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As filed with the Securities and Exchange Commission on February 2, 1996
Registration No. 33-44964
Investment Company Act File No. 811-6526
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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. 24 / X /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 26 / 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:
Roy E. Rogers
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
It is proposed that this filing will become effective (check appropriate box)
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/ / Immediately upon filing pursuant to /X/ on February 5, 1996 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
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.
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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 Regis
trant'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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Statement of Additional
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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
18. Capital Stock and other
Securities.................. Additional Information
-Description of Shares
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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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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.
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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.
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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 ______________, 1996
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PROSPECTUS SUMMARY
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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 of the Global Asset Allocation
Fund, the Global Smaller Companies Fund and the
Australia-New Zealand Fixed Income Fund is equal to the net
asset value per Share plus a sales charge equal to 5.50% of
the public offering price (5.21% of the amount invested),
for the Global Asset Allocation and Global Smaller
Companies Funds and 3.25% (3.15% 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 Policies The Global Asset Allocation and the Global Smaller
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
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primarily in 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.
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.
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FEE TABLE
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Global Global Australia-
Asset Smaller New Zealand
Allocation Companies Fixed
Fund Fund Income Fund
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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 Expenses(3). . . . . . . . . . . . . . . . . . 1.50% 1.50% 1.45%
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Total Fund Operating Expenses . . . . . . . . . . . 2.85% 2.85% 2.30%
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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:
1 Year 3 Years
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Global Asset Allocation Fund . . . . . . . . . . $82 $138
Global Smaller Companies Fund . . . . . . . . . $82 $138
Australia-New Zealand Fixed Income Fund . . . . $55 $102
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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.
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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 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.
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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.
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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.
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
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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.
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).
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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 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
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<PAGE> 14
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
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assurances from Australian federal and 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 twenty years there has been strong growth in the
economy and diversification so that in more recent years the rural sector has
accounted for less than 5% of gross domestic product and employment. During
the 1990s, Australia has experienced positive increases in gross domestic
product and generally low inflation rates. 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 1995. 10 year Australian
Government Bonds have, during this period, carried interests rates that have
generally exceeded 10 year U.S. Government Bond rates by 1% to 2%. 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.
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<PAGE> 16
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.
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.
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<PAGE> 17
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., 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
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<PAGE> 18
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
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
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<PAGE> 19
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 complete the transaction; the seller's failure to do so may
cause a Fund to miss a price or yield considered to be advantageous.
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<PAGE> 20
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,
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<PAGE> 21
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 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.
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<PAGE> 22
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 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
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<PAGE> 23
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.
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).
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<PAGE> 24
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.
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:
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<PAGE> 25
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,
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<PAGE> 26
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 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
- 22 -
<PAGE> 27
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 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.
- 23 -
<PAGE> 28
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.
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>
- 24 -
<PAGE> 29
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 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.
- 25 -
<PAGE> 30
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.
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
- 26 -
<PAGE> 31
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
- 27 -
<PAGE> 32
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.
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
- 28 -
<PAGE> 33
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 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.
- 29 -
<PAGE> 34
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
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.
- 30 -
<PAGE> 35
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 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.
- 31 -
<PAGE> 36
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 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
- 32 -
<PAGE> 37
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.
- 33 -
<PAGE> 38
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
- 34 -
<PAGE> 39
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 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
- 35 -
<PAGE> 40
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 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.
- 36 -
<PAGE> 41
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.
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
- 37 -
<PAGE> 42
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.
- 38 -
<PAGE> 43
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
- 39 -
<PAGE> 44
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Techniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Purchase and Redeem Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses and Certain Fund Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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.
- 40 -
<PAGE> 45
ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST GLOBAL SMALLER COMPANIES FUND
ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND
LOGO
Ernst & Company
INVESTMENT ADVISER
BISYS
PROSPECTUS DATED ____________, 1996
LOGO
- 41 -
<PAGE> 46
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> 47
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> 48
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> 49
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> 50
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 __, 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> 51
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> 52
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> 53
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> 54
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> 55
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> 56
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> 57
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> 58
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> 59
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> 60
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> 61
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> 62
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> 63
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> 64
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> 65
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> 66
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> 67
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> 68
<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> 69
<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> 70
<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> 71
*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> 72
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> 73
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> 74
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> 75
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
<PAGE> 76
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.
B-25
<PAGE> 77
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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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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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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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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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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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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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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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
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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.
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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
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<PAGE> 91
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> 92
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Not Applicable
(b) Exhibits
(1) Declaration of Trust(1)
(2) (a) By-Laws(1)
(b) Establishment and Designation of
three Series of Shares
(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 &
Company
(b) Sub-Investment Advisory Agreement
between Ernst & Company and National
Mutual Funds Management (Global)
Ltd. (with respect to the Ernst
Global Asset Allocation Fund)
(c) Sub-Investment Advisory Agreement
between Ernst & Company and National
Mutual Funds Management (Global)
Ltd. (with respect to the Ernst
Global Smaller Companies Fund)
(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)
- ---------------------
(1) Filed with initial Registration Statement on January 8, 1992.
C-1
<PAGE> 93
(6) Distribution Agreement between Registrant
and BISYS Fund Services, Inc.
(7) Not Applicable
(8) Custodian Agreement between Registrant and
The Bank of California, N.A.
(9) (a) Management and Administration
Agreement between the Registrant and
BISYS Fund Services, Inc.
(b) Fund Accounting Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.
(c) Transfer Agency Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.
(10) Opinion and Consent of Counsel(2)
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Distribution and Shareholder Service Plan
(16) Not Applicable
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
- ---------------------
(2) Filed with Rule 24f-2 Notice on May 25, 1995.
C-2
<PAGE> 94
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> 95
(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> 96
(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> 97
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> 98
(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> 99
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> 100
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. 24 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 1st day of February, 1996.
THE COVENTRY GROUP
By: Roy E. Rogers
-------------------------
Roy E. Rogers, 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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Roy E. Rogers Chairman, President February 1, 1996
- --------------------- and Trustee
Roy E. Rogers* (Principal Executive
Officer)
Chalmers P. Wylie Trustee February 1, 1996
- ---------------------
Chalmers P. Wylie**
Maurice G. Stark Trustee February 1, 1996
- ---------------------
Maurice G. Stark*
Michael M. Van Buskirk Trustee February 1, 1996
- ----------------------
Michael M. Van Buskirk*
</TABLE>
<PAGE> 101
<TABLE>
<S> <C> <C>
Walter B. Grimm Trustee February 1, 1996
- ----------------------
Walter B. Grimm***
William J. Tomko Treasurer February 1, 1996
- ---------------------- (Principal
William J. Tomko* Financial and
Accounting Officer)
By: /s/ Jeffrey L. Steele
--------------------------
Jeffrey L. Steele,
as attorney-in-fact
</TABLE>
* 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.
<PAGE> 102
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 24)
<TABLE>
<CAPTION>
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
- ------------ ---------------
<S> <C>
2(b) Establishment and Designation of three series of Shares
5(a) Investment Advisory Agreement between Registrant and Ernst & Company
5(b) Sub-Investment Advisory Agreement between Ernst & Company and National Mutual Funds
Management (Global) Ltd. (with respect to Ernst Global Asset Allocation Fund)
5(c) Sub-Investment Advisory Agreement between Ernst & Company and National Mutual Funds
Management (Global) Ltd. (with respect to Ernst Global Smaller Companies Fund)
5(d) Sub-Investment Advisory Agreement between Ernst & Company and National Mutual Funds
Management (Global) Ltd. (with respect to Ernst Australia-New Zealand Fixed Income Fund)
6 Distribution Agreement between Registrant and BISYS Fund Services, Inc.
8 Custodian Agreement between Registrant and The Bank of California, N.A.
9(a) Management and Administration Agreement between the Registrant and BISYS Fund Services,
Inc.
9(b) Fund Accounting Agreement between the Registrant and BISYS Funds Services Ohio, Inc.
9(c) Transfer Agency Agreement between the Registrant and BISYS Fund Services Ohio, Inc.
15 Distribution and Shareholder Service Plan
</TABLE>
<PAGE> 1
EXHIBIT 2(b)
ESTABLISHMENT AND DESIGNATION OF THREE SERIES OF SHARES
<PAGE> 2
THE COVENTRY GROUP
Establishment and Designation of three Series of Shares
of Beneficial Interest, Par Value $0.01 Per Share
RESOLVED, that pursuant to Section 5.11 of the Declaration of Trust of
The Coventry Group (the "Trust") dated January 8, 1992, ("Declaration"), three
separate series of the shares of beneficial interest of the Trust shall hereby
be established, relating to the Trust's new investment portfolios (the
"Funds");
FURTHER RESOLVED, that the Funds shall have the following special and
relative rights:
1. The Funds shall be designated the "Ernst Global Asset
Allocation Fund" the "Ernst Global Smaller Companies Fund" and the "Ernst
Australia-New Zealand Fixed Income Fund."
2. The Funds shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in each Fund's
then currently effective prospectus and registration statement under the
Securities Act of 1933. Each share of beneficial interest of a Fund ("Share")
shall be redeemable, shall be entitled to one vote (or fraction thereof in
respect of a fractional Share) on matters on which Shares of a Fund shall be
entitled to vote, shall represent a pro rata beneficial interest in the assets
allocated to a Fund, and shall be entitled to receive its pro rata share of net
assets of the Fund upon liquidation of the Fund, all as provided in the
Declaration.
3. Shareholders of each series of shares of the Trust shall vote
separately as a class on any matter, except, consistent with the Investment
Company Act of 1940, as amended ("the Act"), and the rules thereunder, and the
Trust's registration statement, with respect to (i) the election of Trustees,
(ii) any amendment of the Declaration, unless the amendment affects fewer than
all classes of shares, in which case only shareholders of the affected classes
shall vote, and (iii) ratification of the selection of auditors. In each case
of separate voting, the Trustees shall determine whether, for the matter to be
effectively acted upon within the meaning of Rule 18f-2 under the Act (or any
successor rule) as to a series, the applicable percentage (as specified in the
Declaration, or the Act and the rules thereunder) of the shares of that series
alone must be voted in favor of the matter, or whether the favorable vote of
such applicable percentage of the shares of each series entitled to vote on the
matter is required.
<PAGE> 3
4. The assets and liabilities of the Trust shall be allocated
among the series of the Trust as set forth in Section 5.11(d) of the
Declaration; except that costs of establishing the Funds and of the
registration and public offering of the Funds' Shares shall be amortized for
the Funds over the period beginning on the date such costs become payable and
ending sixty months thereafter.
5. The Trustees shall have the right at any time and from time to
time to reallocate assets and expenses or to change the designation of the
Funds hereby created, or to otherwise change the special and relative rights of
each such Fund, provided that such change shall not adversely affect the rights
of the Shareholders of each such Fund.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
16th day of November, 1995.
/s/ Roy E. Rogers
------------------------------
Roy E. Rogers
/s/ Walter B. Grimm
------------------------------
Walter B. Grimm
/s/ Maurice G. Stark
------------------------------
Maurice G. Stark
/s/ Michael M. Van Buskirk
------------------------------
Michael M. Van Buskirk
/s/ Chalmers P. Wylie
------------------------------
Chalmers P. Wylie
-1-
<PAGE> 1
EXHIBIT 5(a)
INVESTMENT ADVISORY AGREEMENT BETWEEN REGISTRANT AND ERNST & COMPANY
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 27th day of October, 1995, between THE COVENTRY
GROUP (the "Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and ERNST & COMPANY, a
Delaware corporation (the "Investment Adviser"), having its principal place of
business at One Battery Park Plaza, New York, New York 10004.
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory and administrative services to certain investment
portfolios of the Trust and may retain the Investment Adviser to serve in such
capacity with respect to certain additional investment portfolios of the Trust,
all as now or hereafter may be identified in Schedule A hereto as such Schedule
may be amended from time to time (individually referred to herein as a "Fund"
and collectively referred to herein as the "Funds") and the Investment Adviser
represents that it is willing and possesses legal authority to so furnish such
services without violation of applicable laws and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1 . Appointment. The Trust hereby appoints the Investment Adviser to act
as investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
Additional investment portfolios may from time to time be added to those
covered by this Agreement by the parties executing a new Schedule A which shall
become effective upon its execution and shall supersede any Schedule A having
an earlier date.
2. Delivery of Documents. The Trust has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Trust's Declaration of Trust, dated January 8, 1992, and
filed with the Secretary of State of Massachusetts on January
8, 1992, and any and all amendments thereto or restatements
thereof (such Declaration, as presently in effect and as it
shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this
Agreement;
<PAGE> 3
(d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission (the "Commission") on January 8, 1992, and all
amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under
the 1940 Act as filed with the Commission and all amendments
thereto; and
(f) the most recent prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and
Statement of Additional Information, as presently in effect,
and all amendments and supplements thereto, are herein
collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing.
3. Management; Use of Subadvisers. Subject to the supervision of the
Trust's Board of Trustees, the Investment Adviser will provide a
continuous investment program for the Funds, including investment
research and management with respect to all securities and investments
and cash equivalents in the Funds. Subject to appropriate Board of
Trustees and shareholder approval, the Investment Adviser may enter
into a contractual relationship with one or more subadvisers (each a
"Subadviser", collectively the "Subadvisers") concerning the provision
of investment management services contemplated hereunder; provided,
however, that the Investment Adviser shall not be relieved of its
obligations under this Agreement by the appointment of a Subadviser
and, provided further, that the Investment Adviser shall be
responsible, to the extent provided in Section 3(a) and Section 8
hereof, for all acts of any such Subadviser as if such acts were its
own. In each contract that the Investment Adviser enters into with a
Subadviser, the Investment Adviser shall review the activities of each
Subadviser for purposes of ensuring compliance with each of the
representations and warranties contained herein. A Subadviser,
subject to the review of the Adviser, may determine from time to time
the securities and other investments to be purchased, retained or sold
by the Funds. The Investment Adviser and each Subadviser will provide
the services under this Agreement in accordance with each respective
Fund's investment objectives, policies, and restrictions as stated in
the Prospectus and resolutions of the Trust's Board of Trustees. The
Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities.
- 2 -
<PAGE> 4
(b) will conform with all applicable Rules and Regulations of the
Commission under the 1940 Act and in addition will conduct its
activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to the investment advisory activities of the
Investment Adviser;
(c) will place or cause to be placed orders for the Funds either
directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment
Adviser will attempt to obtain prompt execution of orders in
an effective manner at the most favorable price. Consistent
with this obligation and to the extent permitted by the 1940
Act, when the execution and price offered by two or more
brokers or dealers are comparable, the Investment Adviser may,
in its discretion, purchase and sell portfolio securities to
and from brokers and dealers who provide the Investment
Adviser with research advice and other services. In no
instance will portfolio securities be purchased from or sold
to BISYS Fund Services, the Investment Adviser, any Subadviser
or any affiliated person of the Trust, BISYS Fund Services,
any Subadviser or the Investment Adviser, except to the extent
permitted by the 1940 Act and the Commission;
(d) will maintain or cause to be maintained all books and records
with respect to the securities transactions of the Funds and
will furnish the Trusts Board of Trustees with such periodic
and special reports as the Board may request; and
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust and the Funds and prior, present, or potential
shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the
Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or
when so requested by the Trust.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive,
and the Investment Adviser shall be free to furnish similar services
to others so long as its services under this Agreement are not
impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Funds are the property of the Trust
and further agrees to surrender promptly
- 3 -
<PAGE> 5
to the Trust any of such records upon the Trust's request. The
Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment
Adviser and the Investment Adviser will accept as full compensation
therefor a fee as set forth on Schedule A hereto. The obligation of
each Fund to pay the above-described fee to the Investment Adviser
will begin as of the date of the initial public sale of shares in such
Fund. The fee attributable to each Fund shall be the obligation of
that Fund and not of any other Fund.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having
jurisdiction over the Trust) exceed the expense limitations of any
such state, the Investment Adviser will reimburse the Fund for a
portion of such excess expenses equal to such excess times the ratio
of the fees otherwise payable by the Fund to the Investment Adviser
hereunder to the aggregate fees otherwise payable by the Fund to the
Investment Adviser hereunder and to BISYS Fund Services under the
Management and Administration Agreement between BISYS Fund Services
and the Trust. The obligation of the Investment Adviser to reimburse
the Funds hereunder is limited in any fiscal year to the amount of its
fee hereunder for such fiscal year, provided, however, that
notwithstanding the foregoing, the Investment Adviser shall reimburse
the Funds for such proportion of such excess expenses regardless of
the amount of fees paid to it during such fiscal year to the extent
that the securities regulations of any state having jurisdiction over
the Trust so require. Such expense reimbursement, if any, will be
estimated daily and reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered
by the Funds in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
- 4 -
<PAGE> 6
9. Duration and Termination. This Agreement will become effective with
respect to each Fund listed on Schedule A as of the date first written
above (or, if a particular Fund is not in existence on that date, on
the date a registration statement relating to that Fund becomes
effective with the Commission), provided that it shall have been
approved by vote of a majority of the outstanding voting securities of
such Fund, in accordance with the requirements under the 1940 Act,
and, unless sooner terminated as provided herein, shall continue in
effect until October 27, 1997. Thereafter, if not terminated, this
Agreement shall continue in effect as to a particular Fund for
successive one-year terms, provided that such continuance is
specifically approved at least annually (a) by the vote of a majority
of those members of the Trust's Board of Trustees who are not parties
to this Agreement or interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes
attributable to the outstanding shares of such Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to a particular
Fund at any time on sixty days' written notice, without the payment of
any penalty, by the Trust (by vote of the Trust's Board of Trustees or
by vote of a majority of the outstanding voting securities of such
Fund) or by the Investment Adviser. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement,
the terms "majority of the outstanding voting securities", "interested
persons" and "assignment" shall have the same meanings as ascribed to
such terms in the 1940 Act.)
10. Investment Adviser's Representations. The Investment Adviser hereby
represents and warrants that it is willing and possesses all requisite
legal authority to provide the services contemplated by this Agreement
without violation of applicable law and regulations.
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
12. Governing Law. This Agreement shall be governed by and its provisions
shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
13. Miscellaneous. The names "The Coventry Group" and "Trustees of The
Coventry Group" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from
time to time under an Agreement and Declaration of Trust dated as of
January 8, 1992, to which reference is hereby made and a copy of which
is on file at the office of the Secretary of State of The Commonwealth
of Massachusetts and elsewhere as required by law, and to any and
- 5 -
<PAGE> 7
all amendments thereto so filed or hereafter filed. The obligations
of "The Coventry Group" entered into in the name or on behalf thereof
by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of
the Trustees, shareholders or representatives of the Trust personally,
but bind only the assets of the Trust and all persons dealing with any
series of shares of the Trust must look solely to the assets of the
Trust belonging to such series for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE COVENTRY GROUP
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
ERNST & COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
- 6 -
<PAGE> 8
Schedule A
to the
Investment Advisory Agreement
between The Coventry Group and
Ernst & Company
<TABLE>
<CAPTION>
Name of Fund Compensation
- ------------ ------------
<S> <C>
Ernst Asia Fund Annual rate of one percent
Ernst Global Resources Fund of the average daily net
assets of such Funds.
Ernst Global Asset Allocation Fund Annual rate of 1.10% of the average
daily net assets of the Fund
Ernst Global Smaller Companies Fund Annual rate of 1.10% of the average
daily net assets of the Fund
Ernst Australia-New Zealand Fixed Annual rate of .60% of the average daily
Income Fund net assets of the Fund
</TABLE>
- 7 -
<PAGE> 9
THE COVENTRY GROUP
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Date:
----------------------------
ERNST & COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Date:
----------------------------
- --------------------
All fees are computed daily and paid monthly.
- 8 -
<PAGE> 1
EXHIBIT 5(b)
SUB-INVESTMENT ADVISORY AGREEMENT BETWEEN ERNST & COMPANY AND NATIONAL MUTUAL
FUNDS MANAGEMENT (GLOBAL) LTD.
(WITH RESPECT TO ERNST GLOBAL ASSET ALLOCATION FUND)
<PAGE> 2
SUB-ADVISORY AGREEMENT
AGREEMENT made this 27th day of October, 1995, between Ernst &
Company (the "Adviser"), and National Mutual Funds Management (Global), Ltd.
(the "Sub-Adviser").
WHEREAS, The Coventry Group (the "Trust") is registered as an
open-end, management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, Ernst Global Asset Allocation Fund (the "Fund") is a
separate investment series of the Trust; and
WHEREAS, the Adviser has been appointed investment adviser to
the Fund; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to
assist it in the provision of a continuous investment program for the Fund and
the Sub-Adviser is willing to do so; and
WHEREAS, the Board of Trustees of the Trust and the Fund's
sole shareholder have approved this Agreement, and the Sub-Adviser is willing
to furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the
Sub-Adviser to act as sub-adviser to the Fund as permitted by the Adviser's
Advisory Agreement with the Trust pertaining to the Fund. Intending to be
legally bound, the Sub-Adviser accepts such appointment and agrees to render
the services herein set forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of
the Trust's Board of Trustees, the Sub-Adviser shall assist the Adviser in
providing a continuous investment program with respect to the Fund's portfolio,
including investment research and management with respect to all securities and
investments and cash equivalents in the Fund. The Sub-Adviser may, subject to
the Adviser's review, determine the securities and investments to be purchased,
sold or retained by the Fund, and the Sub-Adviser may place orders directly
with the issuer or any broker or dealer for such securities and investments.
The Sub-Adviser will provide services under this Agreement in accordance with
the Fund's investment objective, policies and restrictions as stated in the
Fund's prospectus and Statement of Additional Information, which shall be
forwarded to the Sub-Adviser by the Adviser from time to time, and resolutions
of the Trust's Board of Trustees applicable to the Fund provided those
resolutions are communicated to the Sub-Adviser and a reasonable amount of time
is provided in order for it to comply.
<PAGE> 3
Without limiting the generality of the foregoing, the
Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Commission under the 1940 Act applicable to sub-advisers to
registered investment companies and in addition will conduct
its activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to the investment advisory activities of the
Sub-Adviser;
(c) will place or cause to be placed orders for the Fund either
directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Sub-Adviser will
attempt to obtain prompt execution of orders in an effective
manner at the most favorable price. Consistent with this
obligation and to the extent permitted by the 1940 Act, when
the execution and price offered by two or more brokers or
dealers are comparable, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research
advice and other services. In no instance will portfolio
securities be purchased from or sold to BISYS Fund Services,
the Investment Adviser, the Sub-Adviser or any affiliated
person of the Trust, BISYS Fund Services, the Sub-Adviser or
the Investment Adviser, except to the extent permitted by the
1940 Act and the Commission;
(d) will maintain or cause to be maintained all books and records
with respect to the securities transactions of the Fund and
will furnish the Trust's Board of Trustees with such periodic
and special reports as the Board may request; and
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust and the Fund and prior, present, or potential
shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so
requested by the Trust.
- 2 -
<PAGE> 4
3. Services Not Exclusive. Except as provided herein,
the services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the
Sub-Adviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities, commodities
and other investments (including brokerage commissions and other transaction
charges, if any) purchased for the Fund.
6. Compensation. For the services provided and the
expenses assumed with respect to the Fund pursuant to this Agreement, the
Sub-Adviser will be entitled to a fee, computed daily and payable monthly,
calculated at the annual rate of 0.70% of the Fund's average daily net assets.
Such fee shall be payable in Australian dollars and shall be delivered to the
Sub-Adviser at its principal place of business (or to a specified bank account)
promptly after the end of each month.
7. Limitation of Liability. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing herein shall in any way constitute a waiver or limitation of
any rights that the Trust, the Fund or the Adviser may have under the United
States federal or State securities laws, which may impose liability on persons
who act in good faith.
8. Duration and Termination. Unless sooner terminated,
this Agreement shall continue until October 27, 1997, and thereafter shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of Trustees or
vote of the lesser of (a) 67% of the shares of the Fund represented at a
meeting if holders of more than 50 % of the outstanding shares of the Fund are
present in person or by proxy or (b) more than 50 % of the outstanding shares
of the Fund, provided that in either event its continuance also is approved by
a majority of the Trust's Trustees who are not "interested persons" (as defined
in the 1940
- 3 -
<PAGE> 5
Act) of any party to this Agreement (the "Independent Trustees"), by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable at any time without penalty, on 60 days' notice, by the
Adviser, the Sub-Adviser or by the Trust's Board of Trustees or by vote of the
lesser of (a) 67% of the shares of the Fund represented at a meeting if holders
of more than 50 % of the outstanding shares of the Fund are present in person
or by proxy or (b) more than 50 % of the outstanding shares of the Fund. This
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
9. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
10. Governing Law. This Agreement shall be governed by
and its provisions shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
11. Possession of Fund Assets. At all times the assets
of the Fund (consisting of all cash, securities and other instruments held by
the Fund) shall remain exclusively under the management and control of the
Fund's custodian. At no time will the Sub-Adviser have custody or possession
of any such assets of the Fund.
12. Miscellaneous. The names The Coventry Group and
"Trustees of the Coventry Group" refer respectively to the Trust created and to
the Trustees, as trustees but not individually or personally, acting from time
to time under an Agreement and Declaration of Trust dated as of January 8,
1992, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of State of The Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of the Trust entered into in the name or on
behalf hereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind
only the assets of the Trust and all persons dealing with any series of shares
of the Trust must look solely to the assets of the Trust belonging to such
series for the enforcement of any claims against the Trust.
- 4 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
ERNST & COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
NATIONAL MUTUAL FUNDS MANAGEMENT
(GLOBAL), LTD.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
- 5 -
<PAGE> 1
EXHIBIT 5(c)
SUB-INVESTMENT ADVISORY AGREEMENT BETWEEN ERNST & COMPANY AND NATIONAL MUTUAL
FUNDS MANAGEMENT (GLOBAL) LTD.
(WITH RESPECT TO ERNST GLOBAL SMALLER COMPANIES FUND)
<PAGE> 2
SUB-ADVISORY AGREEMENT
AGREEMENT made this 27th day of October, 1995, between Ernst &
Company (the "Adviser"), and National Mutual Funds Management (Global), Ltd.
(the "Sub-Adviser").
WHEREAS, The Coventry Group (the "Trust") is registered as an
open-end, management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, Ernst Global Smaller Companies Fund (the "Fund") is a
separate investment series of the Trust; and
WHEREAS, the Adviser has been appointed investment adviser to
the Fund; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to
assist it in the provision of a continuous investment program for the Fund and
the Sub-Adviser is willing to do so; and
WHEREAS, the Board of Trustees of the Trust and the Fund's
sole shareholder have approved this Agreement, and the Sub-Adviser is willing
to furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the
Sub-Adviser to act as sub-adviser to the Fund as permitted by the Adviser's
Advisory Agreement with the Trust pertaining to the Fund. Intending to be
legally bound, the Sub-Adviser accepts such appointment and agrees to render
the services herein set forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of
the Trust's Board of Trustees, the Sub-Adviser shall assist the Adviser in
providing a continuous investment program with respect to the Fund's portfolio,
including investment research and management with respect to all securities and
investments and cash equivalents in the Fund. The Sub-Adviser may, subject to
the Adviser's review, determine the securities and investments to be purchased,
sold or retained by the Fund, and the Sub-Adviser may place orders directly
with the issuer or any broker or dealer for such securities and investments.
The Sub-Adviser will provide services under this Agreement in accordance with
the Fund's investment objective, policies and restrictions as stated in the
Fund's prospectus and Statement of Additional Information, which shall be
forwarded to the Sub-Adviser by the Adviser from time to time, and resolutions
of the Trust's Board of Trustees applicable to the Fund provided those
resolutions are communicated to the Sub-Adviser and a reasonable amount of time
is provided in order for it to comply.
<PAGE> 3
Without limiting the generality of the foregoing, the
Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Commission under the 1940 Act applicable to sub-advisers to
registered investment companies and in addition will conduct
its activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to the investment advisory activities of the
Sub-Adviser;
(c) will place or cause to be placed orders for the Fund either
directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Sub-Adviser will
attempt to obtain prompt execution of orders in an effective
manner at the most favorable price. Consistent with this
obligation and to the extent permitted by the 1940 Act, when
the execution and price offered by two or more brokers or
dealers are comparable, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research
advice and other services. In no instance will portfolio
securities be purchased from or sold to BISYS Fund Services,
the Investment Adviser, the Sub-Adviser or any affiliated
person of the Trust, BISYS Fund Services, the Sub-Adviser or
the Investment Adviser, except to the extent permitted by the
1940 Act and the Commission;
(d) will maintain or cause to be maintained all books and records
with respect to the securities transactions of the Fund and
will furnish the Trust's Board of Trustees with such periodic
and special reports as the Board may request; and
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust and the Fund and prior, present, or potential
shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so
requested by the Trust.
- 2 -
<PAGE> 4
3. Services Not Exclusive. Except as provided herein,
the services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the
Sub-Adviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities, commodities
and other investments (including brokerage commissions and other transaction
charges, if any) purchased for the Fund.
6. Compensation. For the services provided and the
expenses assumed with respect to the Fund pursuant to this Agreement, the
Sub-Adviser will be entitled to a fee, computed daily and payable monthly,
calculated at the annual rate of 0.70% of the Fund's average daily net assets.
Such fee shall be payable in Australian dollars and shall be delivered to the
Sub-Adviser at its principal place of business (or to a specified bank account)
promptly after the end of each month.
7. Limitation of Liability. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing herein shall in any way constitute a waiver or limitation of
any rights that the Trust, the Fund or the Adviser may have under the United
States federal or State securities laws, which may impose liability on persons
who act in good faith.
8. Duration and Termination. Unless sooner terminated,
this Agreement shall continue until October 27, 1997, and thereafter shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of Trustees or
vote of the lesser of (a) 67% of the shares of the Fund represented at a
meeting if holders of more than 50 % of the outstanding shares of the Fund are
present in person or by proxy or (b) more than 50 % of the outstanding shares
of the Fund, provided that in either event its continuance also is approved by
a majority of the Trust's Trustees who are not "interested persons" (as defined
in the 1940
- 3 -
<PAGE> 5
Act) of any party to this Agreement (the "Independent Trustees"), by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable at any time without penalty, on 60 days' notice, by the
Adviser, the Sub-Adviser or by the Trust's Board of Trustees or by vote of the
lesser of (a) 67% of the shares of the Fund represented at a meeting if holders
of more than 50 % of the outstanding shares of the Fund are present in person
or by proxy or (b) more than 50 % of the outstanding shares of the Fund. This
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
9. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
10. Governing Law. This Agreement shall be governed by
and its provisions shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
11. Possession of Fund Assets. At all times the assets
of the Fund (consisting of all cash, securities and other instruments held by
the Fund) shall remain exclusively under the management and control of the
Fund's custodian. At no time will the Sub-Adviser have custody or possession
of any such assets of the Fund.
12. Miscellaneous. The names The Coventry Group and
"Trustees of the Coventry Group" refer respectively to the Trust created and to
the Trustees, as trustees but not individually or personally, acting from time
to time under an Agreement and Declaration of Trust dated as of January 8,
1992, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of State of The Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of the Trust entered into in the name or on
behalf hereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind
only the assets of the Trust and all persons dealing with any series of shares
of the Trust must look solely to the assets of the Trust belonging to such
series for the enforcement of any claims against the Trust.
- 4 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
ERNST & COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
NATIONAL MUTUAL FUNDS MANAGEMENT
(GLOBAL), LTD.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
- 5 -
<PAGE> 1
EXHIBIT 5(d)
SUB-INVESTMENT ADVISORY AGREEMENT BETWEEN ERNST & COMPANY AND NATIONAL MUTUAL
FUNDS MANAGEMENT (GLOBAL) LTD.
(WITH RESPECT TO ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND)
<PAGE> 2
SUB-ADVISORY AGREEMENT
AGREEMENT made this 27th day of October, 1995, between Ernst &
Company (the "Adviser"), and National Mutual Funds Management (Global), Ltd.
(the "Sub-Adviser").
WHEREAS, The Coventry Group (the "Trust") is registered as an
open-end, management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, Ernst Australia New-Zealand Fixed Income Fund (the
"Fund") is a separate investment series of the Trust; and
WHEREAS, the Adviser has been appointed investment adviser to
the Fund; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to
assist it in the provision of a continuous investment program for the Fund and
the Sub-Adviser is willing to do so; and
WHEREAS, the Board of Trustees of the Trust and the Fund's
sole shareholder have approved this Agreement, and the Sub-Adviser is willing
to furnish such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints the
Sub-Adviser to act as sub-adviser to the Fund as permitted by the Adviser's
Advisory Agreement with the Trust pertaining to the Fund. Intending to be
legally bound, the Sub-Adviser accepts such appointment and agrees to render
the services herein set forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of
the Trust's Board of Trustees, the Sub-Adviser shall assist the Adviser in
providing a continuous investment program with respect to the Fund's portfolio,
including investment research and management with respect to all securities and
investments and cash equivalents in the Fund. The Sub-Adviser may, subject to
the Adviser's review, determine the securities and investments to be purchased,
sold or retained by the Fund, and the Sub-Adviser may place orders directly
with the issuer or any broker or dealer for such securities and investments.
The Sub-Adviser will provide services under this Agreement in accordance with
the Fund's investment objective, policies and restrictions as stated in the
Fund's prospectus and Statement of Additional Information, which shall be
forwarded to the Sub-Adviser by the Adviser from time to time, and resolutions
of the Trust's Board of Trustees applicable to the Fund provided those
resolutions are communicated to the Sub-Adviser and a reasonable amount of time
is provided in order for it to comply.
<PAGE> 3
Without limiting the generality of the foregoing, the
Sub-Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Commission under the 1940 Act applicable to sub-advisers to
registered investment companies and in addition will conduct
its activities under this Agreement in accordance with any
applicable regulations of any governmental authority
pertaining to the investment advisory activities of the
Sub-Adviser;
(c) will place or cause to be placed orders for the Fund either
directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Sub-Adviser will
attempt to obtain prompt execution of orders in an effective
manner at the most favorable price. Consistent with this
obligation and to the extent permitted by the 1940 Act, when
the execution and price offered by two or more brokers or
dealers are comparable, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Sub-Adviser with research
advice and other services. In no instance will portfolio
securities be purchased from or sold to BISYS Fund Services,
the Investment Adviser, the Sub-Adviser or any affiliated
person of the Trust, BISYS Fund Services, the Sub-Adviser or
the Investment Adviser, except to the extent permitted by the
1940 Act and the Commission;
(d) will maintain or cause to be maintained all books and records
with respect to the securities transactions of the Fund and
will furnish the Trust's Board of Trustees with such periodic
and special reports as the Board may request; and
(e) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust and the Fund and prior, present, or potential
shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the
Sub-Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so
requested by the Trust.
- 2 -
<PAGE> 4
3. Services Not Exclusive. Except as provided herein,
the services furnished by the Sub-Adviser hereunder are deemed not to be
exclusive, and the Sub-Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
4. Books and Records. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees
that all records which it maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
5. Expenses. During the term of this Agreement, the
Sub-Adviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities, commodities
and other investments (including brokerage commissions and other transaction
charges, if any) purchased for the Fund.
6. Compensation. For the services provided and the
expenses assumed with respect to the Fund pursuant to this Agreement, the
Sub-Adviser will be entitled to a fee, computed daily and payable monthly,
calculated at the annual rate of 0.40% of the Fund's average daily net assets.
Such fee shall be payable in Australian dollars and shall be delivered to the
Sub-Adviser at its principal place of business (or to a specified bank account)
promptly after the end of each month.
7. Limitation of Liability. The Sub-Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or from reckless disregard by it of its obligations and duties under
this Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing herein shall in any way constitute a waiver or limitation of
any rights that the Trust, the Fund or the Adviser may have under the United
States federal or State securities laws, which may impose liability on persons
who act in good faith.
8. Duration and Termination. Unless sooner terminated,
this Agreement shall continue until October 27, 1997, and thereafter shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by the Trust's Board of Trustees or
vote of the lesser of (a) 67% of the shares of the Fund represented at a
meeting if holders of more than 50 % of the outstanding shares of the Fund are
present in person or by proxy or (b) more than 50 % of the outstanding shares
of the Fund, provided that in either event its continuance also is approved by
a majority of the Trust's Trustees who are not "interested persons" (as defined
in the 1940
- 3 -
<PAGE> 5
Act) of any party to this Agreement (the "Independent Trustees"), by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable at any time without penalty, on 60 days' notice, by the
Adviser, the Sub-Adviser or by the Trust's Board of Trustees or by vote of the
lesser of (a) 67% of the shares of the Fund represented at a meeting if holders
of more than 50 % of the outstanding shares of the Fund are present in person
or by proxy or (b) more than 50 % of the outstanding shares of the Fund. This
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
9. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
10. Governing Law. This Agreement shall be governed by
and its provisions shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
11. Possession of Fund Assets. At all times the assets
of the Fund (consisting of all cash, securities and other instruments held by
the Fund) shall remain exclusively under the management and control of the
Fund's custodian. At no time will the Sub-Adviser have custody or possession
of any such assets of the Fund.
12. Miscellaneous. The names The Coventry Group and
"Trustees of the Coventry Group" refer respectively to the Trust created and to
the Trustees, as trustees but not individually or personally, acting from time
to time under an Agreement and Declaration of Trust dated as of January 8,
1992, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of State of The Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of the Trust entered into in the name or on
behalf hereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind
only the assets of the Trust and all persons dealing with any series of shares
of the Trust must look solely to the assets of the Trust belonging to such
series for the enforcement of any claims against the Trust.
- 4 -
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
ERNST & COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
NATIONAL MUTUAL FUNDS MANAGEMENT
(GLOBAL), LTD.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
- 5 -
<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
AGREEMENT made this 27 day of October, 1995, between THE COVENTRY GROUP
(the "Trust"), a Massachusetts business trust having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES
LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES ("Distributor"), having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as a Massachusetts business trust and registered with the Securities
and Exchange Commission (the "Commission") under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust identified on Schedule A hereto as such Schedule may be amended from
time to time (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Trust then
in effect under the Securities Act of 1933, as amended (the "Securities Act").
As used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term
"prospectus" shall mean each form of prospectus and Statement of Additional
Information used by the Funds for delivery to shareholders and prospective
shareholders after the effective dates of the above referenced registration
statements, together with any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Trust understands that Distributor is now and may in the future be the
distributor of the shares of several investment companies or series (together,
"Companies") including Companies having investment objectives similar to those
of the Trust. The Trust further understands that investors and potential
investors in the Trust may invest in shares of such other Companies. The Trust
agrees that Distributor's duties to such Companies shall not be deemed in
conflict with its duties to the Trust under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate
activities which it deems reasonable, which are primarily intended to result in
the sale of the Shares, including, but not
<PAGE> 2
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and it partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under
the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for
the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees as its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification
of the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly
show or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized
list of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with
the Commission under the Securities Act have been carefully prepared in
conformity with requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and prospectus contain all
statements required to be stated therein in conformity with said Act and the
rules and regulations of
2
<PAGE> 3
said Commission and all statements of fact contained in any such registration
statement and prospectus are true and correct. Furthermore, neither any
registration statement nor any prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Shares. The Trust may, but shall not be obligated to, propose from time to time
such amendment or amendments to any registration statement and such supplement
or supplements to any prospectus as, in the light of future developments, may,
in the opinion of the Trust's counsel, be necessary or advisable. If the Trust
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Trust of a written request from
Distributor to do so, Distributor may, at its option, terminate this Agreement.
The Trust shall not file any amendment to any registration statement or
supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to
3
<PAGE> 4
be given by letter or by telegram addressed to the Trust at its principal
office in Columbus, Ohio and sent to the Trust by the person against whom such
action is brought, within 10 days after the summons or other first legal
process shall have been served. The failure to so notify the Trust of any such
action shall not relieve the Trust from any liability which the Trust may have
to the person against whom such action is brought by reason of any such untrue,
or allegedly untrue, statement or omission, or alleged omission, otherwise than
on account of the Trust's indemnity agreement contained in this paragraph 1.11.
The Trust will be entitled to assume the defense of any suit brought to enforce
any such claim, demand or liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the Trust and approved by
Distributor, which approval shall not be unreasonably withheld. In the event
the Trust elects to assume the defense of any such suit and retain counsel of
good standing approved by Distributor, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any of
them; but in case the Trust does not elect to assume the defense of any such
suit, or in case Distributor reasonably does not approve of counsel chosen by
the Trust, the Trust will reimburse Distributor, its partners and employees, or
the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by Distributor or them.
The Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or
Trustees or any such controlling person, may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Trust, its officers or Trustees or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by Distributor to the Trust and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the
Trust required to be stated in such answers or necessary to make such
information not misleading. Distributor's agreement to indemnify the Trust, its
officers and Trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon Distributor being notified of any action brought
against the Trust, its officers or Trustees, or any such controlling
4
<PAGE> 5
person, such notification to be given by letter or telegram addressed to
Distributor at its principal office in Columbus, Ohio, and sent to Distributor
by the person against whom such action is brought, within 10 days after the
summons or other first legal process shall have been served. Distributor shall
have the right of first control of the defense of such action, with counsel of
its own choosing, satisfactory to the Trust, if such action is based solely
upon such alleged misstatement or omission on Distributor's part, and in any
other event the Trust, its officers or Trustees or such controlling person
shall each have the right to participate in the defense or preparation of the
defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however,
that nothing contained in this paragraph 1.13 shall in any way restrict or have
an application to or bearing upon the Trust's obligation to repurchase Shares
from any Shareholder in accordance with the provisions of the Trust's
prospectus, Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation by
service of process on the Trust of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a
change in such registration statement or prospectus in order
to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment
to any registration statement or prospectus which may from
time to time be filed with the Commission.
5
<PAGE> 6
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
2. Fee.
Distributor shall receive from the Funds identified in Schedule B
hereto (the "Distribution Plan Funds") a distribution fee at the rate and upon
the terms and conditions set forth in the Distribution and Shareholder Service
Plan attached as Schedule C hereto, and as amended from time to time. The
distribution fee shall be accrued daily and shall be paid on the first business
day of each month, or at such time(s) as the Distributor shall reasonably
request.
3. Sale and Payment.
Pursuant to the Agreement and Declaration of Trust dated as of
January 8, 1992, as amended, each Fund may be divided into separate classes of
Shares in which case the Shares of one or more classes may be subject to a
sales load and may be subject to the imposition of a distribution fee pursuant
to the Distribution and Service Plan referred to above. To the extent that
Shares of a Fund are sold at an offering price which includes a sales load or
at net asset value subject to a contingent deferred sales load with respect to
certain redemptions (either within a single class of Shares or pursuant to two
or more classes of Shares), such Shares shall hereinafter be referred to
collectively as "Load Shares" (in the case of Shares that are sold with a
front-end sales load or Shares that are sold subject to a contingent deferred
sales load), "Front-End Load Shares" or "CDSL Shares" and individually as a
"Load Share," a "Front-End Load Share" or a "CDSL Share." A Fund that contains
Front-End Load Shares shall hereinafter be referred to collectively as "Load
Funds" or "Front-End Load Funds" and individually as a "Load Fund" or a
"Front-End Load Fund." A Fund that contains CDSL Shares shall hereinafter be
referred to collectively as "Load Funds" or "CDSL Funds" and individually as a
"Load Fund" or a "CDSL Fund." Under this Agreement, the following provisions
shall apply with respect to the sale of, and payment for, Load Shares of the
Funds identified in Schedule D hereto.
6
<PAGE> 7
3.1 Distributor shall have the right, as principal, to purchase
Load Shares at their net asset value and to sell such Load Shares to the public
against orders therefor at the applicable public offering price, as defined in
Section 4 hereof. Distributor shall also have the right, as principal, to sell
Load Shares to dealers against orders therefor at the public offering price
less a concession determined by Distributor, which concession shall not exceed
the amount of the sales charge or underwriting discount, if any, referred to in
Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in Boston or New York clearing
house funds equal to the applicable net asset value of such Shares. Distributor
may retain so much of any sales charge or underwriting discount as is not
allowed by Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net asset
value of such Load Share, plus any applicable sales charge, all as set forth in
the current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Agreement and Declaration
of Trust and Bylaws of the Trust and the then-current prospectus of the Load
Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load
Shares at net asset value (a) in connection with the merger or consolidation
of the Trust or the Load Fund(s) with any other investment company or the
acquisition by the Trust or the Load Fund(s) of all or substantially all of the
assets or of the outstanding Shares of any other investment company; (b) in
connection with a pro rata distribution directly to the holders of Shares in
the nature of a stock dividend or split; (c) upon the exercise of subscription
rights granted to the holders of Shares on a pro rata basis; (d) in connection
with the issuance of Load Shares pursuant to any exchange and reinvestment
privileges described in any then-current prospectus of the Load Fund; and (e)
otherwise in accordance with any then-current prospectus of the Load Fund.
6. Term, Duration and Termination.
This Agreement shall become effective with respect to each Fund
listed on Schedule A hereof as of the date first written above (or, if a
particular Fund is not in existence on such date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is executed) and, unless
sooner terminated as provided herein, shall continue until October 26, 2000.
Thereafter, if not terminated, this Agreement shall continue with respect to a
particular Fund automatically for successive one-year terms, provided that such
continuance is specifically approved at least annually by (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not parties
to this Agreement or interested persons of any such party, cast in person at a
meeting for the
7
<PAGE> 8
purpose of voting on such approval and (b) by the vote of the Trust's Board of
Trustees or the vote of a majority of the outstanding voting securities of such
Fund. This Agreement is terminable without penalty, on not less than sixty
days' prior written notice, by the Trust's Board of Trustees, by vote of a
majority of the outstanding voting securities of the Trust or by the
Distributor. This Agreement will also terminate automatically in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall
have the same meanings as ascribed to such terms in the 1940 Act.)
7. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust personally, but shall bind
only the trust property of the Trust. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
trust property of the Trust as provided in the Trust's Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
THE COVENTRY GROUP BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: /s/ R. Jeffrey Young By: BISYS Fund Services, Inc.,
-------------------- General Partner
Title: Assistant Secretary By: /s/ Stephen G. Mintos
------------------- ---------------------
Date: October 27, 1995
Title:
--------------------
Date: October 27, 1995
8
<PAGE> 9
Dated: 10/27/95
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF FUND
- ---------------------------
Ernst Asia Fund
Ernst Global Resources Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
---------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
-------------------------
A-1
<PAGE> 10
Dated: 2/2/96
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF FUND
- -----------------------------
Ernst Asia Fund
Ernst Global Resources Fund
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australian-New Zealand
Fixed Income Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
---------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
-------------------------
A-1
<PAGE> 11
Dated: 10/27/95
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF DISTRIBUTION PLAN FUND
- ------------------------------
Ernst Asia Fund
Ernst Global Resources Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
---------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
-------------------------
B-1
<PAGE> 12
Dated: 2/2/96
SCHEDULE B
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF DISTRIBUTION PLAN FUND
- ------------------------------
Ernst Asia Fund
Ernst Global Resources Fund
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australian-New Zealand Fixed Income Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
---------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
-------------------------
B-1
<PAGE> 13
Dated: 10/27/95
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
C-1
<PAGE> 14
Dated: 10/27/95
SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF LOAD FUND
- -----------------
Ernst Asia Fund
Ernst Global Resources Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
--------------------------
D-1
<PAGE> 15
Dated: 2/2/96
SCHEDULE D
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF LOAD FUND
- --------------------------------------
Ernst Asia Fund
Ernst Global Resources Fund
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australian-New Zealand Fixed Income Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
------------------------
D-1
<PAGE> 1
EXHIBIT 8
MITSUBISHI GLOBAL CUSTODY
CUSTODIAN AGREEMENT
(FOREIGN AND DOMESTIC SECURITIES)
This Custodian Agreement is made by and between THE COVENTRY GROUP
("Principal") and THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Custodian").
Principal desires that Custodian hold and administer on behalf of Principal
certain Securities (as herein defined). Custodian is willing to do so on the
terms and conditions set forth in this Agreement. Accordingly, Principal and
Custodian agree as follows:
1. Definitions. Certain terms used in this Agreement are defined as
follows:
(a) "Account" means, collectively, each custodianship account maintained
by Custodian pursuant to Paragraph 3 of this Agreement.
(b) "Eligible Foreign Securities Depository", ("Depository") shall mean
a securities depository or clearing agency incorporated or organized under the
laws of a country other than the United States which operates (i) the central
system for handling securities or equivalent book-entries in that country, or
(ii) a transnational system for the central handling of securities or equivalent
book-entries.
(c) "Investment Manager" means an investment advisor or manager
identified by Principal in a written notice to Custodian as having the authority
to direct Custodian regarding the management, acquisition, or disposition of
Securities.
(d) "Securities" means domestic or foreign securities or both within the
meaning of Section 2(a)(36) of the Investment Company Act of 1940 ("1940 Act")
and regulations issued by the U.S. Securities and Exchange Commission ("SEC")
under Section 17(f) of the 1940 Act, 17 C.F.R. 270.17f-5(c)(1), as amended,
which are held by Custodian in the Account, and shall include cash of any
currency or other property of Principal and all income and proceeds of sale of
such securities or other property of Principal.
(e) "Eligible Foreign Custodian", ("Sub-Custodian") shall mean (i) a
banking institution or trust company incorporated or organized under the laws of
a country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders' equity
in excess of $100 million in U.S. currency (or a foreign currency equivalent
thereof), (iii) a banking institution or trust company incorporated or organized
under the laws of a country other than the United States or a majority owned
direct or indirect subsidiary of a qualified U.S. bank as defined in Rule 17f-5
or bank holding company that is incorporated or organized under the laws of a
country other than the United States which has such other qualifications as
shall be specified in Instructions and approved by the Bank; or (iv) any other
entity that shall have been so qualified by exemptive order, rule or other
appropriate action of the SEC. Custodian shall evaluate and determine at least
annually the continued eligibility of each Sub-Custodian as described in
Paragraph 5(d) of this Agreement.
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<PAGE> 2
2. Representations
(a) Principal represents that with respect to any Account
established by Principal to hold Securities, Principal is authorized to enter
into this Agreement and to retain Custodian on the terms and conditions and for
the purposes described herein.
(b) Custodian represents that (i) it is organized under the
laws of the United States and has its principal place of business in the United
States, (ii) it is a bank within the meaning of Section 202(a)(2) of the
Investment Advisers Act of 1940 and Section 2(a)(5) of the Investment Company
Act of 1940, as amended, and (iii) it has equity capital in excess of $1
million.
3. Establishment of Accounts. Principal hereby establishes with
Custodian, and may in the future establish, one or more Accounts in Principal's
name. The Account shall consist of Securities delivered to and receipted for by
Custodian or by any Sub-Custodian. Custodian, in its sole discretion, may
reasonably refuse to accept any property now or hereafter delivered to it for
inclusion in the Account. Principal shall be notified promptly of such refusal
and any such property shall be immediately returned to Principal.
4. Custody. Subject to the terms of this Agreement, Custodian
shall be responsible for the safekeeping and custody of the Securities.
Custodian may (i) retain possession of all or any portion of the Securities in a
foreign branch or other office of Custodian, or (ii) retain, in accordance with
Paragraph 5 of this Agreement, one or more Sub-Custodians to hold all or any
portion of the Securities. Custodian and any Sub-Custodian may, in accordance
with Paragraph 5 of this Agreement, deposit definitive or book-entry Securities
with one or more Depositories.
(a) If Custodian retains possession of Securities,
Custodian shall ensure the Securities are at all times properly identified as
being held for the appropriate Account. Custodian shall segregate physically
the Securities from other securities or property held by Custodian. Custodian
shall not be required to segregate physically the Securities from other
securities or property held by Custodian for third parties as Custodian, but
Custodian shall maintain adequate records showing the true ownership of the
Securities.
(b) If Custodian deposits Securities with a Sub-Custodian,
Custodian shall maintain adequate records showing the identity and location of
the Sub-Custodian, the Securities held by the Sub-Custodian, and each Account to
which such Securities belong.
(c) If Custodian or any Sub-Custodian deposits Securities
with a Depository, Custodian shall maintain, or shall cause the Sub-Custodian
to maintain, adequate records showing the identity and location of the
Depository, the Securities held by the Depository, and each Account to which
such Securities belong.
(d) If Principal directs Custodian to deliver certificates
or other physical evidence of ownership of Securities to any broker or other
party, other than a Sub-Custodian or Depository employed by Custodian for
purposes of maintaining the Account, Custodian's sole responsibility shall be to
exercise care and diligence in effecting the delivery as instructed by
Principal. Upon completion of the delivery, Custodian shall be discharged
completely of any further liability or responsibility with respect to the
safekeeping and custody of Securities so delivered.
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<PAGE> 3
(e) Custodian shall ensure that (i) the Securities will not
be subject to any right, charge, security interest, lien, or claim of any kind
in favor of Custodian or any Sub-Custodian or Depository except for Custodian's
expenses relating to the Securities' safe custody or administration, and (ii)
the beneficial ownership of the Securities will be freely transferable without
the payment of money or value other than for safe custody or administration.
(f) Principal or its authorized representatives shall have
reasonable access to inspect books and records maintained by Custodian or any
Sub-Custodian or Depository holding Securities hereunder to verify the accuracy
of such books and records. Custodian shall notify Principal promptly of any
applicable law or regulation in any country where Securities are held that would
restrict such access or inspection.
5. Sub-Custodians and Depositories. With Principal's advance written
approval, as provided in Paragraph 5(c) of this Agreement, Custodian may from
time to time retain one or more Sub-Custodians and Depositories to hold
Securities hereunder.
(a) Custodian shall exercise reasonable care in the selection
of Sub-Custodians and Depositories. In making its selection, Custodian shall
consider (i) the Sub-Custodian's or Depository's financial strength, general
reputation and standing in the country in which it is located, its ability to
provide efficiently the custodial services required, and the relative cost of
such services, (ii) whether the Sub-Custodian or Depository would provide a
level of safeguards for safekeeping and custody of Securities not materially
different from those prevailing in the U.S., (iii) whether the Sub-Custodian or
Depository has branch offices in the U.S. in order to facilitate jurisdiction
over and enforcement of judgments against it, and (iv) in the case of a
Depository, the number of its participants and its operating history.
(b) Custodian shall give written notice to Principal of its
intention to deposit Securities with a Sub-Custodian or (directly or through a
Sub-Custodian) with a Depository. The notice shall identify the proposed
Sub-Custodian or Depository and shall include reasonably available information
relied on by Custodian in making the selection.
(c) Within 30 days of its receipt of a notice from Custodian
pursuant to Paragraph 5(b) of this Agreement regarding Custodian's proposed
selection of one or more Sub-Custodians or Depositories, Principal shall give
written notice to Custodian of Principal's approval or disapproval of the
proposed selection. If Principal has not responded within 30 days of receipt of
Custodian's request for approval of a Sub-Custody, Principal will be deemed to
have approved such Sub-Custody. Principal hereby approves Custodian's retention
of those Sub-Custodians and Depositories, if any, which are identified in
Appendix A of this Agreement.
(d) Custodian shall evaluate and determine at least annually
the continued eligibility of each Sub-Custodian and Depository approved by
Principal to act as such hereunder. In discharging this responsibility,
Custodian shall (i) monitor continuously the day to day services and reports
provided by each Sub-Custodian or Depository, (ii) at least annually, obtain and
review the annual financial report published by such Sub-Custodian or Depository
and any reports on such Sub-Custodian or Depository prepared by a reputable
independent analyst, (iii) at least triennially, physically inspect the
operations of such Sub-Custodian or Depository and (iv) Custodian shall provide
Principal with a report of its annual review of each Sub-Custodian and
Depository.
(e) If Custodian determines that any Sub-Custodian or
Depository no longer satisfies the applicable requirements described in
Paragraph 1(b) (in the case of a Depository) or Paragraph 1(e) (in the case of a
Sub-Custodian) of this Agreement or is otherwise no longer capable or qualified
to
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<PAGE> 4
perform the functions contemplated herein, Custodian shall promptly give written
notice thereof to Principal. The notice shall, in addition, either (i) indicate
Custodian's intention to transfer Securities held by the removed Sub-Custodian
or Depository to another Sub-Custodian or Depository previously approved by
Principal, or (ii) include a notice pursuant to Paragraph 5(b) of this Agreement
of Custodian's intention to deposit Securities with a new Sub-Custodian or
Depository.
6. Registration. Subject to any specific instructions from
Principal, Custodian shall hold or cause to be held all Securities in the name
of Custodian, or any Sub-Custodian or Depository approved by Principal pursuant
to Paragraph 5 of this Agreement, or in the name of a nominee of any of them, as
Custodian shall determine to be appropriate under the circumstances.
7. Transactions. Principal or any Investment Manager from time to
time may instruct Custodian (which in turn shall be responsible for giving
appropriate instructions to any Sub-Custodian or Depository) regarding the
purchase or sale of Securities in accordance with this Paragraph 7:
(a) Custodian shall effect and account for each Securities and
currency sale on the date such transaction actually settles; provided, however,
that Principal may in its sole discretion direct Custodian, in such manner as
shall be acceptable to Custodian, to account for Securities and currency
purchases and sales on contractual settlement date, regardless of whether
settlement of such transactions actually occurs on contractual settlement date.
Principal may, from time to time, direct Custodian to change the accounting
method employed by Custodian in a written notice delivered to Custodian at least
thirty (30) days prior to the date a change in accounting method shall become
effective.
(b) Custodian shall effect purchases by charging the Account
with the amount necessary to make the purchase and effecting payment to the
seller or broker for the securities or other property purchased. Custodian shall
have no liability of any kind to any person, including Principal, except in the
case of negligent or intentional tortious acts, or willful misconduct, if the
Custodian effects payment on behalf of Principal, and the seller or broker fails
to deliver the securities or other property purchased. Custodian shall exercise
such ordinary care and diligence as would be employed by a reasonably prudent
custodian and due diligence in examining and verifying the certificates or other
indicia of ownership of the property purchased before accepting them.
(c) Custodian shall effect sales by delivering certificates or
other indicia of ownership of the Property, and, as instructed, shall receive
cash for such sales. Custodian shall have no liability of any kind to any
person, including Principal, if Custodian exercises due diligence and delivers
such certificates or indicia of ownership and the purchaser or broker fails to
effect payment. If a purchase or sale is effected through a Depository,
Custodian shall exercise such ordinary care and diligence as would be employed
by a reasonably prudent custodian and due diligence in verifying proper
consummation of the transaction by the Depository.
(d) Principal or, where applicable, the Investment Manager, is
responsible for ensuring Custodian receives timely instructions and/or funds to
enable Custodian to effect settlement of any purchase or sale of Securities or
Currency Transactions. If Custodian does not receive such timely instructions or
funds, Custodian shall have no liability of any kind to any person, including
Principal, for failing to effect settlement. However, Custodian shall use
reasonable efforts to effect settlement as soon as possible after receipt of
appropriate instructions. Principal shall be liable for interest compensation
and/or principal amounts to Custodian and/or its counterparty for failure to
deliver instructions or funds in a timely manner to effect settlements of
foreign exchange funds movement.
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<PAGE> 5
(e) At the direction of Principal or the
Investment Manager, as the case may be, Custodian shall convert currency in
the Account to other currencies through customary channels including, without
limitation, Custodian or any of its affiliates, as shall be necessary to
effect any transaction directed by Principal or the Investment Manager.
Principal or the Investment Manager, as the case may be, acknowledges that 1)
the foreign currency exchange department is a part of the Custodian or one of
its affiliates or subsidiaries, 2) the Account is not obligated to effect
foreign currency exchange with Custodian, 3) the Custodian will receive
benefits for such foreign currency transactions which are in addition to the
compensation which the Custodian receives for administering the Account, and
4) the Custodian will make available the relevant data so that Principal or
the Investment Manager, as the case may be, can determine that the foreign
currency exchange transactions are as favorable to the Account as terms
generally available in arm's length transactions between unrelated parties.
(f) Custodian shall have no responsibility to
manage or recommend investments of the Account or to initiate any purchase,
sale, or other investment transaction in the absence of instructions from
Principal, or where applicable, an Investment Manager.
8. Capital Changes: Income.
(a) Custodian may, without further instructions
from Principal or any Investment Manager, exchange temporary certificates and
may surrender and exchange Securities for other securities in connection with
any reorganization, recapitalization, or similar transaction in which the
owner of the Securities is not given an option. Custodian has no
responsibility to effect any such exchange unless it has received actual
notice of the event permitting or requiring such exchange at its office
designated in Paragraph 14 of this Agreement or at the office of its
designated agents.
(b) Custodian, or its designated agents, are
authorized, as Principal's agent, to surrender against payment maturing
obligations and obligations called for redemption, and to collect and receive
payments of interest and principal, dividends, warrants, and other things of
value in connection with Securities. Except as otherwise provided in Paragraph
15(d) of this Agreement, Custodian or its designated agents shall not be
obligated to enforce collection of any item by legal process or other means.
(c) Custodian or its designated agents are
authorized to sign for Principal all declarations, affidavits, certificates,
or other documents that may be required to collect or receive payments or
distributions with respect to Securities. Custodian or its designated agents
are authorized to disclose, without further consent of Principal, Principal's
identity to issuers of Securities, or the agents of such issuers, who may
request such disclosure.
9. Notices re Account Securities. Custodian shall notify
Principal or, where applicable, the Investment Manager, of any reorganization,
recapitalization, or similar transaction not covered by Paragraph 8, and any
subscription rights, proxies, and other shareholder information pertaining to
the Securities actual notice of which is received by Custodian at its office
designated in Paragraph 14 of this Agreement or at the offices of its
designated agents. Custodian's sole responsibility in this regard shall be to
give such notices to Principal or the Investment Manager, as the case may be,
within a reasonable time after Custodian receives them, and Custodian shall not
otherwise be responsible for the timeliness of such notices. Custodian has no
responsibility to respond or otherwise act with respect to any such notice
unless and until Custodian has received appropriate instructions from Principal
or the Investment Manager.
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<PAGE> 6
10. Taxes. Custodian shall pay or cause to be paid from the
Account all taxes and levies in the nature of taxes imposed on the Account or
the Securities thereof by any country. Custodian will use its best efforts to
give the Investment Manager advance written notice of the imposition of such
taxes. However, Custodian shall use reasonable efforts to obtain refunds of
taxes withheld on Securities or the income thereof that are available under
applicable tax laws, treaties, and regulations.
11. Cash. The Principal may from time to time, direct
Custodian to hold Account cash in The HighMark Group of mutual funds or in any
investment company for which Custodian or its affiliates or subsidiaries, acts
as investment advisor, custodies the assets, or provides other services.
Principal shall designate the particular HighMark fund or such other
above-mentioned fund that Principal deems appropriate for the Account.
Principal or an Investment Manager, where applicable, acknowledges that
Custodian will receive fees for such services which will be in addition to
those fees charged by Custodian as agent for the Account.
12. Reports. Custodian shall give written reports to
Principal showing (i) each transaction involving Securities effected by or
reported to Custodian, (ii) the identity and location of Securities held by
Custodian as of the date of the report, (iii) any transfer of location of
Securities not otherwise reported, and (iv) such other information as shall be
agreed upon by Principal and Custodian. Unless otherwise agreed upon by
Principal and Custodian, Custodian shall provide the reports described in this
Paragraph 12 on a monthly basis.
13. Instructions from Principal.
(a) Principal shall certify or cause to be
certified to Custodian in writing the names and specimen signatures of all
persons authorized to give instructions, notices, or other communications on
behalf of Principal or any Investment Manager. Such certification shall
remain effective until Custodian receives notice to the contrary.
(b) Principal or authorized Investment Manager,
as the case may be, may give instruction, notice, or other communication
called for by this Agreement to Custodian in writing, or by telecopy, telex,
telegram, or other form of electronic communication acceptable to Custodian.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. Principal or Investment
Manager may give and Custodian may accept oral instructions on an exception
basis; provided, however, that Principal or Investment Manager shall promptly
confirm any oral communications in writing or by telecopy or other means
permitted hereunder. Principal will hold Custodian harmless for the failure of
Principal or Investment Manager to send confirmation in writing, the failure
of such confirmation to conform to the telephone instructions received or the
Custodians's failure to produce such confirmation at any subsequent time. The
Custodian may electronically record any instruction given by telephone, and
any other telephone discussions with respect to the Custody Account.
(c) All such communications shall be deemed
effective upon receipt by Custodian at its address specified in Paragraph 14
of this Agreement, as amended from time to time. Custodian without liability
may rely upon and act in accordance with any instruction that Custodian using
ordinary care believes has been given by Principal or any Investment Manager.
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<PAGE> 7
(d) Custodian may at any time request instructions from
Principal and may await such instructions without incurring liability. Custodian
has no obligation to act in the absence of such requested instructions, but may,
however, without liability take such action as it deems appropriate to carry out
the purposes of this Agreement.
14. Addresses: Until further notice from either party, all
communications called for under this Agreement shall be addressed as follows:
If to Principal:
Name:
-----------------------------------
Street Address:
-------------------------
City, State, Zip:
-----------------------
Attn:
-----------------------------------
Telephone:
------------------------------
Telecopier:
-----------------------------
Telex (Answerback):
---------------------
If to Custodian:
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
Mitsubishi Global Custody
Attn: Ms. Janet E. Potter, Vice President
475 Sansome Street, 15th Floor
San Francisco, California 94111
Telephone: (415) 291-7685
Telecopier: (415) 291-7697
Telex (Answerback): 215748/MBCTD UR
15. Custodian's Responsibilities and Liabilities
(a) Custodian's duties and responsibilities shall be limited to
those expressly set forth in this Agreement, or as otherwise agreed by Custodian
in writing. In carrying out its responsibilities, Custodian shall exercise no
less than the same degree of care and diligence it usually exercises with
respect to similar property of its own.
(b) Custodian (i) shall not be required to maintain any special
insurance for the benefit of Principal, and (ii) shall not be liable or
responsible for any loss of or damage to Securities resulting from any causes
beyond Custodian's reasonable control including, without limitations, acts of
God, war, government action, civil commotion, fire, earthquake, or other
casualty or disaster. However, Custodian shall use reasonable efforts to
replace Securities lost or damaged due to such causes with
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<PAGE> 8
securities of the same class and issue with all rights and privileges
pertaining thereto. The Custodian shall be liable to the Principal for any loss
which shall occur as the result of the failure of a Sub-Custodian to exercise
reasonable care with respect to the safekeeping of assets to the same extent
that the Custodian would be liable to the Principal if the Custodian were
holding such securities and cash in their own premises. The Custodian shall be
liable to the Principal only to the extent of the Principal's direct damages,
to be determined based on the market value of the property which is subject to
loss and without reference to any special conditions or circumstances.
(c) The parties intend that Custodian shall not be considered a
fiduciary of the Account. Accordingly, Custodian shall have no power to make
decisions regarding any policy, interpretation, practice, or procedure with
respect to the Account, but shall perform the ministerial and administrative
functions described in this Agreement as provided herein and within the
framework of policies, interpretations, rules, practices, and procedures made
by Principal or an investment manager, where applicable, as the same shall be
reflected in instructions to Custodian from Principal or any Investment Manager.
(d) Custodian shall not be required to appear in or defend any
legal proceedings with respect to the Account or the Securities unless
Custodian has been indemnified to its reasonable satisfaction against loss and
expense (including reasonable attorneys' fees).
(e) With respect to legal proceedings referred to in paragraph
15(d) of this agreement, Custodian may consult with counsel acceptable to it
after written notification to Principal concerning its duties and
responsibilities under this Agreement, and shall not be liable for any action
taken or not taken in good faith on the advice of such counsel.
16. Indemnities.
(a) Principal hereby agrees to indemnify Custodian against all
liability, claims, demands, damages, losses, and costs, including reasonable
attorneys' fees and expenses of legal proceedings, resulting from Custodian's
compliance with instructions from Principal or any Investment Manager and the
terms of this Agreement, except where Custodian has acted with negligence or
willful misconduct.
(b) Custodian's right to indemnity under Paragraph 16(a) of
this Agreement shall survive the termination of this Agreement.
17. Compensation; Expenses. Principal shall reimburse Custodian for all
reasonable out-of-pocket expenses and processing costs incurred by Custodian in
the administration of the Account including, without limitation, reasonable
counsel fees incurred by Custodian pursuant to Paragraph 15(e) of this
Agreement. Principal also shall pay Custodian reasonable compensation for its
services hereunder as specified in Appendix B. Custodian shall be entitled to
withdraw such expenses or compensation from the Account if Principal fails to
pay the same to Custodian within 45 days after Custodian has sent an
appropriate billing to Principal; provided, however, that Custodian will give
Principal ten (10) days prior written notice before withdrawing such funds.
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<PAGE> 9
18. Amendment: Termination. This Agreement may be amended at any
time by a written instrument signed by the parties. Either party may terminate
this Agreement and the Account upon 60 days' written notice to the other unless
the parties agree on a different time period. Upon such termination, Custodian
shall deliver or cause to be delivered the Securities, less any amounts due and
owing to Custodian under this Agreement, to a successor custodian designated by
Principal or, if a successor custodian has not accepted an appointment by the
effective date of termination of the Account, to Principal. Upon completion of
such delivery Custodian shall be discharged of any further liability or
responsibility with respect to the Securities so delivered.
19. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors in interest. Without
consent of the parties, this agreement cannot be assigned to any third party.
20. Governing Law. The validity, construction, and administration of
this Agreement shall be governed by the applicable laws of the United States
from time to time in force and effect and, to the extent not preempted by such
laws of the United States, by the laws of the State of California from time to
time in force and effect.
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<PAGE> 10
Appendix A
MITSUBISHI GLOBAL CUSTODY SUB-CUSTODIAN NETWORK SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit Ratings
Last Reported ------------------------------------
Market Sub-Custodian Equity ($mill) IBCA Moody's S&P
- ------ ------------- -------------- ---- ------- ---
<S> <C> <C> <C> <C> <C>
Argentina Citibank $11,067 AA- A1 A+
Australia National Australia Bank $5,830 AA Aa3 AA
Austria Creditansalt-Bankverein $1,791 A+ Aa3 A-1
Belgium Kredietbank $2,381 AA Aa2 A+
(1)Brazil Citibank $11.=,067 AA- A1 A+
Canada Royal Bank of Canada $6,066 AA- Aa2 AA-
Chile Citibank $11,067 AA- A1 A+
(1)China/Shenzen Standard Chartered Bank $1,982 A A2 -NR-
Denmark Den Danske Bank $2,960 AA- Aa3 A
Euro-CDs First National Bank of Chicago $4,264 A+ A1 A+
Finland Union Bank of Finland $1,354 A- A3 BBB
France Banque Indosuez $2,655 AA- A1 A+
Germany Dresdner Bank $7,077 AA+ Aaa A-1+
Hong Kong Hong Kong & Shanghai Bank $7,827 AA- A3 A-1
(1)India Standard Chartered Bank $1,982 A A2 -NR-
Indonesia Standard Chartered Bank $1,982 A A2 -NR-
Ireland Allied Irish Banks $1,784 A+ A1 A
Italy Banca Commerciale Italiana $3,631 AA- A1 A
Japan Mitsubishi Bank Limited $15,398 AA Aa3 AA-
(1)Korea (Rep. of) Standard Chartered Bank $1,982 A A2 -NR-
Malaysia Malayan Banking Berhad $1,330 A(2) -NR- -NR-
Mexico Citibank $11,067 AA- A1 A+
Netherlands MeesPierson N.V. $1,019 A1 -NR- -NR-
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Market restrictions require investor registration prior to trading. Please
see your Relationship Manager for further details.
(2) Rated by Thomson BankWatch-Asia.
<PAGE> 11
Appendix A
MITSUBISHI GLOBAL CUSTODY SUB-CUSTODIAN NETWORK SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit Ratings
Last Reported -------------------------------------
Market Sub-Custodian Equity ($mill) IBCA Moody's S&P
- ------ ------------- -------------- ---- ------- ---
<S> <C> <C> <C> <C> <C>
New Zealand National Australia Bank $5,830 AA Aa3 AA
Norway Christiania Bank $715 A A3 A-3
Philippines Standard Chartered Bank $1,982 A A2 -NR-
Portugal Banco Totta & Acores $790 A A3 A-
Singapore DBS Bank $2,860 AA(2) -NR- -NR-
Spain Banco Bilbao Vizcaya $5,211 AA Aa2 AA-
Sweden Svenska Handelsbanken $2,528 AA- A1 A
Switzerland Union Bank of Switzerland $14,076 AAA Aaa AAA
(1)Taiwan Standard Chartered Bank $1,982 A A2 -NR-
Thailand Hong Kong & Shanghai Bank $7,827 AA- A3 A-1
U.K. Midland Bank $4,214 AA- Aa3 A
(1)Venezuala Citibank $11,067 AA- A1 A+
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Market restrictions require investor registration prior to trading. Please
see your Relationship Manager for further details.
(2) Rated by Thomson Ban Watch-Asia.
<PAGE> 12
Exhibit B1
ERNST WORLD FUNDS
Global Resource Fund
CONFIDENTIAL
<TABLE>
<CAPTION>
CUSTODY FEES
----------------------------------------------------------------------------------------------------
TRANSACTION
FEES .015% .02% .035% .05% .10% .15% .20% .30% .40%
- ------------ ----- ---- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$15 United States
$25 Japan South Africa
$35 Canada CEDEL Singapore
Eurobonds
Euroclear
$50 Britain Australia Netherlands China*
Austria
Korea
Mexico
$75 Belgium Finland New Zealand
France Ireland Sri Lanka
Germany Sweden
Norway
Switzerland
$100 Denmark Hong Kong Indonesia Isreal Argentina
Italy Malaysia Portugal Brazil
Thailand
$125 Philippines Taiwan
Spain
$200 India**
Pakistan**
</TABLE>
MITSUBISHI GLOBAL CUSTODY
A Division of
The Bank of California, N.A.
Federal Reserve Wires $10.00 Foreign (Third Party Wires $35.00)
*China, Out-of-pocket Stamp Duties
**India/Pakistan $300.00 Monthly Subaccount Fee, $35.00
Corporate Actions Fee, Out-of-pocket Stamp Duties
<PAGE> 13
EXHIBIT B2
ERNST WORLD FUNDS
Asia Fund
CONFIDENTIAL
- -------------------------------------------------------------------------------
15% 40%
- -------------------------------------------------------------------------------
Australia Argentina
Austria Brazil
Belgium China*
Britain India**
Canada Israel
CEDEL Pakistan**
Denmark
Eurobonds
Euroclear
Finland
France
Germany
Hong Kong
Indonesia
Ireland
Italy
Japan
Korea
Malaysia
Mexico
Netherlands
New Zealand
Norway
Philippines
Portugal
Singapore
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Taiwan
Thailand
United States
- --------------------------------------------------------------------------------
MITSUBISHI GLOBAL CUSTODY Federal Reserve Wires $10.00
A DIVISION OF Foreign (Third Party Wires $35.00)
THE BANK OF CALIFORNIA, N.A. *China, Out-of-pocket Stamp Duties
**India/Pakistan $300.00 Monthly Subaccount Fee,
$35.00 Corporate Actions Fee, Out-of-pocket Stamp Duties
<PAGE> 14
July 11, 1995 VIA FEDERAL EXPRESS
Ms. Nancy Converse
Manager, Client Services
The Winsbury Company
BISYS Investment Services Group
1900 East Dublin-Granville Road
Columbus, Ohio 43229
RE: ERNST WORLD FUNDS; WIRE FEES
Dear Nancy,
I would like to confirm our conversations regarding the charges referenced
above.
DOMESTIC (US) FED WIRES @ $10.00 EA.
FOREIGN OR "THIRD-PARTY" WIRES @ $35.00 EA.
As always, should you or Jeff have any questions or comments, please do not
hesitate to contact me.
Personal Regards,
Kevin P. Galvin
Vice President
<PAGE> 15
Appendix C1
21. Effective Date. This Agreement shall be effective as of the date
appearing below, and shall supersede any prior or existing agreements between
the parties pertaining to the subject matter hereof.
ERNST WORLD FUNDS
GLOBAL RESOURCE FUND
Date: August 21, 1995
---------------------------------------------
By: /s/ Roy E. Rogers
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
Authorized Signature
"Principal"
The Bank of California, National Association
By: /s/ K. Galvin
--------------------------------------------
Title: Vice President
--------------------------------------------
By: /s/ Janet Potter
--------------------------------------------
Title: Vice President
--------------------------------------------
"Custodian"
<PAGE> 16
Appendix C2
21. Effective Date. This Agreement shall be effective as of the date
appearing below, and shall supersede any prior or existing agreements between
the parties pertaining to the subject matter hereof.
ERNST WORLD FUNDS
ASIAN FUND
Date: August 21, 1995
---------------------------------------------
By: /s/ Roy E. Rogers
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
By:
---------------------------------------------
Authorized Signature
"Principal"
The Bank of California, National Association
By: /s/ K. Galvin
--------------------------------------------
Title: Vice President
--------------------------------------------
By: /s/ Janet Potter
--------------------------------------------
Title: Vice President
--------------------------------------------
"Custodian"
<PAGE> 1
Exhibit 9(a)
MANAGEMENT AND ADMINISTRATION AGREEMENT
AGREEMENT made this 27 day of October, 1995, between THE COVENTRY GROUP
(the "Trust"), a Massachusetts business trust having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES
LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES ("Administrator"), having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as a Massachusetts business trust and registered with the Securities
and Exchange Commission (the "Commission") under the Investment Company Act of
1940 (the "1940 Act"); and
WHEREAS, the Trust desires to retain Administrator to furnish
management and administration services to certain investment portfolios of the
Trust and may retain Administrator to serve in such capacity with respect to
additional investment portfolios of the Trust, all as now or hereafter may be
identified in Schedule A hereto as such Schedule may be amended from time to
time (individually referred to herein as "Fund" and collectively referred to
herein as the "Funds"); and
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Manager and Administrator
Subject to the direction and control of the Board of Trustees
of the Trust, Administrator will assist in supervising all aspects of the
operations of the Funds except those performed by the investment adviser for
the Funds under its Investment Advisory Agreement, the custodian for the Funds
under its Custodian Agreement, the transfer agent for the Funds under its
Transfer Agency Agreement and the fund accountant for the Funds under its Fund
Accounting Agreement.
Administrator will maintain office facilities (which may be in
the offices of Administrator or an affiliate but shall be in such location as
the Trust shall reasonably determine); furnish statistical and research data,
clerical and 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, assist the Trust or its designee in the
preparation of, and file, all 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 Trust's counsel; assist to the extent
requested by the Trust with the Trust's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statements (on Form
N-1A or any replacement therefor); compile data for and prepare for filing
Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act;
keep and maintain the financial accounts and records of the Funds, including
calculation of daily expense accruals; in the case of money market funds,
periodic review of the amount of the deviation, if any, of the current net
asset value per share (calculated using available
<PAGE> 2
market quotations or an appropriate substitute that reflects current market
conditions) from each money market fund's amortized cost price per share; and
generally assist in all aspects of the operations of the Funds. In compliance
with the requirements of Rule 31a-3 under the 1940 Act, Administrator hereby
agrees that all records which it maintains for the Trust are the property of
the Trust and further agrees to surrender promptly to the Trust any of such
records upon the Trust's request. Administrator further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act. Administrator may delegate some
or all of its responsibilities under this Agreement.
Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Administrator shall be responsible, to the extent
provided in Section 4 hereof, for all acts of such subcontractor as if such
acts were its own.
2. Fees; Expenses: Expense Reimbursement
In consideration of services rendered and expenses assumed pursuant to
this Agreement, each of the Funds will pay Administrator on the first business
day of each month, or at such time(s) as Administrator shall request and the
parties hereto shall agree, a fee computed daily and paid as specified below
calculated at the applicable annual rate set forth on Schedule A hereto. The
fee for the period from the day of the month this Agreement is entered into
until the end of that month shall be prorated according to the proportion which
such period bears to the full monthly period. Upon any termination of this
Agreement before the end of any month, the fee for such part of a month shall
be prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement.
For the purpose of determining fees payable to Administrator, the value
of the net assets of a particular Fund shall be computed in the manner
described in the Trust's Declaration of Trust or in the Prospectus or
Statement of Additional Information respecting that Fund as from time to time
is in effect for the computation of the value of such net assets in connection
with the determination of the liquidating value of the shares of such Fund.
Administrator will from time to time employ or associate with itself
such person or persons as Administrator may believe to be particularly fitted
to assist it in the performance of this Agreement. Such person or persons may
be partners, officers, or employees who are employed by both Administrator and
the Trust. The compensation of such person or persons shall be paid by
Administrator and no obligation may be incurred on behalf of the Funds in such
respect. Other expenses to be incurred in the operation of the Funds including
taxes, interest, brokerage fees and commissions, if any, fees of Trustees who
are not partners, officers, directors, shareholders or employees of
Administrator or the investment adviser or distributor for the Funds,
Commission fees and state Blue Sky qualification and renewal fees and expenses,
investment advisory fees, custodian fees, transfer and dividend disbursing
agents' fees, fund accounting fees including pricing of portfolio securities,
service organization fees, certain insurance premiums,
2
<PAGE> 3
outside and, to the extent authorized by the Trust, inside auditing and legal
fees and expenses, costs of maintenance of corporate existence, typesetting and
printing prospectuses for regulatory purposes and for distribution to current
shareholders of the Funds, costs of shareholders' and Trustees' reports and
meetings and any extraordinary expenses will be borne by the Funds; provided,
however, that the Funds will not bear, directly or indirectly, the cost of any
activity which is primarily intended to result in the distribution of shares of
the Funds.
If in any fiscal year the aggregate expenses of a particular
Fund (as defined under the securities regulations of any state having
jurisdiction over the Trust) exceed the expense limitations of any such state,
Administrator will reimburse such Fund for a portion of such excess expenses
equal to such excess times the ratio of the fees respecting such Fund otherwise
payable to Administrator hereunder to the aggregate fees respecting such Fund
otherwise payable to Administrator hereunder and to Ernst & Company under the
Investment Advisory Agreements between Ernst & Company and the Trust. The
expense reimbursement obligation of Administrator is limited to the amount of
its fees hereunder for such fiscal year, provided, however, that notwithstanding
the foregoing, Administrator shall reimburse a particular Fund for such
proportion of such excess expenses regardless of the amount of fees paid to it
during such fiscal year to the extent that the securities regulations of any
state having jurisdiction over the Trust so require. Such expense reimbursement,
if any, will be estimated daily and reconciled and paid on a monthly basis.
3. Proprietary and Confidential Information
Administrator agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and prior, present, or
potential shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
4. Limitation of Liability
Administrator shall not be liable for any loss suffered by the
Funds in connection with the matters to which this Agreement relates, except
for a loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. Any person, even though also a
partner, employee, or agent of Administrator, who may be or become an officer,
Trustee, employee, or agent of the Trust or the Funds shall be deemed, when
rendering services to the Trust or the Funds, or acting on any business of that
party, to be rendering such services to or acting solely for that party and not
as a partner, employee, or agent or one under the control or direction of
Administrator even though paid by it.
3
<PAGE> 4
5. Term
This Agreement shall become effective as of the date first written
above (or, if a particular Fund is not in existence on the date, on the date an
amendment to Schedule A to this Agreement relating to that Fund is executed)
and shall continue until October 26, 2000, and unless sooner terminated as
provided herein, thereafter shall be renewed automatically for successive
1-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; provided that such continuance is specifically reviewed and
approved at least annually (a) by the vote of a majority of the Trust's Board
of Trustees or by the vote of a majority of the outstanding voting securities
of such Fund and (b) by the majority of the Trust's Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. The scope of such review shall be whether
there is any "cause" (as defined below) that would justify terminating the
Agreement. This Agreement is terminable with respect to a particular Fund
through a failure to renew at the end of a 5-year term; upon mutual agreement
of the parties hereto; or for "cause" by the party alleging "cause," in any
case on not less than 60 days notice by the Trust's Board of Trustees or by
Administrator. Written notice not to renew may be given for any reason, with
or without "cause" (as defined below).
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which is evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors; or (d) any circumstance which substantially impairs the
performance of the obligations and duties of the party to be terminated, or the
ability to perform those obligations and duties, as contemplated herein.
Notwithstanding the foregoing, the absence of either or both an annual review
or ratification of this Agreement by the Board of Trustees shall not, in and of
itself, constitute "cause" as used herein.
If, for any reason other than "cause" as defined above,
Administrator is replaced as fund manager and administrator, or if a third
party is added to perform all or a part of the services provided by
Administrator under this Agreement (excluding any sub-administrator appointed
by Administrator as provided in Section 1 hereof), then the Trust shall make a
one-time cash payment, as liquidated damages, to Administrator equal to the
balance due Administrator for the remainder of the term of this Agreement,
assuming for purposes of calculation of the payment that the asset level of the
Trust on the date Administrator is replaced, or a third party is added, will
remain constant for the balance of the contract term.
4
<PAGE> 5
6. Governing Law and Matters Relating to the Trust as a
Massachusetts Business Trust
This Agreement shall be governed by the law of the Commonwealth
of Massachusetts. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust personally, but shall bind
only the trust property of the Trust. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
trust property of the Trust as provided in the Trust's Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first written above.
THE COVENTRY GROUP BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: /s/ R. Jeffrey Young By: BISYS Fund Services, Inc.,
-------------------- General Partner
Title: Assistant Secretary By: /s/ Stephen G. Mintos
------------------- ---------------------
Date: October 27, 1995
---------------- Title:
-------------------
Date: October 27, 1995
----------------
5
<PAGE> 6
Dated: 10/27/95
SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN THE COVENTRY GROUP AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Name of Fund Compensation*
- --------------------------------- -------------------------------
Ernst Asia Fund Annual Rate of seventeen one-
Ernst Global Resources Fund hundredths of one percent (.17%)
of each such Fund's average
daily net assets
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
---------------------
- --------------
*All fees are computed daily and paid periodically.
A-1
<PAGE> 7
Dated: 2/2/96
SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN THE COVENTRY GROUP AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Name of Fund Compensation*
- ----------------------------------- ----------------------------------------
Ernst Asia Fund Annual Rate of seventeen one-hundredths
Ernst Global Resources Fund of one percent (.17%) of each such
Ernst Global Asset Allocation Fund Fund's average daily net assets
Ernst Global Smaller Companies Fund
Ernst Australian-New Zealand
Fixed Income Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------------------
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
---------------------------------
- ------------
* All fees are computed daily and paid periodically.
A-1
<PAGE> 1
Exhibit 9(b)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 27 day of October, 1995, between THE COVENTRY GROUP
(the "Trust"), a Massachusetts business trust having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES
OHIO, INC. ("BISYS"), a corporation organized under the laws of the State of
Ohio and having its principal place of business at 3435 Stelzer Road, Columbus,
Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain fund accounting
services for each investment portfolio of the Trust identified on Schedule A
hereto, as such Schedule shall be amended from time to time (individually
referred to herein as the "Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. BISYS will keep and
maintain the following books and records of each Fund
pursuant to Rule 31a-1 under the Investment Company Act
of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in
detail of all purchases and sales of securities,
all receipts and disbursements of cash and all
other debits and credits, as required by
subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income and
expense accounts, including interest accrued and
interest received, as required by subsection
(b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts
(except shareholder accounts) as required by
subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, BISYS shall perform the following accounting
services daily for each Fund:
<PAGE> 2
(i) Calculate the net asset value per share
utilizing prices obtained from the sources
described in subsection 1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable,
then obtain such prices from each Fund's
investment adviser or its designee, as approved
by the Trust's Board of Trustees;
(iii) Verify and reconcile with the Funds' custodian
all daily trade activity;
(iv) Compute, as appropriate, each Fund's net income
and capital gains, dividend payables, dividend
factors, 7-day yields, 7-day effective yields,
30-day yields, and weighted average portfolio
maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to
release to shareholders, check and confirm the
net asset values and dividend factors for
reasonableness and deviations, and distribute
net asset values and yields to NASDAQ;
(vi) Report to the Trust the daily market pricing of
securities in any money market Funds, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable net
asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than face
value, if requested by the Trust;
(ix) Update fund accounting system to reflect rate
changes, as received from a Fund's investment
adviser, on variable interest rate instruments;
(x) Post Fund transactions to appropriate
categories;
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2) Fund
share transactions and (3) income and expense
accounts;
2
<PAGE> 3
(xiii) Provide accounting reports in connection with
the Trust's regular annual audit and other
audits and examinations by regulatory agencies;
and
(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) BISYS may provide additional special reports
upon the request of the Trust or a Fund's
investment adviser, which may result in an
additional charge, the amount of which shall be
agreed upon between the parties.
(ii) BISYS may provide such other similar services
with respect to a Fund as may be reasonably
requested by the Trust, which may result in an
additional charge, the amount of which shall be
agreed upon between the parties.
(d) Additional Accounting Services. BISYS shall also
perform the following additional accounting services for
each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements described
below, upon request of the Trust. The download
will include the following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax returns and
federal excise tax returns;
(B) the Trust's semi-annual reports with the
Securities and Exchange Commission
("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and
quarterly (if any) shareholder reports;
(D) registration statements on Form N-1A and
other filings relating to the
registration of shares;
3
<PAGE> 4
(E) the Administrator's monitoring of the Trust's
status as a regulated investment company under
Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
BISYS may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that BISYS shall not be relieved of any of its obligations
under this Agreement by the appointment of such subcontractor and provided
further, that BISYS shall be responsible, to the extent provided in Section 7
hereof, for all acts of such subcontractor as if such acts were its own.
3. Compensation.
The Trust shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto, as such Schedule may be amended from time to time.
4. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 3
hereof, the Trust agrees to reimburse BISYS for its out-of-pocket expenses in
providing services hereunder, including without limitation the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment advisor
or custodian, dealers or others as required for BISYS to
perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section 1(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Trust thereunto duly authorized; and
(f) Any additional expenses reasonably incurred by BISYS in the
performance of its duties and obligations under this Agreement.
4
<PAGE> 5
5. Effective Date.
This Agreement shall become effective with respect to a Fund as
of the date first written above (or, if a particular Fund is not in existence
on that date, on the date an amendment to Schedule A to this Agreement relating
to the Fund is executed) (the "Effective Date").
6. Term.
This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
October 26, 1998, and 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; provided, however, that after such termination for so long
as BISYS, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement or any schedule
or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due BISYS and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the compensation described under Section 3 hereof, the amount of all of BISYS'
cash disbursements for services in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, for a
reasonable fee, BISYS will provide the Trust with reasonable access to any
Trust documents or records remaining in its possession. Written notice not to
renew may be given for any reason, with or without "cause" (as defined below).
This Agreement is terminable with respect to a particular Fund through a
failure to renew the Agreement as the end of a 3-year term; upon mutual
agreement of the parties hereto; or for "cause" (as defined below) by the party
alleging "cause," in any case or not less than 60 days' notice by the Trust's
Board of Trustees or by BISYS.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial
difficulties on the part of the party to be terminated which is evidenced by
the authorization or commencement of, or involvement by way of pleading,
answer, consent, or acquiescence in, a voluntary or involuntary case under
Title 11 of the United States Code, as from time to time is in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration
of the rights of creditors; or (d) any circumstance which substantially
impairs the performance of the obligations and duties of the party to be
terminated, or the ability to perform those obligations and duties as
contemplated herein.
5
<PAGE> 6
If, for any reason other than "cause" as defined above, BISYS is
replaced as Fund Accountant, or if a third party is added to perform all or a
part of the services provided by BISYS under this Agreement (excluding any
sub-accountant appointed by BISYS as provided in Section 2 hereof), then the
Trust shall make a one-time cash payment, as liquidated damages, to BISYS equal
to the balance due BISYS for the remainder of the term of this Agreement,
assuming for purposes of calculation of the payment that the asset level of the
Trust on the date BISYS is replaced, or a third party is added, will remain
constant for the balance of the contract term.
7. Standard of Care: Reliance on Records and Instructions:
Indemnification.
BISYS shall use its best efforts to insure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement with respect to such Fund or
based, if applicable, upon reasonable reliance on information, records,
instructions or requests with respect to such Fund given or made to BISYS by a
duly authorized representative of the Trust; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, gross negligence or from reckless disregard by it of its
obligations and duties, and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
8. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust and BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Trust and
to make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Trust
and its shareholders; except when requested to divulge such information by
duly-constituted authorities or court process.
6
<PAGE> 7
9. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be
liable, for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
10. Reports.
BISYS will furnish to the Trust and to its properly authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports and at such times as are prescribed pursuant to the terms and the
conditions of this Agreement to be provided or completed by BISYS, or as
subsequently agreed upon by the parties pursuant to an amendment hereto. The
Trust agrees to examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein no later than three
business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within three days after conducting a
diligent examination, are not so reported within the aforesaid period of time,
a report will for all purposes be accepted by and binding upon the Trust and
any other recipient, and BISYS shall have no liability for errors or
discrepancies therein and shall have no further responsibility with respect to
such report except to perform reasonable corrections of such errors and
discrepancies within a reasonable time after requested to do so by the Trust.
11. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. Return of Records.
BISYS may at its option at any time, and shall promptly upon
the Trust's demand, turn over to the Trust and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this
Agreement which are no longer needed by BISYS in the performance of its
services or for its legal protection. If not so turned over to the Trust, such
documents and records will be retained by BISYS for six years from the year of
creation. At the end of such six-year period, such records and documents will
be turned over to the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
7
<PAGE> 8
13. Representations of the Trust.
The Trust certifies to BISYS that: (1) as of the close of
business on the Effective Date, each Fund that is in existence as of the
Effective Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of BISYS.
BISYS represents and warrants that: (1) the various procedures
and systems which BISYS has implemented with regard to safeguarding from loss
or damage attributable to fire, theft, or any other cause the records, and
other data of the Trust and BISYS' records, data, equipment facilities and
other property used in the performance of its obligations hereunder are
adequate and that it will make such changes therein from time to time as are
required for the secure performance of its obligations hereunder, and (2) this
Agreement has been duly authorized by BISYS and, when executed and delivered by
BISYS, will constitute a legal, valid and binding obligation of BISYS,
enforceable against BISYS in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
15. Insurance.
BISYS shall notify the Trust should any of its insurance coverage
be canceled or reduced. Such notification shall include the date of change and
the reasons therefor. BISYS shall notify the Trust of any material claims
against it with respect to services performed under this Agreement, whether or
not they may be covered by insurance, and shall notify the Trust from time to
time as may be appropriate of the total outstanding claims made by BISYS under
its insurance coverage.
16. Information to be Furnished by the Trust and Funds.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of
the state in which such Declaration has been filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments thereto; and
8
<PAGE> 9
(ii) Certified copies of resolutions of the Board of
Trustees covering the approval of this Agreement,
authorization of a specified officer of the Trust to
execute and deliver this Agreement and authorization
for specified officers of the Trust to instruct BISYS
thereunder.
(c) A list of all the officers of the Trust, together with
specimen signatures of those officers who are authorized to
instruct BISYS in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
17. Information Furnished by BISYS.
(a) BISYS has furnished to the Trust the following:
(i) BISYS' Articles of Incorporation; and
(ii) BISYS' Bylaws and any amendments thereto.
(b) BISYS shall, upon request, furnish certified copies of
corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement; and
(ii) Authorization of BISYS to act as fund accountant for
the Trust and to provide accounting services for the
Trust.
18. Amendments to Documents.
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 16 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statements of
Additional Information of the Trust which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
19. Compliance with Law.
Except for the obligations of BISYS set forth in Section 8
hereof, the Trust assumes full responsibility for the preparation, contents and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the
9
<PAGE> 10
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. BISYS shall have no obligation to
take cognizance of any laws relating to the sale of the Trust's shares. The
Trust represents and warrants that no shares of the Trust will be offered to
the public until the Trust's registration statement under the Securities Act
and the 1940 Act has been declared or becomes effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
21. Headings.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
22. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party.
23. Governing Law.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the Commonwealth of Massachusetts.
24. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust personally, but shall bind
only the trust property of the Trust. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement has been
signed and delivered by an authorized officer of the Trust, acting as such, and
neither such authorization by the Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
trust property of the Trust as provided in the Trust's Agreement and
Declaration of Trust.
10
<PAGE> 11
Dated: 10/27/95
SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES OHIO, INC.
FEES
BISYS shall be entitled to receive a fee from each taxable Fund from each
tax-free Fund in accordance with the following schedule:
Average Daily Net Assets Fee Amount
- ------------------------ ----------
First $500 million .03%
Next $500 million .02%
All assets exceeding $1 billion .01%
Such fees shall be subject to a minimum annual fee amount of $30,000 per
taxable Fund (other than global or international Funds), $35,000 per tax-free
Fund and $40,000 per global or international Fund.
Multiple Classes of Shares:
Funds which have two or more classes of shares each having different net asset
values or paying different daily dividends are subject to an additional annual
fee of $10,000 per additional class.
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
--------------------------
B-1
<PAGE> 12
Dated: 10/27/95
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES OHIO, INC.
NAME OF FUND
- ------------------------------
Ernst Asia Fund
Ernst Global Resources Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
---------------------
A-1
<PAGE> 13
Dated: 2/2/96
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES OHIO, INC.
NAME OF FUND
- ----------------------------
Ernst Asia Fund
Ernst Global Resources Fund
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australian-New Zealand
Fixed Income Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
---------------------
A-1
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
---------------------
11
<PAGE> 1
Exhibit 9(c)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 27 day of October, 1995, between THE COVENTRY
GROUP ("the Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND
SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for
those series of the Trust set forth in Schedule A attached hereto, as such
Schedule may be amended from time to time (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
BISYS shall perform for the Trust the transfer agent services set
forth in Schedule B hereto.
BISYS also agrees to perform for the Trust such special services
incidental to the performance of the services enumerated herein as agreed to by
the parties from time to time. BISYS shall perform such additional services as
are provided on an amendment to Schedule B hereof, in consideration of such
fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the
Trust (individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided,
however, that the Sub-transfer Agent shall be the agent of BISYS and not the
agent of the Trust or such Fund, and that BISYS shall be fully responsible for
the acts of such Sub-transfer Agent and shall not be relieved of any of its
responsibilities hereunder by the appointment of such Sub-transfer Agent.
2. Fees.
The Trust shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule C hereto. BISYS may increase the fees it charges pursuant to the fee
schedule; provided, however, that BISYS may not increase such fees until the
expiration of the Initial Term of this Agreement (as defined below), unless the
Trust otherwise agrees to such change in writing. Fees for any additional
services to be
<PAGE> 2
provided by BISYS pursuant to an amendment to Schedule B hereto shall be
subject to mutual agreement at the time such amendment to Schedule B is
proposed.
3. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 2
hereof, the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses
in providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivery materials to and from the
Trust and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and
telecopy or other electronic transmission expenses
incurred by BISYS in communication with the Trust, the
Trust's investment adviser or custodian, dealers,
shareholders or others as required for BISYS to perform
the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction
of an officer of the Trust thereunto duly authorized.
4. Effective Date.
This Agreement shall become effective as of the date first
written above (the "Effective Date").
5. Term.
This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
October 27, 1998. Thereafter, it 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; provided, however, that after such termination, for so long
as BISYS, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement or any Schedule
or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force
2
<PAGE> 3
and effect. Fees and out-of-pocket expenses incurred by BISYS but unpaid by the
Trust upon such termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled to collect from the
Trust, in addition to the fees and disbursements provided by Sections 2 and 3
hereof, the amount of all BISYS' cash disbursements and a reasonable fee (which
fee shall be not less than one hundred and two percent (102%) of the sum of the
actual costs incurred by BISYS in performing such service) for services in
connection with BISYS' activities in effecting such termination, including
without limitation, the delivery to the Trust and/or its distributor or
investment adviser and/or other parties, of the Trust's property, records,
instruments and documents, or any copies thereof. Subsequent to such
termination, BISYS, for a reasonable fee, will provide the Trust with
reasonable access to any Trust documents or records remaining in its possession.
6. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be
liable for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
7. Legal Advice.
BISYS shall notify the Trust at any time BISYS believes that it
is in need of the advice of counsel (other than counsel in the regular employ
of BISYS or any affiliated companies) with regard to BISYS' responsibilities
and duties pursuant to this Agreement; and after so notifying the Trust, BISYS,
at its discretion, shall be entitled to seek, receive and act upon advice of
legal counsel of its choosing, such advice to be at the expense of the Trust or
Funds unless relating to a matter involving BISYS' willful misfeasance, bad
faith, gross negligence or reckless disregard with respect to BISYS'
responsibilities and duties hereunder and BISYS shall in no event be liable to
the Trust or any Fund or any shareholder or beneficial owner of the Trust for
any action reasonably taken pursuant to such advice.
8. Instructions.
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a
Fund, BISYS shall be entitled to rely upon any certificate, letter or other
instrument or communication, believed by BISYS to be genuine and to have been
properly made, signed or authorized by an officer or other authorized agent of
the Trust or by the shareholder or shareholder's agent, as the case may be, and
shall be entitled to receive as conclusive proof of any fact or matter required
to be ascertained by it hereunder a certificate signed by an officer of the
Trust or any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds
3
<PAGE> 4
to the extent that such services are described therein unless BISYS receives
written instructions to the contrary in a timely manner from the Trust.
9. Standard of Care; Reliance on Records and Instructions; Indemnification.
BISYS shall use its best efforts to ensure the accuracy of all services
performed under this Agreement, but shall not be liable to the Trust for any
action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, gross negligence or from reckless disregard by it of its
obligations and duties. The Trust agrees to indemnify and hold harmless BISYS,
its employees, agents, directors, officers and nominees from and against any
and all claims, demands, actions and suits, whether groundless or otherwise,
and from and against any and all judgments, liabilities, losses, damages,
costs, charges, counsel fees and other expenses of every nature and character
arising out of or in any way relating to BISYS' actions taken or nonactions
with respect to the performance of services under this Agreement or based, if
applicable, upon reasonable reliance on information, records, instructions or
requests given or made to BISYS by the Trust, the investment adviser and on
any records provided by any fund accountant or custodian thereof; provided that
this indemnification shall not apply to actions or omissions of BISYS in cases
of its own bad faith, willful misfeasance, gross negligence or from reckless
disregard by it of its obligations and duties; and further provided that prior
to confessing any claim against it which may be the subject of this
indemnification, BISYS shall give the Trust written notice of and reasonable
opportunity to defend against said claim in its own name or in the name of
BISYS.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Trust all books and
records which the Trust or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Trust and to make such
books and records available for inspection by the Trust or by the Securities and
Exchange Commission (the "Commission") at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Trust
and its shareholders, except when requested to divulge such information by
duly-constituted authorities or court process, or requested by a shareholder or
shareholder's agent with respect to information concerning an account as to
which such shareholder has either a legal or beneficial interest or when
requested by the Trust, the shareholder, or shareholder's agent, or the dealer
of record as to such account.
11. Reports.
BISYS will furnish to the Trust and to its properly-authorized auditors,
investment advisers, examiners, distributors, dealers, underwriters, salesmen,
insurance companies and others designated by the Trust in writing, such reports
at such times as are prescribed in Schedule D
4
<PAGE> 5
attached hereto, or as subsequently agreed upon by the parties pursuant to an
amendment to Schedule D. The Trust agrees to examine each such report or copy
promptly and will report or cause to be reported any errors or discrepancies
therein not later than three business days from the receipt thereof. In the
event that errors or discrepancies, except such errors and discrepancies as may
not reasonably be expected to be discovered by the recipient within three days
after conducting a diligent examination, are not so reported within the
aforesaid period of time, a report will for all purposes be accepted by and be
binding upon the Trust and any other recipient, and BISYS shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
12. Rights of Ownership.
All computer programs and procedures developed to perform services
required to be provided by BISYS under this Agreement are the property of
BISYS. All records and other data except such computer programs and procedures
are the exclusive property of the Trust and all such other records and data
will be furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this
Agreement which are no longer needed by BISYS in the performance of its
services or for its legal protection. If not so turned over to the Trust, such
documents and records will be retained by BISYS for six years from the year of
creation. At the end of such six-year period, such records and documents will
be turned over to the Trust unless the Trust authorizes in writing the
destruction of such records and documents.
14. Bank Accounts.
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed
hereunder. To the extent that the performance of such services shall require
BISYS directly to disburse amounts for payment of dividends, redemption
proceeds or other purposes, the Trust and Funds shall provide such bank or
banks with all instructions and authorizations necessary for BISYS to effect
such disbursements.
15. Representations of the Trust.
The Trust certifies to BISYS that: (a) as of the close of business
on the Effective Date, each Fund which is in existence as of the Effective Date
has authorized unlimited shares, and (b) by virtue of its Declaration of Trust,
shares of each Fund which are redeemed by the Trust may be sold
5
<PAGE> 6
by the Trust from its treasury, and (c) this Agreement has been duly authorized
by the Trust and, when executed and delivered by the Trust, will constitute a
legal, valid and binding obligation of the Trust, enforceable against the Trust
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors and secured parties.
16. Representations of BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties
under this Agreement; and (b) the various procedures and systems which BISYS
has implemented with regard to safekeeping from loss or damage attributable to
fire, theft or any other cause of the blank checks, records, and other data of
the Trust and BISYS' records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. Insurance.
BISYS shall notify the Trust should its insurance coverage with respect
to professional liability or errors and omissions coverage be canceled or
reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. Information to be Furnished by the Trust and Funds.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the state
in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of Trustees
covering the following matters:
6
<PAGE> 7
A. Approval of this Agreement and
authorization of a specified officer of
the Trust to execute and deliver this
Agreement and authorization for
specified officers of the Trust to
instruct BISYS hereunder; and
B. Authorization of BISYS to act as
Transfer Agent for the Trust on behalf
of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are
authorized to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statement of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or
its Distributor with regard to their
relationships and transactions with shareholders
of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent
(or as of the date on which BISYS' services are
commenced, whichever is the later date) and as to
receipt of full consideration by the Trust for all
shares outstanding, such statement to be certified by
the Treasurer of the Trust.
19. Information Furnished by BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement.
2. Authorization of BISYS to act as Transfer Agent for the
Trust.
7
<PAGE> 8
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad-13 under the
Exchange Act.
20. Amendments to Documents.
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forth-
with upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statement
of Additional Information of the Trust which might have the effect of changing
the procedures employed by BISYS in providing the services agreed to hereunder
or which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses
of every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action
as a result of any of such amendments or changes unless the Trust first obtains
BISYS' written consent to and approval of such amendments or changes.
22. Compliance with Law.
Except for the obligations of BISYS set forth in Section 10
hereof, the Trust assumes full responsibility for the preparation, contents,
and distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
23. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice at the following address: 3435
8
<PAGE> 9
Stelzer Road, Columbus, Ohio 43219, or at such other address as such party may
from time to time specify in writing to the other party pursuant to this
Section.
24. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way
affect BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1
hereof.
26. Governing Law and Matters Relating to the Trust as a
Massachusetts Business Trust.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the Commonwealth of Massachusetts. It
is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but shall bind only the trust property of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees, and this Agreement has been signed and delivered by an authorized
officer of the Trust, acting as such, and neither such authorization by the
Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as
provided in the Trust's Agreement and Declaration of Trust.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
--------------------------------
10
<PAGE> 11
Dated: 10/27/95
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES OHIO, INC.
NAME OF FUND
- --------------------------
Ernst Asia Fund
Ernst Global Resources Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
--------------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
--------------------------------
A-1
<PAGE> 12
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES, OHIO, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to
current shareholders.
B-1
<PAGE> 13
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a
load Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
B-2
<PAGE> 14
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES, OHIO, INC.
TRANSFER AGENT FEES
Annual Fee $20,000
Annual Account Fee $23.00 per shareholder account
Multiple Classes of Shares:
Classes of shares which have different net asset values or pay different daily
dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
Additional Services:
Additional services are subject to additional fees which will be quoted upon
request. The fee for IRA processing services shall be $20.00 per account per
tax year. Programming costs or database management fees for special reports or
specialized processing will be quoted upon request.
Out-of-pocket Expenses:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule C is attached.
C-1
<PAGE> 15
SCHEDULE D
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES, OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
D-1
<PAGE> 16
Dated: 2/2/96
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES OHIO, INC.
NAME OF FUND
------------
Ernst Asia Fund
Ernst Global Resources Fund
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australian-New Zealand
Fixed Income Fund
THE COVENTRY GROUP
By: /s/ R. Jeffrey Young
---------------------------
BISYS FUND SERVICES OHIO, INC.
By: /s/ Stephen G. Mintos
---------------------------
A-1
<PAGE> 1
Exhibit 15
[BISYS' LOGO]
BISYS FUND SERVICES LIMITED PARTNERSHIP, DISTRIBUTOR
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
SHAREHOLDER SERVICES AGREEMENT
Ladies and Gentlemen:
As the principal underwriter of the shares ("Shares") of each investment
company portfolio ("Fund") of Ernst World Funds (the "Trust"), BISYS Fund
Services Limited Partnership ("BISYS") hereby agrees that you, the undersigned
broker-dealer, shall provide the shareholder services that are more fully
described below.
1. We represent and warrant to you that the shareholder services described
herein have been authorized pursuant to a Distribution and Shareholder
Services Plan (the "Plan") adopted by the shareholders ("Shareholders") of
each Fund. The Plan has been adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). It is intended that you
shall provide such shareholder services to your customers ("Customers") who
may, from time to time, beneficially own a Fund's Shares.
2. You represent and warrant to us that (i) you are and will be at all times
relevant to this Agreement a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), and (ii) you are and
will be at all times relevant to this Agreement a broker-dealer properly
registered and qualified under all applicable federal, state and local laws
to engage in the business and transactions described in this Agreement. You
agree to comply with all applicable laws, including federal and state
securities laws, the Rules and Regulations of the Securities and Exchange
Commission and the Rules of Fair Practice of the NASD. We have furnished
you with a list of the states or other jurisdictions in which Shares of the
Funds have been registered for sale under, or are otherwise qualified for
sale pursuant to, the respective securities laws of such states and
jurisdictions. You agree that you will not offer a Fund's Shares to persons
in any jurisdiction in which such Shares are not registered or otherwise
qualified for sale. You further agree that you will maintain all records
required by applicable law or otherwise reasonably requested by us relating
to Fund transactions that you have executed.
3. You agree to provide various types of distribution assistance and
Shareholder support services with respect to a Fund's Shares. Such
distribution assistance and Shareholder support services may include those
items that are enumerated in Schedule A attached hereto and such other
similar services that we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
4. For all purposes of this Agreement, you shall be deemed to be an
independent contractor, and shall have no authority to act as agent for us
or for the Trust in any matter or in any respect. No person is authorized
to make any representations concerning us, the Trust, or a Fund's Shares
except those representations contained in the Fund's then-current
Prospectus and the Trust's Statement of Additional Information and in such
printed information as we or the Trust may subsequently prepare. You are
specifically authorized to distribute to Customers a Fund's Prospectus
(including any supplements to such Prospectus), the Trust's Statement of
Additional Information and sales material received from us. No person is
authorized to distribute any other sales material relating to the Trust
without our prior written approval. You further agree to deliver to
Customers, upon our request, copies of amended Prospectuses and Statements
of Additional Information.
<PAGE> 2
5. You and your employees will, upon request, be available during normal
business hours to consult with us concerning the performance of your
responsibilities under this Agreement. You will provide to us and the
Trust's Board of Trustees a written report of all expenditures under this
Agreement, including a discussion of the purposes for which such
expenditures were made. In addition, you will furnish to us or to the Trust
such information as we or the Trust may reasonably request (including,
without limitation, periodic certifications confirming the rendering of
distribution assistance and support services with respect to Shares
described herein), and will otherwise cooperate with us and the Trust in
the preparation of reports to the Trust's Board of Trustees concerning this
Agreement and the monies paid or payable by us under this Agreement, as
well as any other reports or filings that may be required by law.
6. The minimum dollar purchase of a Fund's Shares (including Shares being
acquired by Customers pursuant to the exchange privileges described in the
Fund's Prospectus) shall be the applicable minimum amount set forth in the
Prospectus of such Fund, and no order for less than such amount shall be
accepted by you. The procedures relating to the handling of orders shall be
subject to instructions which we shall forward to you from time to time.
All orders for a Fund's Shares are subject to acceptance or rejection by
the Trust in its sole discretion, and the Trust may, in its discretion and
without notice, suspend or withdraw the sale of a Fund's Shares, including
the sale of such Shares to you for the account of any Customer or
Customers. You acknowledge that it is your responsibility to date and time
stamp all orders received by you and to transmit such orders promptly to
us. You further acknowledge that any failure to promptly transmit such
orders to us that causes a purchaser of Shares to be disadvantaged, based
upon the pricing requirements of Rule 22c-1 under the 1940 Act, shall be
your sole responsibility. We reserve the right to cancel this Agreement at
any time without notice if any Shares shall be offered for sale by you at
less than the then-current offering price determined by or for the
applicable Fund.
7. For the services provided under this Agreement, you shall receive a fee
calculated at the applicable annual rate set forth on Schedule B hereto
with respect to the average daily net asset value of each Fund's Shares
which are owned of record by you as nominee for Customers or which are
owned by Customers whose records, as maintained by such Fund or its agent,
designate you as the Customer's dealer of record, which fee will be
computed daily and paid monthly. The fee will not be paid with respect to
(i) Shares of a Fund sold by you and redeemed or repurchased by the Trust
or by us within seven business days of receipt of confirmation of such
sale, or (ii) a Customer if the amount of such fee on an annual basis with
respect to such Customer shall be less than $1.00. The fee rate stated on
Schedule B hereto may be prospectively increased or decreased by us in our
sole discretion, at any time upon notice to you. Such fee shall be subject
to the limitations on the payment of asset-based sales charges that are set
forth in Article III, Section 26 of the NASD's Rules of Fair Practice.
8. Neither of us shall be liable to the other except for (1) acts or failures
to act which constitute a lack of good faith or negligence and (2)
obligations expressly assumed under this Agreement. In addition, you agree
to indemnify us and hold us harmless from any claims or assertions relating
to the lawfulness of your participation in this Agreement and the
transactions contemplated hereby or relating to any activities of any
persons or entities affiliated with your organization which are performed
in connection with the discharge of your responsibilities under this
Agreement. If such claims are asserted, you shall have the right to manage
your own defense, including the selection and engagement of legal counsel,
and all costs of such defense shall be borne by you.
2
<PAGE> 3
9. This Agreement will automatically terminate in the event of its
assignment. This Agreement may be terminated by either of us, without
penalty, upon ten days' prior written notice to the other party. This
Agreement may also be terminated at any time without penalty by the vote
of a majority of the Disinterested Trustees of a Fund or by a vote of a
majority of the outstanding voting securities of a Fund on ten days'
written notice.
10. All communications to us shall be sent to the address set forth on page 1
hereof or at such other address as we may designate in writing. Any notice
to you shall be duly given if mailed or telecopied to you at the address
set forth below or at such other address as you may provide in writing.
ERNST & COMPANY, Attn: Mutual Funds
ONE BATTERY PARK-PLAZA
NEW YORK, NEW YORK 10004
11. You represent and warrant that all requisite corporate proceedings have
been undertaken to authorize you to enter into this Agreement and to
perform the services contemplated herein. You further represent and warrant
that the individual that has signed this Agreement below is a duly elected
officer that has been empowered to act for and on behalf of your
organization with respect to the execution of this Agreement.
12. This Agreement supersedes any other agreement between us with respect to
the offer and sale of Shares and relating to any other matters discussed
herein. All covenants, agreements, representations and warranties made
herein shall be deemed to have been material and relied on by each party.
The invalidity of unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision
thereof. This Agreement may be executed in any number of counterparts,
which together shall constitute one instrument, and shall be governed by
and construed in accordance with the laws (other than the conflict of laws
rules) of the State of Ohio and shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
If the foregoing corresponds with your understanding of our agreement, please
sign this document and the accompanying copies thereof in the appropriate space
below and return the same to us, whereupon this Agreement shall be binding upon
each of us, effective as of the date of execution.
<TABLE>
<S> <C>
BISYS FUND SERVICES LIMITED PARTNERSHIP The foregoing Agreement is hereby
BY: BISYS FUND SERVICES, INC., GENERAL PARTNER accepted:
ERNST & COMPANY
-------------------------------------------
Company Name
By /s/ Stephen G. Mintos 11-17-95 By /s/ William P. Behrens 11/13/95
------------------------------------------- ----------------------------------------
Stephen G. Mintos Date William P. Behrens Date
Executive Vice President
</TABLE>
3
<PAGE> 4
Dated: As of November 13, 1995
Schedule A
to the
Shareholder Services Agreement
Shareholder Services
In accordance with Section 3 of the Shareholder Services Agreement, you agree
to provide various types of distribution assistance and shareholder support
services that we may reasonably request with respect to Fund Shares that are
beneficially owned by your Customers. Such distribution assistance and
shareholder support services may include the following.
Distribution Assistance
(i) placing orders with the Trust for the purchase or exchange of a Fund's
Shares and tendering a Fund's Shares to the Trust for redemption; (ii)
promoting the purchase of Shares by Customers; (iii) responding to inquiries
from Customers concerning their investments in Fund Shares; (iv) engaging in
advertising with respect to a Fund's Shares; and (v) distributing Fund
prospectuses, reports and sales literature.
Shareholder Support Services
(i) providing Customers with a service that invests the assets of their
accounts in a Fund's Shares pursuant to specific or pre-authorized
instructions; (ii) processing dividend payments from the Trust on behalf of
Customers; (iii) providing information periodically to Customers showing their
positions in a Fund's Shares; (iv) arranging for bank wire transfers of funds
to or from a Customer's account; (v) responding to inquiries from Customers
relating to the services performed by the Participating Organization under this
Agreement; (vi) providing subaccounting, in the case of omnibus accounts, with
respect to a Fund's Shares beneficially owned by Customers or the information
to the Trust necessary for subaccounting; (vii) if required by law, forwarding
Shareholder communications from the Trust (such as proxies, Shareholder
reports, annual and semi-annual financial statements, and dividend,
distribution, and tax notices) to Customers; (viii) forwarding to Customers
proxy statements and proxies containing any proposals regarding this Agreement
or a Fund's Plan; and (ix) rendering ongoing advice respecting the suitability
of particular investment opportunities offered by the Trust in light of the
Customer's need.
A-1
<PAGE> 5
Dated: As of November 25, 1995
Schedule B
to the
Shareholder Services Agreement
Compensation
Annual rate of up to 25 one-hundredths of one percent (.25%) of the average
daily net asset value of each Fund's Shares held of record by you from time to
time on behalf of Customers.
- ---------------
* All fees are computed daily and paid monthly.
B-1
