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ERNST WORLD FUNDS
WORLD
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST GLOBAL SMALLER COMPANIES FUND
ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND
ERNST & COMPANY
INVESTMENT ADVISER
PROSPECTUS DATED FEBRUARY 5, 1996
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................................................................... 2
Fee Table............................................................................. 4
Investment Objectives and Policies.................................................... 5
Investment Techniques................................................................. 9
Management of the Group............................................................... 14
Investment Restrictions............................................................... 17
Valuation of Shares................................................................... 17
How to Purchase and Redeem Shares..................................................... 18
Dividends and Taxes................................................................... 26
Expenses and Certain Fund Services.................................................... 28
General Information................................................................... 29
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INVESTMENT ADVISER
Ernst & Company
One Battery Park Plaza
New York, New York 10004
SUB-INVESTMENT ADVISER:
NATIONAL MUTUAL FUNDS
MANAGEMENT (GLOBAL), LTD.
447 Collins Street
Melbourne, Australia 3000
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
AUDITORS
Coopers & Lybrand, L.L.P.
100 East Broad Street
Columbus, Ohio 43215
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE GROUP
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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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.
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 February 5, 1995
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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 The Global Asset Allocation and the Global Smaller
Policies......................... Companies Funds seek long-term capital appreciation.
Under normal market conditions, the Global Asset
Allocation Fund will invest primarily in equity
securities of U.S. and foreign companies, debt
securities issued by both private issuers and
governments and in money market instruments. Under
normal market conditions, the Global Smaller Companies
Fund will invest primarily in equity securities of U.S.
and foreign companies, the market capitalization of
which is less than $1 billion. In the case of U.S.
companies, these smaller companies will usually have
market capitalization outside of the top 75% of U.S.
companies by market capitalization. In the case of
non-U.S. companies, these smaller companies will usually
have market capitalization outside of the top 50% of
companies by capitalization in their market. The
Australia-New Zealand Fixed Income Fund seeks current
income. Under normal market conditions, it will invest
primarily in fixed income securities which present
minimal credit risk and which are issued by the govern-
ments of Australia or New Zealand, or governmental
authorities in those countries.
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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 Expenses3....................................... 1.50% 1.50% 1.45%
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Total Fund Operating Expenses......................... 2.85% 2.85% 2.30%
========= ========== ============
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
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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.
Although the Fund is not restricted to any particular mix of equity, debt
and money market instruments, it will normally invest at least 10% of its total
assets in equity securities and at least 20% of its total assets in debt
securities or money market instruments. It will not invest more than 70% of its
total assets in equity securities or in debt securities at any one time. For
temporary, defensive purposes, the Fund may invest up to 100% of its assets in
debt securities of corporate and governmental issuers rated in the three highest
rating categories by a recognized rating service or determined to be of
comparable quality by NMFM and in liquid short-term money market instruments.
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The Fund intends to use various hedging techniques to hedge against
currency exchange rate risks. If the value of a currency in which the Fund has
invested a portion of its assets, should fall in value relative to the dollar,
the value of the Fund's invested assets, expressed in dollars, will also fall.
As a general policy, NMFM will attempt to hedge all foreign currency exposures
so that the Fund will not be exposed to the risk of foreign currency
fluctuations relative to the U.S. dollar. The Adviser may deviate from this
policy for temporary defensive purposes where the use of hedging techniques
appears particularly ill advised. (See "Foreign Currency Transactions"). In
addition to using forward foreign currency exchange contracts, the Fund may also
use foreign currency futures and options for foreign currency hedging purposes.
The Fund may also use futures and options contracts to facilitate efficient
cash management, portfolio restructuring and hedging purposes. The Fund will not
use such contracts to leverage its assets and these contracts will, in
accordance with applicable regulatory requirements, be covered by appropriate
assets or segregated accounts (see Futures Contracts; Call and Put Options).
NMFM uses a global investment process in managing the Fund which involves
an ongoing review of global economic developments, changes in economies and
securities markets in countries in which the Fund may invest, as well as
possible changes in currency values. NMFM relies upon its regional offices to
assist in these reviews. In part because of the periodic need to allocate and
reallocate assets among the asset classes of the Fund, it is anticipated that
the Fund's portfolio turnover rate may be approximately, but is not expected to
exceed, 100% (see Expenses and Portfolio Transactions and Foreign Investment
Risk).
ERNST GLOBAL SMALLER COMPANIES FUND
The investment objective of the Global Smaller Companies Fund is to seek
long-term capital appreciation. Under normal conditions, the Global Smaller
Companies Fund will invest primarily (i.e., at least 65% of its total assets) in
equity securities of U.S. and foreign small companies. The Fund will also
normally invest at least 65% of its total assets in at least three different
countries around the world. The balance of the Fund's assets will normally be
invested in equity securities of larger companies or other permissible
investments for the Ernst World Funds (See "Investment Techniques").
The Global Smaller Companies Fund is intended for long term investors who
seek broader diversification by investing a portion of their assets globally and
primarily in smaller sized companies. In today's share price environment,
companies with total market capitalization of less than $1 billion will be
considered small. In the case of U.S. companies, these smaller companies will
usually have market capitalization outside of the top 75% of U.S. companies by
market capitalization. In the case of non-U.S. companies, these smaller
companies will usually have market capitalization outside of the top 50% of
companies by capitalization in this market. Smaller companies can, in the view
of the Adviser and NMFM, represent attractive investment opportunities. Smaller
companies can sometimes focus their energies in more flexible and more
innovative ways than larger companies and can position themselves more readily
in growing sectors of an economy. Also, smaller companies sometimes are less
well researched by investment firms and may as a result be somewhat undervalued.
At the same time, investment in smaller companies may involve greater risk than
investing in larger companies. Smaller companies may have more limited product
lines, markets or financial and management resources. Securities trading markets
for smaller companies often trade less frequently and in smaller volume and may
be subject to more abrupt or erratic price movements affecting the value of the
Fund's shares.
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For temporary, defensive purposes, the Fund may invest up to 100% of its
assets in debt securities of corporate and governmental issuers rated in the
three highest rating categories by a recognized rating organization or
determined to be of comparable quality by NMFM and in liquid short-term money
market instruments.
The Fund intends to use various hedging techniques to hedge against
currency exchange rate risks. If the value of a currency in which the Fund has
invested a portion of its assets, should fall in value relative to the dollar,
the value of the Fund's invested assets, expressed in dollars, will also fall.
As a general policy, NMFM will attempt to hedge all foreign currency exposures
so that the Fund will not be exposed to the risk of foreign currency
fluctuations relative to the U.S. dollar. The Adviser may deviate from this
policy for temporary defensive purposes where the use of hedging techniques
appears particularly ill advised. (See "Foreign Currency Transactions"). In
addition to using forward foreign currency exchange contracts, the Fund may also
use foreign currency futures and options for foreign currency hedging purposes.
The Fund may also use futures and options contracts to facilitate efficient
cash management, portfolio restructuring and hedging purposes. The Fund will not
use such contracts to leverage its assets and these contracts will, in
accordance with applicable regulatory requirements be covered by appropriate
assets or segregated accounts (see Futures Contracts; Call and Put Options).
NMFM uses a global investment process in managing the Fund. It reviews on
an on-going basis global economic developments in the regions and countries in
which the Fund may invest. It examines conditions in local economies, securities
markets, companies and currencies and relies upon its regional offices to assist
in these reviews. NMFM does not anticipate the Fund's portfolio turnover rate to
exceed 75%.
ERNST AUSTRALIA-NEW ZEALAND FIXED INCOME FUND
The investment objective of the Australia-New Zealand Fixed Income Fund is
current income. The Fund seeks this objective by investing primarily (i.e., at
least 65% of its total assets) in fixed income securities which present minimal
credit risk and which are issued or guaranteed by either the government of
Australia or New Zealand, or governmental authorities in those countries.
The Australia-New Zealand Fixed Income Fund is intended for investors who
wish to diversify their investments by investing in a fund which holds high
quality debt securities issued primarily by Australian and New Zealand
governmental bodies. Historically, debt securities of Australia-New Zealand
governments have provided higher yields than U.S. government securities. Like
the United States, Australia and New Zealand have had more stable economic and
political environments than many other countries of the world. However, like
other funds investing outside of the United States, this Fund will be exposed to
the risks of international investing (see Risk Factors and Special
Considerations).
The Fund will invest at least 65% of its total assets in securities issued
or guaranteed by the Australian government, its agencies, authorities and
instrumentalities, as well as Australian state governments and their agencies,
authorities and instrumentalities, and in comparable securities issued by the
New Zealand government, its agencies or instrumentalities. The Fund may also
invest in high rated corporate debt securities of Australian or New Zealand
companies and money market instruments. The average duration of securities held
by the Fund is expected to be normally between 2 and 6 years. All securities
held by the Fund must be rated in one of the three highest rating categories by
a recognized rating agency or be of comparable quality in the view of NMFM. For
temporary defense purposes, the Fund may reduce its holdings of Australia and
New
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Zealand securities and invest all its assets in U.S. government securities. The
Fund does not anticipate that its portfolio turnover rate will exceed 500%. The
Fund will be actively traded by NMFM to increase income. Existing tax rules will
limit the extent of such trading. While debt securities are generally traded
free of brokerage commissions, dealer spreads or mark-ups do not make such
trading free of trading costs.
The Fund does not intend to engage in hedging transactions to hedge against
currency exchange risks, since it is intended for investors who desire a "pure
play," that is exposure to Australian interest rate and currency fluctuations.
Accordingly, the net asset value of the Fund's shares will fluctuate with
changes in both interest rates in Australia and New Zealand and currency
exchange rates. As interest rates increase, the value of the Fund's holdings
will generally decrease and as interest rates decrease, the value of the Fund's
holdings will generally increase. If the value of Australian and New Zealand
currencies fall relative to the U.S. dollar, the value of the Fund's holdings
expressed in dollars would also fall. If those currencies were to increase in
value relative to the U.S. dollar, the value of the Fund's holdings in U.S.
dollars would increase. Under extraordinary circumstances, the Fund may,
however, use foreign currency hedging strategies (see Foreign Currency
Transactions) to attempt to avoid losses that are highly likely to occur in the
view of the sub-adviser.
Because the Fund may invest a substantial portion of its assets in
securities issued by the Australian government, it will be considered a
non-diversified fund. It also will have a policy to concentrate its investments
in Australian governmental issuers. In general, funds which are non-diversified
or concentrate in particular industry groups are considered more risky than
diversified funds or funds which do not concentrate. Non-diversified funds and
funds that concentrate their investments may be more susceptible to any single
economic, political or regulatory event. As noted above, the Fund is investing
primarily in high quality securities issued by Australian and New Zealand
governmental bodies. These securities will be guaranteed as to principal and
interest by the issuing body or the national or state government of Australia or
New Zealand as the case may be, although there can be no guarantee that
political upheaval would never lead to a repudiation.
The Fund will, nonetheless, be required to comply with diversification
requirements of the U.S. Internal Revenue Code. These requirements will
generally restrict the Fund's investments, with respect to particular
governmental bodies, such that the Fund could not invest substantial assets in a
single issuer for extended periods of time.
Australian Governmental Entities. The Fund is permitted to invest in
Commonwealth of Australia government bonds and treasury notes and state
government and semi-government bonds and notes. Commonwealth government bonds
and treasury notes represent the obligations of the Commonwealth of Australia
and are sold by the Reserve Bank of Australia (the central bank) through public
tenders. Bonds typically have maturities of twelve to fifteen years but may be
longer term. Notes may be issued in maturities up to six months. The
Commonwealth also guarantees as to payment of principal and interest similar
debt obligations issued by its instrumentalities. State government and
semi-government bonds and notes are issued by various States and State
instrumentalities and, in the case of State instrumentalities, are guaranteed by
the applicable State government. Maturities range from less than one year to 15
years.
Mortgage-Backed Securities. The Fund is also permitted to invest in
Australian mortgage-backed securities, which represent part ownership by the
Fund in a pool of mortgage loans. These loans are made by private lenders and to
be eligible for purchase by the Fund must have assurances from Australian
federal and
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state governmental entities or agencies. These securities must also satisfy the
Fund's general credit criteria to qualify for purchase.
The Fund may invest in options and futures contracts to assist in the
efficient management of cash holdings and for other investment purposes. (See
Futures Contracts, Call and Put Options.)
Information about Australia. Australia comprises an area almost the same
size as the United States, excluding Alaska. Its population is approximately 18
million. The Commonwealth of Australia was formed as a federal union in 1901,
with federal legislative powers vested in the Federal Parliament and federal
executive power in the Governor-General who is advised by a Federal Executive
Council comprised of the Prime Minister and other Federal Ministers. Prior to
World War II, the economy was highly dependent on the rural sector. In the last
forty years there has been strong growth in the economy and diversification so
that the rural sector now accounts for less than 5% of gross domestic product
and employment. During the 1990s, Australia has experienced good growth in gross
domestic product of around 3% and generally low inflation rates below 3%.
Australia has traditionally been a net importer of capital and has traditionally
run a current account deficit. Exchange rates between the U.S. dollar and
Australia dollar have fluctuated between 1990 and 1995 between a low of $1.21
and a high of $1.55 Australian dollars per U.S. dollar. In late January 1995,
the exchange rate was $1.35 Australian to $1.00 U.S. Changes in the exchange
rate may occur for numerous reasons and could be significant, affecting the U.S.
dollar value of the Fund's assets, its yield and the amount of securities needed
to be sold in order to meet dividend distribution requirements.
Australian interest rates, both short and long term, generally declined
during the early 1990s but increased during 1994. 10 year Australian Government
Bonds have, during the 1990's, carried interests rates that have generally
exceeded 10 year U.S. Government Bond rates by 1% to 2.5%. There is no assurance
that this will continue. (See the Statement of Additional Information for
information comparing interest rates of U.S. and Australian Bonds). During most
of the 1990s, the Australian government has run budget deficits in excess of 10%
of revenues. The Commonwealth and State governments of Australia and their
agencies and instrumentalities issue bonds and notes which are generally listed
on the Australian Stock Exchange. Most trading in Australian debt securities
takes place over-the-counter.
INVESTMENT TECHNIQUES
The following investments and investment techniques are available to each
of the Funds, unless otherwise indicated. When an investment limitation is
expressed in terms of a percentage of a Fund's assets, that limitation will
apply at the time the investment is made. The Funds are not required to sell
assets as a result of subsequent market changes in asset values.
EQUITY SECURITIES (ALL FUNDS EXCEPT THE AUSTRALIA-NEW ZEALAND FIXED INCOME FUND)
Equity securities include but are not limited to common and preferred
stock, debt securities convertible into common stock (sometimes referred to as
"convertible debentures"), common stock purchase warrants, closed-end country
funds listed on a securities exchange, American Depositary Receipts, European
Depositary Receipts and Global Depositary Receipts.
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DEBT SECURITIES (ALL FUNDS)
Debt securities are securities issued by companies and governments in
various forms such as bonds, notes and debentures, and the fixed income
valuation of securities convertible into stock and convertible stock. The issuer
receives an amount of money which it promises to repay at a particular time
(typically the maturity date of the security). The issuer promises to pay
interest at stated intervals in either a fixed or variable amount. Debt
securities issued by governments and private issuers often receive ratings from
recognized rating agencies. (See Appendix A.)
DEPOSITARY RECEIPTS (ALL FUNDS)
American Depositary Receipts ("ADRs") are Depositary Receipts typically
issued by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs") are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risk of other
investments in foreign securities, as discussed below.
FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS)
Forward Foreign Currency Exchange Contracts are used in order to protect
against the adverse effect that future changes in foreign currency exchange
rates may have on an investment portfolio or on its investment activities that
are undertaken in foreign currencies. Many of the foreign securities in which
the Funds invest will be denominated in foreign currencies. Changes in foreign
exchange rates will affect the value of securities denominated or quoted in
foreign currencies. Exchange rate movements can be large and can endure for
extended periods of time, affecting either favorably or unfavorably the value of
the Fund's assets.
Contracts to purchase foreign currencies are used to protect against an
anticipated rise in the U.S. dollar price of securities it intends to purchase.
Contracts to sell foreign currencies are used to protect against the decline in
value of its foreign currency-denominated portfolio securities due to a decline
in the value of the foreign currencies relative to the U.S. dollar. A Fund may
use one currency (or a basket of currencies) to hedge against adverse changes in
the value of another currency (or a basket of currencies) when exchange rates
between the two currencies are correlated. Contracts to sell foreign currency
would limit any potential gain which might be realized by a Fund if the value of
the hedged currency increases. Foreign currency transactions may include forward
foreign currency contracts, currency exchange transactions on a spot (i.e.,
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<PAGE> 13
cash) basis, put and call options on foreign currencies, and foreign exchange
futures contracts. No assurance can be given that these techniques will be
successful if used.
FUTURES CONTRACTS (ALL FUNDS)
Each Fund may enter into contracts for the future delivery of securities
and futures contracts based on a specific security, class of securities or an
index. Each Fund may also purchase or sell options on any such futures contracts
and engage in related closing transactions. A futures contract on a securities
index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on the
level of a specified securities index. The Funds may engage in such futures
contracts for hedging purposes, for example, to manage its cash position through
exposure to particular markets or securities through the purchase of financial
futures contracts and to a more limited extent for general trading and
investment purposes. When interest rates are expected to fall or market values
are expected to rise, a Fund, through the purchase of such contracts, can
attempt to secure better rates or prices for the Fund than might later be
available in the market when it effects anticipated purchases.
Aggregate initial margin deposits for futures contracts for other than
"bona fide hedging" purposes, as defined in applicable rules of the Commodity
Futures Trading Commission, may not exceed 5% of a Fund's total assets, and the
value of securities that are the subject of such futures and options on all such
futures contracts may not exceed the market value of a Fund's total assets.
GOVERNMENT OBLIGATIONS (ALL FUNDS)
The Funds may invest in government obligations of the U.S. Government as
well as government obligations of foreign countries. The types of U.S.
Government Obligations invested in by a Fund will include obligations issued or
guaranteed as to payment of principal and interest by the full faith and credit
of the U.S. Treasury, such as Treasury bills, notes, bonds and certificates of
indebtedness, and obligations issued or guaranteed by the agencies or
instrumentalities of the U.S. Government, but not supported by such full faith
and credit. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations. The Funds may also invest in
obligations issued or guaranteed by foreign governments or their agencies and
instrumentalities.
MONEY MARKET INSTRUMENTS (ALL FUNDS)
The Funds may invest in U.S. and foreign money market instruments. Money
market instruments consist of: repurchase agreements, certificates of deposit,
time deposits and bankers acceptances; commercial paper rated in one of the two
highest rating categories by at least one recognized rating organization or
deemed to be of comparable quality by the Fund's sub-adviser and money market
mutual funds.
CALL AND PUT OPTIONS (ALL FUNDS)
Each Fund may purchase call options or write (sell) call options on
securities or on security indexes. The Fund is not required to own the
underlying security or the securities in the index. A call option gives the
11
<PAGE> 14
purchaser of the option the right to buy, and obligates the seller of the option
to sell, the underlying security or group of securities at the stated exercise
price at any time prior to the expiration date of the option, regardless of the
market price of the security. When a Fund writes a covered call option (i.e., an
option where the Fund owns the underlying security) and such option is
exercised, it will forgo the appreciation, if any, on the underlying security in
excess of the exercise price. In order to close out a call option it has
written, a Fund may enter into a "closing purchase transaction" -- the purchase
of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously wrote on any
particular securities. When a portfolio security subject to a call option is
sold, the Fund may effect a closing purchase transaction to close out any
existing call option on that security. If a Fund is unable to effect a closing
purchase transaction, it will not be able to sell the underlying security until
the option expires or the Fund delivers the underlying security upon exercise.
If the Fund writes an uncovered call, it will segregate assets equal to the
market value of the underlying security or securities index, using highly liquid
instruments. Each Fund will not permit the underlying value of their portfolio
securities subject to such options to exceed 50% of its total assets.
The Funds may also purchase and sell puts. A Fund, when it acquires a put,
would have the right to sell or redeem a specified security at a certain time or
within a certain period of time at a specified price. The security is sold to a
third party or redeemed by the issuer as provided contractually. The put may be
an independent feature or may be combined with a reset feature that is designed
to reduce downward price volatility as interest rates rise by enabling the
holder to liquidate the investment prior to maturity. The Funds may acquire put
options to facilitate portfolio liquidity, shorten the maturity of the
underlying security, or to permit the investment of funds at a more favorable
rate of return. The price of a put option or putable security may be higher than
the price which otherwise would be paid for the security without such put
feature, thereby increasing the security's cost and reducing its yield. The time
remaining to the put date will apply for purposes of determining the maximum
maturity of such securities. When the Fund acquires a put for a security or
group of securities it does not own or when it writes a put, it will segregate
highly liquid assets equal in value to its obligation under the put agreement.
The call and put options discussed above, which are traded on exchanges and
over-the-counter, may also be referred to as derivatives. Derivatives generally
are instruments whose value is derived from or related to the value of some
other instrument or index. While exchange traded options in the U.S. are
generally liquid, over-the-counter options are generally illiquid.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS (ALL FUNDS)
Each Fund may purchase securities on a when-issued or delayed-delivery
basis. A Fund will engage in when-issued and delayed-delivery transactions only
for the purpose of acquiring portfolio securities consistent with its investment
objectives and policies, not for investment leverage. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those available in the market when delivery takes
place. A Fund will generally not pay for such securities or start earning
interest on them until they are received. When a Fund agrees to purchase such
securities, however, the Fund's custodian will set aside cash or liquid
securities equal to the amount of the commitment in a separate account.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in the value based upon changes in the general level of
interest rates. In when-issued and delayed-delivery transactions, a Fund relies
on the seller to
12
<PAGE> 15
complete the transaction; the seller's failure to do so may cause a Fund to miss
a price or yield considered to be advantageous.
Each Fund's commitments to purchase when-issued securities will not exceed
25% of the value of its respective total assets, absent unusual market
conditions. Each of the Funds does not intend to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objectives.
REPURCHASE AGREEMENTS (ALL FUNDS)
Each Fund may enter into repurchase agreements to earn income. A repurchase
agreement is an agreement whereby a Fund purchases securities and the seller
agrees to repurchase the securities within a particular time at a specified
price. Such price will exceed the original purchase price, the difference being
income to the Fund, and will be unrelated to any interest rate on the purchased
security. The Fund's Custodian will maintain the custody of the purchased
securities for the duration of the agreement. The value of the purchased
securities, including any accrued interest, will at all times exceed the value
of the repurchase agreement. In the event of the bankruptcy of the seller or the
failure of the seller to repurchase the securities as agreed, a Fund could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. The
Trustees have reviewed and approved certain sellers who they believe to be
creditworthy and have authorized the Funds to enter into repurchase agreements
with such sellers.
OTHER INVESTMENT POLICIES (ALL FUNDS)
Each of the Funds may invest up to 5% of its total assets in another
investment company, not to exceed 10% of the value of its total assets in the
securities of other investment companies. A Fund will incur additional expenses
due to the duplication of expenses as a result of investing in other mutual
funds. Additional restrictions on a Fund's investments in the securities of
other mutual funds are contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Foreign Investment Risk
Investment in foreign securities is subject to special risks that differ in
some respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income and
other taxes, possible seizure, nationalization, or expropriation of foreign
investments or deposits, currency blockage, less stringent disclosure
requirements, the possible establishment of exchange controls, or the adoption
of other foreign governmental restrictions. Additional risks include the
difficulty in obtaining or enforcing a court judgment abroad, restrictions on
foreign investment in other jurisdictions, reduced levels of governmental
regulation of certain foreign securities markets, difficulties in effecting
repatriation of capital invested abroad, difficulties in transaction
settlements, different accounting and financial standards and the possibility of
price volatility and reduced liquidity in certain foreign markets. For
additional information regarding the special risks associated with investments
in foreign securities, see "Foreign Investments" in the Statement of Additional
Information.
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<PAGE> 16
Brokerage commissions, custodial services and other costs relating to
investments in foreign countries are generally more expensive than the United
States. Foreign securities markets have different clearance and settlement
systems. In certain markets, settlements can be delayed, resulting in temporary
periods when a Fund may not be fully invested, difficulty in disposing of
securities or difficulty in achieving attractive investment opportunities. In
addition, different business practices and different levels of government
supervision and regulation may cause increased risk of loss due to lost, stolen
or counterfeit securities.
Because of their specialized investment techniques and their emphasis on
foreign securities, the Funds should be considered as vehicles for
diversification of investments and not as balanced investment programs.
Currency Risks
Since significant portions of the Funds will be invested in currencies
other than the U.S. Dollar, changes in the exchange rate of the U.S. Dollar
against other currencies will affect the U.S. Dollar value of the Funds. This
risk is particularly present for the Australia-New Zealand Fixed Income Fund
which does not intend to hedge against currency risks. Currency exchange rates
are determined by forces of supply and demand on the foreign exchange markets.
These forces are in turn affected by international balance of payments and other
economic, political and financial conditions, government intervention,
speculation and other factors. Each Fund's net asset value will be reported, and
distributions from the Funds will be made, in U.S. dollars. Therefore, a Fund's
reported net asset value and distributions would be adversely affected by
depreciation of foreign currencies relative to the U.S. Dollar.
Other Considerations
The Adviser and the Sub-Adviser began managing for the first time other
U.S. registered mutual funds in 1995; however, the Adviser and the Sub-Adviser
have extensive prior experience in providing investment advisory services to
large institutional clients, high net worth individuals and, in the case of the
Sub-Adviser, to several mutual funds organized outside of the United States in
such markets as Hong Kong, Australia, New Zealand and Luxembourg.
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of the Group's funds. There are
currently five Trustees, of whom two are "interested persons" of the Group
within the meaning of that term under the 1940 Act. The Group is managed by the
Trustees in accordance with the laws of Massachusetts governing business trusts.
The Trustees, in turn, elect the officers of the Group to supervise actively its
day-to-day operations.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. However, no
officer or employee of BISYS Fund Services or BISYS Fund Services Ohio, Inc.
receives any compensation from the Group for acting as a Trustee of the Group.
The officers of the Group (see the Statement of Additional Information) receive
no compensation directly from the Group for performing the duties of their
offices. BISYS Fund Services receives fees from the Funds for
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<PAGE> 17
acting as administrator. BISYS Fund Services Ohio, Inc. receives fees from the
Funds for acting as Transfer Agent and for providing certain fund accounting
services.
INVESTMENT ADVISER AND SUB-INVESTMENT ADVISER
Ernst & Company
Ernst & Company, New York, New York (the "Adviser" or "Ernst") serves as
investment adviser to the Funds. Ernst is a securities investment firm that was
founded in 1924. Ernst has been a member of the New York Stock Exchange for over
65 years and is a member of each of the major U.S. stock exchanges. Ernst acts
as a specialist on the New York and American Stock Exchanges and is also a
market maker in the over-the-counter markets. It is an institutionally oriented
broker-dealer firm that serves numerous institutional and individual accounts
through its correspondent broker-dealer firms. Ernst is registered as an
investment adviser with the Commission and with sixteen states and currently
manages approximately $40 million in a general securities managed account
program, $1 million in a U.S. domestic bank equities managed account program and
$9 million in The Ernst Bank Equity Fund, L.P., a limited partnership that
invests in U.S. domestic bank equities.
Subject to the general supervision of the Group's Board of Trustees and in
accordance with a Fund's investment objective and restrictions, Ernst oversees
and supervises management of the investments of each Fund. Ernst will review the
performance of the Sub-Adviser who will be fully responsible for the selection
of each respective Fund's portfolio investments. For the services provided and
expenses assumed pursuant to its investment advisory agreement with the Group,
Ernst receives a fee computed daily and paid monthly, at the annual rate of one
and one tenth of one percent (1.10%) of the Fund's average daily net assets, in
the case of the Global Asset Allocation and Smaller Companies Funds. Ernst in
turn pays the Sub-Adviser seven tenths of one percent (0.70%) of the average
daily net assets of each of these funds. The investment advisory fees paid by
the Funds are higher than those paid by most other investment companies that
invest in domestic U.S. securities, but they are not necessarily higher than the
fees paid by those investment companies with investment objectives similar to
those of the Funds. In the case of the Australian-New Zealand Fixed Income Fund,
Ernst receives a fee computed daily and paid monthly, at an annual rate of six
tenths of one percent (0.60%) of the Fund's average daily net assets. Ernst in
turn pays the sub-adviser four tenths of one percent (0.40%) of the Fund's
average daily net assets. Ernst may periodically waive all or a portion of its
advisory fee which will cause the yield of a Fund to be higher than it would
otherwise be in the absence of such a waiver.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia ("NMFM")
NMFM of Melbourne, Australia serves as sub-adviser to each of the Funds.
NMFM is part of the worldwide AXA Group of Companies which provide insurance and
investment services in locations throughout the world. NMFM is a subsidiary of
National Mutual Holdings, the parent company of the National Mutual Group of
Companies, which have been involved in the provision of insurance and investment
services for in excess of 125 years. NMFM, through NMFM and its affiliated
companies now manage over $15 billion in assets. NMFM has access to global money
management resources through affiliates in the United Kingdom, Japan, Hong Kong,
New Zealand and the United States. NMFM's staff includes 150 investment
professionals.
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<PAGE> 18
The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the Fund's portfolio:
The Global Asset Allocation Fund is managed on a day to day basis by
Richard Greenfield, Investment Director of National Mutual Funds Management
(Global) Limited. Mr. Greenfield has held this position since December 1995.
Prior to this he held the positions of Managing Director for Australia, Chief
Investment Manager for Australia and Head of the Research and Strategy Group. He
has been with NMFM Group since 1986 and prior to this was a Partner/Principal
for an international firm of consulting actuaries.
The Global Smaller Companies Fund is managed on a day to day basis by Nigel
Purchase, Executive Director, International Strategy, since July 1995. He has
been employed by NMFM since January 1995. Prior to that he was held the
positions of Chief Economist for two Australian broker houses, ANZ McCaughan
(1993-94) and Potter Warburg (1990-93), and for the U.K. based life insurance
company, Norwich Union (1988-90).
The Australia-New Zealand Fixed Income Fund is managed on a day-to-day
basis by Kevin Talbot. Mr. Talbot joined NMFM in 1985 and was appointed Manager,
Fixed Income Investments in 1989 and was in 1992 appointed to his present
position, Manager, Financial Markets with responsibility for the management of
all of NMFM's Australian fixed income and currency dealings. He will be assisted
by Mark Brown based in New Zealand who has been a fixed income manager for NMFM
since September 1994. Prior to that he was an analyst with NMFM which he joined
in May 1994. From 1992 to 1994, Mr. Brown was an international bond manager with
Credit Suisse Asset Management. From 1990 to 1992, Mr. Brown was a bond trader
and foreign exchange dealer.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership ("BISYS Fund Services") is the
administrator for the Funds and also acts as the Funds' principal underwriter
and distributor (the "Administrator" or the "Distributor," as the context
indicates). BISYS Fund Services is wholly-owned by The BISYS Group, Inc., 150
Clove Road, Little Falls, New Jersey 07424, a publicly owned company engaged in
information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the Funds'
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Funds, the Administrator receives a fee computed daily and paid periodically,
calculated at an annual rate of seventeen one-hundredths of one percent (0.17%)
of the Fund's first $500 million in average daily net assets. This fee is
reduced on a sliding scale to 0.05% of assets in excess of $1 billion. The
Administrator is entitled to a minimum fee of $75,000 per Fund per year. The
Administrator may periodically waive all or a portion of its administrative fee
which will cause the yield of a Fund to be higher than it would otherwise be in
the absence of such a waiver.
The Distributor acts as agent for the Funds in the distribution of their
Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities.
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INVESTMENT RESTRICTIONS
A Fund is subject to a number of investment restrictions, some of which
that may be changed only by a vote of a majority of the outstanding Shares of
such a Fund (as defined in the Statement of Additional Information). The
following are three of the Funds' investment restrictions which may only be
changed by a majority vote of the outstanding shares of a Fund:
Each of the Funds will not:
1. Purchase securities while borrowings in excess of 5% of its total assets
are outstanding.
2. Make loans, except that a Fund may purchase or hold debt securities and
other investments and enter into repurchase agreements in accordance with its
investment objective and policies.
3. Other than the Australia-New Zealand Fixed Income Fund which
concentrates in securities issued by Australian governmental issuers, none of
the Funds will invest in excess of 25% of its total assets in issuers in a
particular industry or group of industries.
In addition to the above investment restrictions, each Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Funds' Statement of Additional
Information.
Any of these investment restrictions, as well as other investment policies,
that may limit a Fund's investment to a specified percentage of Fund assets
apply only at the time of investment. The Funds are not required to sell
portfolio investments which have appreciated in value relative to other assets
in order to comply with investment limitations.
VALUATION OF SHARES
The net asset value of each of the Funds is determined and its Shares are
priced as of the close of regular trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern Time) on each Business Day ("Valuation
Time"). As used herein, a "Business Day" constitutes any day on which the NYSE
is open for trading, and any other day except days on which there are not
sufficient changes in the value of the Fund's portfolio securities that the
Fund's net asset value might be materially affected and days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, the NYSE is closed on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets of the Fund less the liabilities charged to the Fund by the number of its
outstanding Shares. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the scheduled closing time of the NYSE, if that is earlier,
and that value is then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, Eastern time, on the day the value of the
foreign security is determined. If no sale is reported at that time, the mean
between the current bid and asked price is used. Occasionally, events which
affect the values of such securities and such exchange rates may occur between
the times at which they are determined and the close of the NYSE, and will
therefore not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur
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<PAGE> 20
during such period, then these securities will be valued at fair value as
determined by the management and approved in good faith by the Board of
Trustees.
The securities in the Funds will be valued at market value. If market
quotations are not available, the securities will be valued by a method which
the Board of Trustees believes accurately reflects fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Funds are sold on a continuous basis by the Group's
Distributor, BISYS Fund Services. The principal office of the Distributor is
3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, contact
the Funds at (800) 672-4797.
PURCHASES OF SHARES
Shares of the Funds are continuously offered and may be purchased directly
either by mail, by telephone or by electronic transfer. Shares may also be
purchased through a broker-dealer who has established a dealer agreement with
the Distributor. The minimum investment is generally $1,000 for the initial
purchase of Shares ($250 in the case of an Ernst World IRA) and $50 for
subsequent purchases. For purchases that are made in connection with 401(k)
plans, 403(b) plans and other similar plans or payroll deduction plans, the
minimum investment amount for initial and subsequent purchases is $50. (But, see
"HOW TO PURCHASE AND REDEEM SHARES -- Auto Invest Plan" below for minimum
investment requirements under the Auto Invest Plan).
Purchasers of Shares of the Funds will pay the sum of the next calculated
net asset value per Share after the Distributor's receipt of an order to
purchase Shares in good form plus a sales charge, when applicable ("public
offering price") (see "HOW TO PURCHASE AND REDEEM SHARES" below).
In the case of orders for the purchase of Shares placed through a
broker-dealer, the public offering price will be the net asset value as so
determined plus any applicable sales charge, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Funds by the Valuation Time. The broker-dealer is responsible for
transmitting such orders promptly. If the broker-dealer fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next Business Day.
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<PAGE> 21
Purchases By Mail
To purchase Shares of a Fund, complete an Account Application and return it
along with a check (or other negotiable bank draft or money order) in at least
the minimum initial purchase amount, made payable to the appropriate Fund to:
Ernst World Funds
Dept. L-1636
Columbus, Ohio 43260-1636
An Account Application form can be obtained by calling your broker or the
Funds at (800) 672-4797. Subsequent purchases of Shares of a Fund may be made at
any time by mailing a check payable to a Fund, to the above address.
Purchases by Telephone
Shares of a Fund may be purchased by calling your broker or the Funds at
(800) 672-4797, if your Account Application, in good form, has been previously
received by the Distributor. Payment for Shares ordered by telephone is made by
electronic transfer to the Funds' custodian. Prior to wiring funds and in order
to ensure that wire orders are invested promptly, investors must call the Funds
at the number above to obtain instructions regarding the bank account number to
which the funds should be wired and other pertinent information.
Other Information Regarding Purchases
Purchases of Shares in a Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") based upon the public offering price. In the
case of an order for the purchase of Shares placed through a broker-dealer, it
is the responsibility of the broker-dealer to transmit the order to the
Distributor promptly.
The Group reserves the right to reject any order for the purchase of a
Fund's Shares in whole or in part including purchases made with foreign and
third party checks.
Every Shareholder of record will receive a confirmation of each transaction
in his or her account, which will also show the total number of Shares of a Fund
owned by the Shareholder. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares of the Funds will not be issued.
SALES CHARGES
The Public Offering Price of Shares of the Funds equals the sum of the net
asset value per Share plus a sales load in accordance with the table below. The
BISYS Fund Services receives this sales charge as Distributor and reallows a
portion of it as dealer discounts and brokerage commissions. However, the
Distributor, in its sole discretion, may pay certain dealers all or part of the
portion of the sales charge it receives. A broker or dealer who receives a
reallowance in excess of 90% of the sales charge may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933.
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GLOBAL ASSET ALLOCATION & GLOBAL SMALLER COMPANIES
<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS AS
% OF NET % OF PUBLIC % OF PUBLIC
AMOUNT OFFERING OFFERING
AMOUNT OF PURCHASE INVESTED PRICE PRICE
- --------------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000............................ 5.82% 5.50% 4.90%
$50,000 but less than $100,000............... 4.71 4.50 4.00
$100,000 but less than $250,000.............. 3.36 3.25 2.85
$250,000 but less than $500,000.............. 2.30 2.25 2.00
$500,000 but less than $1,000,000............ 1.01 1.00 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
AUSTRALIA-NEW ZEALAND FIXED INCOME
<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS AS
% OF NET % OF PUBLIC % OF PUBLIC
AMOUNT OFFERING OFFERING
AMOUNT OF PURCHASE INVESTED PRICE PRICE
- --------------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000............................ 3.36% 3.25% 2.90%
$50,000 but less than $100,000............... 3.09 3.00 2.70
$100,000 but less than $250,000.............. 2.83 2.75 2.45
$250,000 but less than $500,000.............. 2.04 2.00 1.80
$500,000 but less than $1,000,000............ 1.01 1.00 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers.
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which includes the
combination of any of the following: (i) an individual, his or her spouse and
children under the age of 21; (ii) a trustee or other fiduciary of a single
trust estate or single fiduciary account; and (iii) businesses owned as sole
proprietorships (or partnerships), provided that such organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company. In order to qualify
for a lower sales charge, all orders from a Purchaser will have to be placed
through a single investment dealer and identified at the time of purchase as
originating from the same Purchaser, although such orders may be placed into
more than one account which identifies the Purchasers.
The Distributor, at its expense, will also provide additional compensation
to broker-dealers, financial consultants and financial institutions in
connection with sales of Shares of a Fund. Such compensation will
20
<PAGE> 23
include financial assistance to such entities in connection with conferences,
sales or training programs for their employees, seminars for the public,
advertising campaigns regarding one or more of the Funds and/or other
dealer-sponsored special events. In some instances, this compensation may be
made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of Shares. Compensation will include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to locations within or outside of the United States for meetings or seminars of
a business nature. Compensation will also include the following types of
non-cash compensation offered through sales contests: (1) vacation trips,
including the provision of travel arrangements and lodging at luxury resorts at
exotic locations, (2) tickets for entertainment events (such as concerts,
cruises and sporting events), and (3) merchandise (such as clothing, trophies
and clocks). Dealers may not use sales of Shares to qualify for this
compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc.
The Distributor or the Adviser, at its expense, may also provide additional
compensation to certain broker-dealers, financial consultants and financial
institutions in connection with sales of Shares of a Fund, which compensation,
payable in amounts not to exceed 0.20% of the average daily net assets of
shareholders with whom such persons have relationships, is paid in connection
with various services provided to such shareholders.
SALES CHARGE WAIVERS
The following classes of investors may purchase Shares of the Funds with no
sales charge:
(1) existing Shareholders of a Fund upon the automatic reinvestment of
dividend and capital gains distributions;
(2) Trustees of the Group, officers, directors, employees and retired
employees of (a) the Adviser, the Sub-Advisers and their affiliates and
(b) the Distributor and its affiliates, and spouses and children under
the age of 21 of each of the foregoing;
(3) employees (and their spouses and children under the age of 21) of any
broker-dealer with whom the Distributor enters into a dealer agreement
to sell Shares of the Fund;
(4) investors for whom an investment dealer or one of their affiliates acts
in a fiduciary, advisory, custodial, agency or similar capacity and for
whom purchases are made through such accounts or with proceeds from
liquidations of such accounts; and
(5) purchases made on behalf of other investment companies distributed by
any affiliate of BISYS Group, Inc.
Each investor described in paragraphs (2) and (3) above must so identify
himself/herself at the time of purchase. The Distributor may change or eliminate
the foregoing waivers at any time. The Distributor may also periodically waive
all or a portion of the sales charge for all investors with respect to a Fund.
In addition, the Distributor may waive the sales charge for the purchase of a
Fund's shares with the proceeds from the recent redemption of shares of another
non-money market front-end load mutual fund (but not funds subject to a
contingent deferred sales load). The purchase must be made within 60 days of the
redemption, and the Distributor must be notified in writing by the investor, or
by his financial institution, at the time the purchase is made. A copy of the
investor's account statement showing such redemption must accompany such notice.
21
<PAGE> 24
LETTERS OF INTENT
Any Purchaser may obtain a reduced sales charge by means of a written
Letter of Intent which expresses the Purchaser's intention to purchase Shares at
a specified total public offering price within a 13-month period.
A Letter of Intent is not a binding obligation upon the Purchaser to
purchase the full dollar amount indicated. The minimum initial investment under
a Letter of Intent is 5% of such dollar amount. Shares purchased with the first
5% of such amount will be held in escrow (while remaining registered in the name
of the investor) to secure payment of the higher sales charge applicable to the
Shares actually purchased if the full dollar amount indicated is not purchased,
and such escrowed Shares will be involuntarily redeemed to pay the additional
sales charge, if necessary. Dividends on escrowed Shares, whether paid in cash
or reinvested in additional Shares, are not subject to escrow. The escrowed
Shares will not be available for disposal by the Purchaser until all purchases
pursuant to the Letter of Intent have been made or the higher sales charge has
been paid. When the full amount indicated by the Letter of Intent has been
purchased, the escrow will be released. A Letter of Intent may include purchases
of Shares made not more than 30 days prior to the date the Purchaser signs a
Letter of Intent; however, the 13-month period during which the Letter of Intent
is in effect will begin on the date of the earliest purchase to be included. A
Purchaser as defined above may combine purchases made in several capacities for
purposes of obtaining reduced sales charges by means of a written Letter of
Intent. In order to accomplish this, however, a Purchaser must designate on the
account application the accounts that are to be combined for this purpose.
If a Purchaser qualifies for a further reduced sales charge because he or
she either has purchased more than the dollar amount indicated on the Letter of
Intent or has entered into a Letter of Intent which includes Shares purchased
prior to the date of the Letter of Intent, the difference in the sales charge
will be used to purchase additional Shares of the Fund on behalf of the
Purchaser; thus the total purchases (included in the Letter of Intent) will
reflect the applicable reduced sales charge of the Letter of Intent.
For Purchasers who purchase more than the dollar amount indicated on the
Letter of Intent or enter into a Letter of Intent that includes Shares purchased
prior to the date of the Letter of Intent and qualify for a reduced sales
charge, such additional Shares will be purchased at the conclusion of the
13-month period and in the form of additional Shares, credited to the
Purchaser's account at the then current public offering price applicable to a
single purchase of the total amount of the purchases.
For further information about Letters of Intent, interested investors
should contact the Funds at (800) 672-4797. This program, however, may be
modified or eliminated at any time or from time to time without notice.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Shares of the Funds or by combining a current purchase of Shares of
a Fund with prior purchases of Shares of the other Fund. The applicable sales
charge is based on the sum of (i) the Purchaser's current purchase of shares of
a Fund plus (ii) the then-current net asset value of all Shares held by the
Purchaser in either of the Funds. To receive the applicable public offering
price pursuant to the right of accumulation, Shareholders must provide the
Transfer Agent or the Distributor with sufficient information at the time of
purchase to permit
22
<PAGE> 25
confirmation of qualification. Accumulation privileges may be amended or
terminated without notice at any time by the Distributor.
ERNST WORLD INDIVIDUAL RETIREMENT ACCOUNT ("ERNST WORLD IRA")
An Ernst World IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Ernst World IRA contributions may be tax-deductible and earnings are
tax-deferred. The tax deductibility of Ernst World IRA contributions is
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
All Ernst World IRA distribution requests must be made in writing to the
Distributor. Any additional deposits to an Ernst World IRA must designate the
type and year of the contribution.
For more information on an Ernst World IRA, including the forms required to
open an Ernst World IRA, call your broker or the Funds at (800) 672-4797.
Shareholders are advised to consult a tax adviser on IRA contribution and
withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Shareholders of the Funds to make regular
monthly or quarterly purchases of Shares through automatic deductions from their
bank accounts (which must be with a domestic member of the Automatic Clearing
House). With Shareholder authorization, the Transfer Agent will deduct the
amount specified from the Shareholder's bank account which will automatically be
invested in Shares at the public offering price on the dates of the deduction.
The required minimum initial investment when opening an account using the Auto
Invest Plan is $50; the minimum amount for subsequent investments in a Fund is
$50. To participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Account Application which can be requested by calling
(800) 672-4797. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Distributor.
EXCHANGE PRIVILEGE
The Funds offer an exchange program whereby Shareholders are entitled to
exchange their Shares for Shares of the other Fund. Such exchanges will be
executed on the basis of the relative net asset values of the Shares exchanged.
The Shares exchanged must have a current value that equals or exceeds the
minimum investment that is required (either the minimum amount required for
initial or subsequent investments as the case may be) for the Fund whose Shares
are being acquired. Share exchanges will only be permitted where the Shares to
be acquired may legally be sold in the investor's state of residence and are
limited to five per year. An exchange is considered to be a sale of Shares for
federal income tax purposes on which a Shareholder may realize a taxable gain or
loss. A Shareholder may make an exchange request by calling your broker or the
Funds at (800) 672-4797 or by providing written instructions to the Funds. An
investor should consult the Funds for further information regarding exchanges.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. If a Shareholder is unable to contact the Funds by
telephone, a Shareholder may also mail the exchange request to the Funds at the
address listed under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption By Mail."
The Funds reserve the right to
23
<PAGE> 26
modify or terminate the exchange privilege described above at any time and to
reject any exchange request. If an exchange request in good order is received by
the Distributor by the Valuation Time, on any Business Day, the exchange usually
will occur on that day. Any Shareholder who wishes to make an exchange should
obtain and review the current prospectus of the Fund in which he or she wishes
to invest before making the exchange. Shareholders wishing to make use of the
Funds' exchange program must so indicate on the Account Application.
REDEMPTION OF SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions will be effected at the net
asset value per share next determined after receipt of a redemption request in
good order. Redemptions may ordinarily be requested by mail or by telephone.
REDEMPTION BY MAIL
A written request for redemption must be received by the Funds in order to
honor the request. The Funds' address is: 3435 Stelzer Road, Columbus, Ohio
43219. The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The
Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the Shareholder(s) of record and (2) the
redemption check is mailed to the Shareholder(s) at the address of record or the
proceeds are either mailed or wired to a commercial bank account previously
designated on the Account Application. There is no charge for having redemption
requests mailed to a designated bank account.
If the Group receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Group cannot
execute the order. In such cases, the Group will request the missing information
and process the order on the day such information is received.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option
on the Account Application. The Shareholder may have the proceeds mailed to his
or her address of record or mailed or sent electronically to a commercial bank
account previously designated on the Account Application. Electronic payment
requests may be made by the Shareholder by telephone to the Funds at (800)
672-4797. For a wire redemption, the then-current wire redemption charge may be
deducted from the proceeds of a wire redemption. This charge, if applied, is
presently $15.00 for each wire redemption. It is not necessary for Shareholders
to confirm telephone redemption requests in writing. During periods of
significant economic or market change, telephone redemptions may be difficult to
complete. If a Shareholder is unable to contact the Funds by telephone, a
Shareholder may also mail the redemption request to the Distributor at the
address listed above under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption by
Mail." Neither the Distributor, the Transfer Agent, Ernst nor the Group will be
liable for any losses, damages, expense or cost
24
<PAGE> 27
arising out of any telephone transaction (including exchanges and redemptions)
effected in accordance with the Funds' telephone transaction procedures, upon
instructions reasonably believed to be genuine. The Funds will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, the Funds or their service
contractors may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all phone conversations,
sending confirmations to shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of a Fund to make regular
monthly or quarterly redemptions of Shares. With Shareholder authorization, the
Transfer Agent will automatically redeem Shares at the net asset value on the
dates of the withdrawal and have a check in the amount specified mailed to the
Shareholder. The required minimum account balance is $10,000 and the required
minimum withdrawal is $100. To participate in the Auto Withdrawal Plan,
Shareholders should call (800) 672-4797 for more information. Purchases of
additional Shares concurrent with withdrawals may be disadvantageous to certain
Shareholders because of tax liabilities. For a Shareholder to change the Auto
Withdrawal instructions the request must be made in writing to the Distributor.
DIRECTED DIVIDEND OPTION
A Shareholder may elect to have all income dividends and capital gains
distributions from one Fund paid by check or reinvested in the other Fund
(provided the other Fund is maintained at the minimum required balance).
The Directed Dividend Option may be modified or terminated at any time
after notice to participating Shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the Shareholder at any time by
writing the Distributor. The Directed Dividend Option is not available to
participants in an Ernst World IRA.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made in accordance
with the applicable settlement requirements after receipt by the Distributor of
the request for redemption. However, to the greatest extent possible, the Funds
will attempt to honor requests from Shareholders for next day payments if
received by the Distributor before the Valuation Time on a Business Day or if
the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Fund or the Shareholders of the Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, a Fund may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, a Fund may delay the
forwarding of proceeds until payment has been collected for the purchase of such
Shares, which delay may be for up to 10 days or more. A Fund intends to pay cash
for all Shares redeemed, but under abnormal conditions which make payment in
cash unwise, a Fund
25
<PAGE> 28
may make payment wholly or partly in portfolio securities at their then-current
market value equal to the redemption price. In such cases, an investor may incur
brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Funds
reserve the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder (but not
as a result of a decrease in the market price of such Shares), the account of
such Shareholder has a value of less than $500. Before the Funds exercise their
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Matters Affecting
Redemption" in the Statement of Additional Information for examples of when the
Group may, under applicable law and regulation, suspend the right of redemption
if it appears appropriate to do so in light of the Group's responsibilities
under the 1940 Act.
DIVIDENDS AND TAXES
DIVIDENDS
Each Fund (other than the Australia-New Zealand Fixed Income Fund) intends
to declare their net investment income quarterly as a dividend to Shareholders
at the close of business on the day of declaration, and generally will pay such
dividends quarterly. The Australia-New Zealand Fixed Income Fund intends to
declare and pay such dividends monthly. Each Fund also intends to distribute its
capital gains, if any, at least annually, normally in December of each year. A
Shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of a Fund at net asset
value as of the date of payment, unless the Shareholder elects to receive
dividends or distributions in cash. Such election must be made on the Account
Application; any change in such election must be made in writing to the Funds at
3435 Stelzer Road, Columbus, Ohio 43219, and will become effective with respect
to dividends and distributions having record dates after its receipt by the
Transfer Agent.
FEDERAL TAXES
Each Fund intends to elect to be treated and to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 (the "Code"). A regulated investment company generally is not subject to
Federal income tax on income and gains distributed in a timely manner to its
shareholders. Earnings of a Fund not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To prevent imposition of this tax, each Fund intends to comply with
this distribution requirement.
Each Fund intends to distribute substantially all of its net investment
income and realized capital gains to Shareholders. Distributions will be taxed
as ordinary income in the hands of shareholders, except to the extent they are
designated as capital gain dividends or are from sources other than net
investment income or net realized capital gains. Capital gain dividends are
treated as long-term capital gains in the hands of shareholders, regardless of
how long the shareholder has held a Fund's shares. Distributions that are not
from the Fund's net investment income or net realized capital gain may be
characterized as a return of capital to
26
<PAGE> 29
shareholders, reducing the shareholder's basis in its shares, and amounts so
distributed in excess of such basis generally will be characterized as capital
gain. Distributions declared in October, November or December to Shareholders of
record on a date in such month and paid during the following January will be
treated as having been received by Shareholders on December 31 in the year such
distributions were declared, rather than the calendar year in which the
distributions are actually received. The Company will inform Shareholders each
year of the amount and nature of such income or gains. Sales or other
dispositions of Fund shares generally will give rise to taxable gain or loss.
Shareholders who purchase shares of a Fund in the period prior to the
declaration of a dividend by that Fund, will receive a portion of his or her
investment back as taxable income or capital gain as a result of the dividend
distribution.
A Fund may be subject to certain taxes imposed by the countries in which it
invests or operates. If a Fund qualifies as a regulated investment company and
if more than 50% of the value of the total assets of the Fund at the close of
the taxable year consists of stocks or securities of foreign corporations, the
Fund may elect, for U.S. federal income tax purposes, to treat any foreign taxes
paid by the Fund that qualify as income or similar taxes under United States
income tax principals as having been paid by the Fund's shareholders. For any
year for which a Fund makes such an election, each shareholder will be required
to include in its gross income an amount equal to its allocable share of such
taxes paid by the Fund and the shareholders will be entitled, subject to tax law
limitations, to credit their portions of these amounts against their U.S.
federal income tax liability, if any, or to deduct their portions from their
U.S. taxable income, if any. No deduction for foreign taxes may be claimed by
individuals who do not itemize deductions. In any year in which it elects to
"pass through" foreign taxes to shareholders, the Fund will so notify
shareholders.
A more detailed description of tax consequences to Shareholders is
contained in the Statement of Additional Information under the heading "Tax
Status."
STATE AND LOCAL TAXES
The Group is organized as a Massachusetts business trust and, under current
law, neither the Group nor any Fund is liable for any income or franchise tax in
the Commonwealth of Massachusetts as long as each Fund qualifies as a regulated
investment company under the Code.
Distributions from the Funds may be subject to state and local taxes.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisers regarding the possible exclusion for state and local income tax
purposes of the portion of dividends paid by a Fund which is attributable to
interest from obligations of the U.S. Government and its agencies, authorities
and instrumentalities, and the particular tax consequences to them of an
investment in a Fund, including the application of state and local tax laws.
27
<PAGE> 30
EXPENSES AND CERTAIN FUND SERVICES
EXPENSES AND PORTFOLIO TRANSACTIONS
Ernst and the Administrator each bear all expenses in connection with the
performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
The policy of each of the Funds, regarding purchases and sales of
securities for its portfolio, is that primary consideration be given to
obtaining the most favorable prices and efficient execution of transactions. In
seeking to implement each Fund's policies, the Funds' Adviser or Sub-Adviser
effects transactions with those brokers and dealers whom they provide the most
favorable prices and are capable of providing efficient executions. If the
adviser believes such price and executions are obtainable from more than one
broker or dealer, it may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the adviser. Such services may include, but are not limited to, any one or more
of the following: information as to the availability of securities for purchase
or sale; statistical or factual information or opinions pertaining to
investments; wire services; and appraisals or evaluations of portfolio
securities. Such information may be useful to the advisers in serving both the
Funds and other clients and, conversely, supplemental information obtained by
the placement of business of other clients may be useful to the advisers in
carrying out its obligations to the Funds.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commission charged by other broker-dealers in
recognition of their research or execution services. In order to cause the Funds
to pay such higher commissions, the adviser must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage and/or
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or the adviser's overall responsibilities to the Funds.
In reaching this determination, the adviser will not attempt to place a specific
dollar value on the brokerage and/or research services provided, or to determine
what portion of the compensation should be related to those services.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which each Fund is
authorized to pay or reimburse BISYS Fund Services, as Distributor, a periodic
amount calculated at an annual rate not to exceed twenty-five one hundredths of
one percent (0.25%) of the average daily net assets of each Fund. Such amount
may be used to pay banks, broker-dealers and other institutions for
administrative and shareholder services and other similar services, including
distribution services (each such bank, broker-dealer and other institution is
hereafter referred to as a "Participating Organization"), pursuant to an
agreement between BISYS Fund Services and the Participating Organization. Under
the Plan, a Participating Organization may include BISYS Fund Services, its
subsidiaries and its affiliates.
CUSTODIAN
The Bank of California, N.A., through its Mitsubishi Global Custody
Division (the "Custodian") serves as custodian for the Funds. Pursuant to the
Custodian Agreement with the Group, the Custodian receives an
28
<PAGE> 31
annual asset-based fee from each Fund for such services plus, under certain
circumstances, fixed fees charged for certain portfolio transactions and
out-of-pocket expenses.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services Ohio" or the "Transfer
Agent"), 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Funds' transfer
agent pursuant to a Transfer Agency Agreement for the Funds and receives a fee
for such services. BISYS Fund Services Ohio also provides certain accounting
services for the Funds pursuant to a Fund Accounting Agreement and receives a
fee for such services. See "MANAGEMENT OF THE COMPANY -- Transfer Agency and
Fund Accounting Services" in the Statement of Additional Information for further
information.
While BISYS Fund Services Ohio is a distinct legal entity from BISYS Fund
Services (the Funds' Administrator and Distributor), BISYS Fund Services Ohio is
considered to be an affiliated person of BISYS Fund Services under the 1940 Act
due to, among other things, the fact that BISYS Fund Services Ohio is owned by
substantially the same persons that directly or indirectly own BISYS Fund
Services.
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as a Massachusetts business trust on January 8,
1992. The Group consists of several funds organized as separate series of
shares. Each share represents an equal proportionate interest in a fund with
other shares of the same fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that fund as
are declared at the discretion of the Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held, and will vote in
the aggregate and not by series except as otherwise expressly required by law.
For example, shareholders of each fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees and
ratification of the selection of independent auditors. However, shareholders of
a particular fund will vote as a fund, and not in the aggregate with other
shareholders of the Group, for purposes of approval of that fund's investment
advisory agreement and the Plan.
Overall responsibility for the management of the Funds is vested in the
Board of Trustees of the Group. See "MANAGEMENT OF THE GROUP -- Trustees of the
Group." Individual Trustees are elected by the shareholders of the Group and may
be removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and
Massachusetts law. See "ADDITIONAL INFORMATION -- Miscellaneous" in the
Statement of Additional Information for further information.
An annual or special meeting of shareholders is not generally required by
the Declaration of Trust, the 1940 Act or other applicable authority. To the
extent that such a meeting is not required, the Group may elect not to have an
annual or special meeting.
The Group has undertaken that the Trustees will call a special meeting of
shareholders for purposes of considering the removal of one or more Trustees
upon written request therefor from shareholders holding not
29
<PAGE> 32
less than 10% of the outstanding votes of the Group. The Group will, to the
extent required under the 1940 Act, assist Shareholders in calling such a
meeting. At such a meeting, a quorum of shareholders (constituting a majority of
votes attributable to all outstanding shares of the Group), by majority vote,
has the power to remove one or more Trustees.
PERFORMANCE INFORMATION
From time to time the Funds may advertise their average annual total
return, aggregate total return, yield and effective yield in advertisements,
sales literature and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average
annual total return will be calculated for the period since the establishment of
the Fund and will reflect the imposition of the maximum sales charge. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. Yield will be computed by dividing a Fund's net investment income
per share earned during a recent one-month period by the Fund's per share
maximum offering price (reduced by any undeclared earned income expected to be
paid shortly as a dividend) on the last day of the period and annualizing the
result.
Distribution rates will be computed by dividing the distribution per share
made by the Fund over a twelve-month period by the maximum offering price per
share. The distribution rate includes both income and capital gain dividends and
does not reflect unrealized gains or losses. The distribution rate differs from
the yield, because it includes capital items which are often non-recurring in
nature, whereas yield does not include such items.
Investors may also judge the performance of a Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and to
data prepared by various services which may be published by such services or by
other services or publications. In addition to performance information, general
information about a Fund that appears in such publications may be included in
advertisements, sales literature and in reports to Shareholders.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results.
Additional information regarding the investment performance of the Funds
will be contained in the annual report of the Funds which, when available, may
be obtained without charge by writing or calling the Funds.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent auditors.
30
<PAGE> 33
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a fund" means the consideration received by the fund upon
the issuance or sale of shares in that fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Group not readily identified as belonging to a particular fund
that are allocated to the Fund by the Group's Board of Trustees. The Board of
Trustees may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Trustees of the Group as to the timing
of the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of a Fund present at a meeting at which the holders
of more than 50% of the votes attributable to Shareholders of record of the Fund
are represented in person or by proxy, or (b) the holders of more than 50% of
the outstanding votes of Shareholders of a Fund.
Inquiries regarding the Funds may be directed in writing to the Funds at
3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 672-4797.
31
<PAGE> 34
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 35
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> 36
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> 37
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> 38
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 _ _
===============================================================================
