fund Services under the 1940 Act
due to, among other things, the fact that BISYS Fund Services Ohio is owned by
substantially the same persons that directly or indirectly own BISYS Fund
Services.
23
<PAGE> 31
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as a Massachusetts business trust on January 8,
1992. The Group consists of several funds organized as separate series of
shares. Each share represents an equal proportionate interest in a fund with
other shares of the same fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that fund as
are declared at the discretion of the Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held, and will vote in
the aggregate and not by series except as otherwise expressly required by law.
For example, shareholders of the Fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees and
ratification of the selection of independent auditors. However, shareholders of
the Fund will vote as a fund, and not in the aggregate with other shareholders
of the Group, for purposes of approval of the Fund's investment advisory
agreement and the Plan.
Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "MANAGEMENT OF THE GROUP -- Trustees of the
Group." Individual Trustees are elected by the shareholders of the Group and may
be removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and
Massachusetts law. See "ADDITIONAL INFORMATION -- Miscellaneous" in the
Statement of Additional Information for further information.
An annual or special meeting of shareholders is not generally required by
the Declaration of Trust, the 1940 Act or other applicable authority. To the
extent that such a meeting is not required, the Group may elect not to have an
annual or special meeting.
The Group has undertaken that the Trustees will call a special meeting of
shareholders for purposes of considering the removal of one or more Trustees
upon written request therefor from shareholders holding not less than 10% of the
outstanding votes of the Group. The Group will, to the extent required under the
1940 Act, assist Shareholders in calling such a meeting. At such a meeting, a
quorum of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its average annual total return,
aggregate total return, yield and effective yield in advertisements, sales
literature and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average
annual total return will be calculated for the period since the establishment of
the Fund and will reflect the imposition of the maximum sales charge. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. Yield will be computed by dividing the Fund's net investment income
per share
24
<PAGE> 32
earned during a recent one-month period by the Fund's per share maximum offering
price (reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last day of the period and annualizing the result.
Distribution rates will be computed by dividing the distribution per share
made by the Fund over a twelve-month period by the maximum offering price per
share. The distribution rate includes both income and capital gain dividends and
does not reflect unrealized gains or losses. The distribution rate differs from
the yield, because it includes capital items which are often non-recurring in
nature, whereas yield does not include such items.
Investors may also judge the performance of the Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and to
data prepared by various services which may be published by such services or by
other services or publications. In addition to performance information, general
information about the Fund that appears in such publications may be included in
advertisements, sales literature and in reports to Shareholders.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results.
Additional information regarding the investment performance of the Fund
will be contained in the annual report of the Fund which, when available, may be
obtained without charge by writing or calling the Fund.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent auditors.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a fund" or "assets belonging to the fund" means the
consideration received by the fund upon the issuance or sale of shares in the
fund, together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange, or
liquidation of such investments, and any funds or amounts derived from any
reinvestment of such proceeds, and any general assets of the Group not readily
identified as belonging to a particular fund that are allocated to the Fund by
the Group's Board of Trustees. The Board of Trustees may allocate such general
assets in any manner it deems fair and equitable. Determinations by the Board of
Trustees of the Group as to the timing of the allocation of general liabilities
and expenses and as to the timing and allocable portion of any general assets
with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of the Fund means the
affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a)
67% or more of the votes of Shareholders of the Fund present at a meeting at
which the holders of more than 50% of the votes attributable to Shareholders of
record of the Fund are represented in person or by proxy, or (b) the holders of
more than 50% of the outstanding votes of Shareholders of the Fund.
Inquiries regarding the Fund may be directed in writing to the Fund at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 672-4797.
25
<PAGE> 33
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<PAGE> 34
ACCOUNT REGISTRATION ERNST WORLD FUNDS
RETURN COMPLETED FORM TO:
Ernst World Funds
Dept. L-1636 [ LOGO ]
Columbus, OH 43260-1636
FOR ASSISTANCE, CALL 1-800-672-4797 GLOBAL THINKING * SMART INVESTING
- --------------------------------------------------------------------------------
SHARES OF ERNST WORLD FUNDS:
* Are not insured by the Federal Deposit Insurance Corporation (FDIC) or any
other government agency.
* Are not deposits or other obligations of, or guranteed by, any bank.
* Are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
1 FUND SELECTION
The minimum initial investment is $1,000 per fund; the minimum additional
investment is $50 (Lower limits may apply. Please see "How to purchase and
redeem shares" in the prospectus). I am investing in the following fund(s). The
payment method I have chosen is: [ ] Check: My check, made payable to Ernst
World Funds, is enclosed. [ ] Wire: I will call 1-800-672-4797 for
instructions. [ ] Bank transfer. Debit my bank account as indicated in Section
4.
<TABLE>
<S> <C>
$________________ Ernst Global Asset Allocation Fund
$_________________ Ernst Asia Fund $________________
$_________________ Ernst Global Resources Fund $________________
-----------------------------------------
$ TOTAL AMOUNT INVESTED
------------------------------------------
</TABLE>
================================================================================
2 ACCOUNT REGISTRATION Do not use this form to establish a retirement account.
To receive the forms necessary to open a retirement account, please call
1-800-672-4797.
TYPE OF REGISTRATION (check one)
<TABLE>
<S> <C> <C> <C>
[ ] Community Property [ ] Nonprofit Organization* [ ] Charitable Organization*
[ ] Individual [ ] Tenants in Common [ ] Corporation* [ ] Custodian for Minor
[ ] Joint Tenants with Right of Survivorship [ ] Partnership* [ ] Trust* [ ] Other (Specify)*_______
<FN>
* Please attach a copy of the appropriate bylaws, resolutions or trust documents establishing authority to open this account. If any
such aggrements or resolutions are not in existence, complete Section 9.
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________________ ___________________________ _______________________________________
INDIVIDUAL (First Name/Initial/Last Name) Date of Birth Social Security Number
_____________________________________________________ ___________________________
JOINT OWNER - IF ANY (First Name/Initial/Last Name) Date of Birth
_____________________________________________________
NAME OF CUSTODIAN (only one) as custodian for
_____________________________________________________ ___________________________ _______________________________________
Name of Minor (only one) Minor's State Minor's Date of Birth Minor's Social Security Number
of Residence
_____________________________________________________ ___________________________ _______________________________________
NAME OF ORGANIZATION/TRUST/PLAN Date of Trust Tax ID Number
_____________________________________________________
Name of Trustee
_______________________________________________________________________________________________________________________________
ADDRESS Number and Street Apt# City State Zip
(___)___________________________________________________(____)_________________________________________________________________
Daytime Telephone Number Evening Telephone Number
CITIZENSHIP [ ] U.S. Citizen
[ ] Nonresident Alien (Attach a W-8 form. Dividends are subject to tax witholding)
[ ] Resident Alien
EMPLOYMENT Required by National Association of Securities Dealers, Inc.
_______________________________________________________________________________________________________________________________
Employer's Name Occupation
_______________________________________________________________________________________________________________________________
Employer's Address City State Zip
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association
of Securities Dealers, Inc.?
[ ] No [ ] Yes Name of institution________________________________________Please complete section 5E.
EMPLOYMENT FOR JOINT ACCOUNT OWNER Required by National Associtation of Securities Dealers, Inc.
_______________________________________________________________________________________________________________________________
Employer's Name Occupation
_______________________________________________________________________________________________________________________________
Employer's Address City State Zip
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association
of Securities Dealers, Inc.?
[ ] No [ ] Yes Name of instituion________________________________________Please complete section 5E.
</TABLE>
<PAGE> 35
3 DISTRIBUTION SELECTION Your dividends and capital gains will be automatically
reinvested into your account unless you indicate otherwise below.
I would like my:
[ ] Dividends and capital gains reinvested for
fund(s)___________________________
[ ] Dividends paid by check and capital gains reinvested for
fund(s)___________________________
[ ] Dividends and capital gains sent to me by check to the address indicated in
Section 2 for fund(s)___________________________
[ ] Dividends and capital gains automatically deposited to my bank account as
indicated in Section 4 for fund(s)__________________________
[ ] Dividends and capital gains reinvested in another established Ernst World
Fund (minimum balance of $500 required)
From__________________________ __________________________
(Fund) Account Number
to__________________________ __________________________
(Fund) Account Number
From__________________________ __________________________
(Fund) Account Number
to__________________________ __________________________
(Fund) Account Number
================================================================================
4 ELECTRONIC FUNDS TRANSFER INSTRUCTIONS
FOR YOUR CONVENIENCE, YOU MAY AUTHORIZE ERNST WORLD FUNDS TO TRANSFER MONEY
BETWEEN YOUR BANK ACCOUNT AND YOUR ERNST WORLD FUNDS ACCOUNT.
I have attached a VOIDED CHECK OR DEPOSIT SLIP for my
[ ] checking* [ ] savings* [ ] money market* account.
I would like to use this service:
[ ] for the Automatic Plan(s) I signed up for in Section 5
[ ] to establish Bank Wire instructions
[ ] to receive dividends and capital gains
________________________________________________________________________________
Bank Name Branch Office Bank Telephone Number
________________________________________________________________________________
Account Number Bank Routing Number or ABA Number (if unknown, call your bank)
________________________________________________________________________________
Name(s) on Bank Account (must be the same as Ernst World Funds account)
________________________________________________________________________________
Bank Address (do not use P.O. Box) City State Zip
________________________________________________________________________________
Signature of Co-Owner of Bank Account
[FN]
*Debits to this account may count toward the maximum number of withdrawals
allowed for this type of account. Please check with your bank to ensure that
they accept "ACH transactions" for the account you are using.
================================================================================
5 ACCOUNT OPTIONS
A. AUTOMATIC INVESTMENT AND WITHDRAWAL PLANS Minimum $50 automatic investment
and $100 automatic withdrawal per fund; please see prospectus for details.
[ ] AUTOMATIC INVESTMENT PLAN. I would like the plan to begin the month
of_________________ 19_____. Please have the amount(s) indicated below
withdrawn from my bank account noted in Section 4 and invested in the
fund(s) listed below.
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
[ ] AUTOMATIC WITHDRAWAL PLAN. Required minimum balance is $10,000. I would
like the plan to begin the month of_________________ 19_____. Please have
the amount(s) indicated below [ ] deposited into my bank account noted in
Section 4. [ ] mailed to me by check at the address indicated in Section 2.
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
B. RIGHTS OF ACCUMULATION Please see the prospectus for qualifications.
[ ] My combined holdings in the Ernst World Funds may entitle me to a reduced
sales charge. Applicable shareholder account numbers are:
Fund ___________________ Fund ___________________ Fund ___________________
Account #_______________ Account #_______________ Account #_______________
C. LETTER OF INTENT You may qualify for reduced sales charges if you plan to
make additional investments within a 13-month period. Please see the
prospectus for qualifications.
[ ] I agree to the terms of the Letter of Intent set forth in the prospectus.
Although I am not obligated to do so, it is my intention to invest over a
13-month period in shares of one or more of the above Funds (except the
money market funds) an aggregate amount at least equal to that which is
checked below.
[ ] $50,000 [ ]$100,000 [ ]$250,000 [ ]$500,000 [ ]$1,000,000
D. SALES CHARGE WAIVER Please see current prospectus for eligibility.
The Sales Charge Waiver Form must be attached.
To receive a copy of the Sales Charge Waiver Form, see your employer or call
1-800-672-4797. Investor Category___________________
E. DUPLICATE STATEMENTS & CONFIRMATIONS (Optional, at your discretion)
Please send duplicate statements and confirmations to:
________________________________________________________________________________
Name Company
________________________________________________________________________________
Address City State Zip
<PAGE> 36
6 TELEPHONE REDEMPTION AND EXCHANGE If left blank, you will automatically
receive telephone privileges.
I elect the telephone privileges as described in the prospectus. [ ] Yes [ ] No
================================================================================
7 CUSTOMER AGREEMENT
To: BISYS Fund Services (BISYS), Distributor, and BISYS Fund Services Ohio,
Inc., Transfer Agent.
I (We) have full right, power, authority and legal capacity; and am (are) of
legal age in my (our) state of residence to purchase shares of the fund(s). I
(We) affirm that I (we) have received and read the current prospectus(es) of
the fund(s) selected and agree to be bound by its (their) terms.
Any changes to sections 1, 2 or 4 must be made in writing to BISYS Fund
Services, accompanied by a signature guarantee from an eligible guarantor
institution as outlined in the funds' prospectuses.
Any changes to sections 3, 5, 6, or 9 must be made in writing to BISYS Fund
Services, but do not require a signature guarantee. Please allow 15 business
days after receipt of the request to add, change or discontinue the Auto
Withdrawal feature.
The meaning of words in this Agreement: The words I," me" and "my" refer to the
person(s) who signed this Agreement. The words "you" and "your" refer to the
Distributor and the Transfer Agent.
a. REPRESENTATIONS. I understand that you provide no investment, tax or legal
advice, and I have relied on my independent judgment with respect to the
suitability or potential value of any security or order.
b. FORCE MAJEURE. You shall not be liable for loss or delay caused directly or
indirectly by war, natural disaster, government restrictions, exchange or
market rulings or other conditions beyond the control of the Distributor and
the Transfer Agent.
c. RECORDING CONVERSATIONS. I understand and agree that, for our mutual
protection, telephone conversations may be recorded without further notice.
d. APPLICABLE LAWS AND REGULATIONS. All transactions shall be subject to
rules, regulations, customs and usages of the exchange, market or clearing
house where executed, all applicable federal and state laws and regulations,
and the policies and procedures as determined by Ernst World Funds (the "Fund")
set forth in the funds' then-current prospectuses.
e. GOVERNING LAWS. The Agreement shall be governed by the laws of the State of
Ohio as applicable.
f. RELIANCE ON REPRESENTATIONS. I understand that the Distributor and the
Transfer Agent shall rely on the information which I have set forth in this
Agreement. I agree that all changes to this information shall be promptly
provided to the Distributor or the Transfer Agent in writing. The Distributor
and the Transfer Agent are entitled to rely on this information until I change
it by subsequent written notice.
g. DELIVERY AND RECEIPT. Any orders for transactions in the funds under this
Agreement will NOT be effective until received and approved by the Distributor
or the Transfer Agent at their offices in Columbus, Ohio. The Distributor or
the Transfer Agent shall not be responsible for any losses or lost profit
opportunity I may experience due to any delays in the execution of purchase and
redemption orders as a result of delayed receipt of such orders.
h. INSTRUCTIONS. Neither the Distributor, the Transfer Agent nor the Fund will
be liable for any loss, damages, expense or cost arising out of any telephone
redemption effected in accordance with the Fund's telephone redemption
procedures, upon instructions reasonably believed to be genuine. The Fund and
its agents will employ procedures designed to provide reasonable assurance that
instructions by telephone are genuine. These procedures include recording all
phone conversations, sending confirmations to shareholders within 72 hours of
the telephone transaction, verification of account name and account number or
tax identification number and sending redemption proceeds only to the address
of record or to a previously authorized bank account.
i. ARBITRATION. This paragraph contains what is sometimes referred to as a
predispute arbitration clause. In this regard, I am aware of the following:
(i) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(ii) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
(iii) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
(iv) THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
(v) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
(vi) ALL AGREEMENTS SHALL INCLUDE A STATEMENT THAT "NO PERSON SHALL BRING A
PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY
PREDISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT
A PUTATIVE CLASS ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT
OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE
CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED, OR (ii) THE CLASS
IS DECERTIFIED, OR (iii) THE PERSON AGAINST WHOM THE ARBITRATION AGREEMENT
WOULD BE ENFORCED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO
ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS
UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN." IT IS AGREED THAT ANY
CONTROVERSY BETWEEN ME AND ALL OR ANY OF THE FUNDS AND ITS SERVICE PROVIDERS,
ARISING OUT OF THIS AGREEMENT OR MY BUSINESS WITH YOU, SHALL BE SETTLED BY
ARBITRATION CONDUCTED IN ACCORDANCE WITH THE RULES OF THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS, INC. OR THE AMERICAN ARBITRATION ASSOCIATION, AS I MAY
ELECT. FAILURE TO NOTIFY YOU OF SUCH ELECTION IN WRITING WITHIN FIVE (5) DAYS
AFTER RECEIPT FROM YOU OF A REQUEST FOR ARBITRATION SHALL BE DEEMED TO BE
AUTHORIZATION TO MAKE SUCH ELECTION ON MY BEHALF. JUDGMENT UPON THE AWARD OF
THE ARBITRATORS MAY BE ENTERED BY ANY COURT HAVING JURISDICTION.
j. INDEMNIFICATION. As additional consideration for the services of the
Distributor, the Transfer Agent and the Fund, with regard to this Account, I
agree to indemnify and hold the Distributor, the Transfer Agent and the Fund,
its officers, directors, employees and agents harmless from and against any and
all losses, liabilities, demands, claims, actions, expenses and attorney's fees
arising out of or in connection with this Agreement, which are not caused by
the negligence or willful misconduct of the Distributor, the Transfer Agent or
the Fund. The provisions of this Section shall survive termination of this
Agreement; the provisions of this Section shall be binding on my successors and
assigns.
k. I understand that, if disbursements out of this account are to anyone other
than applicant or applicant's joint tenant, a signature guarantee will be
required.
l. With respect to Section 5A, I understand that if the 5th or 20th should
fall on a nonbusiness day, the transaction will be effective on the next
business day.
m. I UNDERSTAND THAT MUTUAL FUND SHARES ARE NOT DEPOSITS OF ANY BANK, ARE NOT
INSURED BY THE FDIC, ARE NOT OBLIGATIONS OF ANY BANK OR THE U.S. GOVERNMENT
AND ARE NOT ENDORSED OR GUARANTEED IN ANY WAY BY ANY BANK.
<PAGE> 37
[LOGO SIGNIFYING "NO FDIC
INSURANCE"]
8 YOUR SIGNATURE All registered shareholders must sign.
I HAVE RECEIVED AND READ THE CURRENT PROSPECTUS(ES) OF THE FUND(S) SELECTED AND
THIS ACCOUNT REGISTRATION FORM AND AGREE TO BE BOUND BY THEIR TERMS.
By signing below, I certify under the penalty of perjury, that (check
appropriate box):
[ ] The number I have provided is the correct taxpayer identification
number for this account, and I AM NOT subject to backup withholding
because (a) I am exempt from backup withholding (and if I am a
nonresident alien, I have provided you with a compete W-8 form), or (b)
I have not been notified by the Internal Revenue Service that I am
subject to backup withholding as a result of a failure to report
interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] The number I have provided is my correct taxpayer identification
number, and I AM subject to backup withholding.
BY SIGNING BELOW, I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS
GOVERNING THIS ACCOUNT AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS
ARE CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME, AND I
ACKNOWLEDGE THAT I HAVE READ AND UNDERSTAND THE DISCLOSURE WITH RESPECT TO
NON-DEPOSIT INVESTMENT PRODUCTS AT THE CONCLUSION OF THIS AGREEMENT.
X X
- -------------------------------------- ---------------------------------------
Signature Date Signature Date
X X
- -------------------------------------- ---------------------------------------
Signature(Joint Owner-if any) Date Signature(Joint Owner-if any) Date
===============================================================================
9 ORGANIZATION RESOLUTION
This seciton is to be completed by organizations. In some circumstances,
additional documentation is required. Pleas call 1-800-672-4797 to inquired.
Also, please be sure to fill out the appropriate resolution fully, as
incomplete documentation will cause delays in investing and redeeming.
TYPE OF ORGANIZATION
[ ] Corporation [ ] Nonprofit Organization [ ] Partnership
- -------------------------------------- ---------------------------------------
Name of Organization Name (Please print) Title
- -------------------------------------- ---------------------------------------
Address Signature
- -------------------------------------- ---------------------------------------
City State Zip Name (Please print) Title
- -------------------------------------- ---------------------------------------
Telephone Signature
---------------------------------------
I,_________________of_________________ Name (Please print) Title
certify that the following is a true
copy of a resolution now in full force ---------------------------------------
and effect, duly adopted by the Signature
Board of Directors or by those with
authority to act on behalf of said
Organization on _______________ 19__:
Resolved, that any [ ] one [ ] two
[ ] three [ ] four of the persons
whose names and signatures appear Be it further resolved, that the
below are hereby authorized and parties named above are hereby
directed to execute and deliver any authorized and directed to sign such
written instruments including, without documents, make such filings and to
limitation, the Customer Agreement, take such further actions as may be
which is attached hereto and made a necessary or desirable to implement
part hereof by this reference, this resolution.
necessary to establish and maintain
accounts with any fund within the Ernst
World Funds, to effect purchases and
redemptions of such shares. X
---------------------------------------
Signature of certifying Date
person of officer
- --------------------------------------- (Other than those listed above) All
Name (Please print) Title persons authorized to act on the
account must also sign under Section 8
- --------------------------------------- of this application.
Signature
===============================================================================
BANK, BROKER/DEALER USE ONLY
Investment Rep__________________ SS#_______________________ Rep#_______________
Broker/Dealer#__________________ Office Name_______________ Office#____________
Telephone (___)_________________ Signature_____________________ Date___________
Referred by_____________________ Office Name_______________ Office#____________
Principal ______________________ Signature_____________________ Date___________
===============================================================================
===============================================================================
OFFICE USE ONLY
Dealer# _ _ _ _ _ _ _ Rep # _ _ _ _ _ _ Lead Source _ _
Wholesaler # _ _ _ Referring Employee _ _ _ _ Fund Source _ _
Office# _ _ _ _ _ _ _ Referring Branch _ _ _ _ Campaign Code _ _
===============================================================================
<PAGE> 38
ERNST WORLD FUNDS
WORLD
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST GLOBAL SMALLER COMPANIES FUND
ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND
ERNST & COMPANY
INVESTMENT ADVISER
PROSPECTUS DATED FEBRUARY 5, 1996
<PAGE> 39
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 2
Fee Table............................................................................. 4
Investment Objectives and Policies.................................................... 5
Investment Techniques................................................................. 9
Management of the Group............................................................... 14
Investment Restrictions............................................................... 17
Valuation of Shares................................................................... 17
How to Purchase and Redeem Shares..................................................... 18
Dividends and Taxes................................................................... 26
Expenses and Certain Fund Services.................................................... 28
General Information................................................................... 29
</TABLE>
INVESTMENT ADVISER
Ernst & Company
One Battery Park Plaza
New York, New York 10004
SUB-INVESTMENT ADVISER:
NATIONAL MUTUAL FUNDS
MANAGEMENT (GLOBAL), LTD.
447 Collins Street
Melbourne, Australia 3000
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
AUDITORS
Coopers & Lybrand, L.L.P.
100 East Broad Street
Columbus, Ohio 43215
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE GROUP
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE> 40
THE ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST GLOBAL SMALLER COMPANIES FUND
ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND
For current purchase, redemption and
performance
information, call (800) 672-4797.
TDD/TTY call (800) 300-8893
The ERNST WORLD FUNDS are a family of mutual funds with each Fund having a
separately managed portfolio of assets. The three Funds offered by this
Prospectus are the ERNST GLOBAL ASSET ALLOCATION FUND (the "Global Asset
Allocation Fund"), the ERNST GLOBAL SMALLER COMPANIES FUND (the "Global Smaller
Companies Fund") and the ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND (the
"Australia-New Zealand Fixed Income Fund") (collectively the "Funds"). Each of
the Funds is a diversified mutual fund, except for the Australia-New Zealand
Fixed Income Fund which is non-diversified. These Funds are intended for
investors seeking international diversification through investment in
specialized portfolios. The Global Asset Allocation Fund has been developed for
investors who seek higher levels of capital stability available from investing
globally in a mix of equity, debt and money market securities. The Global
Smaller Companies Fund has been developed for investors who seek to have their
assets invested globally and primarily in smaller companies, as defined below.
The Australia-New Zealand Fixed Income Fund has been developed for investors who
seek current income with some, but limited, potential for capital appreciation
through investment in a portfolio of primarily fixed income securities which
present minimal credit risk and which are issued by the governments of Australia
or New Zealand or governmental authorities in those countries. The Global Asset
Allocation and Smaller Companies Funds are particularly intended for investors
who are willing to invest on a longer term basis. All of the Funds are intended
for investors who seek the potential benefits in international securities
markets and who can accept the risks inherent in those markets.
The Funds are advised by Ernst & Company ("Ernst" or the "Adviser"), an
institutional, securities investment firm with its principal offices in New
York, New York. Ernst, founded in 1924, is a member firm of the New York Stock
Exchange and of all principal U.S. securities exchanges. Each Fund also utilizes
the services of National Mutual Funds Management (Global) Ltd., Melbourne,
Australia as sub-investment adviser.
The investment objective of the Global Asset Allocation Fund is long-term
capital appreciation. It seeks this objective by investing primarily in equity
securities of U.S. and foreign companies, debt securities issued by both private
issuers and governments and in money market instruments.
The investment objective of the Global Smaller Companies Fund is long-term
capital appreciation. It seeks this objective by investing primarily in equity
securities of U.S. and foreign companies, the market capitalization of which is
less than $1 billion. In the case of U.S. companies, these smaller companies
will usually have market capitalization outside of the top 75% of U.S. companies
by market capitalization. In the case of non-U.S. companies, these smaller
companies will usually have market capitalization outside of the top 50% of
companies by capitalization in their market.
The investment objective of the Australia-New Zealand Fixed Income Fund is
current income. It seeks this objective by investing primarily in fixed income
securities which present minimal credit risk and which are issued by either the
governments of Australia or New Zealand, or governmental authorities in those
countries. It may also invest to a more limited extent in corporate debt
securities.
The Funds are investment series of The Coventry Group (the "Group"), an
open-end management investment company consisting of several separate investment
series. BISYS Fund Services, Limited Partnership, Columbus, Ohio (the
"Distributor") acts as the Funds' administrator and distributor. BISYS Fund
Services Ohio, Inc., Columbus, Ohio, an affiliate of the Distributor, acts as
the Funds' transfer agent (the "Transfer Agent") and performs certain accounting
services for the Funds.
Additional information about the Funds, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission (the "Commission") and is available upon request without charge by
writing to the Funds at their address or by calling the Funds at the telephone
number shown above. The Statement of Additional Information bears the same date
as this Prospectus and is incorporated by reference in its entirety into this
Prospectus.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION AND THE SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENTS IN THE FUNDS ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
The date of this Prospectus is February 5, 1996
<PAGE> 41
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
The Funds.......................... Ernst Global Asset Allocation Fund (the "Global Asset
Allocation Fund"), Ernst Global Smaller Companies Fund
(the "Global Smaller Companies Fund") and Ernst
Australia-New Zealand Fixed Income Fund (the
"Australia-New Zealand Fixed Income Fund"), each a
separate investment portfolio (collectively, the
"Funds") of The Coventry Group, an open-end, management
investment company organized as a Massachusetts business
trust.
Shares Offered..................... Shares of beneficial interest ("Shares") of the Funds.
Offering Price..................... The public offering price is equal to the net asset
value per Share plus a sales charge equal to 5.50%
of the public offering price (5.82% of the amount
invested) for the Global Asset Allocation and Global
Smaller Companies Funds, and 3.25% (3.36% of the amount
invested) for the Australia-New Zealand Fixed Income
Fund reduced on investments of $50,000 or more.
Minimum Purchase................... $1,000 minimum for the initial investment with a $50
minimum for subsequent investments. (See "HOW TO
PURCHASE AND REDEEM SHARES -- Purchases of Shares and
Auto Invest Plan" for a discussion of lower minimum
purchase amounts).
Investment Objective and The Global Asset Allocation and the Global Smaller
Policies......................... Companies Funds seek long-term capital appreciation.
Under normal market conditions, the Global Asset
Allocation Fund will invest primarily in equity
securities of U.S. and foreign companies, debt
securities issued by both private issuers and
governments and in money market instruments. Under
normal market conditions, the Global Smaller Companies
Fund will invest primarily in equity securities of U.S.
and foreign companies, the market capitalization of
which is less than $1 billion. In the case of U.S.
companies, these smaller companies will usually have
market capitalization outside of the top 75% of U.S.
companies by market capitalization. In the case of
non-U.S. companies, these smaller companies will usually
have market capitalization outside of the top 50% of
companies by capitalization in their market. The
Australia-New Zealand Fixed Income Fund seeks current
income. Under normal market conditions, it will invest
primarily in fixed income securities which present
minimal credit risk and which are issued by the govern-
ments of Australia or New Zealand, or governmental
authorities in those countries.
</TABLE>
2
<PAGE> 42
<TABLE>
<S> <C>
Risks and Special Considerations... Each of the Funds invest substantial amounts of its
assets in securities of issuers located outside of the
United States. The risks of such investments include,
among others, currency fluctuations, possible price
volatility and reduced liquidity, different financial,
accounting and regulatory standards, possible
withholding taxes and expropriation. (See Risk Factors
and Special Considerations) In addition, the Global
Smaller Companies Fund invests primarily in securities
issued by smaller companies which can in some instances
involve greater risks than investing in larger
companies. (See Ernst Global Smaller Companies Fund)
Investment Adviser................. Ernst & Company, New York, New York.
Sub-Investment Adviser............. National Mutual Funds Management (Global) Ltd.,
Melbourne, Australia.
Dividends.......................... The Global Asset Allocation Fund and the Global Smaller
Companies Fund intend to declare dividends from net
investment income quarterly and pay such dividends
quarterly. The Australia-New Zealand Fixed Income Fund
intends to declare dividends from net investment income
monthly and pay such dividends monthly. Each Fund will
distribute net realized capital gains, if any, at least
once annually. All such dividends shall be paid in
additional full and fractional shares of a Fund unless a
shareholder elects to take dividends in cash.
Distributor........................ BISYS Fund Services, Limited Partnership, Columbus,
Ohio.
</TABLE>
3
<PAGE> 43
FEE TABLE
<TABLE>
<CAPTION>
GLOBAL GLOBAL AUSTRALIA-
ASSET SMALLER NEW ZEALAND
ALLOCATION COMPANIES FIXED
FUND FUND INCOME FUND
---------- --------- -----------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)....................... 5.50% 5.50% 3.25%
Maximum Sales Load Imposed on Reinvested Dividends (as
a percentage of offering price)..................... 0% 0% 0%
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as
applicable)......................................... 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed,
if applicable)1..................................... 0% 0% 0%
Exchange Fee.......................................... $ 0 $ 0 $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees....................................... 1.10% 1.10% .60%
12b-1 Fees............................................ 0.25% 0.25% 0.25%
Other Expenses3....................................... 1.07% 1.07% 1.45%
---------- --------- -----------
Total Fund Operating Expenses......................... 2.42% 2.42% 2.30%
========= ========== ============
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
---------- ---------
<S> <C> <C> <C>
Global Asset Allocation Fund........................ $ 78 $ 126
Global Smaller Companies Fund....................... $ 78 $ 126
Australia-New Zealand Fixed Income Fund............. $ 55 $ 102
</TABLE>
The purpose of the above table is to assist a potential purchaser of a
Fund's Shares in understanding the various costs and expenses that an investor
in a Fund will bear directly or indirectly. Ernst and the Administrator may
voluntarily waive or reduce a portion of the fees payable to them which may
result in lower total operating expenses. See "MANAGEMENT OF THE GROUP" and
"GENERAL INFORMATION" for a more complete discussion of the Shareholder
transaction expenses and annual operating expenses for the Funds. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ---------------
1 A wire redemption charge of $15.00 is deducted from the amount of a wire
redemption payment made at the request of a shareholder.
2 As a result of expenses payable in connection with the Funds' Distribution and
Shareholder Service Plan, it is possible that long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers.
3 "Other Expenses" for the Funds are based on estimated amounts for the current
fiscal year.
4
<PAGE> 44
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies, which are
described below. There is no assurance that a Fund will be successful in
achieving its investment objectives. The investment objective of each Fund is a
fundamental policy and, as such, may not be changed without a vote of the
holders of a majority of the outstanding Shares of a Fund (as described in the
Statement of Additional Information). The other policies of a Fund may be
changed without a vote of the holders of a majority of Shares unless (1) the
policy is expressly deemed to be a fundamental policy of the Fund or (2) the
policy is expressly deemed to be changeable only by such majority vote.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia
("NMFM") serves as sub-investment adviser for each of the Funds. NMFM will
manage each Fund from its offices in Melbourne, Australia, and will coordinate a
global team of regionally based investment professionals in Australia, Japan,
Hong Kong, New Zealand, the United States and Europe.
ERNST GLOBAL ASSET ALLOCATION FUND
The investment objective of the Global Asset Allocation Fund is to seek
long-term capital appreciation. Under normal market conditions, the Global Asset
Allocation Fund will invest primarily (i.e., not less than 65% of its total
assets) in equity securities of U.S. and foreign companies, debt securities
issued by both private issuers and governments and in money market instruments.
The Fund will normally invest at least 65% of its total assets in at least three
different countries around the world.
While the Global Asset Allocation Fund has been developed for investors who
seek long-term capital appreciation, it has been designed for investors who also
wish a level of capital stability greater than that which would be realized by a
fund which invests solely in global equity markets. Accordingly, the Global
Asset Allocation Fund will normally invest in a mix of equity, debt and money
market securities. The Adviser and NMFM believe that portfolios so invested can
over the long term provide capital appreciation and lower levels of volatility
than traditional equity funds.
The Fund is not limited geographically but will invest primarily in the
principal securities markets in North America, Europe and the United Kingdom,
Asia and Japan, and Australasia. Like other global funds, this Fund will be
exposed to the risks of international investing (See Risk Factors and Special
Considerations). The Fund's investments in equity securities will be primarily
in larger capitalization companies in the principal securities market for that
company. It intends also to limit its investment in debt securities of private
issuers to those rated investment grade (rated A or better) by a nationally
recognized statistical rating organization or judged by NMFM to be of comparable
quality). Money market securities include repurchase agreements, commercial
paper, certificates of deposit, bankers acceptances and other liquid, short-term
debt securities.
Although the Fund is not restricted to any particular mix of equity, debt
and money market instruments, it will normally invest at least 10% of its total
assets in equity securities and at least 20% of its total assets in debt
securities or money market instruments. It will not invest more than 70% of its
total assets in equity securities or in debt securities at any one time. For
temporary, defensive purposes, the Fund may invest up to 100% of its assets in
debt securities of corporate and governmental issuers rated in the three highest
rating categories by a recognized rating service or determined to be of
comparable quality by NMFM and in liquid short-term money market instruments.
5
<PAGE> 45
The Fund intends to use various hedging techniques to hedge against
currency exchange rate risks. If the value of a currency in which the Fund has
invested a portion of its assets, should fall in value relative to the dollar,
the value of the Fund's invested assets, expressed in dollars, will also fall.
As a general policy, NMFM will attempt to hedge all foreign currency exposures
so that the Fund will not be exposed to the risk of foreign currency
fluctuations relative to the U.S. dollar. The Adviser may deviate from this
policy for temporary defensive purposes where the use of hedging techniques
appears particularly ill advised. (See "Foreign Currency Transactions"). In
addition to using forward foreign currency exchange contracts, the Fund may also
use foreign currency futures and options for foreign currency hedging purposes.
The Fund may also use futures and options contracts to facilitate efficient
cash management, portfolio restructuring and hedging purposes. The Fund will not
use such contracts to leverage its assets and these contracts will, in
accordance with applicable regulatory requirements, be covered by appropriate
assets or segregated accounts (see Futures Contracts; Call and Put Options).
NMFM uses a global investment process in managing the Fund which involves
an ongoing review of global economic developments, changes in economies and
securities markets in countries in which the Fund may invest, as well as
possible changes in currency values. NMFM relies upon its regional offices to
assist in these reviews. In part because of the periodic need to allocate and
reallocate assets among the asset classes of the Fund, it is anticipated that
the Fund's portfolio turnover rate may be approximately, but is not expected to
exceed, 100% (see Expenses and Portfolio Transactions and Foreign Investment
Risk).
ERNST GLOBAL SMALLER COMPANIES FUND
The investment objective of the Global Smaller Companies Fund is to seek
long-term capital appreciation. Under normal conditions, the Global Smaller
Companies Fund will invest primarily (i.e., at least 65% of its total assets) in
equity securities of U.S. and foreign small companies. The Fund will also
normally invest at least 65% of its total assets in at least three different
countries around the world. The balance of the Fund's assets will normally be
invested in equity securities of larger companies or other permissible
investments for the Ernst World Funds (See "Investment Techniques").
The Global Smaller Companies Fund is intended for long term investors who
seek broader diversification by investing a portion of their assets globally and
primarily in smaller sized companies. In today's share price environment,
companies with total market capitalization of less than $1 billion will be
considered small. In the case of U.S. companies, these smaller companies will
usually have market capitalization outside of the top 75% of U.S. companies by
market capitalization. In the case of non-U.S. companies, these smaller
companies will usually have market capitalization outside of the top 50% of
companies by capitalization in this market. Smaller companies can, in the view
of the Adviser and NMFM, represent attractive investment opportunities. Smaller
companies can sometimes focus their energies in more flexible and more
innovative ways than larger companies and can position themselves more readily
in growing sectors of an economy. Also, smaller companies sometimes are less
well researched by investment firms and may as a result be somewhat undervalued.
At the same time, investment in smaller companies may involve greater risk than
investing in larger companies. Smaller companies may have more limited product
lines, markets or financial and management resources. Securities trading markets
for smaller companies often trade less frequently and in smaller volume and may
be subject to more abrupt or erratic price movements affecting the value of the
Fund's shares.
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For temporary, defensive purposes, the Fund may invest up to 100% of its
assets in debt securities of corporate and governmental issuers rated in the
three highest rating categories by a recognized rating organization or
determined to be of comparable quality by NMFM and in liquid short-term money
market instruments.
The Fund intends to use various hedging techniques to hedge against
currency exchange rate risks. If the value of a currency in which the Fund has
invested a portion of its assets, should fall in value relative to the dollar,
the value of the Fund's invested assets, expressed in dollars, will also fall.
As a general policy, NMFM will attempt to hedge all foreign currency exposures
so that the Fund will not be exposed to the risk of foreign currency
fluctuations relative to the U.S. dollar. The Adviser may deviate from this
policy for temporary defensive purposes where the use of hedging techniques
appears particularly ill advised. (See "Foreign Currency Transactions"). In
addition to using forward foreign currency exchange contracts, the Fund may also
use foreign currency futures and options for foreign currency hedging purposes.
The Fund may also use futures and options contracts to facilitate efficient
cash management, portfolio restructuring and hedging purposes. The Fund will not
use such contracts to leverage its assets and these contracts will, in
accordance with applicable regulatory requirements be covered by appropriate
assets or segregated accounts (see Futures Contracts; Call and Put Options).
NMFM uses a global investment process in managing the Fund. It reviews on
an on-going basis global economic developments in the regions and countries in
which the Fund may invest. It examines conditions in local economies, securities
markets, companies and currencies and relies upon its regional offices to assist
in these reviews. NMFM does not anticipate the Fund's portfolio turnover rate to
exceed 75%.
ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND
The investment objective of the Australia-New Zealand Fixed Income Fund is
current income. The Fund seeks this objective by investing primarily (i.e., at
least 65% of its total assets) in fixed income securities which present minimal
credit risk and which are issued or guaranteed by either the government of
Australia or New Zealand, or governmental authorities in those countries.
The Australia-New Zealand Fixed Income Fund is intended for investors who
wish to diversify their investments by investing in a fund which holds high
quality debt securities issued primarily by Australian and New Zealand
governmental bodies. Historically, debt securities of Australia-New Zealand
governments have provided higher yields than U.S. government securities. Like
the United States, Australia and New Zealand have had more stable economic and
political environments than many other countries of the world. However, like
other funds investing outside of the United States, this Fund will be exposed to
the risks of international investing (see Risk Factors and Special
Considerations).
The Fund will invest at least 65% of its total assets in securities issued
or guaranteed by the Australian government, its agencies, authorities and
instrumentalities, as well as Australian state governments and their agencies,
authorities and instrumentalities, and in comparable securities issued by the
New Zealand government, its agencies or instrumentalities. The Fund may also
invest in high rated corporate debt securities of Australian or New Zealand
companies and money market instruments. The average duration of securities held
by the Fund is expected to be normally between 2 and 6 years. All securities
held by the Fund must be rated in one of the three highest rating categories by
a recognized rating agency or be of comparable quality in the view of NMFM. For
temporary defense purposes, the Fund may reduce its holdings of Australia and
New
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Zealand securities and invest all its assets in U.S. government securities. The
Fund does not anticipate that its portfolio turnover rate will exceed 500%. The
Fund will be actively traded by NMFM to increase income. Existing tax rules will
limit the extent of such trading. While debt securities are generally traded
free of brokerage commissions, dealer spreads or mark-ups do not make such
trading free of trading costs.
The Fund does not intend to engage in hedging transactions to hedge against
currency exchange risks, since it is intended for investors who desire a "pure
play," that is exposure to Australian interest rate and currency fluctuations.
Accordingly, the net asset value of the Fund's shares will fluctuate with
changes in both interest rates in Australia and New Zealand and currency
exchange rates. As interest rates increase, the value of the Fund's holdings
will generally decrease and as interest rates decrease, the value of the Fund's
holdings will generally increase. If the value of Australian and New Zealand
currencies fall relative to the U.S. dollar, the value of the Fund's holdings
expressed in dollars would also fall. If those currencies were to increase in
value relative to the U.S. dollar, the value of the Fund's holdings in U.S.
dollars would increase. Under extraordinary circumstances, the Fund may,
however, use foreign currency hedging strategies (see Foreign Currency
Transactions) to attempt to avoid losses that are highly likely to occur in the
view of the sub-adviser.
Because the Fund may invest a substantial portion of its assets in
securities issued by the Australian government, it will be considered a
non-diversified fund. It also will have a policy to concentrate its investments
in Australian governmental issuers. In general, funds which are non-diversified
or concentrate in particular industry groups are considered more risky than
diversified funds or funds which do not concentrate. Non-diversified funds and
funds that concentrate their investments may be more susceptible to any single
economic, political or regulatory event. As noted above, the Fund is investing
primarily in high quality securities issued by Australian and New Zealand
governmental bodies. These securities will be guaranteed as to principal and
interest by the issuing body or the national or state government of Australia or
New Zealand as the case may be, although there can be no guarantee that
political upheaval would never lead to a repudiation.
The Fund will, nonetheless, be required to comply with diversification
requirements of the U.S. Internal Revenue Code. These requirements will
generally restrict the Fund's investments, with respect to particular
governmental bodies, such that the Fund could not invest substantial assets in a
single issuer for extended periods of time.
Australian Governmental Entities. The Fund is permitted to invest in
Commonwealth of Australia government bonds and treasury notes and state
government and semi-government bonds and notes. Commonwealth government bonds
and treasury notes represent the obligations of the Commonwealth of Australia
and are sold by the Reserve Bank of Australia (the central bank) through public
tenders. Bonds typically have maturities of twelve to fifteen years but may be
longer term. Notes may be issued in maturities up to six months. The
Commonwealth also guarantees as to payment of principal and interest similar
debt obligations issued by its instrumentalities. State government and
semi-government bonds and notes are issued by various States and State
instrumentalities and, in the case of State instrumentalities, are guaranteed by
the applicable State government. Maturities range from less than one year to 15
years.
Mortgage-Backed Securities. The Fund is also permitted to invest in
Australian mortgage-backed securities, which represent part ownership by the
Fund in a pool of mortgage loans. These loans are made by private lenders and to
be eligible for purchase by the Fund must have assurances from Australian
federal and
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state governmental entities or agencies. These securities must also satisfy the
Fund's general credit criteria to qualify for purchase.
The Fund may invest in options and futures contracts to assist in the
efficient management of cash holdings and for other investment purposes. (See
Futures Contracts, Call and Put Options.)
Information about Australia. Australia comprises an area almost the same
size as the United States, excluding Alaska. Its population is approximately 18
million. The Commonwealth of Australia was formed as a federal union in 1901,
with federal legislative powers vested in the Federal Parliament and federal
executive power in the Governor-General who is advised by a Federal Executive
Council comprised of the Prime Minister and other Federal Ministers. Prior to
World War II, the economy was highly dependent on the rural sector. In the last
forty years there has been strong growth in the economy and diversification so
that the rural sector now accounts for less than 5% of gross domestic product
and employment. During the 1990s, Australia has experienced good growth in gross
domestic product of around 3% and generally low inflation rates below 3%.
Australia has traditionally been a net importer of capital and has traditionally
run a current account deficit. Exchange rates between the U.S. dollar and
Australia dollar have fluctuated between 1990 and 1995 between a low of $1.21
and a high of $1.55 Australian dollars per U.S. dollar. In late January 1995,
the exchange rate was $1.35 Australian to $1.00 U.S. Changes in the exchange
rate may occur for numerous reasons and could be significant, affecting the U.S.
dollar value of the Fund's assets, its yield and the amount of securities needed
to be sold in order to meet dividend distribution requirements.
Australian interest rates, both short and long term, generally declined
during the early 1990s but increased during 1994. 10 year Australian Government
Bonds have, during the 1990's, carried interests rates that have generally
exceeded 10 year U.S. Government Bond rates by 1% to 2.5%. There is no assurance
that this will continue. (See the Statement of Additional Information for
information comparing interest rates of U.S. and Australian Bonds). During most
of the 1990s, the Australian government has run budget deficits in excess of 10%
of revenues. The Commonwealth and State governments of Australia and their
agencies and instrumentalities issue bonds and notes which are generally listed
on the Australian Stock Exchange. Most trading in Australian debt securities
takes place over-the-counter.
INVESTMENT TECHNIQUES
The following investments and investment techniques are available to each
of the Funds, unless otherwise indicated. When an investment limitation is
expressed in terms of a percentage of a Fund's assets, that limitation will
apply at the time the investment is made. The Funds are not required to sell
assets as a result of subsequent market changes in asset values.
EQUITY SECURITIES (ALL FUNDS EXCEPT THE AUSTRALIA-NEW ZEALAND FIXED INCOME FUND)
Equity securities include but are not limited to common and preferred
stock, debt securities convertible into common stock (sometimes referred to as
"convertible debentures"), common stock purchase warrants, closed-end country
funds listed on a securities exchange, American Depositary Receipts, European
Depositary Receipts and Global Depositary Receipts.
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DEBT SECURITIES (ALL FUNDS)
Debt securities are securities issued by companies and governments in
various forms such as bonds, notes and debentures, and the fixed income
valuation of securities convertible into stock and convertible stock. The issuer
receives an amount of money which it promises to repay at a particular time
(typically the maturity date of the security). The issuer promises to pay
interest at stated intervals in either a fixed or variable amount. Debt
securities issued by governments and private issuers often receive ratings from
recognized rating agencies. (See Appendix A.)
DEPOSITARY RECEIPTS (ALL FUNDS)
American Depositary Receipts ("ADRs") are Depositary Receipts typically
issued by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs") are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risk of other
investments in foreign securities, as discussed below.
FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS)
Forward Foreign Currency Exchange Contracts are used in order to protect
against the adverse effect that future changes in foreign currency exchange
rates may have on an investment portfolio or on its investment activities that
are undertaken in foreign currencies. Many of the foreign securities in which
the Funds invest will be denominated in foreign currencies. Changes in foreign
exchange rates will affect the value of securities denominated or quoted in
foreign currencies. Exchange rate movements can be large and can endure for
extended periods of time, affecting either favorably or unfavorably the value of
the Fund's assets.
Contracts to purchase foreign currencies are used to protect against an
anticipated rise in the U.S. dollar price of securities it intends to purchase.
Contracts to sell foreign currencies are used to protect against the decline in
value of its foreign currency-denominated portfolio securities due to a decline
in the value of the foreign currencies relative to the U.S. dollar. A Fund may
use one currency (or a basket of currencies) to hedge against adverse changes in
the value of another currency (or a basket of currencies) when exchange rates
between the two currencies are correlated. Contracts to sell foreign currency
would limit any potential gain which might be realized by a Fund if the value of
the hedged currency increases. Foreign currency transactions may include forward
foreign currency contracts, currency exchange transactions on a spot (i.e.,
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cash) basis, put and call options on foreign currencies, and foreign exchange
futures contracts. No assurance can be given that these techniques will be
successful if used.
FUTURES CONTRACTS (ALL FUNDS)
Each Fund may enter into contracts for the future delivery of securities
and futures contracts based on a specific security, class of securities or an
index. Each Fund may also purchase or sell options on any such futures contracts
and engage in related closing transactions. A futures contract on a securities
index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on the
level of a specified securities index. The Funds may engage in such futures
contracts for hedging purposes, for example, to manage its cash position through
exposure to particular markets or securities through the purchase of financial
futures contracts and to a more limited extent for general trading and
investment purposes. When interest rates are expected to fall or market values
are expected to rise, a Fund, through the purchase of such contracts, can
attempt to secure better rates or prices for the Fund than might later be
available in the market when it effects anticipated purchases.
Aggregate initial margin deposits for futures contracts for other than
"bona fide hedging" purposes, as defined in applicable rules of the Commodity
Futures Trading Commission, may not exceed 5% of a Fund's total assets, and the
value of securities that are the subject of such futures and options on all such
futures contracts may not exceed the market value of a Fund's total assets.
GOVERNMENT OBLIGATIONS (ALL FUNDS)
The Funds may invest in government obligations of the U.S. Government as
well as government obligations of foreign countries. The types of U.S.
Government Obligations invested in by a Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes, bonds and certificates of
indebtedness, and obligations issued or guaranteed by the agencies or
instrumentalities of the U.S. Government, but not supported by such full faith
and credit. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations. The Funds may also invest in
obligations issued or guaranteed by foreign governments or their agencies and
instrumentalities.
MONEY MARKET INSTRUMENTS (ALL FUNDS)
The Funds may invest in U.S. and foreign money market instruments. Money
market instruments consist of: repurchase agreements, certificates of deposit,
time deposits and bankers acceptances; commercial paper rated in one of the two
highest rating categories by at least one recognized rating organization or
deemed to be of comparable quality by the Fund's sub-adviser and money market
mutual funds.
CALL AND PUT OPTIONS (ALL FUNDS)
Each Fund may purchase call options or write (sell) call options on
securities or on security indexes. The Fund is not required to own the
underlying security or the securities in the index. A call option gives the
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purchaser of the option the right to buy, and obligates the seller of the option
to sell, the underlying security or group of securities at the stated exercise
price at any time prior to the expiration date of the option, regardless of the
market price of the security. When a Fund writes a covered call option (i.e., an
option where the Fund owns the underlying security) and such option is
exercised, it will forgo the appreciation, if any, on the underlying security in
excess of the exercise price. In order to close out a call option it has
written, a Fund may enter into a "closing purchase transaction" -- the purchase
of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously wrote on any
particular securities. When a portfolio security subject to a call option is
sold, the Fund may effect a closing purchase transaction to close out any
existing call option on that security. If a Fund is unable to effect a closing
purchase transaction, it will not be able to sell the underlying security until
the option expires or the Fund delivers the underlying security upon exercise.
If the Fund writes an uncovered call, it will segregate assets equal to the
market value of the underlying security or securities index, using highly liquid
instruments. Each Fund will not permit the underlying value of their portfolio
securities subject to such options to exceed 50% of its total assets.
The Funds may also purchase and sell puts. A Fund, when it acquires a put,
would have the right to sell or redeem a specified security at a certain time or
within a certain period of time at a specified price. The security is sold to a
third party or redeemed by the issuer as provided contractually. The put may be
an independent feature or may be combined with a reset feature that is designed
to reduce downward price volatility as interest rates rise by enabling the
holder to liquidate the investment prior to maturity. The Funds may acquire put
options to facilitate portfolio liquidity, shorten the maturity of the
underlying security, or to permit the investment of funds at a more favorable
rate of return. The price of a put option or putable security may be higher than
the price which otherwise would be paid for the security without such put
feature, thereby increasing the security's cost and reducing its yield. The time
remaining to the put date will apply for purposes of determining the maximum
maturity of such securities. When the Fund acquires a put for a security or
group of securities it does not own or when it writes a put, it will segregate
highly liquid assets equal in value to its obligation under the put agreement.
The call and put options discussed above, which are traded on exchanges and
over-the-counter, may also be referred to as derivatives. Derivatives generally
are instruments whose value is derived from or related to the value of some
other instrument or index. While exchange traded options in the U.S. are
generally liquid, over-the-counter options are generally illiquid.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS (ALL FUNDS)
Each Fund may purchase securities on a when-issued or delayed-delivery
basis. A Fund will engage in when-issued and delayed-delivery transactions only
for the purpose of acquiring portfolio securities consistent with its investment
objectives and policies, not for investment leverage. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those available in the market when delivery takes
place. A Fund will generally not pay for such securities or start earning
interest on them until they are received. When a Fund agrees to purchase such
securities, however, the Fund's custodian will set aside cash or liquid
securities equal to the amount of the commitment in a separate account.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in the value based upon changes in the general level of
interest rates. In when-issued and delayed-delivery transactions, a Fund relies
on the seller to
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complete the transaction; the seller's failure to do so may cause a Fund to miss
a price or yield considered to be advantageous.
Each Fund's commitments to purchase when-issued securities will not exceed
25% of the value of its respective total assets, absent unusual market
conditions. Each of the Funds does not intend to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objectives.
REPURCHASE AGREEMENTS (ALL FUNDS)
Each Fund may enter into repurchase agreements to earn income. A repurchase
agreement is an agreement whereby a Fund purchases securities and the seller
agrees to repurchase the securities within a particular time at a specified
price. Such price will exceed the original purchase price, the difference being
income to the Fund, and will be unrelated to any interest rate on the purchased
security. The Fund's Custodian will maintain the custody of the purchased
securities for the duration of the agreement. The value of the purchased
securities, including any accrued interest, will at all times exceed the value
of the repurchase agreement. In the event of the bankruptcy of the seller or the
failure of the seller to repurchase the securities as agreed, a Fund could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. The
Trustees have reviewed and approved certain sellers who they believe to be
creditworthy and have authorized the Funds to enter into repurchase agreements
with such sellers.
OTHER INVESTMENT POLICIES (ALL FUNDS)
Each of the Funds may invest up to 5% of its total assets in another
investment company, not to exceed 10% of the value of its total assets in the
securities of other investment companies. A Fund will incur additional expenses
due to the duplication of expenses as a result of investing in other mutual
funds. Additional restrictions on a Fund's investments in the securities of
other mutual funds are contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Foreign Investment Risk
Investment in foreign securities is subject to special risks that differ in
some respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income and
other taxes, possible seizure, nationalization, or expropriation of foreign
investments or deposits, currency blockage, less stringent disclosure
requirements, the possible establishment of exchange controls, or the adoption
of other foreign governmental restrictions. Additional risks include the
difficulty in obtaining or enforcing a court judgment abroad, restrictions on
foreign investment in other jurisdictions, reduced levels of governmental
regulation of certain foreign securities markets, difficulties in effecting
repatriation of capital invested abroad, difficulties in transaction
settlements, different accounting and financial standards and the possibility of
price volatility and reduced liquidity in certain foreign markets. For
additional information regarding the special risks associated with investments
in foreign securities, see "Foreign Investments" in the Statement of Additional
Information.
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Brokerage commissions, custodial services and other costs relating to
investments in foreign countries are generally more expensive than the United
States. Foreign securities markets have different clearance and settlement
systems. In certain markets, settlements can be delayed, resulting in temporary
periods when a Fund may not be fully invested, difficulty in disposing of
securities or difficulty in achieving attractive investment opportunities. In
addition, different business practices and different levels of government
supervision and regulation may cause increased risk of loss due to lost, stolen
or counterfeit securities.
Because of their specialized investment techniques and their emphasis on
foreign securities, the Funds should be considered as vehicles for
diversification of investments and not as balanced investment programs.
Currency Risks
Since significant portions of the Funds will be invested in currencies
other than the U.S. Dollar, changes in the exchange rate of the U.S. Dollar
against other currencies will affect the U.S. Dollar value of the Funds. This
risk is particularly present for the Australia-New Zealand Fixed Income Fund
which does not intend to hedge against currency risks. Currency exchange rates
are determined by forces of supply and demand on the foreign exchange markets.
These forces are in turn affected by international balance of payments and other
economic, political and financial conditions, government intervention,
speculation and other factors. Each Fund's net asset value will be reported, and
distributions from the Funds will be made, in U.S. dollars. Therefore, a Fund's
reported net asset value and distributions would be adversely affected by
depreciation of foreign currencies relative to the U.S. Dollar.
Other Considerations
The Adviser and the Sub-Adviser began managing for the first time other
U.S. registered mutual funds in 1995; however, the Adviser and the Sub-Adviser
have extensive prior experience in providing investment advisory services to
large institutional clients, high net worth individuals and, in the case of the
Sub-Adviser, to several mutual funds organized outside of the United States in
such markets as Hong Kong, Australia, New Zealand and Luxembourg.
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of the Group's funds. There are
currently five Trustees, of whom two are "interested persons" of the Group
within the meaning of that term under the 1940 Act. The Group is managed by the
Trustees in accordance with the laws of Massachusetts governing business trusts.
The Trustees, in turn, elect the officers of the Group to supervise actively its
day-to-day operations.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. However, no
officer or employee of BISYS Fund Services or BISYS Fund Services Ohio, Inc.
receives any compensation from the Group for acting as a Trustee of the Group.
The officers of the Group (see the Statement of Additional Information) receive
no compensation directly from the Group for performing the duties of their
offices. BISYS Fund Services receives fees from the Funds for
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acting as administrator. BISYS Fund Services Ohio, Inc. receives fees from the
Funds for acting as Transfer Agent and for providing certain fund accounting
services.
INVESTMENT ADVISER AND SUB-INVESTMENT ADVISER
Ernst & Company
Ernst & Company, New York, New York (the "Adviser" or "Ernst") serves as
investment adviser to the Funds. Ernst is a securities investment firm that was
founded in 1924. Ernst has been a member of the New York Stock Exchange for over
65 years and is a member of each of the major U.S. stock exchanges. Ernst acts
as a specialist on the New York and American Stock Exchanges and is also a
market maker in the over-the-counter markets. It is an institutionally oriented
broker-dealer firm that serves numerous institutional and individual accounts
through its correspondent broker-dealer firms. Ernst is registered as an
investment adviser with the Commission and with sixteen states and currently
manages approximately $40 million in a general securities managed account
program, $1 million in a U.S. domestic bank equities managed account program and
$9 million in The Ernst Bank Equity Fund, L.P., a limited partnership that
invests in U.S. domestic bank equities.
Subject to the general supervision of the Group's Board of Trustees and in
accordance with a Fund's investment objective and restrictions, Ernst oversees
and supervises management of the investments of each Fund. Ernst will review the
performance of the Sub-Adviser who will be fully responsible for the selection
of each respective Fund's portfolio investments. For the services provided and
expenses assumed pursuant to its investment advisory agreement with the Group,
Ernst receives a fee computed daily and paid monthly, at the annual rate of one
and one tenth of one percent (1.10%) of the Fund's average daily net assets, in
the case of the Global Asset Allocation and Smaller Companies Funds. Ernst in
turn pays the Sub-Adviser seven tenths of one percent (0.70%) of the average
daily net assets of each of these funds. The investment advisory fees paid by
the Funds are higher than those paid by most other investment companies that
invest in domestic U.S. securities, but they are not necessarily higher than the
fees paid by those investment companies with investment objectives similar to
those of the Funds. In the case of the Australian-New Zealand Fixed Income Fund,
Ernst receives a fee computed daily and paid monthly, at an annual rate of six
tenths of one percent (0.60%) of the Fund's average daily net assets. Ernst in
turn pays the sub-adviser four tenths of one percent (0.40%) of the Fund's
average daily net assets. Ernst may periodically waive all or a portion of its
advisory fee which will cause the yield of a Fund to be higher than it would
otherwise be in the absence of such a waiver.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia ("NMFM")
NMFM of Melbourne, Australia serves as sub-adviser to each of the Funds.
NMFM is part of the worldwide AXA Group of Companies which provide insurance and
investment services in locations throughout the world. NMFM is a subsidiary of
National Mutual Holdings, the parent company of the National Mutual Group of
Companies, which have been involved in the provision of insurance and investment
services for in excess of 125 years. NMFM, through NMFM and its affiliated
companies now manage over $15 billion in assets. NMFM has access to global money
management resources through affiliates in the United Kingdom, Japan, Hong Kong,
New Zealand and the United States. NMFM's staff includes 150 investment
professionals.
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<PAGE> 55
The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the Fund's portfolio:
The Global Asset Allocation Fund is managed on a day to day basis by
Richard Greenfield, Investment Director of National Mutual Funds Management
(Global) Limited. Mr. Greenfield has held this position since December 1995.
Prior to this he held the positions of Managing Director for Australia, Chief
Investment Manager for Australia and Head of the Research and Strategy Group. He
has been with NMFM Group since 1986 and prior to this was a Partner/Principal
for an international firm of consulting actuaries.
The Global Smaller Companies Fund is managed on a day to day basis by Nigel
Purchase, Executive Director, International Strategy, since July 1995. He has
been employed by NMFM since January 1995. Prior to that he was held the
positions of Chief Economist for two Australian broker houses, ANZ McCaughan
(1993-94) and Potter Warburg (1990-93), and for the U.K. based life insurance
company, Norwich Union (1988-90).
The Australia-New Zealand Fixed Income Fund is managed on a day-to-day
basis by Kevin Talbot. Mr. Talbot joined NMFM in 1985 and was appointed Manager,
Fixed Income Investments in 1989 and was in 1992 appointed to his present
position, Manager, Financial Markets with responsibility for the management of
all of NMFM's Australian fixed income and currency dealings. He will be assisted
by Mark Brown based in New Zealand who has been a fixed income manager for NMFM
since September 1994. Prior to that he was an analyst with NMFM which he joined
in May 1994. From 1992 to 1994, Mr. Brown was an international bond manager with
Credit Suisse Asset Management. From 1990 to 1992, Mr. Brown was a bond trader
and foreign exchange dealer.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership ("BISYS Fund Services") is the
administrator for the Funds and also acts as the Funds' principal underwriter
and distributor (the "Administrator" or the "Distributor," as the context
indicates). BISYS Fund Services is wholly-owned by The BISYS Group, Inc., 150
Clove Road, Little Falls, New Jersey 07424, a publicly owned company engaged in
information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Funds'
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Funds, the Administrator receives a fee computed daily and paid periodically,
calculated at an annual rate of seventeen one-hundredths of one percent (0.17%)
of the Fund's first $500 million in average daily net assets. This fee is
reduced on a sliding scale to 0.05% of assets in excess of $1 billion. The
Administrator is entitled to a minimum fee of $75,000 per Fund per year. The
Administrator may periodically waive all or a portion of its administrative fee
which will cause the yield of a Fund to be higher than it would otherwise be in
the absence of such a waiver.
The Distributor acts as agent for the Funds in the distribution of their
Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities.
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<PAGE> 56
INVESTMENT RESTRICTIONS
A Fund is subject to a number of investment restrictions, some of which
that may be changed only by a vote of a majority of the outstanding Shares of
such a Fund (as defined in the Statement of Additional Information). The
following are three of the Funds' investment restrictions which may only be
changed by a majority vote of the outstanding shares of a Fund:
Each of the Funds will not:
1. Purchase securities while borrowings in excess of 5% of its total assets
are outstanding.
2. Make loans, except that a Fund may purchase or hold debt securities and
other investments and enter into repurchase agreements in accordance with its
investment objective and policies.
3. Other than the Australia-New Zealand Fixed Income Fund which
concentrates in securities issued by Australian governmental issuers, none of
the Funds will invest in excess of 25% of its total assets in issuers in a
particular industry or group of industries.
In addition to the above investment restrictions, each Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Funds' Statement of Additional
Information.
Any of these investment restrictions, as well as other investment policies,
that may limit a Fund's investment to a specified percentage of Fund assets
apply only at the time of investment. The Funds are not required to sell
portfolio investments which have appreciated in value relative to other assets
in order to comply with investment limitations.
VALUATION OF SHARES
The net asset value of each of the Funds is determined and its Shares are
priced as of the close of regular trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern Time) on each Business Day ("Valuation
Time"). As used herein, a "Business Day" constitutes any day on which the NYSE
is open for trading, and any other day except days on which there are not
sufficient changes in the value of the Fund's portfolio securities that the
Fund's net asset value might be materially affected and days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, the NYSE is closed on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets of the Fund less the liabilities charged to the Fund by the number of its
outstanding Shares. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the scheduled closing time of the NYSE, if that is earlier,
and that value is then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, Eastern time, on the day the value of the
foreign security is determined. If no sale is reported at that time, the mean
between the current bid and asked price is used. Occasionally, events which
affect the values of such securities and such exchange rates may occur between
the times at which they are determined and the close of the NYSE, and will
therefore not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur
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<PAGE> 57
during such period, then these securities will be valued at fair value as
determined by the management and approved in good faith by the Board of
Trustees.
The securities in the Funds will be valued at market value. If market
quotations are not available, the securities will be valued by a method which
the Board of Trustees believes accurately reflects fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Funds are sold on a continuous basis by the Group's
Distributor, BISYS Fund Services. The principal office of the Distributor is
3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, contact
the Funds at (800) 672-4797.
PURCHASES OF SHARES
Shares of the Funds are continuously offered and may be purchased directly
either by mail, by telephone or by electronic transfer. Shares may also be
purchased through a broker-dealer who has established a dealer agreement with
the Distributor. The minimum investment is generally $1,000 for the initial
purchase of Shares ($250 in the case of an Ernst World IRA) and $50 for
subsequent purchases. For purchases that are made in connection with 401(k)
plans, 403(b) plans and other similar plans or payroll deduction plans, the
minimum investment amount for initial and subsequent purchases is $50. (But, see
"HOW TO PURCHASE AND REDEEM SHARES -- Auto Invest Plan" below for minimum
investment requirements under the Auto Invest Plan).
Purchasers of Shares of the Funds will pay the sum of the next calculated
net asset value per Share after the Distributor's receipt of an order to
purchase Shares in good form plus a sales charge, when applicable ("public
offering price") (see "HOW TO PURCHASE AND REDEEM SHARES" below).
In the case of orders for the purchase of Shares placed through a
broker-dealer, the public offering price will be the net asset value as so
determined plus any applicable sales charge, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Funds by the Valuation Time. The broker-dealer is responsible for
transmitting such orders promptly. If the broker-dealer fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next Business Day.
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<PAGE> 58
Purchases By Mail
To purchase Shares of a Fund, complete an Account Application and return it
along with a check (or other negotiable bank draft or money order) in at least
the minimum initial purchase amount, made payable to the appropriate Fund to:
Ernst World Funds
Dept. L-1636
Columbus, Ohio 43260-1636
An Account Application form can be obtained by calling your broker or the
Funds at (800) 672-4797. Subsequent purchases of Shares of a Fund may be made at
any time by mailing a check payable to a Fund, to the above address.
Purchases by Telephone
Shares of a Fund may be purchased by calling your broker or the Funds at
(800) 672-4797, if your Account Application, in good form, has been previously
received by the Distributor. Payment for Shares ordered by telephone is made by
electronic transfer to the Funds' custodian. Prior to wiring funds and in order
to ensure that wire orders are invested promptly, investors must call the Funds
at the number above to obtain instructions regarding the bank account number to
which the funds should be wired and other pertinent information.
Other Information Regarding Purchases
Purchases of Shares in a Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") based upon the public offering price. In the
case of an order for the purchase of Shares placed through a broker-dealer, it
is the responsibility of the broker-dealer to transmit the order to the
Distributor promptly.
The Group reserves the right to reject any order for the purchase of a
Fund's Shares in whole or in part including purchases made with foreign and
third party checks.
Every Shareholder of record will receive a confirmation of each transaction
in his or her account, which will also show the total number of Shares of a Fund
owned by the Shareholder. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares of the Funds will not be issued.
SALES CHARGES
The Public Offering Price of Shares of the Funds equals the sum of the net
asset value per Share plus a sales load in accordance with the table below. The
BISYS Fund Services receives this sales charge as Distributor and reallows a
portion of it as dealer discounts and brokerage commissions. However, the
Distributor, in its sole discretion, may pay certain dealers all or part of the
portion of the sales charge it receives. A broker or dealer who receives a
reallowance in excess of 90% of the sales charge may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933.
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<PAGE> 59
GLOBAL ASSET ALLOCATION & GLOBAL SMALLER COMPANIES
<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS AS
% OF NET % OF PUBLIC % OF PUBLIC
AMOUNT OFFERING OFFERING
AMOUNT OF PURCHASE INVESTED PRICE PRICE
- --------------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000............................ 5.82% 5.50% 4.90%
$50,000 but less than $100,000............... 4.71 4.50 4.00
$100,000 but less than $250,000.............. 3.36 3.25 2.85
$250,000 but less than $500,000.............. 2.30 2.25 2.00
$500,000 but less than $1,000,000............ 1.01 1.00 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
AUSTRALIA-NEW ZEALAND FIXED INCOME
<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS AS
% OF NET % OF PUBLIC % OF PUBLIC
AMOUNT OFFERING OFFERING
AMOUNT OF PURCHASE INVESTED PRICE PRICE
- --------------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000............................ 3.36% 3.25% 2.90%
$50,000 but less than $100,000............... 3.09 3.00 2.70
$100,000 but less than $250,000.............. 2.83 2.75 2.45
$250,000 but less than $500,000.............. 2.04 2.00 1.80
$500,000 but less than $1,000,000............ 1.01 1.00 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers.
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which includes the
combination of any of the following: (i) an individual, his or her spouse and
children under the age of 21; (ii) a trustee or other fiduciary of a single
trust estate or single fiduciary account; and (iii) businesses owned as sole
proprietorships (or partnerships), provided that such organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company. In order to qualify
for a lower sales charge, all orders from a Purchaser will have to be placed
through a single investment dealer and identified at the time of purchase as
originating from the same Purchaser, although such orders may be placed into
more than one account which identifies the Purchasers.
The Distributor, at its expense, will also provide additional compensation
to broker-dealers, financial consultants and financial institutions in
connection with sales of Shares of a Fund. Such compensation will
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<PAGE> 60
include financial assistance to such entities in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the Funds and/or other
dealer-sponsored special events. In some instances, this compensation may be
made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of Shares. Compensation will include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to locations within or outside of the United States for meetings or seminars of
a business nature. Compensation will also include the following types of
non-cash compensation offered through sales contests: (1) vacation trips,
including the provision of travel arrangements and lodging at luxury resorts at
exotic locations, (2) tickets for entertainment events (such as concerts,
cruises and sporting events), and (3) merchandise (such as clothing, trophies
and clocks). Dealers may not use sales of Shares to qualify for this
compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc.
The Distributor or the Adviser, at its expense, may also provide additional
compensation to certain broker-dealers, financial consultants and financial
institutions in connection with sales of Shares of a Fund, which compensation,
payable in amounts not to exceed 0.20% of the average daily net assets of
shareholders with whom such persons have relationships, is paid in connection
with various services provided to such shareholders.
SALES CHARGE WAIVERS
The following classes of investors may purchase Shares of the Funds with no
sales charge:
(1) existing Shareholders of a Fund upon the automatic reinvestment of
dividend and capital gains distributions;
(2) Trustees of the Group, officers, directors, employees and retired
employees of (a) the Adviser, the Sub-Advisers and their affiliates and
(b) the Distributor and its affiliates, and spouses and children under
the age of 21 of each of the foregoing;
(3) employees (and their spouses and children under the age of 21) of any
broker-dealer with whom the Distributor enters into a dealer agreement
to sell Shares of the Fund;
(4) investors for whom an investment dealer or one of their affiliates acts
in a fiduciary, advisory, custodial, agency or similar capacity and for
whom purchases are made through such accounts or with proceeds from
liquidations of such accounts; and
(5) purchases made on behalf of other investment companies distributed by
any affiliate of BISYS Group, Inc.
Each investor described in paragraphs (2) and (3) above must so identify
himself/herself at the time of purchase. The Distributor may change or eliminate
the foregoing waivers at any time. The Distributor may also periodically waive
all or a portion of the sales charge for all investors with respect to a Fund.
In addition, the Distributor may waive the sales charge for the purchase of a
Fund's shares with the proceeds from the recent redemption of shares of another
non-money market front-end load mutual fund (but not funds subject to a
contingent deferred sales load). The purchase must be made within 60 days of the
redemption, and the Distributor must be notified in writing by the investor, or
by his financial institution, at the time the purchase is made. A copy of the
investor's account statement showing such redemption must accompany such notice.
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<PAGE> 61
LETTERS OF INTENT
Any Purchaser may obtain a reduced sales charge by means of a written
Letter of Intent which expresses the Purchaser's intention to purchase Shares at
a specified total public offering price within a 13-month period.
A Letter of Intent is not a binding obligation upon the Purchaser to
purchase the full dollar amount indicated. The minimum initial investment under
a Letter of Intent is 5% of such dollar amount. Shares purchased with the first
5% of such amount will be held in escrow (while remaining registered in the name
of the investor) to secure payment of the higher sales charge applicable to the
Shares actually purchased if the full dollar amount indicated is not purchased,
and such escrowed Shares will be involuntarily redeemed to pay the additional
sales charge, if necessary. Dividends on escrowed Shares, whether paid in cash
or reinvested in additional Shares, are not subject to escrow. The escrowed
Shares will not be available for disposal by the Purchaser until all purchases
pursuant to the Letter of Intent have been made or the higher sales charge has
been paid. When the full amount indicated by the Letter of Intent has been
purchased, the escrow will be released. A Letter of Intent may include purchases
of Shares made not more than 30 days prior to the date the Purchaser signs a
Letter of Intent; however, the 13-month period during which the Letter of Intent
is in effect will begin on the date of the earliest purchase to be included. A
Purchaser as defined above may combine purchases made in several capacities for
purposes of obtaining reduced sales charges by means of a written Letter of
Intent. In order to accomplish this, however, a Purchaser must designate on the
account application the accounts that are to be combined for this purpose.
If a Purchaser qualifies for a further reduced sales charge because he or
she either has purchased more than the dollar amount indicated on the Letter of
Intent or has entered into a Letter of Intent which includes Shares purchased
prior to the date of the Letter of Intent, the difference in the sales charge
will be used to purchase additional Shares of the Fund on behalf of the
Purchaser; thus the total purchases (included in the Letter of Intent) will
reflect the applicable reduced sales charge of the Letter of Intent.
For Purchasers who purchase more than the dollar amount indicated on the
Letter of Intent or enter into a Letter of Intent that includes Shares purchased
prior to the date of the Letter of Intent and qualify for a reduced sales
charge, such additional Shares will be purchased at the conclusion of the
13-month period and in the form of additional Shares, credited to the
Purchaser's account at the then current public offering price applicable to a
single purchase of the total amount of the purchases.
For further information about Letters of Intent, interested investors
should contact the Funds at (800) 672-4797. This program, however, may be
modified or eliminated at any time or from time to time without notice.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Shares of the Funds or by combining a current purchase of Shares of
a Fund with prior purchases of Shares of the other Fund. The applicable sales
charge is based on the sum of (i) the Purchaser's current purchase of shares of
a Fund plus (ii) the then-current net asset value of all Shares held by the
Purchaser in either of the Funds. To receive the applicable public offering
price pursuant to the right of accumulation, Shareholders must provide the
Transfer Agent or the Distributor with sufficient information at the time of
purchase to permit
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<PAGE> 62
confirmation of qualification. Accumulation privileges may be amended or
terminated without notice at any time by the Distributor.
ERNST WORLD INDIVIDUAL RETIREMENT ACCOUNT ("ERNST WORLD IRA")
An Ernst World IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Ernst World IRA contributions may be tax-deductible and earnings are
tax-deferred. The tax deductibility of Ernst World IRA contributions is
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
All Ernst World IRA distribution requests must be made in writing to the
Distributor. Any additional deposits to an Ernst World IRA must designate the
type and year of the contribution.
For more information on an Ernst World IRA, including the forms required to
open an Ernst World IRA, call your broker or the Funds at (800) 672-4797.
Shareholders are advised to consult a tax adviser on IRA contribution and
withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Shareholders of the Funds to make regular
monthly or quarterly purchases of Shares through automatic deductions from their
bank accounts (which must be with a domestic member of the Automatic Clearing
House). With Shareholder authorization, the Transfer Agent will deduct the
amount specified from the Shareholder's bank account which will automatically be
invested in Shares at the public offering price on the dates of the deduction.
The required minimum initial investment when opening an account using the Auto
Invest Plan is $50; the minimum amount for subsequent investments in a Fund is
$50. To participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Account Application which can be requested by calling
(800) 672-4797. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Distributor.
EXCHANGE PRIVILEGE
The Funds offer an exchange program whereby Shareholders are entitled to
exchange their Shares for Shares of the other Fund. Such exchanges will be
executed on the basis of the relative net asset values of the Shares exchanged.
The Shares exchanged must have a current value that equals or exceeds the
minimum investment that is required (either the minimum amount required for
initial or subsequent investments as the case may be) for the Fund whose Shares
are being acquired. Share exchanges will only be permitted where the Shares to
be acquired may legally be sold in the investor's state of residence and are
limited to five per year. An exchange is considered to be a sale of Shares for
federal income tax purposes on which a Shareholder may realize a taxable gain or
loss. A Shareholder may make an exchange request by calling your broker or the
Funds at (800) 672-4797 or by providing written instructions to the Funds. An
investor should consult the Funds for further information regarding exchanges.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. If a Shareholder is unable to contact the Funds by
telephone, a Shareholder may also mail the exchange request to the Funds at the
address listed under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption By Mail."
The Funds reserve the right to
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<PAGE> 63
modify or terminate the exchange privilege described above at any time and to
reject any exchange request. If an exchange request in good order is received by
the Distributor by the Valuation Time, on any Business Day, the exchange usually
will occur on that day. Any Shareholder who wishes to make an exchange should
obtain and review the current prospectus of the Fund in which he or she wishes
to invest before making the exchange. Shareholders wishing to make use of the
Funds' exchange program must so indicate on the Account Application.
REDEMPTION OF SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions will be effected at the net
asset value per share next determined after receipt of a redemption request in
good order. Redemptions may ordinarily be requested by mail or by telephone.
REDEMPTION BY MAIL
A written request for redemption must be received by the Funds in order to
honor the request. The Funds' address is: 3435 Stelzer Road, Columbus, Ohio
43219. The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The
Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the Shareholder(s) of record and (2) the
redemption check is mailed to the Shareholder(s) at the address of record or the
proceeds are either mailed or wired to a commercial bank account previously
designated on the Account Application. There is no charge for having redemption
requests mailed to a designated bank account.
If the Group receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Group cannot
execute the order. In such cases, the Group will request the missing information
and process the order on the day such information is received.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option
on the Account Application. The Shareholder may have the proceeds mailed to his
or her address of record or mailed or sent electronically to a commercial bank
account previously designated on the Account Application. Electronic payment
requests may be made by the Shareholder by telephone to the Funds at (800)
672-4797. For a wire redemption, the then-current wire redemption charge may be
deducted from the proceeds of a wire redemption. This charge, if applied, is
presently $15.00 for each wire redemption. It is not necessary for Shareholders
to confirm telephone redemption requests in writing. During periods of
significant economic or market change, telephone redemptions may be difficult to
complete. If a Shareholder is unable to contact the Funds by telephone, a
Shareholder may also mail the redemption request to the Distributor at the
address listed above under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption by
Mail." Neither the Distributor, the Transfer Agent, Ernst nor the Group will be
liable for any losses, damages, expense or cost
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<PAGE> 64
arising out of any telephone transaction (including exchanges and redemptions)
effected in accordance with the Funds' telephone transaction procedures, upon
instructions reasonably believed to be genuine. The Funds will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, the Funds or their service
contractors may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all phone conversations,
sending confirmations to shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of a Fund to make regular
monthly or quarterly redemptions of Shares. With Shareholder authorization, the
Transfer Agent will automatically redeem Shares at the net asset value on the
dates of the withdrawal and have a check in the amount specified mailed to the
Shareholder. The required minimum account balance is $10,000 and the required
minimum withdrawal is $100. To participate in the Auto Withdrawal Plan,
Shareholders should call (800) 672-4797 for more information. Purchases of
additional Shares concurrent with withdrawals may be disadvantageous to certain
Shareholders because of tax liabilities. For a Shareholder to change the Auto
Withdrawal instructions the request must be made in writing to the Distributor.
DIRECTED DIVIDEND OPTION
A Shareholder may elect to have all income dividends and capital gains
distributions from one Fund paid by check or reinvested in the other Fund
(provided the other Fund is maintained at the minimum required balance).
The Directed Dividend Option may be modified or terminated at any time
after notice to participating Shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the Shareholder at any time by
writing the Distributor. The Directed Dividend Option is not available to
participants in an Ernst World IRA.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made in accordance
with the applicable settlement requirements after receipt by the Distributor of
the request for redemption. However, to the greatest extent possible, the Funds
will attempt to honor requests from Shareholders for next day payments if
received by the Distributor before the Valuation Time on a Business Day or if
the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Fund or the Shareholders of the Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, a Fund may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, a Fund may delay the
forwarding of proceeds until payment has been collected for the purchase of such
Shares, which delay may be for up to 10 days or more. A Fund intends to pay cash
for all Shares redeemed, but under abnormal conditions which make payment in
cash unwise, a Fund
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<PAGE> 65
may make payment wholly or partly in portfolio securities at their then-current
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Funds
reserve the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder (but not
as a result of a decrease in the market price of such Shares), the account of
such Shareholder has a value of less than $500. Before the Funds exercise their
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Matters Affecting
Redemption" in the Statement of Additional Information for examples of when the
Group may, under applicable law and regulation, suspend the right of redemption
if it appears appropriate to do so in light of the Group's responsibilities
under the 1940 Act.
DIVIDENDS AND TAXES
DIVIDENDS
Each Fund (other than the Australia-New Zealand Fixed Income Fund) intends
to declare their net investment income quarterly as a dividend to Shareholders
at the close of business on the day of declaration, and generally will pay such
dividends quarterly. The Australia-New Zealand Fixed Income Fund intends to
declare and pay such dividends monthly. Each Fund also intends to distribute its
capital gains, if any, at least annually, normally in December of each year. A
Shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of a Fund at net asset
value as of the date of payment, unless the Shareholder elects to receive
dividends or distributions in cash. Such election must be made on the Account
Application; any change in such election must be made in writing to the Funds at
3435 Stelzer Road, Columbus, Ohio 43219, and will become effective with respect
to dividends and distributions having record dates after its receipt by the
Transfer Agent.
FEDERAL TAXES
Each Fund intends to elect to be treated and to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 (the "Code"). A regulated investment company generally is not subject to
Federal income tax on income and gains distributed in a timely manner to its
shareholders. Earnings of a Fund not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
Each Fund intends to distribute substantially all of its net investment
income and realized capital gains to Shareholders. Distributions will be taxed
as ordinary income in the hands of shareholders, except to the extent they are
designated as capital gain dividends or are from sources other than net
investment income or net realized capital gains. Capital gain dividends are
treated as long-term capital gains in the hands of shareholders, regardless of
how long the shareholder has held a Fund's shares. Distributions that are not
from the Fund's net investment income or net realized capital gain may be
characterized as a return of capital to
26
<PAGE> 66
shareholders, reducing the shareholder's basis in its shares, and amounts so
distributed in excess of such basis generally will be characterized as capital
gain. Distributions declared in October, November or December to Shareholders of
record on a date in such month and paid during the following January will be
treated as having been received by Shareholders on December 31 in the year such
distributions were declared, rather than the calendar year in which the
distributions are actually received. The Company will inform Shareholders each
year of the amount and nature of such income or gains. Sales or other
dispositions of Fund shares generally will give rise to taxable gain or loss.
Shareholders who purchase shares of a Fund in the period prior to the
declaration of a dividend by that Fund, will receive a portion of his or her
investment back as taxable income or capital gain as a result of the dividend
distribution.
A Fund may be subject to certain taxes imposed by the countries in which it
invests or operates. If a Fund qualifies as a regulated investment company and
if more than 50% of the value of the total assets of the Fund at the close of
the taxable year consists of stocks or securities of foreign corporations, the
Fund may elect, for U.S. federal income tax purposes, to treat any foreign taxes
paid by the Fund that qualify as income or similar taxes under United States
income tax principals as having been paid by the Fund's shareholders. For any
year for which a Fund makes such an election, each shareholder will be required
to include in its gross income an amount equal to its allocable share of such
taxes paid by the Fund and the shareholders will be entitled, subject to tax law
limitations, to credit their portions of these amounts against their U.S.
federal income tax liability, if any, or to deduct their portions from their
U.S. taxable income, if any. No deduction for foreign taxes may be claimed by
individuals who do not itemize deductions. In any year in which it elects to
"pass through" foreign taxes to shareholders, the Fund will so notify
shareholders.
A more detailed description of tax consequences to Shareholders is
contained in the Statement of Additional Information under the heading "Tax
Status."
STATE AND LOCAL TAXES
The Group is organized as a Massachusetts business trust and, under current
law, neither the Group nor any Fund is liable for any income or franchise tax in
the Commonwealth of Massachusetts as long as each Fund qualifies as a regulated
investment company under the Code.
Distributions from the Funds may be subject to state and local taxes.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisers regarding the possible exclusion for state and local income tax
purposes of the portion of dividends paid by a Fund which is attributable to
interest from obligations of the U.S. Government and its agencies, authorities
and instrumentalities, and the particular tax consequences to them of an
investment in a Fund, including the application of state and local tax laws.
27
<PAGE> 67
EXPENSES AND CERTAIN FUND SERVICES
EXPENSES AND PORTFOLIO TRANSACTIONS
Ernst and the Administrator each bear all expenses in connection with the
performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
The policy of each of the Funds, regarding purchases and sales of
securities for its portfolio, is that primary consideration be given to
obtaining the most favorable prices and efficient execution of transactions. In
seeking to implement each Fund's policies, the Funds' Adviser or Sub-Adviser
effects transactions with those brokers and dealers whom they provide the most
favorable prices and are capable of providing efficient executions. If the
adviser believes such price and executions are obtainable from more than one
broker or dealer, it may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the adviser. Such services may include, but are not limited to, any one or more
of the following: information as to the availability of securities for purchase
or sale; statistical or factual information or opinions pertaining to
investments; wire services; and appraisals or evaluations of portfolio
securities. Such information may be useful to the advisers in serving both the
Funds and other clients and, conversely, supplemental information obtained by
the placement of business of other clients may be useful to the advisers in
carrying out its obligations to the Funds.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commission charged by other broker-dealers in
recognition of their research or execution services. In order to cause the Funds
to pay such higher commissions, the adviser must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage and/or
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or the adviser's overall responsibilities to the Funds.
In reaching this determination, the adviser will not attempt to place a specific
dollar value on the brokerage and/or research services provided, or to determine
what portion of the compensation should be related to those services.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which each Fund is
authorized to pay or reimburse BISYS Fund Services, as Distributor, a periodic
amount calculated at an annual rate not to exceed twenty-five one hundredths of
one percent (0.25%) of the average daily net assets of each Fund. Such amount
may be used to pay banks, broker-dealers and other institutions for
administrative and shareholder services and other similar services, including
distribution services (each such bank, broker-dealer and other institution is
hereafter referred to as a "Participating Organization"), pursuant to an
agreement between BISYS Fund Services and the Participating Organization. Under
the Plan, a Participating Organization may include BISYS Fund Services, its
subsidiaries and its affiliates.
CUSTODIAN
The Bank of California, N.A., through its Mitsubishi Global Custody
Division (the "Custodian") serves as custodian for the Funds. Pursuant to the
Custodian Agreement with the Group, the Custodian receives an
28
<PAGE> 68
annual asset-based fee from each Fund for such services plus, under certain
circumstances, fixed fees charged for certain portfolio transactions and
out-of-pocket expenses.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services Ohio" or the "Transfer
Agent"), 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Funds' transfer
agent pursuant to a Transfer Agency Agreement for the Funds and receives a fee
for such services. BISYS Fund Services Ohio also provides certain accounting
services for the Funds pursuant to a Fund Accounting Agreement and receives a
fee for such services. See "MANAGEMENT OF THE COMPANY -- Transfer Agency and
Fund Accounting Services" in the Statement of Additional Information for further
information.
While BISYS Fund Services Ohio is a distinct legal entity from BISYS Fund
Services (the Funds' Administrator and Distributor), BISYS Fund Services Ohio is
considered to be an affiliated person of BISYS Fund Services under the 1940 Act
due to, among other things, the fact that BISYS Fund Services Ohio is owned by
substantially the same persons that directly or indirectly own BISYS Fund
Services.
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as a Massachusetts business trust on January 8,
1992. The Group consists of several funds organized as separate series of
shares. Each share represents an equal proportionate interest in a fund with
other shares of the same fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that fund as
are declared at the discretion of the Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held, and will vote in
the aggregate and not by series except as otherwise expressly required by law.
For example, shareholders of each fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees and
ratification of the selection of independent auditors. However, shareholders of
a particular fund will vote as a fund, and not in the aggregate with other
shareholders of the Group, for purposes of approval of that fund's investment
advisory agreement and the Plan.
Overall responsibility for the management of the Funds is vested in the
Board of Trustees of the Group. See "MANAGEMENT OF THE GROUP -- Trustees of the
Group." Individual Trustees are elected by the shareholders of the Group and may
be removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and
Massachusetts law. See "ADDITIONAL INFORMATION -- Miscellaneous" in the
Statement of Additional Information for further information.
An annual or special meeting of shareholders is not generally required by
the Declaration of Trust, the 1940 Act or other applicable authority. To the
extent that such a meeting is not required, the Group may elect not to have an
annual or special meeting.
The Group has undertaken that the Trustees will call a special meeting of
shareholders for purposes of considering the removal of one or more Trustees
upon written request therefor from shareholders holding not
29
<PAGE> 69
less than 10% of the outstanding votes of the Group. The Group will, to the
extent required under the 1940 Act, assist Shareholders in calling such a
meeting. At such a meeting, a quorum of shareholders (constituting a majority of
votes attributable to all outstanding shares of the Group), by majority vote,
has the power to remove one or more Trustees.
PERFORMANCE INFORMATION
From time to time the Funds may advertise their average annual total
return, aggregate total return, yield and effective yield in advertisements,
sales literature and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average
annual total return will be calculated for the period since the establishment of
the Fund and will reflect the imposition of the maximum sales charge. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. Yield will be computed by dividing a Fund's net investment income
per share earned during a recent one-month period by the Fund's per share
maximum offering price (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last day of the period and annualizing the
result.
Distribution rates will be computed by dividing the distribution per share
made by the Fund over a twelve-month period by the maximum offering price per
share. The distribution rate includes both income and capital gain dividends and
does not reflect unrealized gains or losses. The distribution rate differs from
the yield, because it includes capital items which are often non-recurring in
nature, whereas yield does not include such items.
Investors may also judge the performance of a Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and to
data prepared by various services which may be published by such services or by
other services or publications. In addition to performance information, general
information about a Fund that appears in such publications may be included in
advertisements, sales literature and in reports to Shareholders.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results.
Additional information regarding the investment performance of the Funds
will be contained in the annual report of the Funds which, when available, may
be obtained without charge by writing or calling the Funds.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent auditors.
30
<PAGE> 70
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a fund" means the consideration received by the fund upon
the issuance or sale of shares in that fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Group not readily identified as belonging to a particular fund
that are allocated to the Fund by the Group's Board of Trustees. The Board of
Trustees may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Trustees of the Group as to the timing
of the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of a Fund present at a meeting at which the holders
of more than 50% of the votes attributable to Shareholders of record of the Fund
are represented in person or by proxy, or (b) the holders of more than 50% of
the outstanding votes of Shareholders of a Fund.
Inquiries regarding the Funds may be directed in writing to the Funds at
3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 672-4797.
31
<PAGE> 71
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 72
ACCOUNT REGISTRATION ERNST WORLD FUNDS
RETURN COMPLETED FORM TO:
Ernst World Funds
Dept. L-1636 [ LOGO ]
Columbus, OH 43260-1636
FOR ASSISTANCE, CALL 1-800-672-4797 GLOBAL THINKING * SMART INVESTING
- --------------------------------------------------------------------------------
SHARES OF ERNST WORLD FUNDS:
* Are not insured by the Federal Deposit Insurance Corporation (FDIC) or any
other government agency.
* Are not deposits or other obligations of, or guranteed by, any bank.
* Are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
1 FUND SELECTION
The minimum initial investment is $1,000 per fund; the minimum additional
investment is $50 (Lower limits may apply. Please see "How to purchase and
redeem shares" in the prospectus). I am investing in the following fund(s). The
payment method I have chosen is: [ ] Check: My check, made payable to Ernst
World Funds, is enclosed. [ ] Wire: I will call 1-800-672-4797 for
instructions. [ ] Bank transfer. Debit my bank account as indicated in Section
4.
<TABLE>
<S> <C>
$________________ Ernst Global Asset Allocation Fund
$_________________ Ernst Asia Fund $________________ Ernst Global Smaller Companies Fund
$_________________ Ernst Global Resources Fund $________________ Ernst Australia-New Zealand Fixed Income Fund
-----------------------------------------
$ TOTAL AMOUNT INVESTED
------------------------------------------
</TABLE>
================================================================================
2 ACCOUNT REGISTRATION Do not use this form to establish a retirement account.
To receive the forms necessary to open a retirement account, please call
1-800-672-4797.
TYPE OF REGISTRATION (check one)
<TABLE>
<S> <C> <C> <C>
[ ] Community Property [ ] Nonprofit Organization* [ ] Charitable Organization*
[ ] Individual [ ] Tenants in Common [ ] Corporation* [ ] Custodian for Minor
[ ] Joint Tenants with Right of Survivorship [ ] Partnership* [ ] Trust* [ ] Other (Specify)*_______
<FN>
* Please attach a copy of the appropriate bylaws, resolutions or trust documents establishing authority to open this account. If any
such aggrements or resolutions are not in existence, complete Section 9.
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________________ ___________________________ _______________________________________
INDIVIDUAL (First Name/Initial/Last Name) Date of Birth Social Security Number
_____________________________________________________ ___________________________
JOINT OWNER - IF ANY (First Name/Initial/Last Name) Date of Birth
_____________________________________________________
NAME OF CUSTODIAN (only one) as custodian for
_____________________________________________________ ___________________________ _______________________________________
Name of Minor (only one) Minor's State Minor's Date of Birth Minor's Social Security Number
of Residence
_____________________________________________________ ___________________________ _______________________________________
NAME OF ORGANIZATION/TRUST/PLAN Date of Trust Tax ID Number
_____________________________________________________
Name of Trustee
_______________________________________________________________________________________________________________________________
ADDRESS Number and Street Apt# City State Zip
(___)___________________________________________________(____)_________________________________________________________________
Daytime Telephone Number Evening Telephone Number
CITIZENSHIP [ ] U.S. Citizen
[ ] Nonresident Alien (Attach a W-8 form. Dividends are subject to tax witholding)
[ ] Resident Alien
EMPLOYMENT Required by National Association of Securities Dealers, Inc.
_______________________________________________________________________________________________________________________________
Employer's Name Occupation
_______________________________________________________________________________________________________________________________
Employer's Address City State Zip
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association
of Securities Dealers, Inc.?
[ ] No [ ] Yes Name of institution________________________________________Please complete section 5E.
EMPLOYMENT FOR JOINT ACCOUNT OWNER Required by National Associtation of Securities Dealers, Inc.
_______________________________________________________________________________________________________________________________
Employer's Name Occupation
_______________________________________________________________________________________________________________________________
Employer's Address City State Zip
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association
of Securities Dealers, Inc.?
[ ] No [ ] Yes Name of instituion________________________________________Please complete section 5E.
</TABLE>
<PAGE> 73
3 DISTRIBUTION SELECTION Your dividends and capital gains will be automatically
reinvested into your account unless you indicate otherwise below.
I would like my:
[ ] Dividends and capital gains reinvested for
fund(s)___________________________
[ ] Dividends paid by check and capital gains reinvested for
fund(s)___________________________
[ ] Dividends and capital gains sent to me by check to the address indicated in
Section 2 for fund(s)___________________________
[ ] Dividends and capital gains automatically deposited to my bank account as
indicated in Section 4 for fund(s)__________________________
[ ] Dividends and capital gains reinvested in another established Ernst World
Fund (minimum balance of $500 required)
From__________________________ __________________________
(Fund) Account Number
to__________________________ __________________________
(Fund) Account Number
From__________________________ __________________________
(Fund) Account Number
to__________________________ __________________________
(Fund) Account Number
================================================================================
4 ELECTRONIC FUNDS TRANSFER INSTRUCTIONS
FOR YOUR CONVENIENCE, YOU MAY AUTHORIZE ERNST WORLD FUNDS TO TRANSFER MONEY
BETWEEN YOUR BANK ACCOUNT AND YOUR ERNST WORLD FUNDS ACCOUNT.
I have attached a VOIDED CHECK OR DEPOSIT SLIP for my
[ ] checking* [ ] savings* [ ] money market* account.
I would like to use this service:
[ ] for the Automatic Plan(s) I signed up for in Section 5
[ ] to establish Bank Wire instructions
[ ] to receive dividends and capital gains
________________________________________________________________________________
Bank Name Branch Office Bank Telephone Number
________________________________________________________________________________
Account Number Bank Routing Number or ABA Number (if unknown, call your bank)
________________________________________________________________________________
Name(s) on Bank Account (must be the same as Ernst World Funds account)
________________________________________________________________________________
Bank Address (do not use P.O. Box) City State Zip
________________________________________________________________________________
Signature of Co-Owner of Bank Account
[FN]
*Debits to this account may count toward the maximum number of withdrawals
allowed for this type of account. Please check with your bank to ensure that
they accept "ACH transactions" for the account you are using.
================================================================================
5 ACCOUNT OPTIONS
A. AUTOMATIC INVESTMENT AND WITHDRAWAL PLANS Minimum $50 automatic investment
and $100 automatic withdrawal per fund; please see prospectus for details.
[ ] AUTOMATIC INVESTMENT PLAN. I would like the plan to begin the month
of_________________ 19_____. Please have the amount(s) indicated below
withdrawn from my bank account noted in Section 4 and invested in the
fund(s) listed below.
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
[ ] AUTOMATIC WITHDRAWAL PLAN. Required minimum balance is $10,000. I would
like the plan to begin the month of_________________ 19_____. Please have
the amount(s) indicated below [ ] deposited into my bank account noted in
Section 4. [ ] mailed to me by check at the address indicated in Section 2.
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
B. RIGHTS OF ACCUMULATION Please see the prospectus for qualifications.
[ ] My combined holdings in the Ernst World Funds may entitle me to a reduced
sales charge. Applicable shareholder account numbers are:
Fund ___________________ Fund ___________________ Fund ___________________
Account #_______________ Account #_______________ Account #_______________
C. LETTER OF INTENT You may qualify for reduced sales charges if you plan to
make additional investments within a 13-month period. Please see the
prospectus for qualifications.
[ ] I agree to the terms of the Letter of Intent set forth in the prospectus.
Although I am not obligated to do so, it is my intention to invest over a
13-month period in shares of one or more of the above Funds (except the
money market funds) an aggregate amount at least equal to that which is
checked below.
[ ] $50,000 [ ]$100,000 [ ]$250,000 [ ]$500,000 [ ]$1,000,000
D. SALES CHARGE WAIVER Please see current prospectus for eligibility.
The Sales Charge Waiver Form must be attached.
To receive a copy of the Sales Charge Waiver Form, see your employer or call
1-800-672-4797. Investor Category___________________
E. DUPLICATE STATEMENTS & CONFIRMATIONS (Optional, at your discretion)
Please send duplicate statements and confirmations to:
________________________________________________________________________________
Name Company
________________________________________________________________________________
Address City State Zip
<PAGE> 74
6 TELEPHONE REDEMPTION AND EXCHANGE If left blank, you will automatically
receive telephone privileges.
I elect the telephone privileges as described in the prospectus. [ ] Yes [ ] No
================================================================================
7 CUSTOMER AGREEMENT
To: BISYS Fund Services (BISYS), Distributor, and BISYS Fund Services Ohio,
Inc., Transfer Agent.
I (We) have full right, power, authority and legal capacity; and am (are) of
legal age in my (our) state of residence to purchase shares of the fund(s). I
(We) affirm that I (we) have received and read the current prospectus(es) of
the fund(s) selected and agree to be bound by its (their) terms.
Any changes to sections 1, 2 or 4 must be made in writing to BISYS Fund
Services, accompanied by a signature guarantee from an eligible guarantor
institution as outlined in the funds' prospectuses.
Any changes to sections 3, 5, 6, or 9 must be made in writing to BISYS Fund
Services, but do not require a signature guarantee. Please allow 15 business
days after receipt of the request to add, change or discontinue the Auto
Withdrawal feature.
The meaning of words in this Agreement: The words I," me" and "my" refer to the
person(s) who signed this Agreement. The words "you" and "your" refer to the
Distributor and the Transfer Agent.
a. REPRESENTATIONS. I understand that you provide no investment, tax or legal
advice, and I have relied on my independent judgment with respect to the
suitability or potential value of any security or order.
b. FORCE MAJEURE. You shall not be liable for loss or delay caused directly or
indirectly by war, natural disaster, government restrictions, exchange or
market rulings or other conditions beyond the control of the Distributor and
the Transfer Agent.
c. RECORDING CONVERSATIONS. I understand and agree that, for our mutual
protection, telephone conversations may be recorded without further notice.
d. APPLICABLE LAWS AND REGULATIONS. All transactions shall be subject to
rules, regulations, customs and usages of the exchange, market or clearing
house where executed, all applicable federal and state laws and regulations,
and the policies and procedures as determined by Ernst World Funds (the "Fund")
set forth in the funds' then-current prospectuses.
e. GOVERNING LAWS. The Agreement shall be governed by the laws of the State of
Ohio as applicable.
f. RELIANCE ON REPRESENTATIONS. I understand that the Distributor and the
Transfer Agent shall rely on the information which I have set forth in this
Agreement. I agree that all changes to this information shall be promptly
provided to the Distributor or the Transfer Agent in writing. The Distributor
and the Transfer Agent are entitled to rely on this information until I change
it by subsequent written notice.
g. DELIVERY AND RECEIPT. Any orders for transactions in the funds under this
Agreement will NOT be effective until received and approved by the Distributor
or the Transfer Agent at their offices in Columbus, Ohio. The Distributor or
the Transfer Agent shall not be responsible for any losses or lost profit
opportunity I may experience due to any delays in the execution of purchase and
redemption orders as a result of delayed receipt of such orders.
h. INSTRUCTIONS. Neither the Distributor, the Transfer Agent nor the Fund will
be liable for any loss, damages, expense or cost arising out of any telephone
redemption effected in accordance with the Fund's telephone redemption
procedures, upon instructions reasonably believed to be genuine. The Fund and
its agents will employ procedures designed to provide reasonable assurance that
instructions by telephone are genuine. These procedures include recording all
phone conversations, sending confirmations to shareholders within 72 hours of
the telephone transaction, verification of account name and account number or
tax identification number and sending redemption proceeds only to the address
of record or to a previously authorized bank account.
i. ARBITRATION. This paragraph contains what is sometimes referred to as a
predispute arbitration clause. In this regard, I am aware of the following:
(i) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(ii) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
(iii) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
(iv) THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
(v) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
(vi) ALL AGREEMENTS SHALL INCLUDE A STATEMENT THAT "NO PERSON SHALL BRING A
PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY
PREDISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT
A PUTATIVE CLASS ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT
OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE
CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED, OR (ii) THE CLASS
IS DECERTIFIED, OR (iii) THE PERSON AGAINST WHOM THE ARBITRATION AGREEMENT
WOULD BE ENFORCED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO
ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS
UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN." IT IS AGREED THAT ANY
CONTROVERSY BETWEEN ME AND ALL OR ANY OF THE FUNDS AND ITS SERVICE PROVIDERS,
ARISING OUT OF THIS AGREEMENT OR MY BUSINESS WITH YOU, SHALL BE SETTLED BY
ARBITRATION CONDUCTED IN ACCORDANCE WITH THE RULES OF THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS, INC. OR THE AMERICAN ARBITRATION ASSOCIATION, AS I MAY
ELECT. FAILURE TO NOTIFY YOU OF SUCH ELECTION IN WRITING WITHIN FIVE (5) DAYS
AFTER RECEIPT FROM YOU OF A REQUEST FOR ARBITRATION SHALL BE DEEMED TO BE
AUTHORIZATION TO MAKE SUCH ELECTION ON MY BEHALF. JUDGMENT UPON THE AWARD OF
THE ARBITRATORS MAY BE ENTERED BY ANY COURT HAVING JURISDICTION.
j. INDEMNIFICATION. As additional consideration for the services of the
Distributor, the Transfer Agent and the Fund, with regard to this Account, I
agree to indemnify and hold the Distributor, the Transfer Agent and the Fund,
its officers, directors, employees and agents harmless from and against any and
all losses, liabilities, demands, claims, actions, expenses and attorney's fees
arising out of or in connection with this Agreement, which are not caused by
the negligence or willful misconduct of the Distributor, the Transfer Agent or
the Fund. The provisions of this Section shall survive termination of this
Agreement; the provisions of this Section shall be binding on my successors and
assigns.
k. I understand that, if disbursements out of this account are to anyone other
than applicant or applicant's joint tenant, a signature guarantee will be
required.
l. With respect to Section 5A, I understand that if the 5th or 20th should
fall on a nonbusiness day, the transaction will be effective on the next
business day.
m. I UNDERSTAND THAT MUTUAL FUND SHARES ARE NOT DEPOSITS OF ANY BANK, ARE NOT
INSURED BY THE FDIC, ARE NOT OBLIGATIONS OF ANY BANK OR THE U.S. GOVERNMENT
AND ARE NOT ENDORSED OR GUARANTEED IN ANY WAY BY ANY BANK.
<PAGE> 75
[LOGO SIGNIFYING "NO
FDIC INSURANCE"]
8 YOUR SIGNATURE All registered shareholders must sign.
I HAVE RECEIVED AND READ THE CURRENT PROSPECTUS(ES) OF THE FUND(S) SELECTED AND
THIS ACCOUNT REGISTRATION FORM AND AGREE TO BE BOUND BY THEIR TERMS.
By signing below, I certify under the penalty of perjury, that (check
appropriate box):
[ ] The number I have provided is the correct taxpayer identification
number for this account, and I AM NOT subject to backup withholding
because (a) I am exempt from backup withholding (and if I am a
nonresident alien, I have provided you with a compete W-8 form), or (b)
I have not been notified by the Internal Revenue Service that I am
subject to backup withholding as a result of a failure to report
interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] The number I have provided is my correct taxpayer identification
number, and I AM subject to backup withholding.
BY SIGNING BELOW, I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS
GOVERNING THIS ACCOUNT AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS
ARE CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME, AND I
ACKNOWLEDGE THAT I HAVE READ AND UNDERSTAND THE DISCLOSURE WITH RESPECT TO
NON-DEPOSIT INVESTMENT PRODUCTS AT THE CONCLUSION OF THIS AGREEMENT.
X X
- -------------------------------------- ---------------------------------------
Signature Date Signature Date
X X
- -------------------------------------- ---------------------------------------
Signature(Joint Owner-if any) Date Signature(Joint Owner-if any) Date
===============================================================================
9 ORGANIZATION RESOLUTION
This seciton is to be completed by organizations. In some circumstances,
additional documentation is required. Pleas call 1-800-672-4797 to inquired.
Also, please be sure to fill out the appropriate resolution fully, as
incomplete documentation will cause delays in investing and redeeming.
TYPE OF ORGANIZATION
[ ] Corporation [ ] Nonprofit Organization [ ] Partnership
- -------------------------------------- ---------------------------------------
Name of Organization Name (Please print) Title
- -------------------------------------- ---------------------------------------
Address Signature
- -------------------------------------- ---------------------------------------
City State Zip Name (Please print) Title
- -------------------------------------- ---------------------------------------
Telephone Signature
---------------------------------------
I,_________________of_________________ Name (Please print) Title
certify that the following is a true
copy of a resolution now in full force ---------------------------------------
and effect, duly adopted by the Signature
Board of Directors or by those with
authority to act on behalf of said
Organization on _______________ 19__:
Resolved, that any [ ] one [ ] two
[ ] three [ ] four of the persons
whose names and signatures appear Be it further resolved, that the
below are hereby authorized and parties named above are hereby
directed to execute and deliver any authorized and directed to sign such
written instruments including, without documents, make such filings and to
limitation, the Customer Agreement, take such further actions as may be
which is attached hereto and made a necessary or desirable to implement
part hereof by this reference, this resolution.
necessary to establish and maintain
accounts with any fund within the Ernst
World Funds, to effect purchases and
redemptions of such shares. X
---------------------------------------
Signature of certifying Date
person of officer
- --------------------------------------- (Other than those listed above) All
Name (Please print) Title persons authorized to act on the
account must also sign under Section 8
- --------------------------------------- of this application.
Signature
===============================================================================
BANK, BROKER/DEALER USE ONLY
Investment Rep__________________ SS#_______________________ Rep#_______________
Broker/Dealer#__________________ Office Name_______________ Office#____________
Telephone (___)_________________ Signature_____________________ Date___________
Referred by_____________________ Office Name_______________ Office#____________
Principal ______________________ Signature_____________________ Date___________
===============================================================================
===============================================================================
OFFICE USE ONLY
Dealer# _ _ _ _ _ _ _ Rep # _ _ _ _ _ _ Lead Source _ _
Wholesaler # _ _ _ Referring Employee _ _ _ _ Fund Source _ _
Office# _ _ _ _ _ _ _ Referring Branch _ _ _ _ Campaign Code _ _
===============================================================================
<PAGE> 76
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australia-New Zealand Fixed Income Fund
Each an Investment Portfolio of
The Coventry Group
Statement of Additional Information
February 5, 1996
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the prospectus for the Ernst Global Asset Allocation
Fund (the "Global Asset Allocation Fund"), the Ernst Global Smaller Companies
Fund (the "Global Smaller Companies Fund"), and the Ernst Australia-New Zealand
Fixed Income Fund (the "Australia-New Zealand Fund") dated the same date as the
date hereof (the "Prospectus"), hereinafter referred to collectively as the
"Funds" and singly, a "Fund." The Funds are three separate investment
portfolios of The Coventry Group (the "Group"), an open-end management
investment company. This Statement of Additional Information is incorporated
in its entirety into the Prospectus. Copies of the Prospectus may be obtained
by writing the Funds at 3435 Stelzer Road, Columbus, Ohio 43219, or by
telephoning toll free (800) 672-4797.
<PAGE> 77
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COVENTRY GROUP . . . . . . . . . . . . . . . . . . . . . . B-1
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . B-1
Additional Information on Portfolio Instruments . . . B-1
Information Concerning Australia . . . . . . . . . . . B-9
Investment Restrictions . . . . . . . . . . . . . . . B-12
Portfolio Turnover . . . . . . . . . . . . . . . . . . B-14
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . B-14
Valuation of the Funds . . . . . . . . . . . . . . . . B-15
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . B-16
Matters Affecting Redemption . . . . . . . . . . . . . B-16
MANAGEMENT OF THE GROUP . . . . . . . . . . . . . . . . . . . . B-16
Trustees and Officers . . . . . . . . . . . . . . . . B-16
Investment Adviser and Sub-Advisers . . . . . . . . . B-20
Portfolio Transactions . . . . . . . . . . . . . . . . B-21
Administrator . . . . . . . . . . . . . . . . . . . . B-22
Expenses . . . . . . . . . . . . . . . . . . . . . . . B-24
Distributor . . . . . . . . . . . . . . . . . . . . . B-24
Custodian . . . . . . . . . . . . . . . . . . . . . . B-26
Transfer Agency and Fund Accounting Services . . . . . B-26
Independent Auditors . . . . . . . . . . . . . . . . . B-27
Legal Counsel . . . . . . . . . . . . . . . . . . . . B-27
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . B-27
Description of Shares . . . . . . . . . . . . . . . . B-27
Vote of a Majority of the Outstanding Shares . . . . . B-29
Additional Tax Information . . . . . . . . . . . . . . B-29
Yields and Total Returns of the Funds. . . . . . . . . B-36
Performance Comparisons . . . . . . . . . . . . . . . B-38
Miscellaneous . . . . . . . . . . . . . . . . . . . . B-39
</TABLE>
- i -
<PAGE> 78
STATEMENT OF ADDITIONAL INFORMATION
THE COVENTRY GROUP
The Coventry Group (the "Group") is an open-end management
investment company which issues its Shares in separate series. Each series
relates to a separate portfolio of assets. The portfolios advised by Ernst &
Company (the "Adviser") are each referred to generally as a "Fund". This
Statement of Additional Information deals with three Funds, the Ernst Global
Asset Allocation Fund, Ernst Global Smaller Companies Fund and the Ernst
Australia-New Zealand Fixed Income Fund. Much of the information contained in
this Statement of Additional Information expands upon subjects discussed in the
Prospectus of the Funds. Capitalized terms not defined herein are defined in
such Prospectus. No investment in Shares of a Fund should be made without
first reading the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
The following policies supplement the investment objective and
policies of the Funds as set forth in their Prospectus.
Bank Obligations. The Funds may invest in bank obligations
such as bankers' acceptances, certificates of deposit, and time deposits.
Bankers' acceptances are negotiable drafts or bills of
exchange typically drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank or a savings and loan association
for a definite period of time and earning a specified return. Certificates of
deposit and time deposits will be those of domestic banks and savings and loan
associations, if (a) at the time of investment the depository institution has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements), or (b) the principal
amount of the instrument is insured in full by the Federal Deposit Insurance
Corporation.
B-1
<PAGE> 79
Commercial Paper. Commercial paper consists of unsecured
promissory notes issued by corporations. Issues of commercial paper normally
have maturities of less than nine months and fixed rates of return.
The Funds may purchase commercial paper consisting of issues
rated at the time of purchase in one of the two highest rating categories
assigned by an NRSRO or that is not rated but is determined by the Adviser
under guidelines established by the Group's Board of Trustees, to be of
comparable quality.
Government Obligations. The Funds may invest in government
obligations of the U.S. Government as well as government obligations of foreign
countries. The Funds may invest in short-term U.S. Treasury bills, notes and
other obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (collectively, "U.S. Government Obligations"). Obligations
of certain agencies and instrumentalities of the U.S. Government are supported
by the full faith and credit of the U.S. Treasury; others are supported by the
right of the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Funds may also
invest in obligations issued or guaranteed by foreign governments or their
agencies and instrumentalities.
FANMACs. The Australia-New Zealand Fixed Income Fund may
invest in FANMAC securities which are securities issued by a trustee against
housing loans made through the New South Wales Department of Housing and
consist of a series of closed trusts or pools. The mortgage manager is the
First Australian National Mortgage Acceptance Corporation Ltd. ("FANMAC").
FANMAC is owned 26% by the Government of the State of New South Wales with the
remainder owned by other institutions. The Government of the State of New
South Wales has provided the FANMAC Trust with an assurance as to availability
of funds to meet payment. The securities have been rated by Australian Ratings
and Standard and Poors. FANMAC securities are subject to a call provision
under which borrowers (mortgagors) can repay early and the investors in a
particular pool can be repaid on a pro rata basis.
NMMC AUSSIE MACs and National Mortgage Market Bonds. The
Australia-New Zealand Fixed Income Fund may invest in these types of
securities. National Mortgage Market Corporation Ltd. ("National Mortgage")
has issued both AUSSIE MACs, which are medium term bearer securities, and
National Mortgage Market
B-2
<PAGE> 80
Bonds. National Mortgage is a private company which is 26% owned by the
Government of the State of Victoria and 74% by private institutions. Both
AUSSIE MACs and National Mortgage Market Bonds are rated by Australian Ratings.
Foreign Investments. The Funds may, subject to their
investment objective and policies, invest in certain obligations or securities
of foreign issuers. Permissible investments include sponsored and unsponsored
American Depository Receipts ("ADRs"), European Depositary Receipts ("EDRs")
and Global Depositary Receipts ("GDRs"). Investment in securities issued by
foreign branches of U.S. banks, foreign banks, or other foreign issuers,
including ADRs, EDRs and GDRs may subject a Fund to investment risks that
differ in some respects from those related to investment in obligations of U.S.
domestic issuers. Such risks include future adverse political and economic
developments, possible seizure, nationalization, or expropriation of foreign
investments, less stringent disclosure requirements, the possible establishment
of exchange controls or taxation at the source, and the adoption of other
foreign governmental restrictions.
Additional risks include less publicly available information,
the risk that companies may not be subject to the accounting, auditing and
financial reporting standards and requirements of U.S. companies, the risk that
foreign securities markets may have less volume and therefore many securities
traded in these markets may be less liquid and their prices more volatile than
U.S. securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements than those applicable to domestic branches of U.S. banks.
Foreign securities traded in markets of emerging market
countries are particularly subject to certain of these risks. Since these
markets tend to be less developed, emerging market securities can be especially
volatile and may be illiquid. These countries may be less stable politically,
economically or socially, increasing investment risk. While the Global Asset
Allocation Fund and the Global Smaller Companies Fund may each invest in
securities traded in emerging markets (South America, India, Pakistan, Africa
(except South Africa), Turkey, Eastern Europe and Russia), these Funds will
limit their investment to less than 5% of its total assets in such securities.
Forward Foreign Currency Exchange Contracts. The Funds may
engage in foreign currency exchange transactions. A forward
B-3
<PAGE> 81
foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
("Term") from the date of the contract agreed upon by the parties, at a price
set at the time of the contract. These contracts are traded directly between
currency traders (usually large commercial banks) and their customers.
The Funds do not intend to enter into such forward contracts
if the Fund would have more than 100% of the value of its total assets
committed to such contracts on a regular or continuous basis. A Fund also will
not enter into such forward contracts or maintain a net exposure in such
contracts where such Fund would be obligated to deliver an amount of foreign
currency in excess of the value of such Fund's securities or other assets
denominated in that currency. Except for forward foreign currency transactions
entered into for hedging purposes, each Fund's custodian bank segregates cash
or liquid high grade debt securities in an amount not less than the value of
the Fund's total assets committed to forward foreign currency exchange
contracts entered into for the purchase of a foreign security. If the value of
the securities segregated declines, additional cash or securities are added so
that the segregated amount is not less than the amount of such Fund's
commitments with respect to such contracts.
Foreign Currency Options. The Funds may engage in foreign
currency options. A foreign currency option provides a Fund, as the option
buyer, with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period in the secondary market for such options any
time prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect a Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if a Fund has entered into a contract to purchase a security
B-4
<PAGE> 82
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, such
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
Foreign Currency Futures Transactions. The Funds may use
foreign currency futures contracts and options on such futures contracts.
Through the purchase or sale of such contracts, a Fund may be able to achieve
many of the same objectives as through forward foreign currency exchange
contracts more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign
currency futures contracts and options on foreign currency futures contracts
are standardized as to amount and delivery period and may be traded on boards
of trade and commodities exchanges or directly with a dealer which makes a
market in such contracts and options. It is anticipated that such contracts
may provide greater liquidity and lower cost than forward foreign currency
exchange contracts.
Futures Contracts. The Funds may enter into contracts for the
future delivery of securities and futures contracts based on a specific
security, class of securities or an index, purchase or sell options on any such
futures contracts and engage in related closing transactions. In addition, the
Funds may enter into contracts for the future delivery of foreign currencies
and futures contracts based on a specific foreign currency, and purchase or
sell options on any such futures contracts and engage in related closing
transactions. At the time the Fund purchases a futures contract, an amount of
cash, U.S. Government securities, or other highly liquid debt securities equal
to the market value of the contract will be deposited in a segregated account
with the Fund's custodian. When writing a futures contract, the Fund will
maintain with its custodian liquid assets that, when added to the amounts
deposited with a futures commission merchant or broker as margin, are equal to
the market value of the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments underlying the
contract.
Futures transactions involve certain additional costs such as
brokerage costs and the obligation to maintain segregated accounts with the
custodian. The Fund may lose the expected benefits of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. There is no assurance of liquidity in the secondary
market for
B-5
<PAGE> 83
purposes of closing out futures positions when it may be necessary to do so.
Call Options. The Funds may purchase and sell (write) call
options and purchase options to close out options previously written by it. A
call option gives the holder (buyer) the "right to purchase" a security at a
specified price (the exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring him to deliver the underlying security
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by repurchasing an option identical to that
previously sold. To secure his obligation to deliver the underlying security
in the case of a call option, a writer is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation.
Fund securities on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's investment objective. When writing a covered call option, a Fund, in
return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, but retains the
risk of loss should the price of the security decline. Unlike one who owns
securities not subject to an option, a Fund has no control over when it may be
required to sell the underlying securities, since it may be assigned an
exercise notice at any time prior to the expiration of its obligation as a
writer. If a call option which a Fund has written expires, a Fund will realize
a gain in the amount of the premium; however, such gain may be offset by a
decline in the market value of the underlying security during the option
period. If the call option is exercised, the Fund will realize a gain or loss
from the sale of the underlying security. The security covering the call will
be maintained in a segregated account of the Fund's Custodian.
The premium received is the market value of an option. The
premium a Fund will receive from writing a call option will reflect, among
other things, the current market price of the underlying security, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying security, and the length of the option period.
Once the decision to write a call option has been made, the Adviser, in
determining whether a particular call option should be written on a particular
security, will consider the reasonableness of the
B-6
<PAGE> 84
anticipated premium and the likelihood that a liquid secondary market will
exist for such option.
Closing transactions will be effected in order to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, or to permit the sale of the underlying security. Furthermore,
effecting a closing transaction will permit a Fund to write another call option
on the underlying security with either a different exercise price or expiration
date or both. If a Fund desires to sell a particular security from its
portfolio on which it has written a call option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security.
There is, of course, no assurance that a Fund will be able to effect such
closing transactions at a favorable price. If a Fund cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk on the security.
This could result in higher transaction costs. A Fund will pay transaction
costs in connection with the writing of options to close out previously written
options. Such transaction costs are normally higher than those applicable to
purchases and sales of portfolio securities.
Call options written by a Fund will normally have expiration
dates of less than nine months from the date written. The exercise price of
the options may be below, equal to, or above the current market values of the
underlying securities at the time the options are written. From time to time,
the Funds may purchase an underlying security for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering such
security from its portfolio. In such cases, additional costs will be incurred.
The Funds will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more than the
premium received from the writing of the option. Because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.
Put Options. The Funds may purchase or sell (write) "puts".
A put gives the owner a right to sell or redeem a specified security (or
securities) at a certain time or within a certain period of time at a specified
exercise price. The put may be an independent feature or may be combined with
a reset feature that is designed to reduce downward price volatility as
B-7
<PAGE> 85
interest rates rise by enabling the holder to liquidate the investment prior to
maturity.
Puts may be acquired by a Fund to facilitate the liquidity of
the portfolio assets. Puts may also be used to facilitate the reinvestment of
assets at a rate of return more favorable than that of the underlying security.
Puts may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of
calculating the remaining maturity of those securities and the dollar-weighted
average portfolio maturity of a Fund's assets.
The Funds will, if necessary or advisable, pay for puts either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the puts.
When-Issued Securities. As discussed in the Prospectus of the
Funds, each of the Funds may purchase securities on a when-issued or
delayed-delivery basis. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. A Fund will
generally not pay for such securities or start earning interest on them until
they are received. When a Fund agrees to purchase securities on a when-issued
basis, the Custodian will set aside cash or liquid portfolio securities equal
to the amount of the commitment in a separate account. Normally, the Custodian
will set aside portfolio securities to satisfy the purchase commitment, and in
such a case, the Fund may be required subsequently to place additional assets
in the separate account in order to assure that the value of the account
remains equal to the amount of the Fund's commitment. It may be expected that
the Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. In addition, because a Fund will set aside cash or liquid portfolio
securities to satisfy its purchase commitments in the manner described above,
the Fund's liquidity and the ability of the Adviser to manage it might be
affected in the event its commitments to purchase when-issued securities ever
exceeded 25% of the value of its total assets.
When a Fund engages in when-issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result
in the Fund incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. The Funds will engage in when issued delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Funds' investment objectives, policies and restrictions, not for
investment leverage.
B-8
<PAGE> 86
Securities of Other Investment Companies. Each Fund may
invest in securities issued by the other investment companies. Each of the
Funds currently intend to limit its investments so that, as determined
immediately after a securities purchase is made: (a) not more than 5% of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of its total assets will be invested in the aggregate in
securities of all investment companies; (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by any of the Funds;
and (d) not more than 10% of the outstanding voting stock of any one investment
company will be owned in the aggregate by the Funds. As a shareholder of
another investment company, a Fund would bear, along with other shareholders,
its pro rata portion of that company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations. Investment
companies in which a Fund may invest may also impose a sales or distribution
charge in connection with the purchase or redemption of their shares and other
types of commissions or charges. Such charges will be payable by the Funds
and, therefore, will be borne directly by Shareholders.
Information Concerning Australia
Domestic Economy. The Australian economy experienced a
recession in 1982-83. However, by the mid-1982's, the economy emerged from
recession, aided by fiscal stimulus. In 1988-89, the economy saw strong growth
in private sector spending, generating excess demand and widening the current
account deficit. Demand slowed significantly in both 1989-90, due largely to a
tightening a government policy, and in 1990-91, as the economy moved into
recession. Since 1991, the economy has been in recovery and in the twelve
months ended September 30, 1994, GDP grew by 6.4%. The following table shows
GDP for the five years ended June 30, 1994.
GROSS DOMESTIC PRODUCT
(AUSTRALIAN $ IN MILLIONS)
<TABLE>
<CAPTION>
1989-90 1990-91 1991-92 1992-93 1993-94
<S> <C> <C> <C> <C> <C>
GDP, income-based measure
(current prices) . . . . . . . . . . . . . . A$370,286 A$379,252 A$378,264 A$403,719 A$426,297
GDP, average measure
(constant 1989-90 prices) . . . . . . . . . . . . . . A$369,029 A$366,683 A$368,830 A$380,110 A$396,073
Real GDP % change over previous
period (constant 1989-90 prices)(1) . . . . . . . . . 3.3% -0.6% 0.6% 3.1% 4.2%
</TABLE>
- ---------------------------
Source: Australian Bureau of Statistics, Australian National Accounts.
(1) Data may not be calculable due to rounding.
B-9
<PAGE> 87
The following table compares average interest rates of
Australian and U.S. ten-year government bonds during the early 1990s.
COMPARISON OF AVERAGE INTEREST RATES
OF U.S. AND AUSTRALIAN BONDS
(% PER ANNUM)
<TABLE>
<CAPTION>
10-YEAR U.S. 10-YEAR AUSTRALIAN
YEAR TREASURY BONDS GOVERNMENT BONDS
- ---- -------------- ----------------
<S> <C> <C> <C> <C>
1990 Qtr. 1 . . . . . . . . . . . . . . . 8.42 13.18
2 . . . . . . . . . . . . . . . 8.68 13.57
3 . . . . . . . . . . . . . . . 8.70 13.43
4 . . . . . . . . . . . . . . . 8.40 12.55
1991 Qtr. 1 . . . . . . . . . . . . . . . 8.02 11.48
2 . . . . . . . . . . . . . . . 8.13 10.97
3 . . . . . . . . . . . . . . . 7.94 10.65
4 . . . . . . . . . . . . . . . 7.35 9.67
1992 Qtr. 1 . . . . . . . . . . . . . . . 7.30 10.02
2 . . . . . . . . . . . . . . . 7.38 9.15
3 . . . . . . . . . . . . . . . 6.62 8.73
4 . . . . . . . . . . . . . . . 6.74 8.98
1993 Qtr. 1 . . . . . . . . . . . . . . . 6.28 8.13
2 . . . . . . . . . . . . . . . 5.99 7.53
3 . . . . . . . . . . . . . . . 5.62 6.80
4 . . . . . . . . . . . . . . . 5.61 6.67
1994 Qtr. 1 . . . . . . . . . . . . . . . 6.07 7.12
2 . . . . . . . . . . . . . . . 7.08 8.97
3 . . . . . . . . . . . . . . . 7.33 9.75
October . . . . . . . . . . . . . . . . . . . . 7.80 10.50
November . . . . . . . . . . . . . . . . . . . . 7.92 10.45
December . . . . . . . . . . . . . . . . . . . . 7.83 10.05
1995 January . . . . . . . . . . . . . . . . . . . . 7.59 10.39
February . . . . . . . . . . . . . . . . . . . . 7.21 9.85
</TABLE>
B-10
<PAGE> 88
The following table compares the value of an Australian dollar per U.S. dollar
for the periods indicated.
EXCHANGE RATES (PER U.S. $)
<TABLE>
<CAPTION>
AT MONTH ENDING AS
--------------- --
<S> <C> <C>
1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 1.3259
June 1.2674
September 1.2099
December 1.2932
1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 1.2900
June 1.3019
September 1.2508
December 1.3161
1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 1.3014
June 1.3355
September 1.4006
December 1.4535
1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 1.4168
June 1.4877
September 1.5497
December 1.4769
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 1.4269
June 1.3716
September 1.3526
December 1.2873
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 1.3228
February 1.3523
</TABLE>
- --------------------------
Source: Australian Bureau of Statistics, Balance of Payments; SBC Australia
Limited.
Public Finance. The following table summarizes the
outstanding direct debt (National Debt) of the Australian Commonwealth, State
Governments and Northern Territories on the dates indicated.
GOVERNMENT SECURITIES ON ISSUE AT JUNE 30, 1990 TO 1994
(AUSTRALIAN $ IN MILLIONS)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
A$52,118 A$50,095 A$60,855 A$79,109 A$93,910
</TABLE>
- -----------------------
Source: Australian Government Budget Papers; Budget Related Paper No. 1,
1992-93, 1993-94.
B-11
<PAGE> 89
SUMMARY OF AUSTRALIAN GOVERNMENT BUDGET TRANSACTIONS
(AUSTRALIAN $ IN MILLIONS)
<TABLE>
<CAPTION>
1989-90 1990-91 1991-92 1992-93 1993-94
<S> <C> <C> <C> <C> <C>
Total Revenue . . . . . . . . . . . . . . . . . . . . . A$95,942 A$97,986 A$93,358 A$94,858 A$100,920
Total outlays . . . . . . . . . . . . . . . . . . . . . A$87,905 A$96,079 A$102,698 A$109,429 A$114,513
Surplus (deficit) . . . . . . . . . . . . . . . . . . . 8,036 1,907 (9,339) (14,571) (13,593)
</TABLE>
- ---------------------------
Source: Australian Government Budget Papers, Budget Related Paper No. 1,
1994-95.
AUSTRALIAN DEBT SECURITIES
(AUSTRALIAN $ IN BILLIONS AS OF FEBRUARY 28, 1995)
<TABLE>
<CAPTION>
NOMINAL VALUE MARKET VALUE
------------- ------------
<S> <C> <C>
Commonwealth Government . . . . . . . . . . . . . . . . . . . . . . A$76.764 A$76.983
Semi-government . . . . . . . . . . . . . . . . . . . . . . . . . . 52.953 54.204
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.248 8.893
Asset Backed . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.013 1.099
---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . A$138.978 A$141.179
</TABLE>
- -------------------
Source: SBC Australia Limited Monthly Index Update, March 1995.
Investment Restrictions
The following are fundamental investment restrictions and are
in addition to the investment restrictions set forth in the Prospectus. Under
these restrictions a Fund may not:
1. Underwrite securities issued by other persons, except
to the extent that a Fund may be deemed to be an underwriter under certain
securities laws in the disposition of "restricted securities";
2. Purchase or sell commodities or commodities
contracts, except to the extent disclosed in the current Prospectus of the
Funds;
3. Purchase or sell real estate (although investments in
marketable securities of companies engaged in such activities are not
prohibited by this restriction);
4. Except for the Ernst Australia-New Zealand Fixed
Income Fund, Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, if, immediately after such
B-12
<PAGE> 90
purchase, with respect to 75% of its total assets, more than 5% of the value of
the total assets of the Fund would be invested in such issuer, or the Fund
would hold more than 10% of any class of securities of the issuer or more than
10% of the outstanding voting securities of the issuer.
5. Except for the Ernst Australia-New Zealand Fixed
Income Fund, purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and repurchase agreements secured by obligations
of the U.S. Government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their parents
if their activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services. For
example, gas, gas transmission, electric and gas, electric, and telephone will
each be considered a separate industry.
6. Borrow money or issue senior securities, except that
a Fund may borrow from banks, including the Custodian, or brokers, for
temporary purposes in amounts up to 15% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 15% of the value of the Fund's total
assets at the time of its borrowing.
7. Make loans, except that a Fund may purchase or hold
debt or other securities and lend portfolio securities in accordance with its
investment objective and policies, and may make time deposits with financial
institutions and enter into repurchase agreements.
The following additional investment restrictions are not
fundamental and may be changed with respect to a particular Fund without the
vote of a majority of the outstanding Shares of that Fund. A Fund may not:
1. Invest in excess of 15% of its net assets in
securities that are not readily marketable or are otherwise illiquid.
2. Purchase securities on margin, except for use of
short-term credit necessary for clearance of purchases of portfolio securities;
B-13
<PAGE> 91
3. Engage in any short sales;
4. Purchase participation or direct interests in oil,
gas or other mineral exploration or development programs (although investments
in marketable securities of companies engaged in such activities are not
prohibited by this restriction);
5. Purchase securities of other investment companies,
except (a) in connection with a merger, consolidation, acquisition or
reorganization, and (b) a Fund may invest in other investment companies,
including other Funds for which the Adviser acts as investment adviser, as
specified in the Prospectus subject to such restrictions as may be imposed by
the 1940 Act or any state laws.
6. Invest more than 5% of total assets in securities of
issuers which together with any predecessors have a record of less than three
years continuous operation.
If any percentage restriction described above is satisfied at
the time of investment, a later increase or decrease in such percentage
resulting from a change in asset value will not constitute a violation of such
restriction.
Portfolio Turnover
The portfolio turnover rate for each of the Funds is
calculated by dividing the lesser of a Fund's purchases or sales of portfolio
securities for the year by the monthly average value of the portfolio
securities. The calculation excludes all securities whose remaining maturities
at the time of acquisition were one year or less. Portfolio turnover for the
Funds may vary greatly from year to year as well as within a particular year.
High turnover rates will generally result in higher transaction costs to a
Fund. Portfolio turnover will not be a limiting factor in making investment
decisions.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each
Fund is determined and the Shares of each Fund are priced as of the Valuation
Time applicable to such Fund on each Business Day of the Group. A "Business
Day" constitutes any day on which the New York Stock Exchange (the "NYSE") is
open for trading except days on which there are not sufficient changes in the
value of a Fund's portfolio securities that the Fund's net asset value might be
materially affected and days on which no Shares of a Fund are tendered for
redemption and no order to purchase any Shares is received. Currently, the
NYSE is closed on New Year's Day,
B-14
<PAGE> 92
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Valuation of the Funds
Portfolio securities for which market quotations are readily
available are valued based upon their current available bid prices in the
principal market (closing sales prices if the principal market is an exchange)
in which such securities are normally traded. Unlisted securities for which
market quotations are readily available will be valued at the current quoted
bid prices. Other securities and assets for which quotations are not readily
available, including restricted securities and securities purchased in private
transactions, are valued at their fair value in the Adviser's best judgement
under the supervision of the Group's Board of Trustees. Investments in debt
securities with remaining maturities of 60 days or less may be valued based
upon the amortized cost method.
Among the factors that will be considered, if they apply, in
valuing portfolio securities held by the Funds are the existence of
restrictions upon the sale of the security by the Fund, the absence of a market
for the security, the extent of any discount in acquiring the security, the
estimated time during which the security will not be freely marketable, the
expenses of registering or otherwise qualifying the security for public sale,
underwriting commissions if underwriting would be required to effect a sale,
the current yields on comparable securities for debt obligations traded
independently of any equity equivalent, changes in the financial condition and
prospects of the issuer, and any other factors affecting fair value. In making
valuations, opinions of counsel may be relied upon as to whether or not
securities are restricted securities and as to the legal requirements for
public sale.
The Group may use a pricing service to value certain portfolio
securities where the prices provided are believed to reflect the fair market
value of such securities. A pricing service would normally consider such
factors as yield, risk, quality, maturity, type of issue, trading
characteristics, special circumstances and other factors it deems relevant in
determining valuations of normal institutional trading units of debt securities
and would not rely exclusively on quoted prices. The methods used by the
pricing service and the valuations so established will be reviewed by the Group
under the general supervision of the Group's Board of Trustees. Several
pricing services are available, one or more of which may be used by the Adviser
from time to time.
B-15
<PAGE> 93
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Matters Affecting Redemption
Shares in each of the Group's Funds are sold on a continuous
basis by BISYS Fund Services, Limited Partnership (the "Distributor") and the
Distributor has agreed to use appropriate efforts to solicit all purchase
orders.
The Group may suspend the right of redemption or postpone the
date of payment for Shares during any period when (a) trading on the New York
Stock Exchange (the "Exchange") is restricted by applicable rules and
regulations of the Commission, (b) the Exchange is closed for other than
customary weekend and holiday closings, (c) the Commission has by order
permitted such suspension for the protection of security holders of the Group,
or (d) the Commission has determined that an emergency exists as a result of
which (i) disposal by the Group of securities owned by it is not reasonably
practical, or (ii) it is not reasonably practical for the Group to determine
the fair value of its net assets.
The Group may redeem Shares of each of the Funds involuntarily
if redemption appears appropriate in light of the Group's responsibilities
under the 1940 Act. See "NET ASSET VALUE" in this Statement of Additional
Information.
MANAGEMENT OF THE GROUP
Trustees and Officers
Overall responsibility for management of the Group rests with
its Board of Trustees, which is elected by the Shareholders of the Group. The
Trustees elect the officers of the Group to supervise actively its day-to-day
operations.
The names of the Trustees and officers of the Group, their
addresses, ages and principal occupations during the past five years are as
follows:
B-16
<PAGE> 94
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name and Address the Group During Past 5 Years
- ---------------- ----------- -------------------
<S> <C> <C>
Roy E. Rogers* Chairman, President From September 1986 to present,
3435 Stelzer Road and Trustee employee of BISYS Fund Services
Columbus, Ohio 43219 or BISYS Fund Services Ohio,
Age: 33 Inc.
Walter B. Grimm* Vice President and From June 1992 to present,
3435 Stelzer Road Trustee employee of BISYS Fund Services;
Columbus, Ohio 43219 from 1987 to June 1992,
Age: 49 President of Leigh Investments
(investment firm); from May 1989
to November 1990, President of
Security Bank.
Maurice G. Stark Trustee Retired. Until December 31,
505 King Avenue 1994, Vice President-Finance and
Columbus, Ohio 43201 Treasurer, Battelle Memorial
Age: 59 Institute (scientific research
and development service
corporation).
</TABLE>
B-17
<PAGE> 95
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name and Address the Group During Past 5 Years
- ---------------- ----------- -------------------
<S> <C> <C>
Michael M. Van Buskirk Trustee From June 1991 to present,
37 West Broad Street Executive Vice President of The
Suite 1001 Ohio Bankers' Association (trade
Columbus, Ohio 43215-4162 association); from September
Age: 48 1987 to June 1991, Vice
President -Communications, TRW
Information Systems Group
(electronic and space
engineering).
Chalmers P. Wylie Trustee From April 1993 to present, Of
754 Stonewood Court Counsel, Kegler Brown Hill &
Columbus, Ohio 43235 Ritter; from January 1993 to
Age: 74 present, Adjunct Professor, Ohio
State University; from January
1967 to January 1993, member of
the United States House of
Representatives for the 15th
District of Ohio.
J. David Huber Vice President From June 1987 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 49
William J. Tomko Treasurer From April 1987 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 37
</TABLE>
B-18
<PAGE> 96
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name and Address the Group During Past 5 Years
- ---------------- ----------- -------------------
<S> <C> <C>
Nancy E. Converse Secretary From July 1990 to present,
3435 Stelzer Road employee of BISYS Fund Services
Columbus, Ohio 43219 or BISYS Fund Services Ohio,
Age: 46 Inc.
Mark S. Redman Assistant Secretary From February 1989 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 40
Alaina V. Metz Assistant Secretary From June 1995 to present,
3435 Stelzer Road employee of BISYS Fund Services;
Columbus, Ohio 43219 from May 1989 to June 1995,
Age: 28 employee of Alliance Capital
Management.
Richard B. Ille Assistant Secretary From July 1990 to present,
3435 Stelzer Road employee of BISYS Fund Services
Columbus, Ohio 43219 or BISYS Fund Services Ohio,
Age: 30 Inc.
R. Jeffrey Young Assistant Secretary From October 1993 to present,
3435 Stelzer Road employee of BISYS Fund Services
Columbus, Ohio 43219 or BISYS Fund Services Ohio,
Age: 30 Inc.; from April 1989 to October
1993, employee of The Heebink
Group.
</TABLE>
- -----------------------------
B-19
<PAGE> 97
*Messrs. Rogers and Grimm are each considered to be an
"interested person" of the Group as defined in the 1940 Act.
As of the date of this Statement of Additional Information,
the Group's officers and Trustees, as a group, own less than 1% of the Funds'
outstanding Shares.
The officers of the Group receive no compensation directly
from the Group for performing the duties of their offices. BISYS Fund Services
receives fees from the Funds for acting as Administrator. BISYS Fund Services
Ohio, Inc. receives fees from the Funds for acting as transfer agent and for
providing certain fund accounting services. Messrs. Huber, Grimm, Redman,
Rogers, Ille, Tomko and Young and Ms. Converse and Ms. Metz are employees of
BISYS Fund Services.
Trustees of the Group not affiliated with BISYS Fund Services
receive from the Group an annual retainer of $1,250 and a fee of $250 for each
Board of Trustees meeting attended and are reimbursed for all out-of-pocket
expenses relating to attendance at such meetings. Trustees who are affiliated
with BISYS Fund Services do not receive compensation from the Group.
For the fiscal year ended March 31, 1995, the Trustees
received the following compensation from the Group and from certain other
investment companies (if applicable) that have the same investment adviser as
the Funds or an investment adviser that is an affiliated person of the Group's
investment adviser:
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Est. Annual From Registrant
Name of Compensation As Part of Fund Benefits Upon and Fund Complex
Trustee from the Group Expenses Retirement Paid to Trustees
- ------- -------------- ---------------- ------------- --------------------
<S> <C> <C> <C> <C>
Roy E. Rogers $0 $0 $0 $0
Walter B. Grimm $0 $0 $0 $0
Maurice G. Stark $3,750 $0 $0 $3,750
Michael Van Buskirk $3,750 $0 $0 $3,750
Chalmers P. Wylie $3,750 $0 $0 $3,750
</TABLE>
Investment Adviser and Sub-Advisers
Investment advisory services are provided by Ernst & Company,
One Battery Park Plaza, New York, New York 10004 (the "Adviser"), pursuant to
an Investment Advisory Agreement dated as
B-20
<PAGE> 98
of October 27, 1995 (the "Investment Advisory Agreement"). National Mutual
Funds Management (Global), Ltd., 447 Collins Street, Melbourne, Australia 3000
("NMFM") provides sub-investment advisory services to the Funds pursuant to a
Sub-Advisory Agreement dated as of October 27, 1995. (The Investment Advisory
Agreement and each of the Sub-Advisory Agreements are referred to collectively
as the "Advisory Agreements").
Under the Investment Advisory Agreement, the Adviser has
agreed to provide investment advisory services as described in the Prospectus
of the Funds. For the services provided pursuant to the Investment Advisory
Agreement, the Global Asset Allocation and Global Smaller Companies Funds pay
the Adviser a fee computed daily and paid monthly, at the annual rate of one
and one tenth percent (1.10%) of each Fund's average daily net assets. Under
the Sub-Advisory Agreements entered into with the Adviser, NMFM have agreed to
provide sub-investment advisory services as described in the Prospectus. The
Adviser is responsible at all times for supervising the activities of the
Sub-Advisers. For the services provided pursuant to each respective
Sub-Advisory Agreement, the Adviser pays the Sub-Adviser seven-tenths of one
percent (.70%) of the average daily net assets of the respective fund it
advises. The Australia New Zealand Fund pays the Adviser a fee of .60% of that
Fund's average daily net assets and the Adviser pays the Sub-Adviser a fee of
0.40%.
Unless sooner terminated, the Investment Advisory Agreements
will continue in effect as to each Fund until October 27, 1997 and from year to
year thereafter, if such continuance is approved at least annually by the
Group's Board of Trustees or by vote of a majority of the outstanding Shares of
the relevant Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in
the Funds' Prospectus), and a majority of the Trustees who are not parties to
the Investment Advisory Agreements or interested persons (as defined in the
1940 Act) of any party to the Investment Advisory Agreements by votes cast in
person at a meeting called for such purpose. The Investment Advisory
Agreements are terminable as to a Fund at any time on 60 days' written notice
without penalty by the Trustees, by vote of a majority of the outstanding
Shares of that Fund, or by the Adviser or Sub-Adviser, as applicable. The
Investment Advisory Agreements also terminate automatically in the event of any
assignment, as defined in the 1940 Act.
The Investment Advisory Agreements provide that neither the
Adviser nor a Sub-Adviser shall be liable for any error of judgment or mistake
of law or for any loss suffered by a Fund in connection with the performance of
the Investment Advisory Agreements, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or
B-21
<PAGE> 99
a loss resulting from willful misfeasance, bad faith, or gross negligence on
the part of either party in the performance of its duties, or from reckless
disregard by their duties and obligations thereunder.
Portfolio Transactions
Pursuant to the Investment Advisory Agreements, the Adviser
and/or Sub-Advisers, determine, subject to the general supervision of the Board
of Trustees of the Group and in accordance with each Fund's investment
objective and restrictions, which securities are to be purchased and sold by a
Fund, and which brokers are to be eligible to execute such Fund's portfolio
transactions. Purchases and sales of portfolio securities with respect to the
Funds usually are principal transactions in which portfolio securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. Purchases from underwriters of portfolio securities
generally include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers may include
the spread between the bid and asked price. Transactions on stock exchanges
involve the payment of negotiated brokerage commissions. Transactions in the
over-the-counter market are generally principal transactions with dealers.
With respect to the over-the-counter market, the Adviser and/or Sub-Adviser,
where possible, will deal directly with dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere.
The Group, on behalf of the Funds, will not acquire portfolio
securities issued by, or make deposits in, the Adviser, the Sub-Advisers, the
Distributor, or their affiliates, and will not give preference to the Adviser's
or a Sub-Adviser's affiliates with respect to such transactions.
Investment decisions for each Fund are made independently from
those for the other Fund or any other account managed by the Adviser and/or the
Sub-Advisers. When a purchase or sale of the same security is made by a
Sub-Adviser at substantially the same time on behalf of a Fund and another
account, the transaction will be averaged as to price, and available
investments will be allocated as to amount in a manner which the Adviser and/or
the Sub-Advisers believe to be equitable to the Fund(s) and such other account.
In some instances, this investment procedure may adversely affect the price
paid or received by a Fund or the size of the position obtained by a Fund. To
the extent permitted by law, the Adviser and/or the Sub-Advisers may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other accounts in order to obtain best
B-22
<PAGE> 100
execution. As provided by the Investment Advisory Agreements, in making
investment recommendations for the Funds, the Adviser and/or the Sub-Advisers
will not inquire or take into consideration whether an issuer of securities
proposed for purchase or sale by the Funds is a customer of the Adviser and/or
the Sub-Advisers or their subsidiaries or affiliates and, in dealing with its
customers, the Adviser, the Sub-Advisers, their subsidiaries and affiliates
will not inquire or take into consideration whether securities of such
customers are held by the Funds.
Administrator
BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") serves as administrator (the "Administrator") to the Funds pursuant
to a Management and Administration Agreement dated October 27, 1995 (the
"Administration Agreement"). The Administrator assists in supervising all
operations of each Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, the Sub-Advisers under the Sub-Advisory
Agreements, the Custodian under the Custodian Agreement and by BISYS Fund
Services Ohio, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement). The Administrator is a broker-dealer registered with the
Commission, and is a member of the National Association of Securities Dealers,
Inc.
Under the Administration Agreement, the Administrator has
agreed to maintain office facilities; furnish statistical and research data,
clerical, certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Commission on Form N-SAR or any replacement
forms therefor; compile data for, file all of the Funds' federal and state tax
returns and required tax filings other than those required to be made by the
Funds' Custodian and Transfer Agent; prepare compliance filings pursuant to
state securities laws with the advice of the Group's counsel; assist to the
extent requested by the Funds with each Fund's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statement; compile
data for, prepare and file timely Notices to the Commission required pursuant
to Rule 24f-2 under the 1940 Act; keep and maintain the financial accounts and
records of each Fund, including calculation of daily expense accruals; and
generally assists in all aspects of the Funds' operations other than those
performed by the Adviser, the Sub-Advisers, the Custodian and by BISYS Fund
Services Ohio, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement. Under the Administration Agreement, the Administrator may delegate
all or any part of its responsibilities thereunder.
B-23
<PAGE> 101
The Administrator receives a fee from each Fund for its
services as Administrator and expenses assumed pursuant to the Administration
Agreement, which fee is calculated daily and paid periodically, at an annual
rate equal to seventeen one-hundredths of one percent (.17%) of each Fund's
first $500 million in average daily net assets, and this fee is reduced on a
sliding scale to 0.05% of assets in excess of $1 billion.
Unless sooner terminated as provided therein, the
Administration Agreement will continue in effect until October 26, 2000. The
Administration Agreement thereafter shall be renewed automatically for
successive one-year terms, unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term. The Administration Agreement is terminable with
respect to a particular Fund only upon mutual agreement of the parties to the
Administration Agreement and for cause (as defined in the Administration
Agreement) by the party alleging cause, on not less than 60 days' notice by the
Group's Board of Trustees or by the Administrator.
The Administration Agreement provides that the Administrator
shall not be liable for any error of judgment or mistake of law or any loss
suffered by any of the Funds in connection with the matters to which the
Administration Agreement relates, except a loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its duties,
or from the reckless disregard by the Administrator of its obligations and
duties thereunder.
Expenses
The Adviser, Sub-Advisers and the Administrator each bear all
expenses in connection with the performance of their services as investment
advisers and administrator, respectively, other than the cost of securities
(including brokerage commissions) purchased for the Funds. Each Fund will bear
expenses relating to its respective operations including the following: taxes,
interest, brokerage fees and commissions, fees and travel expenses of the
Trustees, Securities and Exchange Commission fees, state securities
qualification expenses, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to current Shareholders, outside
auditing and legal expenses, advisory and administration fees, fees and
out-of-pocket expenses of the custodian and transfer agent, expenses incurred
for pricing securities owned by each respective Fund, insurance premiums, costs
of maintenance of the Group's existence, costs of Shareholders' reports and
meetings, proxy solicitation expenses, costs of Board of Trustees meetings and
any extraordinary expenses incurred in each Fund's operation.
B-24
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Distributor
BISYS Fund Services serves as distributor to the Funds
pursuant to the Distribution Agreement dated October 27, 1995, as amended (the
"Distribution Agreement"). Unless otherwise terminated, the Distribution
Agreement will continue in effect from year to year if its continuance is
approved at least annually (i) by the Group's Board of Trustees or by the vote
of a majority of the outstanding Shares of the Funds and (ii) by the vote of a
majority of the Trustees of the Group who are not parties to the Distribution
Agreement or interested persons (as defined in the 1940 Act) of any party to
the Distribution Agreement, cast in person at a meeting called for the purpose
of voting on such approval. The Distribution Agreement may be terminated in
the event of any assignment, as defined in the 1940 Act.
In its capacity as Distributor, BISYS Fund Services solicits
orders for the sale of Shares, advertises and pays the costs of advertising,
office space and the personnel involved in such activities. The Distributor
receives no compensation under the Distribution Agreement with the Group, but
may receive compensation under the Distribution and Shareholder Service Plan
described below.
As described in the Prospectus, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan") pursuant to Rule 12b-1
under the 1940 Act under which the Funds are authorized to pay the Distributor
for payments it makes to banks, other institutions and broker-dealers, and for
expenses the Distributor and any of its affiliates or subsidiaries incur (with
all of the foregoing organizations being referred to as "Participating
Organizations") for providing administration, distribution or shareholder
service assistance. Payments to such Participating Organizations may be made
pursuant to agreements entered into with the Distributor. The Plan authorizes
the Funds to make payments to the Distributor in an amount not to exceed, on an
annual basis, .25% of the average daily net assets of a Fund. As required by
Rule 12b-1, the Plan was approved by the sole Shareholder of each Fund and by
the Board of Trustees, including a majority of the Trustees who are not
interested persons of the Funds and who have no direct or indirect financial
interest in the operation of the Plan (the "Independent Trustees"). The Plan
may be terminated with respect to a Fund by vote of a majority of the
Independent Trustees, or by vote of a majority of the outstanding Shares of the
Fund. The Trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. The Plan may be amended by
vote of the Trustees including a majority of the Independent Trustees, cast in
person at a meeting called for that purpose.
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However, any change in the Plan that would materially increase the distribution
cost to a Fund requires Shareholder approval. For so long as the Plan is in
effect, selection and nomination of the Independent Trustees shall be committed
to the discretion of such disinterested persons. All agreements with any
person relating to the implementation of the Plan may be terminated, with
respect to a Fund, at any time on 60 days' written notice without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of a
majority of the outstanding Shares of the Fund. The Plan will continue in
effect for successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Independent
Trustees, and (ii) by the vote of a majority of the entire Board of Trustees
cast in person at a meeting called for that purpose. The Board of Trustees has
a duty to request and evaluate such information as may be reasonably necessary
for it to make an informed determination of whether the Plan should be
implemented or continued. In addition the Trustees in approving the Plan must
determine that there is a reasonable likelihood that the Plan will benefit each
Fund and its Shareholders.
The Board of Trustees of the Group believes that the Plan is
in the best interests of each of the Funds since it encourages Fund growth. As
a Fund grows in size, certain expenses, and therefore total expenses per Share,
may be reduced and overall performance per Share may be improved.
Custodian
The Bank of California, N.A., through its Mitsubishi Global
Custody Division serves as custodian (the "Custodian") to the Funds pursuant to
the Custodian Agreement dated as of October 27, 1995, between the Group and the
Custodian (the "Custodian Agreement"). The Custodian's responsibilities
include safeguarding and controlling each Fund's cash and securities, handling
the receipt and delivery of securities, and collecting interest on each Fund's
investments. In consideration of such services, each of the Funds pays the
Custodian an annual asset-based fee plus, under certain circumstances, fixed
fees charged for certain portfolio transactions and out-of-pocket expenses.
Unless sooner terminated, the Custodian Agreement will continue in effect until
terminated by either party upon 60 days' advance written notice to the other
party.
Transfer Agency and Fund Accounting Services
BISYS Fund Services Ohio, Inc. serves as transfer agent and
dividend disbursing agent (the "Transfer Agent") for the Funds, pursuant to the
Transfer Agency Agreement dated October 27, 1995. Pursuant to such Agreement,
the Transfer Agent, among other
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<PAGE> 104
things, performs the following services in connection with each of the Funds'
Shareholders of record: maintenance of shareholder records for each of the
Fund's Shareholders of record; processing shareholder purchase and redemption
orders; processing transfers and exchanges of Shares of the Funds on the
shareholder files and records; processing dividend payments and reinvestments;
and assistance in the mailing of shareholder reports and proxy solicitation
materials. For such services the Transfer Agent receives a fixed fee, a fee
based on the number of shareholders of record and out of pocket expenses.
In addition, BISYS Fund Services Ohio, Inc. provides certain
fund accounting services to the Funds pursuant to a Fund Accounting Agreement
dated October 27, 1995. BISYS Fund Services Ohio, Inc. receives a fee from
each Fund for such services equal to a fee computed daily and paid periodically
at an annual rate of three one-hundredths of one percent (.03%) of each Fund's
first $500 million in average daily net assets, and this fee is reduced on a
sliding scale to 0.01% of assets in excess of $1 billion (subject to a minimum
annual fee of $40,000). Under such Agreement, BISYS Fund Services Ohio, Inc.
maintains the accounting books and records for each Fund, including journals
containing an itemized daily record of all purchases and sales of portfolio
securities, all receipts and disbursements of cash and all other debits and
credits, general and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest accrued and
interest received, and other required separate ledger accounts; maintains a
monthly trial balance of all ledger accounts; performs certain accounting
services for the Fund, including calculation of the net asset value per Share,
calculation of the dividend and capital gain distributions, if any, and of
yield, reconciliation of cash movements with the Custodian, affirmation to the
Custodian of all portfolio trades and cash settlements, verification and
reconciliation with the Custodian of all daily trade activity; provides certain
reports; obtains dealer quotations, prices from a pricing service or matrix
prices on all portfolio securities in order to mark the portfolio to the
market; and prepares an interim balance sheet, statement of income and expense,
and statement of changes in net assets for each Fund.
Independent Auditors
Coopers & Lybrand, L.L.P., 100 East Broad Street, Columbus,
Ohio 43215, has been selected as independent auditors for the Funds for the
fiscal year ended March 31, 1996. Coopers & Lybrand will perform an annual
audit of each Fund's financial statements and provide other services related to
filings with
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<PAGE> 105
respect to securities regulations. Reports of their activities will be
provided to the Group's Board of Trustees.
Legal Counsel
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C.
20005, is counsel to the Group and will pass upon the legality of the Shares
offered hereby.
ADDITIONAL INFORMATION
Description of Shares
The Group is a Massachusetts business trust, organized on
January 8, 1992. The Group's Declaration of Trust is on file with the
Secretary of State of Massachusetts. The Declaration of Trust authorizes the
Board of Trustees to issue an unlimited number of shares, which are shares of
beneficial interest, with a par value of $0.01 per share. The Group consists
of several funds organized as separate series of shares. The Group's
Declaration of Trust authorizes the Board of Trustees to divide or redivide any
unissued shares of the Group into one or more additional series by setting or
changing in any one or more respects their respective preferences, conversion
or other rights, voting power, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the respective funds, of any general assets
not belonging to any particular fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted to the holders of the outstanding voting securities of
an investment company such as the Group shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding Shares of each Fund affected by the matter. For purposes of
determining whether the approval of a majority of the outstanding Shares of a
Fund will be required in connection with a matter, a Fund will be deemed to be
affected by a matter unless it is clear that the interests of each Fund in the
matter are identical, or that the matter does not affect any interest of the
Fund. Under Rule 18f-2, the
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<PAGE> 106
approval of an investment advisory agreement or any change in investment policy
would be effectively acted upon with respect to a Fund only if approved by a
majority of the outstanding Shares of such Fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of Trustees may be
effectively acted upon by Shareholders of the Group voting without regard to
series.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Group.
However, the Declaration of Trust disclaims liability of the Shareholders,
Trustees or officers of the Group for acts or obligations of the Group, which
are binding only on the assets and property of the Group, and requires that
notice of the disclaimer be given in each contract or obligation entered into
or executed by the Group or the Trustees. The Declaration of Trust provides
for indemnification out of Group property for all loss and expense of any
shareholder held personally liable for the obligations of the Group. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Group itself would be unable to meet
its obligations, and thus should be considered remote.
Vote of a Majority of the Outstanding Shares
As used in the Prospectus and this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of a Fund means
the affirmative vote, at a meeting of Shareholders duly called, of the lesser
of (a) 67% or more of the votes of Shareholders of that Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
Shareholders of record of that Fund are represented in person or by proxy, or
(b) the holders of more than 50% of the outstanding votes of Shareholders of
that Fund.
Additional Tax Information
Each Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.
As a regulated investment company required under Subchapter M
of the Code to distribute at least 90% of its taxable net investment income and
net short-term capital gain in excess of net long-term capital losses (and at
least 90% of net tax-exempt interest income), each Fund generally will not be
subject to
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<PAGE> 107
federal income on any of its net investment income or net realized capital
gains which are timely distributed to Shareholders. Provided that each Fund
qualifies as a regulated investment company, it generally will not be subject
to any excise or income taxes in Massachusetts.
The Funds are potentially subject to a 4% nondeductible excise
tax on amounts required to be but are not distributed under a prescribed
formula. The formula generally requires payment to Shareholders during a
calendar year of distributions representing at least 98% of each Fund's
ordinary income for the calendar year and at least 98% of the excess of its
capital gains over capital losses realized during the one-year period ending
October 31 during such year. The Funds have adjusted their distribution
policies to minimize any adverse impact from this tax or eliminate its
application.
Passive Foreign Investment Companies. The Funds may invest in
shares of foreign corporations which may be classified under the Code as
passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, the Fund itself may be subject to a tax on a
portion of the excess distribution, whether or not the corresponding income is
distributed by the Fund to Shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. The Fund itself will be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions
from a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions
might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market a Fund's PFIC
shares at the end of each taxable year (and on certain other dates prescribed
in the Code), with the result
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<PAGE> 108
that unrealized gains are treated as though they were realized. If this
election were made, tax at the fund level under the PFIC rules would generally
be eliminated, but a Fund could, in limited circumstances, incur nondeductible
interest charges. In addition, other elections may become available that would
affect the tax treatment of PFIC shares held by the Fund. Each Fund's
intention to qualify annually as a regulated investment company may limit its
elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss and the timing
of the recognition of income with respect to PFIC shares, as well as subject
the Fund itself to tax on certain income from PFIC shares, the amount that
must be distributed to Shareholders, and which will be taxed to Shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a Fund that did not invest in PFIC shares.
Foreign Taxation. Investment income and gains received by a
Fund from sources outside the United States may be subject to foreign taxes
withheld at the source. If the percentage of a Fund's total assets invested in
foreign corporate securities is not more than 50% at the close of the Fund's
taxable year, any foreign tax credits or deductions associated with such
foreign taxes will not be available for use by its Shareholders. The effective
rate of foreign taxes to which a Fund will be subject depends on the specific
countries in which each Fund's assets will be invested and the extent of the
assets invested in each such country and therefore cannot be determined in
advance.
The Asia Fund may qualify for and make the election permitted
under Section 853 of the Code so that Shareholders will be able to claim a
credit or deduction on their federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid by the Fund to foreign countries (which taxes
relate primarily to investment income). The U.S. shareholders of a Fund may
claim a foreign tax credit or deduction by reason of the Fund's election under
Section 853 of the Code, provided that more than 50% of the value of the total
assets of the Fund at the close of the taxable year consists of securities of
foreign corporations. The foreign tax credit available to Shareholders is
subject to certain limitations imposed by the Code. Also, under Section 63 of
the Code, no deduction for foreign taxes may be claimed by Shareholders who do
not itemize deductions on their federal income tax returns, although any such
Shareholder may claim a credit for foreign taxes and in any event will be
treated as having taxable income in respect to the Shareholder's pro rata share
of foreign taxes paid by the Fund. It should also be noted
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<PAGE> 109
that a tax-exempt Shareholder, like other Shareholders, will be required to
treat as part of the amounts distributed its pro rata portion of the income
taxes paid by the Fund to foreign countries. However, that income will
generally be exempt from taxation by virtue of such Shareholder's tax-exempt
status, and such a Shareholder generally will not be entitled to either a tax
credit or a deduction with respect to such income. The foreign tax credit
generally may offset only up to 90% of the alternative minimum tax in any given
year. Foreign taxes generally are not deductible in computing alternative
minimum taxable income.
Foreign Currency Transactions. Under the Code, gains or
losses attributable to fluctuations in exchange rates which occur between the
time a Fund accrues income or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
and certain other instruments denominated in a foreign currency, gains or
losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition also are
treated as ordinary gain or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its Shareholders
as ordinary income. If section 988 losses exceed other net investment income
during a taxable year, a Fund generally would not be able to make ordinary
dividend distributions, or distributions made before the losses were realized
would be recharacterized as return of capital to Shareholders for Federal
income tax purposes, rather than as an ordinary dividend, reducing each
Shareholder's basis in his Fund Shares, or as capital gain.
Options, Futures and Forward Contracts. Many of the options,
futures contracts and forward contracts entered into by the Funds will be
classified as "Section 1256 contracts." Generally, gains or losses on Section
1256 contracts are considered 60% long-term and 40% short-term capital gains or
losses ("60/40"). Also, certain Section 1256 contracts held by a Fund are
"marked to market" at the times required pursuant to the Code with the result
that unrealized gains or losses are treated as though they were realized and
the resulting gain or loss generally is treated as 60/40 gain or loss, except
for foreign currency gain or loss on such contracts, which generally is
ordinary in character.
The 30% limit on gains from the disposition of certain assets
held less than three months and the diversification requirements applicable to
a Fund's status as a regulated
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investment company may limit the extent to which a Fund will be able to engage
in transactions in options, futures contracts or forward contracts.
Obligations Originally Issued at a Discount. Certain of the
bonds purchased by the Funds, such as zero coupon bonds, may be treated as
bonds that were originally issued at a discount. Original issue discount
represents interest for federal income tax purposes and can generally be
defined as the difference between the price at which a security was issued and
its stated redemption price at maturity. Original issue discount, although no
cash is actually received by a Fund until the maturity of the bond, is treated
for federal income tax purposes as income earned by a Fund over the term of the
bond, and therefore is subject to the distribution requirements of the Code.
The annual amount of income earned on such a bond by a Fund generally is
determined on the basis of a constant yield to maturity which takes into
account the semiannual compounding of accrued interest.
In addition, some of the bonds may be purchased by a Fund at a
discount which exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any bond having market discount,
generally will be treated as ordinary income to the extent it does not exceed
the accrued market discount on such bond (unless a Fund elects to include
market discount in income in tax years to which it is attributable).
Generally, market discount accrues on a daily basis for each day the bond is
held by a Fund at a constant rate over the time remaining to the bond's
maturity. In the case of any debt security having a fixed maturity date of not
more than one year from date of issue, the gain realized on disposition will be
treated as short-term capital gain.
Distributions. Assuming a Fund qualifies as a regulated
investment company, distributions of net investment income and net short-term
capital gains in excess of net long-term capital losses will be treated as
ordinary income in the hands of Shareholders. Distributions of the excess of
net long-term capital gain over net short-term capital loss are taxable to
Shareholders as long-term capital gain, if such distributions are designated as
capital gain dividends, regardless of the length of time the Shares of a Fund
have been held by such Shareholders. Such distributions are not eligible for
the dividends-received deduction.
If any net long-term capital gains in excess of net short-term
capital losses are retained by a Fund for reinvestment, requiring federal
income taxes to be paid thereon by a Fund, the Fund may elect to treat such
capital gains as
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having been distributed to Shareholders. As a result, such amounts would be
taxable as long-term capital gains in the hands of the Shareholders.
Shareholders would be able to claim their proportionate share of the federal
income taxes paid by a Fund on such gains as a credit against their own federal
income tax liabilities and would be entitled to increase the adjusted tax basis
of the relevant Fund Shares by the difference between their pro-rata share of
such gains and their tax credit.
Distributions by a Fund result in a reduction in the net asset
value of a Fund's Shares. Should a distribution reduce the net asset value
below a Shareholder's cost basis, such distribution nevertheless would be
taxable to the Shareholder as ordinary income or capital gain as described
above, even though, from an investment standpoint, it may constitute a partial
return of investment. In particular, investors should be careful to consider
the tax implications of buying Shares just prior to a distribution. The price
of Shares purchased at that time includes the amount of the forthcoming
distribution. Those investors purchasing hares just prior to a distribution
will then receive a partial return of their investment upon such distribution,
which will nevertheless be taxable to them.
Distributions of net investment income and net realized
capital gains will be taxable as described above, whether received in Shares or
in cash. Shareholders electing to receive distributions in the form of
additional Shares will have a cost basis for federal income tax purposes in
each Share so received equal to the net asset value of such Share on the
reinvestment date. Any distributions that are not from a Fund's net investment
income or net realized capital gains may be characterized as a return of
capital to Shareholders or, in some cases, as capital gain.
All distributions, whether received in Shares or cash, must be
reported by each Shareholder on his or her federal income tax return.
Dividends declared and payable to Shareholders of record on a specified date in
October, November or December, if any, will be deemed to have been received by
Shareholders on December 31 if paid during January of the following year. The
Funds will provide a statement of the federal income tax status of all
distributions to Shareholders annually.
Sales of Shares. Upon the sale, exchange or other taxable
disposition of Shares of a Fund, a Shareholder may realize a capital gain or
loss which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Shares. Any loss realized on a sale or
exchange will be disallowed to the extent the Shares disposed of are replaced
(including replacement through the reinvestment of dividends and
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capital gain distributions in a Fund) within a period of 61 days beginning 30
days before and ending 30 days after disposition of the Shares. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a Shareholder on a disposition of Fund
Shares held by the Shareholder for six months or less will be treated as a
long-term capital loss to the extent of any distributions of capital gain
dividends received by the Shareholder with respect to such Shares.
Under certain circumstances, the sales charge incurred in
acquiring Shares of a Fund may not be taken into account in determining the
gain or loss on the disposition of those Shares. This rule applies if (1) the
Shareholder incurs a sales charge in acquiring stock of a Fund, (2) Shares of
the Fund are exchanged within 90 days after the date they were purchased, and
(3) the new shares are acquired without a sales charge or at a reduced sales
charge under a "reinvestment right" received upon the initial purchase of Fund
Shares. In that case, the gain or loss recognized on the exchange will be
determined by excluding from the tax basis of the Shares exchanged all or a
portion of the amount of sales charge incurred in acquiring the Shares. This
exclusion applies to the extent that the otherwise applicable sales charge with
respect to the newly acquired shares is reduced as a result of having incurred
the sales charge initially. Instead, the portion of the sales charge affected
by this rule will be treated as an amount paid for the new shares.
Backup Withholding. A Fund will be required to report to the
IRS all distributions of income and capital gains as well as gross proceeds
from the redemption or exchange of Fund Shares, except in the case of certain
exempt Shareholders. Under the backup withholding provisions of Section 3406
of the Code, all such distributions and proceeds from the redemption or
exchange of a Fund's Shares may be subject to withholding of federal income tax
at the rate of 31% in the case of nonexempt Shareholders who fail to furnish a
Fund with their taxpayer identification number and with required certifications
regarding their status under the federal income tax law or if the IRS or a
broker notifies a Fund that the number furnished by the Shareholder is
incorrect. In addition, both the Fund and the Shareholder are potentially
subject to a $50 penalty imposed by the IRS if a correct, certified taxpayer
identification number is not furnished and used on required information
returns. If the withholding provisions are applicable, any such distributions
and proceeds, whether taken in cash or reinvested in Shares, will be reduced by
the amounts required to be withheld. Backup withholding is not an additional
tax and any amounts withheld are creditable against the Shareholder's U.S.
Federal tax liability.
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Investors may wish to consult their tax advisers about the applicability of the
backup withholding provisions.
Other Taxation. The foregoing discussion relates only to U.S.
Federal income tax law as applicable to U.S. persons (i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates).
The tax consequences to a foreign Shareholder of an investment in the Funds may
differ from those described herein. Distributions by the Funds also may be
subject to state, local and foreign taxes, and their treatment under state and
local income tax laws may differ from U.S. Federal income tax treatment.
Shareholders should consult their tax advisors with respect to their individual
tax situation.
Yields and Total Returns of the Funds
Yield Calculations. As summarized in the Prospectus of the
Funds under the heading "PERFORMANCE INFORMATION", yields of each of the Funds
will be computed by dividing the net investment income per share (as described
below) earned by the Fund during a 30-day (or one month) period by the maximum
offering price per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. A Fund's net investment income per share earned during the period
is based on the average daily number of Shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
a - b 6
Yield = 2 [(------- + 1) - 1]
cd
Where: a = dividends and interest earned during
the period.
b = expenses accrued for the period (net
of reimbursements).
c = the average daily number of Shares
outstanding during the period that
were entitled to receive dividends.
d = maximum offering price per Share on
the last day of the period.
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<PAGE> 114
For the purpose of determining net investment income earned
during the period (variable "a" in the formula), dividend income on equity
securities held by a Fund is recognized by accruing 1/360 of the stated
dividend rate of the security each day that the security is in that Fund.
Interest earned on any debt obligations held by a Fund is calculated by
computing the yield to maturity of each obligation held by that Fund based on
the market value of the obligation (including actual accrued interest) at the
close of business on the last Business Day of each month, or, with respect to
obligations purchased during the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by that Fund. For purposes of this
calculation, it is assumed that each month contains 30 days. The maturity of
an obligation with a call provision is the next call date on which the
obligation reasonably may be expected to be called or, if none, the maturity
date. With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of such debt obligations.
Undeclared earned income will be subtracted from the net asset
value per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter.
During any given 30-day period, the Adviser or Administrator
may voluntarily waive all or a portion of its fees with respect to a Fund.
Such waiver would cause the yield of that Fund to be higher than it would
otherwise be in the absence of such a waiver.
Total Return Calculations. As summarized in the Prospectus of
the Funds under the heading "PERFORMANCE INFORMATION", average annual total
return is a measure of the change in value of an investment in a Fund over the
period covered, which assumes any dividends or capital gains distributions are
reinvested in the Fund immediately rather than paid to the investor in cash.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized.
The Funds compute their average annual total returns by
determining the average annual compounded rates of return during
B-37
<PAGE> 115
specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising
the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:
Average Annual ERV 1/n
Total Return = [(------) - 1]
P
Where: ERV = ending redeemable value at
the end of the period covered
by the computation of a
hypothetical $1,000 payment
made at the beginning of the
period.
P = hypothetical initial payment
of $1,000.
n = period covered by the
computation, expressed in
terms of years.
The Funds compute their aggregate total returns by determining
the aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
Aggregate Total ERV
Return = [(------] - 1]
P
ERV = ending redeemable value at the end
of the period covered by the
computation of a hypothetical $1,000
payment made at the beginning of the
period.
P = hypothetical initial payment of
$1,000.
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period. The ending
redeemable value (variable "ERV" in each formula) is determined by assuming
complete redemption of the hypothetical investment and the deduction of all
nonrecurring charges at the end of the period covered by the computations.
B-38
<PAGE> 116
Performance Comparisons
Investors may judge the performance of the Funds by comparing
them to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices such as
those prepared by Dow Jones & Co., Inc., Standard & Poor's Corporation and
Morningstar, Inc. and to data prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors the performance of mutual
funds or Ibbotson Associates, Inc. Comparisons may also be made to indices or
data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, American Banker, Fortune, Institutional
Investor, CDA/Wiesberger, Pensions and Investments, U.S.A. Today, Investor's
Business Daily, Value Line, MICROPAL and local newspapers. In addition to
performance information, general information about the Funds that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to Shareholders. The Funds may also include in advertisements and
reports to Shareholders information comparing the performance of the Adviser or
Sub-Advisers or their predecessors to other investment advisers; such
comparisons may be published by or included in Nelsons Directory of Investment
Managers, Roger's, Casey/PIPER Manager Database or CDA/Cadence.
Current yields or performance will fluctuate from time to time
and are not necessarily representative of future results. Accordingly, a
Fund's yield or performance may not provide for comparison with bank deposits
or other investments that pay a fixed return for a stated period of time.
Yield and performance are functions of a Fund's quality, composition and
maturity, as well as expenses allocated to the Fund.
From time to time, a Fund may include general comparative
information, such as statistical data regarding inflation, securities indices
or the features or performance of alternative investments, in advertisements,
sales literature and reports to shareholders. The Funds may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any Fund.
Miscellaneous
The Funds may include information in their Annual Reports and
Semi-Annual Reports to Shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for
a fund
B-39
<PAGE> 117
within the Group or (4) describes investment management strategies for such
funds. Such information is provided to inform Shareholders of the activities
of the Funds for the most recent fiscal year or half-year and to provide the
views of the Adviser and/or Group officers regarding expected trends and
strategies.
Individual Trustees are elected by the Shareholders and,
subject to removal by the vote of two-thirds of the Board of Trustees, serve
for a term lasting until the next meeting of Shareholders at which Trustees are
elected. Such meetings are not required to be held at any specific intervals.
Shareholders owning not less than 10% of the outstanding Shares of the Group
entitled to vote may cause the Trustees to call a special meeting, including
for the purpose of considering the removal of one or more Trustees. Any
Trustee may be removed at any meeting of Shareholders by vote of two-thirds of
the Group's outstanding shares. The Declaration of Trust provides that the
Trustees will assist shareholder communications to the extent required by
Section 16(c) of the 1940 Act in the event that a shareholder request to hold a
special meeting is made.
The Prospectus and this Statement of Additional Information
omit certain of the information contained in the Registration Statement filed
with the Commission. Copies of such information may be obtained from the
Commission upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information
are not an offering of the securities herein described in any state in which
such offering may not lawfully be made. No salesman, dealer, or other person
is authorized to give any information or make any representation other than
those contained in the Prospectus and this Statement of Additional Information.
B-40
<PAGE> 118
PART C
------
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Not Applicable
(b) Exhibits
(1) Declaration of Trust1
(2) (a) By-Laws1
(b) Establishment and Designation of three Series of
Shares 2
(3) Not Applicable
(4) Certificates for Shares are not issued. Articles IV, V,
VI and VII of the Declaration of Trust, previously filed
as Exhibit 1 hereto, define rights of holders of Shares.
(5) (a) Investment Advisory Agreement between Registrant
and Ernst & Company2
(b) Sub-Investment Advisory Agreement between Ernst &
Company and National Mutual Funds Management
(Global) Ltd. (with respect to the Ernst Global
Asset Allocation Fund2
(c) Sub-Investment Advisory Agreement between Ernst &
Company and National Mutual Funds Management
(Global) Ltd. (with respect to the Ernst Global
Smaller Companies Fund) 2
(d) Sub-Investment Advisory Agreement between Ernst &
Company and National Mutual Funds Management
(Global) Ltd. (with respect to the Ernst
Australia-New Zealand Fixed Income Fund) 2
1 Filed with initial Registration Statement on January 8, 1992.
2 Filed with Registration Statement dated February 2, 1996.
<PAGE> 119
(6) Distribution Agreement between Registrant and
BISYS Fund Services, Inc.2
(7) Not Applicable
(8) Custodian Agreement between Registrant and
The Bank of California, N.A.2
(9) (a) Management and Administration
Agreement between the Registrant and
BISYS Fund Services, Inc.2
(b) Fund Accounting Agreement between
the Registrant and BISYS Fund Services
Ohio, Inc.2
(c) Transfer Agency Agreement between
the Registrant and BISYS Fund Services
Ohio, Inc.2
(10) Opinion and Consent of Counsel3
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Distribution and Shareholder Service Plan2
(16) Not Applicable
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------
Not applicable.
_____________________
2 Filed with Registration Statement dated February 2, 1996.
3 Filed with Rule 24f-2 Notice on May 25, 1995.
C-2
<PAGE> 120
Item 26. Number of Record Holders
- -------- -------------------------
As of December 31, 1995, the number of record holders of the
series of the Registrant was as follows:
AMCORE Vintage U.S. Government Obligations Fund 640
AMCORE Vintage Fixed Income Fund 214
AMCORE Vintage Intermediate Tax-Free Fund 106
AMCORE Vintage Equity Fund 726
AMCORE Vintage Balanced Fund 64
AMCORE Vintage Aggressive Growth Fund 94
AMCORE Vintage Fixed Total Return Fund 21
Brenton U.S. Government Money Market Fund 80
Brenton Intermediate U.S. Government
Securities Fund 14
Brenton Intermediate Tax-Free Fund 10
Brenton Value Equity Fund 270
The Shelby Fund 3
Ernst World Asia Fund 16
Ernst World Global Resources Fund 10
Item 27. Indemnification
- -------- ---------------
Article IV of the Registrant's Declaration of Trust states as
follows:
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust shall be indemnified by the Trust to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof; and
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative or other, including appeals),
actual or threatened; and the words "liability" and "expenses"
shall include, without limitation, attorneys fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
C-3
<PAGE> 121
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust, a Series thereof, or
the Shareholders by reason of a final adjudication by a court
or other body before which a proceeding was brought that he
engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office;
(ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest
of the Trust; or
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i)
or (b)(ii) resulting in a payment by a Trustee or officer,
unless there has been a determination that such Trustee or
officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (1) vote
of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the
Disinterested Trustees then in office acts on the
matter) or (2) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the
heirs, executors, administrators and assigns of such person. Nothing
contained herein shall affect any rights to indemnification to which
personnel of the Trust other than Trustees and officers may be
entitled by contract or otherwise under law.
C-4
<PAGE> 122
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 4.3 may be advanced by the Trust prior
to final disposition thereof upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification under this
Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the
Trust shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
acts on the matter) or an independent legal counsel in a
written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an Interested Person of the Trust (including anyone who has
been exempted from being an Interested Person by any rule, regulation
or order of the Commission), or (ii) involved in the claim, action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers
or controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons in
connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against
C-5
<PAGE> 123
public policy as expressed in the Act and will be governed by
the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser and its
- -------- ------------------------------------------------------------
Officers and Directors
----------------------
Ernst & Company is the investment adviser for the Ernst Asia
Fund and the Ernst Global Resources Fund. The business and
other connections of Ernst & Company are set forth in the
Uniform Application for Investment Adviser Registration ("Form
ADV") of Ernst & Company as currently filed with the SEC and
which is incorporated by reference herein. Koeneman Capital
Management Pte Ltd. ("KCM") is the sub-investment adviser to
the Ernst Asia Fund. The business and other connections of
KCM are set forth in its Form ADV as currently filed with the
SEC and which is incorporated by reference herein. National
Mutual Funds Management (Global) ("NMFM") is the
sub-investment adviser to the Ernst Global Resources Fund.
The business and other connections of NMFM are set forth in
its Form ADV as currently filed with the SEC and which is
incorporated by reference herein.
Item 29. Principal Underwriter
- -------- ---------------------
(a) BISYS Fund Services Limited Partnership acts as distributor
and administrator for Registrant. BISYS Fund Services also
distributes the securities of The Victory Funds, The
Riverfront Funds, Inc., The HighMark Group, The Parkstone
Group of Funds, The BB&T Mutual Funds Group, the Summit
Investment Trust, the Qualivest Funds, The ARCH Fund, Inc.,
the American Performance Funds, The Sessions Group, the
Pacific Capital Funds, the AmSouth Mutual Funds, the MMA
Praxis Mutual Funds, the MarketWatch Funds and M.S.D.&T.
Funds, each of which is an open-end management investment
company.
C-6
<PAGE> 124
(b) Partners of BISYS Fund Services as of January 31, 1996, were as
follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
- ---------------- ------------------- ----------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records
- -------- --------------------------------
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Ernst & Company, One
Battery Park Plaza, New York, New York 10004 (records relating
to its function as adviser for the Ernst Global Asset
Allocation, Global Smaller Companies and Australia-New Zealand
Fixed Income Funds, National Mutual Funds Management (Global)
Ltd., 525 Collins Street, Melbourne, Australia 3000 (records
relating to its function as sub-investment adviser to the
Funds Global Asset Allocation, Global Smaller Companies and
Australia-New Zealand Fixed Income Funds) BISYS Fund Services,
Limited Partnership, 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as administrator and
distributor), and BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219 (records relating to its functions
as transfer agent).
Item 31. Management Services
- -------- --------------------
Not Applicable.
C-7
<PAGE> 125
Item 32. Undertakings.
- -------- -------------
(a) Not Applicable.
(b) Registrant undertakes to file a Post-Effective
Amendment, using financial statements which need not
be certified, within four to six months from
Registrant's commencement of operations.
(c) Registrant undertakes to furnish each person to whom
a prospectus is delivered a copy of the Registrant's
latest annual report to shareholders, upon request
and without charge, in the event that the information
called for by Item 5A of Form N-1A has been presented
in the Registrant's latest annual report to
shareholders.
(d) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10% of
the Registrant's outstanding shares of beneficial
interest and in connection with such meeting to
comply with the shareholders communications
provisions of Section 16(c) of the Investment Company
Act of 1940.
C-8
<PAGE> 126
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 25 to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Washington in the
District of Columbia on the 15th day of March, 1996.
THE COVENTRY GROUP
By: Walter B. Grimm
-------------------------
Walter B. Grimm, President*
By: /s/ Jeffrey L. Steele
--------------------------------------
Jeffrey L. Steele, as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated:
Signature Title Date
- --------- ----- ----
Walter B. Grimm Chairman, President March 15, 1996
- --------------------- and Trustee
Walter B. Grimm*** (Principal Executive
Officer)
Chalmers P. Wylie Trustee March 15, 1996
- ---------------------
Chalmers P. Wylie**
Maurice G. Stark Trustee March 15, 1996
- ---------------------
Maurice G. Stark*
Michael M. Van Buskirk Trustee March 15, 1996
- -----------------------
Michael M. Van Buskirk*
<PAGE> 127
Roy E. Rogers Trustee March 15, 1996
- ---------------------
Roy E. Rogers*
William J. Tomko Treasurer March 15, 1996
- --------------------- (Principal
William J. Tomko* Financial and
Accounting Officer)
By: /s/ Jeffrey L. Steele
----------------------------
Jeffrey L. Steele,
as attorney-in-fact
* Pursuant to power of attorney filed with Pre-Effective Amendment No. 3 on
April 6, 1992.
** Pursuant to power of attorney filed with Post-Effective Amendment No. 6 on
May 4, 1993.
*** Pursuant to power of attorney filed with Post-Effective Amendment No. 9 on
April 18, 1994.
