<PAGE> 1
As filed with the Securities and Exchange Commission on December 27, 1996
Registration No. 33-44964
___________________________________________________________________________
Investment Company Act File No. 811-6526
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. 29 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE [ ]
INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 31 [ X ]
(Check appropriate box or boxes)
THE COVENTRY GROUP
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number: (614) 470-8000
Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
(Name and Address of Agent for Service)
Copies to:
Walter B. Grimm
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to [ ] on ( ) pursuant to paragraph
paragraph (b), or (b), or
[ ] 75 days after filing pursuant to [ ] on ( ) pursuant to paragraph
paragraph (a), or (a), of Rule 485.
* Registrant has registered an indefinite number of shares of all series
then existing or subsequently established under the Securities Act of
1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940,
which it expressly reaffirms. Registrant filed the notice required by
Rule 24f-2 with respect to its fiscal year ended March 31, 1996, on
May 24, 1996.
<PAGE> 2
CROSS REFERENCE SHEET
The enclosed materials relate only to the Ernst Global Asset
Allocation Fund which is a separate investment series of the Coventry Group
(the "Group"). Information relating to the AMCORE Vintage U.S. Government
Obligations Fund, AMCORE Vintage Fixed Income Fund, AMCORE Vintage Intermediate
Tax-Free Fund, AMCORE Vintage Equity Fund, AMCORE Vintage Balanced Fund, AMCORE
Vintage Aggressive Growth Fund and AMCORE Vintage Fixed Total Return Fund is
contained in Post-Effective Amendment No. 26, filed on May 1, 1996. Information
relating to The Shelby Fund and to Brenton U.S. Government Money Market Fund,
Brenton Intermediate U.S. Government Securities Fund, Brenton Intermediate
Tax-Free Fund, and Brenton Value Equity Fund is contained in Post-Effective
Amendment No. 28, filed on July 31, 1996. Information relating to Ernst Global
Smaller Companies Fund and Ernst Australia-New Zealand Fixed Income Fund is
contained in Post-Effective Amendment No. 25, filed on March 19, 1996.
Information relating to Ernst Asia Fund and Ernst Global Resources Fund is
contained in Post-Effective Amendment No. 27, filed on June 6, 1996.
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
1. Cover page.................. Cover Page
2. Synopsis.................... Fee Table
3. Condensed Financial
Information................. Financial Highlights
4. General Description of
Registrant.................. Investment Objective and
Policies; Investment
Restrictions; General
Information - Description
of the Group and Its Shares
5. Management of the Fund...... Management of the Group
5A. Management's Discussion of
Fund Performance............ Provided in Registrant's
Annual Report to
Shareholders
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6. Capital Stock and Other
Securities.................. How to Purchase and Redeem
Shares; Dividends and Taxes;
General Information -
Description of the Group and
Its Shares; General
Information - Miscellaneous
7. Purchase of Securities
Being Offered............... Valuation of Shares; How to
Purchase and Redeem Shares
8. Redemption or Repurchase.... How to Purchase and Redeem
Shares
9. Pending Legal Proceedings... Inapplicable
</TABLE>
<TABLE>
<CAPTION>
Statement of Additional
-----------------------
Form N-1A Part B Item Information Caption
- --------------------- -------------------
<S> <C> <C>
10. Cover Page.................. Cover Page
11. Table of Contents.......... Table of Contents
12. General Information and
History..................... The Coventry Group;
Additional Information
13. Investment Objectives and
Policies.................... Investment Objective and
Policies
14. Management of the Fund...... Management of the Group -
Trustees and Officers
15. Control Persons and Principal
Holders of Securities....... Additional Information -
Description of Shares
16. Investment Advisory and other
Services.................... Management of the Group
17. Brokerage Allocation........ Management of the Group -
Portfolio Transactions
18. Capital Stock and other
Securities.................. Additional Information -
Description of Shares
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
19. Purchase, Redemption and
Pricing of Securities
Being Offered............... Additional Purchase and
Redemption Information
20. Tax Status.................. Additional Information -
Additional Tax Information
21. Underwriters................ Management of the Group -
Distributor
22. Calculation of Performance
Data........................ Additional Information
23. Financial Statements........ Financial Statements
</TABLE>
<PAGE> 5
ERNST GLOBAL ASSET ALLOCATION FUND
SUPPLEMENT DATED DECEMBER 27, 1996
TO THE PROSPECTUS DATED MARCH 19, 1996
1. The following Financial Highlights are added to the Prospectus
immediately following the section titled "Fee Table":
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information (which is
unaudited) with respect to the Ernst Global Asset Allocation Fund for the period
from July 2, 1996 (commencement of operations) through September 30, 1996.
<TABLE>
<CAPTION>
JULY 2, 1996 TO
SEPTEMBER 30, 1996(A)
---------------------
<S> <C>
Net asset value, beginning of period.............................. $ 10.00
Investment Activities:
Net investment loss............................................. (0.01)
Net realized and unrealized gains from investments and
foreign currencies........................................... 0.15
-------
Total from Investment Activities............................. 0.14
-------
Net Asset Value, End of Period.................................... $ 10.14
=======
Total Return (excludes sales charge).............................. 1.40%(b)
Ratios/Supplementary Data:
Net Assets at end of period (000)............................... $ 5,157
Ratio of expenses to average net assets*........................ 2.58%(c)
Ratio of net investment loss to average net assets*............. (0.17)%(c)
Portfolio Turnover.............................................. 0.00%
- ---------------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio of expenses to average net assets
would have been 3.26%, on an annualized basis, and the ratio of net
investment loss to average net assets would have been (0.85%) on an
annualized basis.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
</TABLE>
2. As of December 27, 1996, Ernst & Company owned a controlling interest
(as that term is used under the Investment Company Act of 1940) in the Fund.
3. On Page 16, under the heading "Sales Charge Waivers", the fourth
paragraph is replaced and superseded with the following:
(4) investors for whom an investment dealer or one of their affiliates
acts in a fiduciary, advisory, custodial, agency or similar capacity
including for broker/dealer managed account programs and for whom purchases
are made through such accounts or with proceeds from liquidations of such
accounts;
<PAGE> 6
ERNST WORLD FUNDS
WORLD
ERNST GLOBAL ASSET ALLOCATION FUND
ERNST & COMPANY
INVESTMENT ADVISER
PROSPECTUS DATED MARCH 19, 1996
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 2
Fee Table............................................................................. 3
Investment Objective and Policies..................................................... 4
Investment Techniques................................................................. 5
Management of the Group............................................................... 10
Investment Restrictions............................................................... 12
Valuation of Shares................................................................... 12
How to Purchase and Redeem Shares..................................................... 13
Dividends and Taxes................................................................... 21
Expenses and Certain Fund Services.................................................... 22
General Information................................................................... 24
</TABLE>
INVESTMENT ADVISER
Ernst & Company
One Battery Park Plaza
New York, New York 10004
SUB-INVESTMENT ADVISER
National Mutual Funds
Management (Global), Ltd.
447 Collins Street
Melbourne, Australia 3000
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
AUDITORS
Coopers & Lybrand, L.L.P.
100 East Broad Street
Columbus, Ohio 43215
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE GROUP
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE> 8
THE ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
For current purchase, redemption and
performance
information, call (800) 672-4797.
TDD/TTY call (800) 300-8893
The ERNST WORLD FUNDS are a family of mutual funds with each Fund having a
separately managed portfolio of assets. The Fund offered by this Prospectus is
the ERNST GLOBAL ASSET ALLOCATION FUND (the "Global Asset Allocation Fund" or
the "Fund"). The Fund is a diversified mutual fund. The Fund has been developed
for investors who seek higher levels of capital stability available from
investing globally in a mix of equity, debt and money market securities and
is particularly intended for investors who are willing to invest on a
longer term basis. The Fund is intended for investors who seek the potential
benefits in international securities markets and who can accept the risks
inherent in those markets.
The Fund is advised by Ernst & Company ("Ernst" or the "Adviser"), an
institutional, securities investment firm with its principal offices in New
York, New York. Ernst, founded in 1924, is a member firm of the New York Stock
Exchange and of all principal U.S. securities exchanges. The Fund also utilizes
the services of National Mutual Funds Management (Global) Ltd., Melbourne,
Australia as sub-investment adviser.
The investment objective of the Global Asset Allocation Fund is long-term
capital appreciation. It seeks this objective by investing primarily in equity
securities of U.S. and foreign companies, debt securities issued by both private
issuers and governments and in money market instruments.
The Fund is an investment series of The Coventry Group (the "Group"), an
open-end management investment company consisting of several separate investment
series. BISYS Fund Services, Limited Partnership, Columbus, Ohio (the
"Distributor") acts as the Fund's administrator and distributor. BISYS Fund
Services Ohio, Inc., Columbus, Ohio, an affiliate of the Distributor, acts as
the Fund's transfer agent (the "Transfer Agent") and performs certain accounting
services for the Fund.
Additional information about the Fund, contained in a Statement of Additional
Information dated February 5, 1996, has been filed with the Securities and
Exchange Commission (the "Commission") and is available upon request without
charge by writing to the Fund at its address or by calling the Fund at the
telephone number shown above. The Statement of Additional Information is
incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION AND THE SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENTS IN THE FUND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------
The date of this Prospectus is March 19, 1996
<PAGE> 9
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
The Fund........................... Ernst Global Asset Allocation Fund (the "Global Asset
Allocation Fund" or the "Fund") is a separate investment
portfolio of The Coventry Group (the "Group"), an
open-end, management investment company organized as a
Massachusetts business trust.
Shares Offered..................... Shares of beneficial interest ("Shares") of the Fund.
Offering Price..................... The public offering price of the Global Asset Allocation
Fund is equal to the net asset value per Share plus a
sales charge equal to 5.50% of the public offering price
(5.82% of the amount invested), reduced on investments
of $50,000 or more.
Minimum Purchase................... $1,000 minimum for the initial investment with a $50
minimum for subsequent investments. (See "HOW TO
PURCHASE AND REDEEM SHARES -- Purchases of Shares and
Auto Invest Plan" for a discussion of lower minimum
purchase amounts).
Investment Objective and The Global Asset Allocation Fund seeks long-term capital
Policies......................... appreciation. Under normal market conditions, the Fund
will invest primarily in equity securities of U.S. and
foreign companies, debt securities issued by both
private issuers and governments and in money market
instruments.
Risks and Special Considerations... The Fund invests substantial amounts of its assets in
securities of issuers located outside of the United
States. The risks of such investments include, among
others, currency fluctuations, possible price volatility
and reduced liquidity, different financial, accounting
and regulatory standards, possible withholding taxes and
expropriation. (See Risk Factors and Special
Considerations)
Investment Adviser................. Ernst & Company, New York, New York.
Sub-Investment Adviser............. National Mutual Funds Management (Global) Ltd.,
Melbourne, Australia.
Dividends.......................... The Global Asset Allocation Fund intends to declare
dividends from net investment income quarterly and pay
such dividends quarterly. The Fund will distribute net
realized capital gains, if any, at least once annually.
All such dividends shall be paid in additional full and
fractional shares of the Fund unless a shareholder
elects to take dividends in cash.
Distributor........................ BISYS Fund Services, Limited Partnership, Columbus,
Ohio.
</TABLE>
2
<PAGE> 10
FEE TABLE
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... 5.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)............................................................ 0%
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)........................................ 0%
Redemption Fees (as a percentage of amount redeemed, if applicable)1........ 0%
Exchange Fee................................................................ $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................................................. 1.10%
12b-1 Fees.................................................................. 0.25%
Other Expenses3............................................................. 1.07%
---------
Total Fund Operating Expenses............................................... 2.42%
==========
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------ -------
<S> <C>
$ 78 $ 126
</TABLE>
The purpose of the above table is to assist a potential purchaser of the
Fund's Shares in understanding the various costs and expenses that an investor
in the Fund will bear directly or indirectly. Ernst and the Administrator may
voluntarily waive or reduce a portion of the fees payable to them which may
result in lower total operating expenses. See "MANAGEMENT OF THE GROUP" and
"GENERAL INFORMATION" for a more complete discussion of the Shareholder
transaction expenses and annual operating expenses for the Fund. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ---------------
1 A wire redemption charge of $15.00 is deducted from the amount of a wire
redemption payment made at the request of a shareholder.
2 As a result of expenses payable in connection with the Fund's Distribution and
Shareholder Service Plan, it is possible that long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers.
3 "Other Expenses" for the Fund are based on estimated amounts for the current
fiscal year.
3
<PAGE> 11
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described below.
There is no assurance that the Fund will be successful in achieving its
investment objective. The investment objective of the Fund is a fundamental
policy and, as such, may not be changed without a vote of the holders of a
majority of the outstanding Shares of the Fund (as described in the Statement of
Additional Information). The other policies of the Fund may be changed without a
vote of the holders of a majority of Shares unless (1) the policy is expressly
deemed to be a fundamental policy of the Fund or (2) the policy is expressly
deemed to be changeable only by such majority vote.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia
("NMFM") serves as sub-investment adviser for the Fund. NMFM will manage the
Fund from its offices in Melbourne, Australia, and will coordinate a global team
of regionally based investment professionals in Australia, Japan, Hong Kong, New
Zealand, the United States and Europe.
The investment objective of the Fund is to seek long-term capital
appreciation. Under normal market conditions, the Fund will invest primarily
(i.e., not less than 65% of its total assets) in equity securities of U.S. and
foreign companies, debt securities issued by both private issuers and
governments and in money market instruments. The Fund will normally invest at
least 65% of its total assets in at least three different countries around the
world.
While the Fund has been developed for investors who seek long-term capital
appreciation, it has been designed for investors who also wish a level of
capital stability greater than that which would be realized by a fund which
invests solely in global equity markets. Accordingly, the Fund will normally
invest in a mix of equity, debt and money market securities. The Adviser and
NMFM believe that portfolios so invested can over the long term provide capital
appreciation and lower levels of volatility than traditional equity funds.
The Fund is not limited geographically but will invest primarily in the
principal securities markets in North America, Europe and the United Kingdom,
Asia and Japan, and Australasia. Like other global funds, this Fund will be
exposed to the risks of international investing (See Risk Factors and Special
Considerations). The Fund's investments in equity securities will be primarily
in larger capitalization companies in the principal securities market for that
company. It intends also to limit its investment in debt securities of private
issuers to those rated investment grade (rated A or better) by a nationally
recognized statistical rating organization or judged by NMFM to be of comparable
quality. Money market securities include repurchase agreements, commercial
paper, certificates of deposit, bankers acceptances and other liquid, short-term
debt securities.
Although the Fund is not restricted to any particular mix of equity, debt
and money market instruments, it will normally invest at least 10% of its total
assets in equity securities and at least 20% of its total assets in debt
securities or money market instruments. It will not invest more than 70% of its
total assets in equity securities or in debt securities at any one time. For
temporary, defensive purposes, the Fund may invest up to 100% of its assets in
debt securities of corporate and governmental issuers rated in the three highest
rating categories by a recognized rating service or determined to be of
comparable quality by NMFM and in liquid short-term money market instruments.
4
<PAGE> 12
The Fund intends to use various hedging techniques to hedge against
currency exchange rate risks. If the value of a currency in which the Fund has
invested a portion of its assets, should fall in value relative to the dollar,
the value of the Fund's invested assets, expressed in dollars, will also fall.
As a general policy, NMFM will attempt to hedge all foreign currency exposures
so that the Fund will not be exposed to the risk of foreign currency
fluctuations relative to the U.S. dollar. The Adviser may deviate from this
policy for temporary defensive purposes where the use of hedging techniques
appears particularly ill advised. (See "Foreign Currency Transactions"). In
addition to using forward foreign currency exchange contracts, the Fund may also
use foreign currency futures and options for foreign currency hedging purposes.
The Fund may also use futures and options contracts to facilitate efficient
cash management, portfolio restructuring and hedging purposes. The Fund will not
use such contracts to leverage its assets and these contracts will, in
accordance with applicable regulatory requirements, be covered by appropriate
assets or segregated accounts (see Futures Contracts; Call and Put Options).
NMFM uses a global investment process in managing the Fund which involves
an ongoing review of global economic developments, changes in economies and
securities markets in countries in which the Fund may invest, as well as
possible changes in currency values. NMFM relies upon its regional offices to
assist in these reviews. In part because of the periodic need to allocate and
reallocate assets among the asset classes of the Fund, it is anticipated that
the Fund's portfolio turnover rate may be approximately, but is not expected to
exceed, 100% (see Expenses and Portfolio Transactions and Foreign Investment
Risk).
INVESTMENT TECHNIQUES
The following investments and investment techniques are available to the
Fund. When an investment limitation is expressed in terms of a percentage of the
Fund's assets, that limitation will apply at the time the investment is made.
The Fund is not required to sell assets as a result of subsequent market changes
in asset values.
EQUITY SECURITIES
Equity securities include but are not limited to common and preferred
stock, debt securities convertible into common stock (sometimes referred to as
"convertible debentures"), common stock purchase warrants, closed-end country
funds listed on a securities exchange, American Depositary Receipts, European
Depositary Receipts and Global Depositary Receipts.
DEBT SECURITIES
Debt securities are securities issued by companies and governments in
various forms such as bonds, notes and debentures, and the fixed income
valuation of securities convertible into stock and convertible stock. The issuer
receives an amount of money which it promises to repay at a particular time
(typically the maturity date of the security). The issuer promises to pay
interest at stated intervals in either a fixed or variable amount. Debt
securities issued by governments and private issuers often receive ratings from
recognized rating agencies.
5
<PAGE> 13
DEPOSITARY RECEIPTS
American Depositary Receipts ("ADRs") are Depositary Receipts typically
issued by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs") are typically issued by foreign
banks or trust companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying securities issued by
either a foreign or a United States corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risk of other
investments in foreign securities, as discussed below.
FOREIGN CURRENCY TRANSACTIONS
Forward Foreign Currency Exchange Contracts are used in order to protect
against the adverse effect that future changes in foreign currency exchange
rates may have on an investment portfolio or on its investment activities that
are undertaken in foreign currencies. Many of the foreign securities in which
the Fund invests will be denominated in foreign currencies. Changes in foreign
exchange rates will affect the value of securities denominated or quoted in
foreign currencies. Exchange rate movements can be large and can endure for
extended periods of time, affecting either favorably or unfavorably the value of
the Fund's assets.
Contracts to purchase foreign currencies are used to protect against an
anticipated rise in the U.S. dollar price of securities it intends to purchase.
Contracts to sell foreign currencies are used to protect against the decline in
value of its foreign currency-denominated portfolio securities due to a decline
in the value of the foreign currencies relative to the U.S. dollar. The Fund may
use one currency (or a basket of currencies) to hedge against adverse changes in
the value of another currency (or a basket of currencies) when exchange rates
between the two currencies are correlated. Contracts to sell foreign currency
would limit any potential gain which might be realized by the Fund if the value
of the hedged currency increases. Foreign currency transactions may include
forward foreign currency contracts, currency exchange transactions on a spot
(i.e., cash) basis, put and call options on foreign currencies, and foreign
exchange futures contracts. No assurance can be given that these techniques will
be successful if used.
FUTURES CONTRACTS
The Fund may enter into contracts for the future delivery of securities and
futures contracts based on a specific security, class of securities or an index.
The Fund may also purchase or sell options on any such futures contracts and
engage in related closing transactions. A futures contract on a securities index
is an agreement obligating either party to pay, and entitling the other party to
receive, while the contract is
6
<PAGE> 14
outstanding, cash payments based on the level of a specified securities index.
The Fund may engage in such futures contracts for hedging purposes, for example,
to manage its cash position through exposure to particular markets or securities
through the purchase of financial futures contracts and to a more limited extent
for general trading and investment purposes. When interest rates are expected to
fall or market values are expected to rise, the Fund, through the purchase of
such contracts, can attempt to secure better rates or prices for the Fund than
might later be available in the market when it effects anticipated purchases.
Aggregate initial margin deposits for futures contracts for other than
"bona fide hedging" purposes, as defined in applicable rules of the Commodity
Futures Trading Commission, may not exceed 5% of the Fund's total assets, and
the value of securities that are the subject of such futures and options on all
such futures contracts may not exceed the market value of the Fund's total
assets.
GOVERNMENT OBLIGATIONS
The Fund may invest in government obligations of the U.S. Government, as
well as, government obligations of foreign countries. The types of U.S.
Government Obligations invested in by the Fund will include obligations issued
or guaranteed as to payment of principal and interest by the full faith and
credit of the U.S. Treasury, such as Treasury bills, notes, bonds and
certificates of indebtedness, and obligations issued or guaranteed by the
agencies or instrumentalities of the U.S. Government, but not supported by such
full faith and credit. Obligations of certain agencies and instrumentalities of
the U.S. Government, such as the Government National Mortgage Association and
the Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations. The Fund may also invest in
obligations issued or guaranteed by foreign governments or their agencies and
instrumentalities.
MONEY MARKET INSTRUMENTS
The Fund may invest in U.S. and foreign money market instruments. Money
market instruments consist of: repurchase agreements, certificates of deposit,
time deposits and bankers acceptances; commercial paper rated in one of the two
highest rating categories by at least one recognized rating organization or
deemed to be of comparable quality by the Fund's sub-adviser and money market
mutual funds.
CALL AND PUT OPTIONS
The Fund may purchase call options or write (sell) call options on
securities or on security indexes. The Fund is not required to own the
underlying security or the securities in the index. A call option gives the
purchaser of the option the right to buy, and obligates the seller of the option
to sell, the underlying security or group of securities at the stated exercise
price at any time prior to the expiration date of the option, regardless of the
market price of the security. When the Fund writes a covered call option (i.e.,
an option where the Fund owns the underlying security) and such option is
exercised, it will forgo the appreciation, if any, on the underlying security in
excess of the exercise price. In order to close out a call option it has
written, the Fund may enter into a "closing purchase transaction" -- the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously wrote on any
particular securities. When a portfolio security subject to a call option is
sold, the Fund may effect a closing purchase transaction to close out any
existing call option on that security. If the Fund is unable to effect a closing
7
<PAGE> 15
purchase transaction, it will not be able to sell the underlying security until
the option expires or the Fund delivers the underlying security upon exercise.
If the Fund writes an uncovered call, it will segregate assets equal to the
market value of the underlying security or securities index, using highly liquid
instruments. The Fund will not permit the underlying value of the portfolio
securities subject to such options to exceed 50% of its total assets.
The Fund may also purchase and sell puts. The Fund, when it acquires a put,
would have the right to sell or redeem a specified security at a certain time or
within a certain period of time at a specified price. The security is sold to a
third party or redeemed by the issuer as provided contractually. The put may be
an independent feature or may be combined with a reset feature that is designed
to reduce downward price volatility as interest rates rise by enabling the
holder to liquidate the investment prior to maturity. The Fund may acquire put
options to facilitate portfolio liquidity, shorten the maturity of the
underlying security, or to permit the investment of funds at a more favorable
rate of return. The price of a put option or putable security may be higher than
the price which otherwise would be paid for the security without such put
feature, thereby increasing the security's cost and reducing its yield. The time
remaining to the put date will apply for purposes of determining the maximum
maturity of such securities. When the Fund acquires a put for a security or
group of securities it does not own or when it writes a put, it will segregate
highly liquid assets equal in value to its obligation under the put agreement.
The call and put options discussed above, which are traded on exchanges and
over-the-counter, may also be referred to as derivatives. Derivatives generally
are instruments whose value is derived from or related to the value of some
other instrument or index. While exchange traded options in the U.S. are
generally liquid, over-the-counter options are generally illiquid.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed-delivery
basis. The Fund will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, not for investment leverage. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield and thereby involve a risk that the yield
obtained in the transaction will be less than those available in the market when
delivery takes place. The Fund will generally not pay for such securities or
start earning interest on them until they are received. When the Fund agrees to
purchase such securities, however, the Fund's custodian will set aside cash or
liquid securities equal to the amount of the commitment in a separate account.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in the value based upon changes in the general level of
interest rates. In when-issued and delayed-delivery transactions, the Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause the Fund to miss a price or yield considered to be advantageous.
The Fund's commitments to purchase when-issued securities will not exceed
25% of the value of its respective total assets, absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objectives.
8
<PAGE> 16
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements to earn income. A repurchase
agreement is an agreement whereby the Fund purchases securities and the seller
agrees to repurchase the securities within a particular time at a specified
price. Such price will exceed the original purchase price, the difference being
income to the Fund, and will be unrelated to any interest rate on the purchased
security. The Fund's Custodian will maintain the custody of the purchased
securities for the duration of the agreement. The value of the purchased
securities, including any accrued interest, will at all times exceed the value
of the repurchase agreement. In the event of the bankruptcy of the seller or the
failure of the seller to repurchase the securities as agreed, the Fund could
suffer losses, including loss of interest on or principal of the security and
costs associated with delay and enforcement of the repurchase agreement. The
Trustees have reviewed and approved certain sellers who they believe to be
creditworthy and have authorized the Fund to enter into repurchase agreements
with such sellers.
OTHER INVESTMENT POLICIES
The Fund may invest up to 5% of its total assets in another investment
company, not to exceed 10% of the value of its total assets in the securities of
other investment companies. The Fund will incur additional expenses due to the
duplication of expenses as a result of investing in other mutual funds.
Additional restrictions on the Fund's investments in the securities of other
mutual funds are contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Foreign Investment Risk
Investment in foreign securities is subject to special risks that differ in
some respects from those related to investments in securities of U.S. domestic
issuers. Such risks include trade balances and imbalances, and related economic
policies, future adverse political, economic and social developments, the
possible imposition of withholding taxes on interest and dividend income and
other taxes, possible seizure, nationalization, or expropriation of foreign
investments or deposits, currency blockage, less stringent disclosure
requirements, the possible establishment of exchange controls, or the adoption
of other foreign governmental restrictions. Additional risks include the
difficulty in obtaining or enforcing a court judgment abroad, restrictions on
foreign investment in other jurisdictions, reduced levels of governmental
regulation of certain foreign securities markets, difficulties in effecting
repatriation of capital invested abroad, difficulties in transaction
settlements, different accounting and financial standards and the possibility of
price volatility and reduced liquidity in certain foreign markets. For
additional information regarding the special risks associated with investments
in foreign securities, see "Foreign Investments" in the Statement of Additional
Information.
Brokerage commissions, custodial services and other costs relating to
investments in foreign countries are generally more expensive than the United
States. Foreign securities markets have different clearance and settlement
systems. In certain markets, settlements can be delayed, resulting in temporary
periods when the Fund may not be fully invested, difficulty in disposing of
securities or difficulty in achieving attractive investment opportunities. In
addition, different business practices and different levels of government
supervision and regulation may cause increased risk of loss due to lost, stolen
or counterfeit securities.
9
<PAGE> 17
Because of its specialized investment techniques and its emphasis on
foreign securities, the Fund should be considered as a vehicle for
diversification of investments and not as a balanced investment program.
Currency Risks
Since significant portions of the Fund will be invested in currencies other
than the U.S. Dollar, changes in the exchange rate of the U.S. Dollar against
other currencies will affect the U.S. Dollar value of the Fund. Currency
exchange rates are determined by forces of supply and demand on the foreign
exchange markets. These forces are in turn affected by international balance of
payments and other economic, political and financial conditions, government
intervention, speculation and other factors. The Fund's net asset value will be
reported, and distributions from the Fund will be made, in U.S. dollars.
Therefore, the Fund's reported net asset value and distributions would be
adversely affected by depreciation of foreign currencies relative to the U.S.
Dollar.
Other Considerations
The Adviser and the Sub-Adviser began managing for the first time other
U.S. registered mutual funds in 1995; however, the Adviser and the Sub-Adviser
have extensive prior experience in providing investment advisory services to
large institutional clients, high net worth individuals and, in the case of the
Sub-Adviser, to several mutual funds organized outside of the United States in
such markets as Hong Kong, Australia, New Zealand and Luxembourg.
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board of
Trustees, who are elected by the shareholders of the Group's funds. There are
currently five Trustees, of whom two are "interested persons" of the Group
within the meaning of that term under the 1940 Act. The Group is managed by the
Trustees in accordance with the laws of Massachusetts governing business trusts.
The Trustees, in turn, elect the officers of the Group to supervise actively its
day-to-day operations.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. However, no
officer or employee of BISYS Fund Services or BISYS Fund Services Ohio, Inc.
receives any compensation from the Group for acting as a Trustee of the Group.
The officers of the Group (see the Statement of Additional Information) receive
no compensation directly from the Group for performing the duties of their
offices. BISYS Fund Services receives fees from the Fund for acting as
administrator. BISYS Fund Services Ohio, Inc. receives fees from the Fund for
acting as Transfer Agent and for providing certain fund accounting services.
INVESTMENT ADVISER AND SUB-INVESTMENT ADVISER
Ernst & Company
Ernst & Company, New York, New York (the "Adviser" or "Ernst") serves as
investment adviser to the Fund. Ernst is a securities investment firm that was
founded in 1924. Ernst has been a member of the New
10
<PAGE> 18
York Stock Exchange for over 65 years and is a member of each of the major U.S.
stock exchanges. Ernst acts as a specialist on the New York and American Stock
Exchanges and is also a market maker in the over-the-counter markets. It is an
institutionally oriented broker-dealer firm that serves numerous institutional
and individual accounts through its correspondent broker-dealer firms. Ernst is
registered as an investment adviser with the Commission and with sixteen states
and currently manages approximately $40 million in a general securities managed
account program, $1 million in a U.S. domestic bank equities managed account
program and $9 million in The Ernst Bank Equity Fund, L.P., a limited
partnership that invests in U.S. domestic bank equities.
Subject to the general supervision of the Group's Board of Trustees and in
accordance with the Fund's investment objective and restrictions, Ernst oversees
and supervises management of the investments of the Fund. Ernst will review the
performance of the Sub-Adviser who will be fully responsible for the selection
of the Fund's portfolio investments. For the services provided and expenses
assumed pursuant to its investment advisory agreement with the Group, Ernst
receives a fee computed daily and paid monthly, at the annual rate of one and
one tenth of one percent (1.10%) of the Fund's average daily net assets. Ernst
in turn pays the Sub-Adviser seven tenths of one percent (0.70%) of the average
daily net assets of the Fund. The investment advisory fees paid by the Fund are
higher than those paid by most other investment companies that invest in
domestic U.S. securities, but they are not necessarily higher than the fees paid
by those investment companies with an investment objective similar to that of
the Fund. Ernst may periodically waive all or a portion of its advisory fee
which will cause the yield of the Fund to be higher than it would otherwise be
in the absence of such a waiver.
National Mutual Funds Management (Global) Ltd., Melbourne, Australia ("NMFM")
NMFM of Melbourne, Australia serves as sub-adviser to the Fund. NMFM is
part of the worldwide AXA Group of Companies which provide insurance and
investment services in locations throughout the world. NMFM is a subsidiary of
National Mutual Holdings, the parent company of the National Mutual Group of
Companies, which have been involved in the provision of insurance and investment
services for in excess of 125 years. NMFM, through NMFM and its affiliated
companies now manage over $15 billion in assets. NMFM has access to global money
management resources through affiliates in the United Kingdom, Japan, Hong Kong,
New Zealand and the United States. NMFM's staff includes 150 investment
professionals.
The Fund is managed on a day to day basis by Richard Greenfield, Investment
Director of National Mutual Funds Management (Global) Limited. Mr. Greenfield
has held this position since December 1995. Prior to this he held the positions
of Managing Director for Australia, Chief Investment Manager for Australia and
Head of the Research and Strategy Group. He has been with NMFM Group since 1986
and prior to this was a Partner/Principal for an international firm of
consulting actuaries.
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership ("BISYS Fund Services") is the
administrator for the Fund and also acts as the Fund's principal underwriter and
distributor (the "Administrator" or the "Distributor," as the context
indicates). BISYS Fund Services is wholly-owned by The BISYS Group, Inc., 150
Clove Road, Little Falls, New Jersey 07424, a publicly owned company engaged in
information processing, loan servicing
11
<PAGE> 19
and 401(k) administration and recordkeeping services to and through banking and
other financial organizations.
The Administrator generally assists in all aspects of the Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Fund, the Administrator receives a fee computed daily and paid periodically,
calculated at an annual rate of seventeen one-hundredths of one percent (0.17%)
of the Fund's first $500 million in average daily net assets. This fee is
reduced on a sliding scale to 0.05% of assets in excess of $1 billion. The
Administrator is entitled to a minimum fee of $25,000 per year from the Fund.
The Administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of the Fund to be higher than it would otherwise
be in the absence of such a waiver.
The Distributor acts as agent for the Fund in the distribution of its
Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions, some of which
that may be changed only by a vote of a majority of the outstanding Shares of
the Fund (as defined in the Statement of Additional Information). The following
are three of the Fund's investment restrictions which may only be changed by a
majority vote of the outstanding shares of the Fund:
The Fund will not:
1. Purchase securities while borrowings in excess of 5% of its total assets
are outstanding.
2. Make loans, except that the Fund may purchase or hold debt securities
and other investments and enter into repurchase agreements in accordance with
its investment objective and policies.
3. Invest in excess of 25% of its total assets in issuers in a particular
industry or group of industries.
In addition to the above investment restrictions, the Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Fund's Statement of Additional
Information.
Any of these investment restrictions, as well as other investment policies,
that may limit the Fund's investment to a specified percentage of Fund assets
apply only at the time of investment. The Fund is not required to sell portfolio
investments which have appreciated in value relative to other assets in order to
comply with investment limitations.
VALUATION OF SHARES
The net asset value of the Fund is determined and its Shares are priced as
of the close of regular trading on the New York Stock Exchange ("NYSE")
(generally 4:00 p.m. Eastern Time) on each Business Day ("Valuation Time"). As
used herein, a "Business Day" constitutes any day on which the NYSE is open for
trading, and any other day except days on which there are not sufficient changes
in the value of the Fund's portfolio securities that the Fund's net asset value
might be materially affected and days during which no
12
<PAGE> 20
Shares are tendered for redemption and no orders to purchase Shares are
received. Currently, the NYSE is closed on New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Net asset value per Share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets of the Fund less the liabilities charged to the Fund by the number of its
outstanding Shares. The value of a foreign security is determined in its
national currency as of the close of trading on the foreign exchange on which it
is traded or as of the scheduled closing time of the NYSE, if that is earlier,
and that value is then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect at noon, Eastern time, on the day the value of the
foreign security is determined. If no sale is reported at that time, the mean
between the current bid and asked price is used. Occasionally, events which
affect the values of such securities and such exchange rates may occur between
the times at which they are determined and the close of the NYSE, and will
therefore not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.
The securities in the Fund will be valued at market value. If market
quotations are not available, the securities will be valued by a method which
the Board of Trustees believes accurately reflects fair value. For further
information about valuation of investments, see "NET ASSET VALUE" in the
Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Fund are sold on a continuous basis by the Group's
Distributor, BISYS Fund Services. The principal office of the Distributor is
3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, contact
the Fund at (800) 672-4797.
PURCHASES OF SHARES
Shares of the Fund are continuously offered and may be purchased directly
either by mail, by telephone or by electronic transfer. Shares may also be
purchased through a broker-dealer who has established a dealer agreement with
the Distributor. The minimum investment is generally $1,000 for the initial
purchase of Shares ($250 in the case of an Ernst World IRA) and $50 for
subsequent purchases. For purchases that are made in connection with 401(k)
plans, 403(b) plans and other similar plans or payroll deduction plans, the
minimum investment amount for initial and subsequent purchases is $50. (But, see
"HOW TO PURCHASE AND REDEEM SHARES -- Auto Invest Plan" below for minimum
investment requirements under the Auto Invest Plan).
Purchasers of Shares of the Fund will pay the sum of the next calculated
net asset value per Share after the Distributor's receipt of an order to
purchase Shares in good form plus a sales charge, when applicable ("public
offering price") (see "HOW TO PURCHASE AND REDEEM SHARES" below).
In the case of orders for the purchase of Shares placed through a
broker-dealer, the public offering price will be the net asset value as so
determined plus any applicable sales charge, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits it to
the Fund by the Valuation Time.
13
<PAGE> 21
The broker-dealer is responsible for transmitting such orders promptly. If the
broker-dealer fails to do so, the investor's right to that day's closing price
must be settled between the investor and the broker-dealer. If the broker-dealer
receives the order after the Valuation Time for that day, the price will be
based on the net asset value determined as of the Valuation Time for the next
Business Day.
Purchases By Mail
To purchase Shares of the Fund, complete an Account Application and return
it along with a check (or other negotiable bank draft or money order) in at
least the minimum initial purchase amount, made payable to Ernst Global Asset
Allocation Fund to:
Ernst World Funds
Dept. L-1636
Columbus, Ohio 43260-1636
An Account Application form can be obtained by calling your broker or the
Fund at (800) 672-4797. Subsequent purchases of Shares of the Fund may be made
at any time by mailing a check payable to the Fund, to the above address.
Purchases by Telephone
Shares of the Fund may be purchased by calling your broker or the Fund at
(800) 672-4797, if your Account Application, in good form, has been previously
received by the Distributor. Payment for Shares ordered by telephone is made by
electronic transfer to the Fund's custodian. Prior to wiring funds and in order
to ensure that wire orders are invested promptly, investors must call the Fund
at the number above to obtain instructions regarding the bank account number to
which the funds should be wired and other pertinent information.
Other Information Regarding Purchases
Purchases of Shares in the Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") based upon the public offering price. In the
case of an order for the purchase of Shares placed through a broker-dealer, it
is the responsibility of the broker-dealer to transmit the order to the
Distributor promptly.
The Group reserves the right to reject any order for the purchase of the
Fund's Shares in whole or in part including purchases made with foreign and
third party checks.
Every Shareholder of record will receive a confirmation of each transaction
in his or her account, which will also show the total number of Shares of the
Fund owned by the Shareholder. Shareholders may rely on these statements in lieu
of certificates. Certificates representing Shares of the Fund will not be
issued.
SALES CHARGES
The Public Offering Price of Shares of the Fund equals the sum of the net
asset value per Share plus a sales load in accordance with the table below.
BISYS Fund Services receives this sales charge as Distributor and reallows a
portion of it as dealer discounts and brokerage commissions. However, the
Distributor, in its sole discretion, may pay certain dealers all or part of the
portion of the sales charge it receives. A broker or
14
<PAGE> 22
dealer who receives a reallowance in excess of 90% of the sales charge may be
deemed to be an "underwriter" for purposes of the Securities Act of 1933.
<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS AS
% OF NET % OF PUBLIC % OF PUBLIC
AMOUNT OFFERING OFFERING
AMOUNT OF PURCHASE INVESTED PRICE PRICE
- --------------------------------------------- --------- ----------- --------------
<S> <C> <C> <C>
Less than $50,000............................ 5.82% 5.50% 4.90%
$50,000 but less than $100,000............... 4.71 4.50 4.00
$100,000 but less than $250,000.............. 3.36 3.25 2.85
$250,000 but less than $500,000.............. 2.30 2.25 2.00
$500,000 but less than $1,000,000............ 1.01 1.00 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers.
The sales charges set forth in the table above are applicable to purchases
made at one time by any purchaser (a "Purchaser"), which includes the
combination of any of the following: (i) an individual, his or her spouse and
children under the age of 21; (ii) a trustee or other fiduciary of a single
trust estate or single fiduciary account; and (iii) businesses owned as sole
proprietorships (or partnerships), provided that such organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company. In order to qualify
for a lower sales charge, all orders from a Purchaser will have to be placed
through a single investment dealer and identified at the time of purchase as
originating from the same Purchaser, although such orders may be placed into
more than one account which identifies the Purchasers.
The Distributor, at its expense, will also provide additional compensation
to broker-dealers, financial consultants and financial institutions in
connection with sales of Shares of the Fund. Such compensation will include
financial assistance to such entities in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
Shares. Compensation will include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Compensation
will also include the following types of non-cash compensation offered through
sales contests: (1) vacation trips, including the provision of travel
arrangements and lodging at luxury resorts at exotic locations, (2) tickets for
entertainment events (such as concerts, cruises and sporting events), and (3)
merchandise (such as clothing, trophies and clocks). Dealers may not use sales
of Shares to qualify for this compensation to the extent such may be prohibited
by the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc.
15
<PAGE> 23
The Distributor or the Adviser, at its expense, may also provide additional
compensation to certain broker-dealers, financial consultants and financial
institutions in connection with sales of Shares of the Fund, which compensation,
payable in amounts not to exceed 0.20% of the average daily net assets of
shareholders with whom such persons have relationships, is paid in connection
with various services provided to such shareholders.
SALES CHARGE WAIVERS
The following classes of investors may purchase Shares of the Fund with no
sales charge:
(1) existing Shareholders of the Fund upon the automatic reinvestment of
dividend and capital gains distributions;
(2) Trustees of the Group, officers, directors, employees and retired
employees of (a) the Adviser, the Sub-Adviser and their affiliates and
(b) the Distributor and its affiliates, and spouses and children under
the age of 21 of each of the foregoing;
(3) employees (and their spouses and children under the age of 21) of any
broker-dealer with whom the Distributor enters into a dealer agreement
to sell Shares of the Fund;
(4) investors for whom an investment dealer or one of their affiliates acts
in a fiduciary, advisory, custodial, agency or similar capacity and for
whom purchases are made through such accounts or with proceeds from
liquidations of such accounts; and
(5) purchases made on behalf of other investment companies distributed by
any affiliate of BISYS Group, Inc.
Each investor described in paragraphs (2) and (3) above must so identify
himself/herself at the time of purchase. The Distributor may change or eliminate
the foregoing waivers at any time. The Distributor may also periodically waive
all or a portion of the sales charge for all investors with respect to the Fund.
In addition, the Distributor may waive the sales charge for the purchase of the
Fund's shares with the proceeds from the recent redemption of shares of another
non-money market front-end load mutual fund (but not funds subject to a
contingent deferred sales load). The purchase must be made within 60 days of the
redemption, and the Distributor must be notified in writing by the investor, or
by his financial institution, at the time the purchase is made. A copy of the
investor's account statement showing such redemption must accompany such notice.
LETTERS OF INTENT
Any Purchaser may obtain a reduced sales charge by means of a written
Letter of Intent which expresses the Purchaser's intention to purchase Shares at
a specified total public offering price within a 13-month period.
A Letter of Intent is not a binding obligation upon the Purchaser to
purchase the full dollar amount indicated. The minimum initial investment under
a Letter of Intent is 5% of such dollar amount. Shares purchased with the first
5% of such amount will be held in escrow (while remaining registered in the name
of the investor) to secure payment of the higher sales charge applicable to the
Shares actually purchased if the full dollar amount indicated is not purchased,
and such escrowed Shares will be involuntarily redeemed to pay the additional
sales charge, if necessary. Dividends on escrowed Shares, whether paid in cash
or reinvested in additional Shares, are not subject to escrow. The escrowed
Shares will not be available for disposal by the
16
<PAGE> 24
Purchaser until all purchases pursuant to the Letter of Intent have been made or
the higher sales charge has been paid. When the full amount indicated by the
Letter of Intent has been purchased, the escrow will be released. A Letter of
Intent may include purchases of Shares made not more than 30 days prior to the
date the Purchaser signs a Letter of Intent; however, the 13-month period during
which the Letter of Intent is in effect will begin on the date of the earliest
purchase to be included. A Purchaser as defined above may combine purchases made
in several capacities for purposes of obtaining reduced sales charges by means
of a written Letter of Intent. In order to accomplish this, however, a Purchaser
must designate on the account application the accounts that are to be combined
for this purpose.
If a Purchaser qualifies for a further reduced sales charge because he or
she either has purchased more than the dollar amount indicated on the Letter of
Intent or has entered into a Letter of Intent which includes Shares purchased
prior to the date of the Letter of Intent, the difference in the sales charge
will be used to purchase additional Shares of the Fund on behalf of the
Purchaser; thus the total purchases (included in the Letter of Intent) will
reflect the applicable reduced sales charge of the Letter of Intent.
For Purchasers who purchase more than the dollar amount indicated on the
Letter of Intent or enter into a Letter of Intent that includes Shares purchased
prior to the date of the Letter of Intent and qualify for a reduced sales
charge, such additional Shares will be purchased at the conclusion of the
13-month period and in the form of additional Shares, credited to the
Purchaser's account at the then current public offering price applicable to a
single purchase of the total amount of the purchases.
For further information about Letters of Intent, interested investors
should contact the Fund at (800) 672-4797. This program, however, may be
modified or eliminated at any time or from time to time without notice.
CONCURRENT PURCHASES AND RIGHT OF ACCUMULATION
A Purchaser may qualify for a reduced sales charge by combining concurrent
purchases of Shares of the Ernst World Funds or by combining a current purchase
of Shares of a Fund with prior purchases of Shares of another Ernst World Fund.
The applicable sales charge is based on the sum of (i) the Purchaser's current
purchase of shares of a Fund plus (ii) the then-current net asset value of all
Shares held by the Purchaser in the other Ernst World Funds. To receive the
applicable public offering price pursuant to the right of accumulation,
Shareholders must provide the Transfer Agent or the Distributor with sufficient
information at the time of purchase to permit confirmation of qualification.
Accumulation privileges may be amended or terminated without notice at any time
by the Distributor.
ERNST WORLD INDIVIDUAL RETIREMENT ACCOUNT ("ERNST WORLD IRA")
An Ernst World IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Ernst World IRA contributions may be tax-deductible and earnings are
tax-deferred. The tax deductibility of Ernst World IRA contributions is
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
All Ernst World IRA distribution requests must be made in writing to the
Distributor. Any additional deposits to an Ernst World IRA must designate the
type and year of the contribution.
17
<PAGE> 25
For more information on an Ernst World IRA, including the forms required to
open an Ernst World IRA, call your broker or the Fund at (800) 672-4797.
Shareholders are advised to consult a tax adviser on IRA contribution and
withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Shareholders of the Fund to make regular
monthly or quarterly purchases of Shares through automatic deductions from their
bank accounts (which must be with a domestic member of the Automatic Clearing
House). With Shareholder authorization, the Transfer Agent will deduct the
amount specified from the Shareholder's bank account which will automatically be
invested in Shares at the public offering price on the dates of the deduction.
The required minimum initial investment when opening an account using the Auto
Invest Plan is $50; the minimum amount for subsequent investments in the Fund is
$50. To participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Account Application which can be requested by calling
(800) 672-4797. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Distributor.
EXCHANGE PRIVILEGE
The Fund offers an exchange program whereby Shareholders are entitled to
exchange their Shares for Shares of another Ernst World Fund. Such exchanges
will be executed on the basis of the relative net asset values of the Shares
exchanged. The Shares exchanged must have a current value that equals or exceeds
the minimum investment that is required (either the minimum amount required for
initial or subsequent investments as the case may be) for the Fund whose Shares
are being acquired. Share exchanges will only be permitted where the Shares to
be acquired may legally be sold in the investor's state of residence and are
limited to five per year. An exchange is considered to be a sale of Shares for
federal income tax purposes on which a Shareholder may realize a taxable gain or
loss. A Shareholder may make an exchange request by calling your broker or the
Fund at (800) 672-4797 or by providing written instructions to the Fund. An
investor should consult the Fund for further information regarding exchanges.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. If a Shareholder is unable to contact the Fund by
telephone, a Shareholder may also mail the exchange request to the Fund at the
address listed under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption By Mail."
The Fund reserves the right to modify or terminate the exchange privilege
described above at any time and to reject any exchange request. If an exchange
request in good order is received by the Distributor by the Valuation Time, on
any Business Day, the exchange usually will occur on that day. Any Shareholder
who wishes to make an exchange should obtain and review the current prospectus
of the Fund in which he or she wishes to invest before making the exchange.
Shareholders wishing to make use of the Fund's exchange program must so indicate
on the Account Application.
REDEMPTION OF SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions will be effected at the net
asset value per share next determined after receipt of a redemption request in
good order. Redemptions may ordinarily be requested by mail or by telephone.
18
<PAGE> 26
REDEMPTION BY MAIL
A written request for redemption must be received by the Fund in order to
honor the request. The Fund's address is: 3435 Stelzer Road, Columbus, Ohio
43219. The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The
Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the Shareholder(s) of record and (2) the
redemption check is mailed to the Shareholder(s) at the address of record or the
proceeds are either mailed or wired to a commercial bank account previously
designated on the Account Application. There is no charge for having redemption
requests mailed to a designated bank account.
If the Group receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Group cannot
execute the order. In such cases, the Group will request the missing information
and process the order on the day such information is received.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option
on the Account Application. The Shareholder may have the proceeds mailed to his
or her address of record or mailed or sent electronically to a commercial bank
account previously designated on the Account Application. Electronic payment
requests may be made by the Shareholder by telephone to the Fund at (800)
672-4797. For a wire redemption, the then-current wire redemption charge may be
deducted from the proceeds of a wire redemption. This charge, if applied, is
presently $15.00 for each wire redemption. It is not necessary for Shareholders
to confirm telephone redemption requests in writing. During periods of
significant economic or market change, telephone redemptions may be difficult to
complete. If a Shareholder is unable to contact the Fund by telephone, a
Shareholder may also mail the redemption request to the Distributor at the
address listed above under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption by
Mail." Neither the Distributor, the Transfer Agent, Ernst nor the Group will be
liable for any losses, damages, expense or cost arising out of any telephone
transaction (including exchanges and redemptions) effected in accordance with
the Fund's telephone transaction procedures, upon instructions reasonably
believed to be genuine. The Fund will employ procedures designed to provide
reasonable assurance that instructions by telephone are genuine; if these
procedures are not followed, the Fund or its service contractors may be liable
for any losses due to unauthorized or fraudulent instructions. These procedures
include recording all phone conversations, sending confirmations to shareholders
within 72 hours of the telephone transaction, verification of account name and
account number or tax identification number, and sending redemption proceeds
only to the address of record or to a previously authorized bank account.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of the Fund to make regular
monthly or quarterly redemptions of Shares. With Shareholder authorization, the
Transfer Agent will automatically redeem Shares
19
<PAGE> 27
at the net asset value on the dates of the withdrawal and have a check in the
amount specified mailed to the Shareholder. The required minimum account balance
is $10,000 and the required minimum withdrawal is $100. To participate in the
Auto Withdrawal Plan, Shareholders should call (800) 672-4797 for more
information. Purchases of additional Shares concurrent with withdrawals may be
disadvantageous to certain Shareholders because of tax liabilities. For a
Shareholder to change the Auto Withdrawal instructions the request must be made
in writing to the Distributor.
DIRECTED DIVIDEND OPTION
A Shareholder may elect to have all income dividends and capital gains
distributions from one Fund paid by check or reinvested in another Ernst World
Fund (provided the other Fund is maintained at the minimum required balance).
The Directed Dividend Option may be modified or terminated at any time
after notice to participating Shareholders. Participation in the Directed
Dividend Option may be terminated or changed by the Shareholder at any time by
writing the Distributor. The Directed Dividend Option is not available to
participants in an Ernst World IRA.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made in accordance
with the applicable settlement requirements after receipt by the Distributor of
the request for redemption. However, to the greatest extent possible, the Fund
will attempt to honor requests from Shareholders for next day payments if
received by the Distributor before the Valuation Time on a Business Day or if
the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Fund or the Shareholders of the Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, the Fund may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Fund may delay the
forwarding of proceeds until payment has been collected for the purchase of such
Shares, which delay may be for up to 10 days or more. The Fund intends to pay
cash for all Shares redeemed, but under abnormal conditions which make payment
in cash unwise, the Fund may make payment wholly or partly in portfolio
securities at their then-current market value equal to the redemption price. In
such cases, an investor may incur brokerage costs in converting such securities
to cash.
Due to the relatively high cost of handling small investments, the Fund
reserves the right to redeem, at net asset value, the Shares of any Shareholder
if, because of redemptions of Shares by or on behalf of the Shareholder (but not
as a result of a decrease in the market price of such Shares), the account of
such Shareholder has a value of less than $500. Before the Fund exercises their
right to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $500.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Matters Affecting
Redemption" in the Statement of Additional Information for examples of when the
Group may, under
20
<PAGE> 28
applicable law and regulation, suspend the right of redemption if it appears
appropriate to do so in light of the Group's responsibilities under the 1940
Act.
DIVIDENDS AND TAXES
DIVIDENDS
The Fund intends to declare its net investment income quarterly as a
dividend to Shareholders at the close of business on the day of declaration, and
generally will pay such dividends quarterly. The Fund also intends to distribute
its capital gains, if any, at least annually, normally in December of each year.
A Shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of the Fund at net asset
value as of the date of payment, unless the Shareholder elects to receive
dividends or distributions in cash. Such election must be made on the Account
Application; any change in such election must be made in writing to the Fund at
3435 Stelzer Road, Columbus, Ohio 43219, and will become effective with respect
to dividends and distributions having record dates after its receipt by the
Transfer Agent.
FEDERAL TAXES
The Fund intends to elect to be treated and to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 (the "Code"). A regulated investment company generally is not subject to
Federal income tax on income and gains distributed in a timely manner to its
shareholders. Earnings of the Fund not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To prevent imposition of this tax, the Fund intends
to comply with this distribution requirement.
The Fund intends to distribute substantially all of its net investment
income and realized capital gains to Shareholders. Distributions will be taxed
as ordinary income in the hands of shareholders, except to the extent they are
designated as capital gain dividends or are from sources other than net
investment income or net realized capital gains. Capital gain dividends are
treated as long-term capital gains in the hands of shareholders, regardless of
how long the shareholder has held the Fund's shares. Distributions that are not
from the Fund's net investment income or net realized capital gain may be
characterized as a return of capital to shareholders, reducing the shareholder's
basis in its shares, and amounts so distributed in excess of such basis
generally will be characterized as capital gain. Distributions declared in
October, November or December to Shareholders of record on a date in such month
and paid during the following January will be treated as having been received by
Shareholders on December 31 in the year such distributions were declared, rather
than the calendar year in which the distributions are actually received. The
Fund will inform Shareholders each year of the amount and nature of such income
or gains. Sales or other dispositions of Fund shares generally will give rise to
taxable gain or loss.
Shareholders who purchase shares of the Fund in the period prior to the
declaration of a dividend by the Fund, will receive a portion of his or her
investment back as taxable income or capital gain as a result of the dividend
distribution.
The Fund may be subject to certain taxes imposed by the countries in which
it invests or operates. If the Fund qualifies as a regulated investment company
and if more than 50% of the value of the total assets of the
21
<PAGE> 29
Fund at the close of the taxable year consists of stocks or securities of
foreign corporations, the Fund may elect, for U.S. federal income tax purposes,
to treat any foreign taxes paid by the Fund that qualify as income or similar
taxes under United States income tax principals as having been paid by the
Fund's shareholders. For any year for which the Fund makes such an election,
each shareholder will be required to include in its gross income an amount equal
to its allocable share of such taxes paid by the Fund and the shareholders will
be entitled, subject to tax law limitations, to credit their portions of these
amounts against their U.S. federal income tax liability, if any, or to deduct
their portions from their U.S. taxable income, if any. No deduction for foreign
taxes may be claimed by individuals who do not itemize deductions. In any year
in which it elects to "pass through" foreign taxes to shareholders, the Fund
will so notify shareholders.
A more detailed description of tax consequences to Shareholders is
contained in the Statement of Additional Information under the heading "Tax
Status."
STATE AND LOCAL TAXES
The Group is organized as a Massachusetts business trust and, under current
law, neither the Group nor the Fund is liable for any income or franchise tax in
the Commonwealth of Massachusetts as long as each Fund within the Group
qualifies as a regulated investment company under the Code.
Distributions from the Fund may be subject to state and local taxes.
Distributions of the Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisers regarding the possible exclusion for state and local income tax
purposes of the portion of dividends paid by the Fund which is attributable to
interest from obligations of the U.S. Government and its agencies, authorities
and instrumentalities, and the particular tax consequences to them of an
investment in the Fund, including the application of state and local tax laws.
EXPENSES AND CERTAIN FUND SERVICES
EXPENSES AND PORTFOLIO TRANSACTIONS
Ernst and the Administrator each bear all expenses in connection with the
performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund.
The policy of the Fund, regarding purchases and sales of securities for its
portfolio, is that primary consideration be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement the Fund's policies, the Fund's Adviser or Sub-Adviser effects
transactions with those brokers and dealers whom they provide the most favorable
prices and are capable of providing efficient executions. If the adviser
believes such price and executions are obtainable from more than one broker or
dealer, it may give consideration to placing portfolio transactions with those
brokers and dealers who also furnish research and other services to the adviser.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investments;
wire services; and appraisals or evaluations of portfolio securities. Such
information may be useful to the advisers in serving both the Fund and other
clients and, conversely,
22
<PAGE> 30
supplemental information obtained by the placement of business of other clients
may be useful to the advisers in carrying out its obligations to the Fund.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commission charged by other broker-dealers in
recognition of their research or execution services. In order to cause the Fund
to pay such higher commissions, the adviser must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage and/or
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or the adviser's overall responsibilities to the Fund.
In reaching this determination, the adviser will not attempt to place a specific
dollar value on the brokerage and/or research services provided, or to determine
what portion of the compensation should be related to those services.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which the Fund is
authorized to pay or reimburse BISYS Fund Services, as Distributor, a periodic
amount calculated at an annual rate not to exceed twenty-five one hundredths of
one percent (0.25%) of the average daily net assets of the Fund. Such amount may
be used to pay banks, broker-dealers and other institutions for administrative
and shareholder services and other similar services, including distribution
services (each such bank, broker-dealer and other institution is hereafter
referred to as a "Participating Organization"), pursuant to an agreement between
BISYS Fund Services and the Participating Organization. Under the Plan, a
Participating Organization may include BISYS Fund Services, its subsidiaries and
its affiliates.
CUSTODIAN
The Bank of California, N.A., through its Mitsubishi Global Custody
Division (the "Custodian") serves as custodian for the Fund. Pursuant to the
Custodian Agreement with the Group, the Custodian receives an annual asset-based
fee from the Fund for such services plus, under certain circumstances, fixed
fees charged for certain portfolio transactions and out-of-pocket expenses.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services Ohio" or the "Transfer
Agent"), 3435 Stelzer Road, Columbus, Ohio 43219, serves as the Fund's transfer
agent pursuant to a Transfer Agency Agreement for the Fund and receives a fee
for such services. BISYS Fund Services Ohio also provides certain accounting
services for the Fund pursuant to a Fund Accounting Agreement and receives a fee
for such services. See "MANAGEMENT OF THE COMPANY -- Transfer Agency and Fund
Accounting Services" in the Statement of Additional Information for further
information.
While BISYS Fund Services Ohio is a distinct legal entity from BISYS Fund
Services (the Fund's Administrator and Distributor), BISYS Fund Services Ohio is
considered to be an affiliated person of BISYS Fund Services under the 1940 Act
due to, among other things, the fact that BISYS Fund Services Ohio is owned by
substantially the same persons that directly or indirectly own BISYS Fund
Services.
23
<PAGE> 31
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as a Massachusetts business trust on January 8,
1992. The Group consists of several funds organized as separate series of
shares. Each share represents an equal proportionate interest in a fund with
other shares of the same fund, and is entitled to such dividends and
distributions out of the income earned on the assets belonging to that fund as
are declared at the discretion of the Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held, and will vote in
the aggregate and not by series except as otherwise expressly required by law.
For example, shareholders of the Fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees and
ratification of the selection of independent auditors. However, shareholders of
the Fund will vote as a fund, and not in the aggregate with other shareholders
of the Group, for purposes of approval of the Fund's investment advisory
agreement and the Plan.
Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "MANAGEMENT OF THE GROUP -- Trustees of the
Group." Individual Trustees are elected by the shareholders of the Group and may
be removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and
Massachusetts law. See "ADDITIONAL INFORMATION -- Miscellaneous" in the
Statement of Additional Information for further information.
An annual or special meeting of shareholders is not generally required by
the Declaration of Trust, the 1940 Act or other applicable authority. To the
extent that such a meeting is not required, the Group may elect not to have an
annual or special meeting.
The Group has undertaken that the Trustees will call a special meeting of
shareholders for purposes of considering the removal of one or more Trustees
upon written request therefor from shareholders holding not less than 10% of the
outstanding votes of the Group. The Group will, to the extent required under the
1940 Act, assist Shareholders in calling such a meeting. At such a meeting, a
quorum of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its average annual total return,
aggregate total return, yield and effective yield in advertisements, sales
literature and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average
annual total return will be calculated for the period since the establishment of
the Fund and will reflect the imposition of the maximum sales charge. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the difference.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized. Yield will be computed by dividing the Fund's net investment income
per share
24
<PAGE> 32
earned during a recent one-month period by the Fund's per share maximum offering
price (reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last day of the period and annualizing the result.
Distribution rates will be computed by dividing the distribution per share
made by the Fund over a twelve-month period by the maximum offering price per
share. The distribution rate includes both income and capital gain dividends and
does not reflect unrealized gains or losses. The distribution rate differs from
the yield, because it includes capital items which are often non-recurring in
nature, whereas yield does not include such items.
Investors may also judge the performance of the Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and to
data prepared by various services which may be published by such services or by
other services or publications. In addition to performance information, general
information about the Fund that appears in such publications may be included in
advertisements, sales literature and in reports to Shareholders.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results.
Additional information regarding the investment performance of the Fund
will be contained in the annual report of the Fund which, when available, may be
obtained without charge by writing or calling the Fund.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent auditors.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to a fund" or "assets belonging to the fund" means the
consideration received by the fund upon the issuance or sale of shares in the
fund, together with all income, earnings, profits, and proceeds derived from the
investment thereof, including any proceeds from the sale, exchange, or
liquidation of such investments, and any funds or amounts derived from any
reinvestment of such proceeds, and any general assets of the Group not readily
identified as belonging to a particular fund that are allocated to the Fund by
the Group's Board of Trustees. The Board of Trustees may allocate such general
assets in any manner it deems fair and equitable. Determinations by the Board of
Trustees of the Group as to the timing of the allocation of general liabilities
and expenses and as to the timing and allocable portion of any general assets
with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of the Fund means the
affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a)
67% or more of the votes of Shareholders of the Fund present at a meeting at
which the holders of more than 50% of the votes attributable to Shareholders of
record of the Fund are represented in person or by proxy, or (b) the holders of
more than 50% of the outstanding votes of Shareholders of the Fund.
Inquiries regarding the Fund may be directed in writing to the Fund at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 672-4797.
25
<PAGE> 33
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 34
ACCOUNT REGISTRATION ERNST WORLD FUNDS
RETURN COMPLETED FORM TO:
Ernst World Funds
Dept. L-1636 [ LOGO ]
Columbus, OH 43260-1636
FOR ASSISTANCE, CALL 1-800-672-4797 GLOBAL THINKING * SMART INVESTING
- --------------------------------------------------------------------------------
SHARES OF ERNST WORLD FUNDS:
* Are not insured by the Federal Deposit Insurance Corporation (FDIC) or any
other government agency.
* Are not deposits or other obligations of, or guranteed by, any bank.
* Are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------
1 FUND SELECTION
The minimum initial investment is $1,000 per fund; the minimum additional
investment is $50 (Lower limits may apply. Please see "How to purchase and
redeem shares" in the prospectus). I am investing in the following fund(s). The
payment method I have chosen is: [ ] Check: My check, made payable to Ernst
World Funds, is enclosed. [ ] Wire: I will call 1-800-672-4797 for
instructions. [ ] Bank transfer. Debit my bank account as indicated in Section
4.
<TABLE>
<S> <C>
$________________ Ernst Global Asset Allocation Fund
$_________________ Ernst Asia Fund $________________
$_________________ Ernst Global Resources Fund $________________
-----------------------------------------
$ TOTAL AMOUNT INVESTED
------------------------------------------
</TABLE>
================================================================================
2 ACCOUNT REGISTRATION Do not use this form to establish a retirement account.
To receive the forms necessary to open a retirement account, please call
1-800-672-4797.
TYPE OF REGISTRATION (check one)
<TABLE>
<S> <C> <C> <C>
[ ] Community Property [ ] Nonprofit Organization* [ ] Charitable Organization*
[ ] Individual [ ] Tenants in Common [ ] Corporation* [ ] Custodian for Minor
[ ] Joint Tenants with Right of Survivorship [ ] Partnership* [ ] Trust* [ ] Other (Specify)*_______
<FN>
* Please attach a copy of the appropriate bylaws, resolutions or trust documents establishing authority to open this account. If any
such aggrements or resolutions are not in existence, complete Section 9.
</TABLE>
<TABLE>
<S> <C> <C>
_____________________________________________________ ___________________________ _______________________________________
INDIVIDUAL (First Name/Initial/Last Name) Date of Birth Social Security Number
_____________________________________________________ ___________________________
JOINT OWNER - IF ANY (First Name/Initial/Last Name) Date of Birth
_____________________________________________________
NAME OF CUSTODIAN (only one) as custodian for
_____________________________________________________ ___________________________ _______________________________________
Name of Minor (only one) Minor's State Minor's Date of Birth Minor's Social Security Number
of Residence
_____________________________________________________ ___________________________ _______________________________________
NAME OF ORGANIZATION/TRUST/PLAN Date of Trust Tax ID Number
_____________________________________________________
Name of Trustee
_______________________________________________________________________________________________________________________________
ADDRESS Number and Street Apt# City State Zip
(___)___________________________________________________(____)_________________________________________________________________
Daytime Telephone Number Evening Telephone Number
CITIZENSHIP [ ] U.S. Citizen
[ ] Nonresident Alien (Attach a W-8 form. Dividends are subject to tax witholding)
[ ] Resident Alien
EMPLOYMENT Required by National Association of Securities Dealers, Inc.
_______________________________________________________________________________________________________________________________
Employer's Name Occupation
_______________________________________________________________________________________________________________________________
Employer's Address City State Zip
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association
of Securities Dealers, Inc.?
[ ] No [ ] Yes Name of institution________________________________________Please complete section 5E.
EMPLOYMENT FOR JOINT ACCOUNT OWNER Required by National Associtation of Securities Dealers, Inc.
_______________________________________________________________________________________________________________________________
Employer's Name Occupation
_______________________________________________________________________________________________________________________________
Employer's Address City State Zip
Are you or an immediate family member affiliated with or working for a member firm of a stock exchange or the National Association
of Securities Dealers, Inc.?
[ ] No [ ] Yes Name of instituion________________________________________Please complete section 5E.
</TABLE>
<PAGE> 35
3 DISTRIBUTION SELECTION Your dividends and capital gains will be automatically
reinvested into your account unless you indicate otherwise below.
I would like my:
[ ] Dividends and capital gains reinvested for
fund(s)___________________________
[ ] Dividends paid by check and capital gains reinvested for
fund(s)___________________________
[ ] Dividends and capital gains sent to me by check to the address indicated in
Section 2 for fund(s)___________________________
[ ] Dividends and capital gains automatically deposited to my bank account as
indicated in Section 4 for fund(s)__________________________
[ ] Dividends and capital gains reinvested in another established Ernst World
Fund (minimum balance of $500 required)
From__________________________ __________________________
(Fund) Account Number
to__________________________ __________________________
(Fund) Account Number
From__________________________ __________________________
(Fund) Account Number
to__________________________ __________________________
(Fund) Account Number
================================================================================
4 ELECTRONIC FUNDS TRANSFER INSTRUCTIONS
FOR YOUR CONVENIENCE, YOU MAY AUTHORIZE ERNST WORLD FUNDS TO TRANSFER MONEY
BETWEEN YOUR BANK ACCOUNT AND YOUR ERNST WORLD FUNDS ACCOUNT.
I have attached a VOIDED CHECK OR DEPOSIT SLIP for my
[ ] checking* [ ] savings* [ ] money market* account.
I would like to use this service:
[ ] for the Automatic Plan(s) I signed up for in Section 5
[ ] to establish Bank Wire instructions
[ ] to receive dividends and capital gains
________________________________________________________________________________
Bank Name Branch Office Bank Telephone Number
________________________________________________________________________________
Account Number Bank Routing Number or ABA Number (if unknown, call your bank)
________________________________________________________________________________
Name(s) on Bank Account (must be the same as Ernst World Funds account)
________________________________________________________________________________
Bank Address (do not use P.O. Box) City State Zip
________________________________________________________________________________
Signature of Co-Owner of Bank Account
[FN]
*Debits to this account may count toward the maximum number of withdrawals
allowed for this type of account. Please check with your bank to ensure that
they accept "ACH transactions" for the account you are using.
================================================================================
5 ACCOUNT OPTIONS
A. AUTOMATIC INVESTMENT AND WITHDRAWAL PLANS Minimum $50 automatic investment
and $100 automatic withdrawal per fund; please see prospectus for details.
[ ] AUTOMATIC INVESTMENT PLAN. I would like the plan to begin the month
of_________________ 19_____. Please have the amount(s) indicated below
withdrawn from my bank account noted in Section 4 and invested in the
fund(s) listed below.
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
[ ] AUTOMATIC WITHDRAWAL PLAN. Required minimum balance is $10,000. I would
like the plan to begin the month of_________________ 19_____. Please have
the amount(s) indicated below [ ] deposited into my bank account noted in
Section 4. [ ] mailed to me by check at the address indicated in Section 2.
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
Fund_____________________________ Amount $_______________
[ ] Each month on the 5th [ ] Quarterly on the 5th
[ ] Each month on the 20th (Mar., June, Sept., Dec.)
B. RIGHTS OF ACCUMULATION Please see the prospectus for qualifications.
[ ] My combined holdings in the Ernst World Funds may entitle me to a reduced
sales charge. Applicable shareholder account numbers are:
Fund ___________________ Fund ___________________ Fund ___________________
Account #_______________ Account #_______________ Account #_______________
C. LETTER OF INTENT You may qualify for reduced sales charges if you plan to
make additional investments within a 13-month period. Please see the
prospectus for qualifications.
[ ] I agree to the terms of the Letter of Intent set forth in the prospectus.
Although I am not obligated to do so, it is my intention to invest over a
13-month period in shares of one or more of the above Funds (except the
money market funds) an aggregate amount at least equal to that which is
checked below.
[ ] $50,000 [ ]$100,000 [ ]$250,000 [ ]$500,000 [ ]$1,000,000
D. SALES CHARGE WAIVER Please see current prospectus for eligibility.
The Sales Charge Waiver Form must be attached.
To receive a copy of the Sales Charge Waiver Form, see your employer or call
1-800-672-4797. Investor Category___________________
E. DUPLICATE STATEMENTS & CONFIRMATIONS (Optional, at your discretion)
Please send duplicate statements and confirmations to:
________________________________________________________________________________
Name Company
________________________________________________________________________________
Address City State Zip
<PAGE> 36
6 TELEPHONE REDEMPTION AND EXCHANGE If left blank, you will automatically
receive telephone privileges.
I elect the telephone privileges as described in the prospectus. [ ] Yes [ ] No
================================================================================
7 CUSTOMER AGREEMENT
To: BISYS Fund Services (BISYS), Distributor, and BISYS Fund Services Ohio,
Inc., Transfer Agent.
I (We) have full right, power, authority and legal capacity; and am (are) of
legal age in my (our) state of residence to purchase shares of the fund(s). I
(We) affirm that I (we) have received and read the current prospectus(es) of
the fund(s) selected and agree to be bound by its (their) terms.
Any changes to sections 1, 2 or 4 must be made in writing to BISYS Fund
Services, accompanied by a signature guarantee from an eligible guarantor
institution as outlined in the funds' prospectuses.
Any changes to sections 3, 5, 6, or 9 must be made in writing to BISYS Fund
Services, but do not require a signature guarantee. Please allow 15 business
days after receipt of the request to add, change or discontinue the Auto
Withdrawal feature.
The meaning of words in this Agreement: The words I," me" and "my" refer to the
person(s) who signed this Agreement. The words "you" and "your" refer to the
Distributor and the Transfer Agent.
a. REPRESENTATIONS. I understand that you provide no investment, tax or legal
advice, and I have relied on my independent judgment with respect to the
suitability or potential value of any security or order.
b. FORCE MAJEURE. You shall not be liable for loss or delay caused directly or
indirectly by war, natural disaster, government restrictions, exchange or
market rulings or other conditions beyond the control of the Distributor and
the Transfer Agent.
c. RECORDING CONVERSATIONS. I understand and agree that, for our mutual
protection, telephone conversations may be recorded without further notice.
d. APPLICABLE LAWS AND REGULATIONS. All transactions shall be subject to
rules, regulations, customs and usages of the exchange, market or clearing
house where executed, all applicable federal and state laws and regulations,
and the policies and procedures as determined by Ernst World Funds (the "Fund")
set forth in the funds' then-current prospectuses.
e. GOVERNING LAWS. The Agreement shall be governed by the laws of the State of
Ohio as applicable.
f. RELIANCE ON REPRESENTATIONS. I understand that the Distributor and the
Transfer Agent shall rely on the information which I have set forth in this
Agreement. I agree that all changes to this information shall be promptly
provided to the Distributor or the Transfer Agent in writing. The Distributor
and the Transfer Agent are entitled to rely on this information until I change
it by subsequent written notice.
g. DELIVERY AND RECEIPT. Any orders for transactions in the funds under this
Agreement will NOT be effective until received and approved by the Distributor
or the Transfer Agent at their offices in Columbus, Ohio. The Distributor or
the Transfer Agent shall not be responsible for any losses or lost profit
opportunity I may experience due to any delays in the execution of purchase and
redemption orders as a result of delayed receipt of such orders.
h. INSTRUCTIONS. Neither the Distributor, the Transfer Agent nor the Fund will
be liable for any loss, damages, expense or cost arising out of any telephone
redemption effected in accordance with the Fund's telephone redemption
procedures, upon instructions reasonably believed to be genuine. The Fund and
its agents will employ procedures designed to provide reasonable assurance that
instructions by telephone are genuine. These procedures include recording all
phone conversations, sending confirmations to shareholders within 72 hours of
the telephone transaction, verification of account name and account number or
tax identification number and sending redemption proceeds only to the address
of record or to a previously authorized bank account.
i. ARBITRATION. This paragraph contains what is sometimes referred to as a
predispute arbitration clause. In this regard, I am aware of the following:
(i) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.
(ii) THE PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING
THE RIGHT TO JURY TRIAL.
(iii) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT
FROM COURT PROCEEDINGS.
(iv) THE ARBITRATORS' AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR
LEGAL REASONING AND ANY PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF
RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.
(v) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS
WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
(vi) ALL AGREEMENTS SHALL INCLUDE A STATEMENT THAT "NO PERSON SHALL BRING A
PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY
PREDISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT
A PUTATIVE CLASS ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT
OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE
CLASS ACTION UNTIL: (i) THE CLASS CERTIFICATION IS DENIED, OR (ii) THE CLASS
IS DECERTIFIED, OR (iii) THE PERSON AGAINST WHOM THE ARBITRATION AGREEMENT
WOULD BE ENFORCED IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO
ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS
UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN." IT IS AGREED THAT ANY
CONTROVERSY BETWEEN ME AND ALL OR ANY OF THE FUNDS AND ITS SERVICE PROVIDERS,
ARISING OUT OF THIS AGREEMENT OR MY BUSINESS WITH YOU, SHALL BE SETTLED BY
ARBITRATION CONDUCTED IN ACCORDANCE WITH THE RULES OF THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS, INC. OR THE AMERICAN ARBITRATION ASSOCIATION, AS I MAY
ELECT. FAILURE TO NOTIFY YOU OF SUCH ELECTION IN WRITING WITHIN FIVE (5) DAYS
AFTER RECEIPT FROM YOU OF A REQUEST FOR ARBITRATION SHALL BE DEEMED TO BE
AUTHORIZATION TO MAKE SUCH ELECTION ON MY BEHALF. JUDGMENT UPON THE AWARD OF
THE ARBITRATORS MAY BE ENTERED BY ANY COURT HAVING JURISDICTION.
j. INDEMNIFICATION. As additional consideration for the services of the
Distributor, the Transfer Agent and the Fund, with regard to this Account, I
agree to indemnify and hold the Distributor, the Transfer Agent and the Fund,
its officers, directors, employees and agents harmless from and against any and
all losses, liabilities, demands, claims, actions, expenses and attorney's fees
arising out of or in connection with this Agreement, which are not caused by
the negligence or willful misconduct of the Distributor, the Transfer Agent or
the Fund. The provisions of this Section shall survive termination of this
Agreement; the provisions of this Section shall be binding on my successors and
assigns.
k. I understand that, if disbursements out of this account are to anyone other
than applicant or applicant's joint tenant, a signature guarantee will be
required.
l. With respect to Section 5A, I understand that if the 5th or 20th should
fall on a nonbusiness day, the transaction will be effective on the next
business day.
m. I UNDERSTAND THAT MUTUAL FUND SHARES ARE NOT DEPOSITS OF ANY BANK, ARE NOT
INSURED BY THE FDIC, ARE NOT OBLIGATIONS OF ANY BANK OR THE U.S. GOVERNMENT
AND ARE NOT ENDORSED OR GUARANTEED IN ANY WAY BY ANY BANK.
<PAGE> 37
[LOGO SIGNIFYING "NO FDIC
INSURANCE"]
8 YOUR SIGNATURE All registered shareholders must sign.
I HAVE RECEIVED AND READ THE CURRENT PROSPECTUS(ES) OF THE FUND(S) SELECTED AND
THIS ACCOUNT REGISTRATION FORM AND AGREE TO BE BOUND BY THEIR TERMS.
By signing below, I certify under the penalty of perjury, that (check
appropriate box):
[ ] The number I have provided is the correct taxpayer identification
number for this account, and I AM NOT subject to backup withholding
because (a) I am exempt from backup withholding (and if I am a
nonresident alien, I have provided you with a compete W-8 form), or (b)
I have not been notified by the Internal Revenue Service that I am
subject to backup withholding as a result of a failure to report
interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
[ ] The number I have provided is my correct taxpayer identification
number, and I AM subject to backup withholding.
BY SIGNING BELOW, I REPRESENT THAT I HAVE READ THE TERMS AND CONDITIONS
GOVERNING THIS ACCOUNT AND AGREE TO BE BOUND BY SUCH TERMS AND CONDITIONS AS
ARE CURRENTLY IN EFFECT AND AS MAY BE AMENDED FROM TIME TO TIME, AND I
ACKNOWLEDGE THAT I HAVE READ AND UNDERSTAND THE DISCLOSURE WITH RESPECT TO
NON-DEPOSIT INVESTMENT PRODUCTS AT THE CONCLUSION OF THIS AGREEMENT.
X X
- -------------------------------------- ---------------------------------------
Signature Date Signature Date
X X
- -------------------------------------- ---------------------------------------
Signature(Joint Owner-if any) Date Signature(Joint Owner-if any) Date
===============================================================================
9 ORGANIZATION RESOLUTION
This seciton is to be completed by organizations. In some circumstances,
additional documentation is required. Pleas call 1-800-672-4797 to inquired.
Also, please be sure to fill out the appropriate resolution fully, as
incomplete documentation will cause delays in investing and redeeming.
TYPE OF ORGANIZATION
[ ] Corporation [ ] Nonprofit Organization [ ] Partnership
- -------------------------------------- ---------------------------------------
Name of Organization Name (Please print) Title
- -------------------------------------- ---------------------------------------
Address Signature
- -------------------------------------- ---------------------------------------
City State Zip Name (Please print) Title
- -------------------------------------- ---------------------------------------
Telephone Signature
---------------------------------------
I,_________________of_________________ Name (Please print) Title
certify that the following is a true
copy of a resolution now in full force ---------------------------------------
and effect, duly adopted by the Signature
Board of Directors or by those with
authority to act on behalf of said
Organization on _______________ 19__:
Resolved, that any [ ] one [ ] two
[ ] three [ ] four of the persons
whose names and signatures appear Be it further resolved, that the
below are hereby authorized and parties named above are hereby
directed to execute and deliver any authorized and directed to sign such
written instruments including, without documents, make such filings and to
limitation, the Customer Agreement, take such further actions as may be
which is attached hereto and made a necessary or desirable to implement
part hereof by this reference, this resolution.
necessary to establish and maintain
accounts with any fund within the Ernst
World Funds, to effect purchases and
redemptions of such shares. X
---------------------------------------
Signature of certifying Date
person of officer
- --------------------------------------- (Other than those listed above) All
Name (Please print) Title persons authorized to act on the
account must also sign under Section 8
- --------------------------------------- of this application.
Signature
===============================================================================
BANK, BROKER/DEALER USE ONLY
Investment Rep__________________ SS#_______________________ Rep#_______________
Broker/Dealer#__________________ Office Name_______________ Office#____________
Telephone (___)_________________ Signature_____________________ Date___________
Referred by_____________________ Office Name_______________ Office#____________
Principal ______________________ Signature_____________________ Date___________
===============================================================================
===============================================================================
OFFICE USE ONLY
Dealer# _ _ _ _ _ _ _ Rep # _ _ _ _ _ _ Lead Source _ _
Wholesaler # _ _ _ Referring Employee _ _ _ _ Fund Source _ _
Office# _ _ _ _ _ _ _ Referring Branch _ _ _ _ Campaign Code _ _
===============================================================================
<PAGE> 38
Ernst Global Asset Allocation Fund
Ernst Global Smaller Companies Fund
Ernst Australia-New Zealand Fixed Income Fund
Each an Investment Portfolio of
The Coventry Group
Statement of Additional Information
February 5, 1996
as Supplemented December 27, 1996
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with: (1) the prospectus for the Ernst Global Asset
Allocation Fund (the "Global Asset Allocation Fund"), the Ernst Global Smaller
Companies Fund (the "Global Smaller Companies Fund"), and the Ernst
Australia-New Zealand Fixed Income Fund (the "Australia-New Zealand Fund")
dated February 5, 1996 and (2) the Prospectus relating solely to the Global
Asset Allocation Fund dated March 19, 1996, as supplemented (collectively the
"Prospectuses"). The Global Asset Allocation Fund, the Global Smaller
Companies Fund and the Australia-New Zealand Fund are hereinafter referred to
collectively as the "Funds" and singly, a "Fund." The Funds are three separate
investment portfolios of The Coventry Group (the "Group"), an open-end
management investment company. This Statement of Additional Information is
incorporated in its entirety into the Prospectuses. Copies of the Prospectuses
may be obtained by writing the Funds at 3435 Stelzer Road, Columbus, Ohio
43219, or by telephoning toll free (800) 672-4797. (Shares of the Global
Smaller Companies Fund and the Australia-New Zealand Fund are not currently
being offered to the public).
<PAGE> 39
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COVENTRY GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Additional Information on Portfolio Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Information Concerning Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Valuation of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Matters Affecting Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MANAGEMENT OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Investment Adviser and Sub-Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Transfer Agency and Fund Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Legal Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Vote of a Majority of the Outstanding Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Additional Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Yields and Total Returns of the Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Performance Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
- 2 -
<PAGE> 40
STATEMENT OF ADDITIONAL INFORMATION
THE COVENTRY GROUP
The Coventry Group (the "Group") is an open-end management investment
company which issues its Shares in separate series. Each series relates to a
separate portfolio of assets. The portfolios advised by Ernst & Company (the
"Adviser") are each referred to generally as a "Fund". This Statement of
Additional Information deals with three Funds, the Ernst Global Asset
Allocation Fund, Ernst Global Smaller Companies Fund and the Ernst
Australia-New Zealand Fixed Income Fund. Much of the information contained in
this Statement of Additional Information expands upon subjects discussed in the
Prospectuses of the Funds. Capitalized terms not defined herein are defined in
such Prospectus. No investment in Shares of a Fund should be made without
first reading a Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objective and
policies of the Funds as set forth in their Prospectus.
Bank Obligations. The Funds may invest in bank obligations such as
bankers' acceptances, certificates of deposit, and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of
deposit and time deposits will be those of domestic banks and savings and loan
associations, if (a) at the time of investment the depository institution has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements), or (b) the principal
amount of the instrument is insured in full by the Federal Deposit Insurance
Corporation.
- 3 -
<PAGE> 41
Commercial Paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
The Funds may purchase commercial paper consisting of issues rated at
the time of purchase in one of the two highest rating categories assigned by an
NRSRO or that is not rated but is determined by the Adviser under guidelines
established by the Group's Board of Trustees, to be of comparable quality.
Government Obligations. The Funds may invest in government
obligations of the U.S. Government as well as government obligations of foreign
countries. The Funds may invest in short-term U.S. Treasury bills, notes and
other obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (collectively, "U.S. Government Obligations"). Obligations
of certain agencies and instrumentalities of the U.S. Government are supported
by the full faith and credit of the U.S. Treasury; others are supported by the
right of the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Funds may also
invest in obligations issued or guaranteed by foreign governments or their
agencies and instrumentalities.
FANMACs. The Australia-New Zealand Fixed Income Fund may invest in
FANMAC securities which are securities issued by a trustee against housing
loans made through the New South Wales Department of Housing and consist of a
series of closed trusts or pools. The mortgage manager is the First Australian
National Mortgage Acceptance Corporation Ltd. ("FANMAC"). FANMAC is owned 26%
by the Government of the State of New South Wales with the remainder owned by
other institutions. The Government of the State of New South Wales has
provided the FANMAC Trust with an assurance as to availability of funds to meet
payment. The securities have been rated by Australian Ratings and Standard and
Poors. FANMAC securities are subject to a call provision under which borrowers
(mortgagors) can repay early and the investors in a particular pool can be
repaid on a pro rata basis.
NMMC AUSSIE MACs and National Mortgage Market Bonds. The
Australia-New Zealand Fixed Income Fund may invest in these types of
securities. National Mortgage Market Corporation Ltd. ("National Mortgage")
has issued both AUSSIE MACs, which are medium term bearer securities, and
National Mortgage Market
- 4 -
<PAGE> 42
Bonds. National Mortgage is a private company which is 26% owned by the
Government of the State of Victoria and 74% by private institutions. Both
AUSSIE MACs and National Mortgage Market Bonds are rated by Australian Ratings.
Foreign Investments. The Funds may, subject to their investment
objective and policies, invest in certain obligations or securities of foreign
issuers. Permissible investments include sponsored and unsponsored American
Depository Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global
Depositary Receipts ("GDRs"). Investment in securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers, including
ADRs, EDRs and GDRs may subject a Fund to investment risks that differ in some
respects from those related to investment in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic
developments, possible seizure, nationalization, or expropriation of foreign
investments, less stringent disclosure requirements, the possible establishment
of exchange controls or taxation at the source, and the adoption of other
foreign governmental restrictions.
Additional risks include less publicly available information, the risk
that companies may not be subject to the accounting, auditing and financial
reporting standards and requirements of U.S. companies, the risk that foreign
securities markets may have less volume and therefore many securities traded in
these markets may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements than those applicable to domestic branches of U.S. banks.
Foreign securities traded in markets of emerging market countries are
particularly subject to certain of these risks. Since these markets tend to be
less developed, emerging market securities can be especially volatile and may
be illiquid. These countries may be less stable politically, economically or
socially, increasing investment risk. While the Global Asset Allocation Fund
and the Global Smaller Companies Fund may each invest in securities traded in
emerging markets (South America, India, Pakistan, Africa (except South Africa),
Turkey, Eastern Europe and Russia), these Funds will limit their investment to
less than 5% of its total assets in such securities.
Forward Foreign Currency Exchange Contracts. The Funds may engage in
foreign currency exchange transactions. A forward
- 5 -
<PAGE> 43
foreign currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
("Term") from the date of the contract agreed upon by the parties, at a price
set at the time of the contract. These contracts are traded directly between
currency traders (usually large commercial banks) and their customers.
The Funds do not intend to enter into such forward contracts if the
Fund would have more than 100% of the value of its total assets committed to
such contracts on a regular or continuous basis. A Fund also will not enter
into such forward contracts or maintain a net exposure in such contracts where
such Fund would be obligated to deliver an amount of foreign currency in excess
of the value of such Fund's securities or other assets denominated in that
currency. Except for forward foreign currency transactions entered into for
hedging purposes, each Fund's custodian bank segregates cash or liquid high
grade debt securities in an amount not less than the value of the Fund's total
assets committed to forward foreign currency exchange contracts entered into
for the purchase of a foreign security. If the value of the securities
segregated declines, additional cash or securities are added so that the
segregated amount is not less than the amount of such Fund's commitments with
respect to such contracts.
Foreign Currency Options. The Funds may engage in foreign currency
options. A foreign currency option provides a Fund, as the option buyer, with
the right to buy or sell a stated amount of foreign currency at the exercise
price at a specified date or during the option period. A call option gives its
owner the right, but not the obligation, to buy the currency, while a put
option gives its owner the right, but not the obligation, to sell the currency.
The option seller (writer) is obligated to fulfill the terms of the option sold
if it is exercised. However, either seller or buyer may close its position
during the option period in the secondary market for such options any time
prior to expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect a Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if a Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if a Fund has entered into a contract to purchase a security
- 6 -
<PAGE> 44
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, such
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.
Foreign Currency Futures Transactions. The Funds may use foreign
currency futures contracts and options on such futures contracts. Through the
purchase or sale of such contracts, a Fund may be able to achieve many of the
same objectives as through forward foreign currency exchange contracts more
effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and may be traded on boards of
trade and commodities exchanges or directly with a dealer which makes a market
in such contracts and options. It is anticipated that such contracts may
provide greater liquidity and lower cost than forward foreign currency exchange
contracts.
Futures Contracts. The Funds may enter into contracts for the future
delivery of securities and futures contracts based on a specific security,
class of securities or an index, purchase or sell options on any such futures
contracts and engage in related closing transactions. In addition, the Funds
may enter into contracts for the future delivery of foreign currencies and
futures contracts based on a specific foreign currency, and purchase or sell
options on any such futures contracts and engage in related closing
transactions. At the time the Fund purchases a futures contract, an amount of
cash, U.S. Government securities, or other highly liquid debt securities equal
to the market value of the contract will be deposited in a segregated account
with the Fund's custodian. When writing a futures contract, the Fund will
maintain with its custodian liquid assets that, when added to the amounts
deposited with a futures commission merchant or broker as margin, are equal to
the market value of the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments underlying the
contract.
Futures transactions involve certain additional costs such as
brokerage costs and the obligation to maintain segregated accounts with the
custodian. The Fund may lose the expected benefits of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. There is no assurance of liquidity in the secondary
market for
- 7 -
<PAGE> 45
purposes of closing out futures positions when it may be necessary to do so.
Call Options. The Funds may purchase and sell (write) call options
and purchase options to close out options previously written by it. A call
option gives the holder (buyer) the "right to purchase" a security at a
specified price (the exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring him to deliver the underlying security
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by repurchasing an option identical to that
previously sold. To secure his obligation to deliver the underlying security
in the case of a call option, a writer is required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objective. When writing a covered call option, a Fund, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security above the exercise price, but retains the risk of loss
should the price of the security decline. Unlike one who owns securities not
subject to an option, a Fund has no control over when it may be required to
sell the underlying securities, since it may be assigned an exercise notice at
any time prior to the expiration of its obligation as a writer. If a call
option which a Fund has written expires, a Fund will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security during the option period. If the call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security. The security covering the call will be maintained in a
segregated account of the Fund's Custodian.
The premium received is the market value of an option. The premium a
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Adviser, in determining whether a
particular call option should be written on a particular security, will
consider the reasonableness of the
- 8 -
<PAGE> 46
anticipated premium and the likelihood that a liquid secondary market will
exist for such option.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being
called, or to permit the sale of the underlying security. Furthermore,
effecting a closing transaction will permit a Fund to write another call option
on the underlying security with either a different exercise price or expiration
date or both. If a Fund desires to sell a particular security from its
portfolio on which it has written a call option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security.
There is, of course, no assurance that a Fund will be able to effect such
closing transactions at a favorable price. If a Fund cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk on the security.
This could result in higher transaction costs. A Fund will pay transaction
costs in connection with the writing of options to close out previously written
options. Such transaction costs are normally higher than those applicable to
purchases and sales of portfolio securities.
Call options written by a Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, the Funds
may purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
The Funds will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
Put Options. The Funds may purchase or sell (write) "puts". A put
gives the owner a right to sell or redeem a specified security (or securities)
at a certain time or within a certain period of time at a specified exercise
price. The put may be an independent feature or may be combined with a reset
feature that is designed to reduce downward price volatility as interest rates
- 9 -
<PAGE> 47
rise by enabling the holder to liquidate the investment prior to maturity.
Puts may be acquired by a Fund to facilitate the liquidity of the
portfolio assets. Puts may also be used to facilitate the reinvestment of
assets at a rate of return more favorable than that of the underlying security.
Puts may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of
calculating the remaining maturity of those securities and the dollar-weighted
average portfolio maturity of a Fund's assets.
The Funds will, if necessary or advisable, pay for puts either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the puts.
When-Issued Securities. As discussed in the Prospectus of the Funds,
each of the Funds may purchase securities on a when-issued or delayed-delivery
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than those available in
the market when delivery takes place. A Fund will generally not pay for such
securities or start earning interest on them until they are received. When a
Fund agrees to purchase securities on a when-issued basis, the Custodian will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy the purchase commitment, and in such a case,
the Fund may be required subsequently to place additional assets in the
separate account in order to assure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash. In
addition, because a Fund will set aside cash or liquid portfolio securities to
satisfy its purchase commitments in the manner described above, the Fund's
liquidity and the ability of the Adviser to manage it might be affected in the
event its commitments to purchase when-issued securities ever exceeded 25% of
the value of its total assets.
When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in
the Fund incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. The Funds will engage in when issued delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Funds' investment objectives, policies and restrictions, not for
investment leverage.
- 10 -
<PAGE> 48
Securities of Other Investment Companies. Each Fund may invest in
securities issued by the other investment companies. Each of the Funds
currently intend to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of its total assets
will be invested in the securities of any one investment company; (b) not more
than 10% of its total assets will be invested in the aggregate in securities of
all investment companies; (c) not more than 3% of the outstanding voting stock
of any one investment company will be owned by any of the Funds; and (d) not
more than 10% of the outstanding voting stock of any one investment company
will be owned in the aggregate by the Funds. As a shareholder of another
investment company, a Fund would bear, along with other shareholders, its pro
rata portion of that company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that the Fund
bears directly in connection with its own operations. Investment companies in
which a Fund may invest may also impose a sales or distribution charge in
connection with the purchase or redemption of their shares and other types of
commissions or charges. Such charges will be payable by the Funds and,
therefore, will be borne directly by Shareholders.
INFORMATION CONCERNING AUSTRALIA
Domestic Economy. The Australian economy experienced a recession in
1982-83. However, by the mid-1982's, the economy emerged from recession, aided
by fiscal stimulus. In 1988-89, the economy saw strong growth in private
sector spending, generating excess demand and widening the current account
deficit. Demand slowed significantly in both 1989-90, due largely to a
tightening a government policy, and in 1990-91, as the economy moved into
recession. Since 1991, the economy has been in recovery and in the twelve
months ended September 30, 1994, GDP grew by 6.4%. The following table shows
GDP for the five years ended June 30, 1994.
Gross Domestic Product
(Australian $ in Millions)
<TABLE>
<CAPTION>
1989-90 1990-91 1991-92 1992-93 1993-94
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
GDP, income-based measure
(current prices) . . . . . . . . . . . . . . . $370,286 A$379,252 A$378,264 A$403,719 $426,297
GDP, average measure
(constant 1989-90 prices) . . . . . . . . . . . A$369,029 A$366,683 A$368,830 A$380,110 A$396,073
Real GDP % change over previous
period (constant 1989-90 prices)(1) . . . . . . 3.3% -0.6% 0.6% 3.1% 4.2%
</TABLE>
- 11 -
<PAGE> 49
Source: Australian Bureau of Statistics, Australian National Accounts.
(1) Data may not be calculable due to rounding.
The following table compares average interest rates of Australian and
U.S. ten-year government bonds during the early 1990s.
Comparison of Average Interest Rates
of U.S. and Australian Bonds
(% per annum)
<TABLE>
<CAPTION>
10-Year U.S. 10-Year Australian
Year Treasury Bonds Government Bonds
- ---- -------------- ------------------
<S> <C> <C> <C>
1990 Qtr. 1 .................................... 8.42 13.18
2 .................................... 8.68 13.57
3 .................................... 8.70 13.43
4 .................................... 8.40 12.55
1991 Qtr. 1 .................................... 8.02 11.48
2 .................................... 8.13 10.97
3 .................................... 7.94 10.65
4 .................................... 7.35 9.67
1992 Qtr. 1 .................................... 7.30 10.02
2 .................................... 7.38 9.15
3 .................................... 6.62 8.73
4 .................................... 6.74 8.98
1993 Qtr. 1 .................................... 6.28 8.13
2 .................................... 5.99 7.53
3 .................................... 5.62 6.80
4 .................................... 5.61 6.67
1994 Qtr. 1 .................................... 6.07 7.12
2 .................................... 7.08 8.97
3 .................................... 7.33 9.75
October.............................................. 7.80 10.50
November............................................. 7.92 10.45
December............................................. 7.83 10.05
1995 January.............................................. 7.59 10.39
February............................................. 7.21 9.85
</TABLE>
- 12 -
<PAGE> 50
The following table compares the value of an Australian dollar per
U.S. dollar for the periods indicated.
Exchange Rates (per U.S. $)
<TABLE>
<CAPTION>
At Month Ending As
<S> <C> <C>
1990........................... March 1.3259
June 1.2674
September 1.2099
December 1.2932
1991........................... March 1.2900
June 1.3019
September 1.2508
December 1.3161
1992........................... March 1.3014
June 1.3355
September 1.4006
December 1.4535
1993........................... March 1.4168
June 1.4877
September 1.5497
December 1.4769
1994........................... March 1.4269
June 1.3716
September 1.3526
December 1.2873
1995........................... January 1.3228
February 1.3523
</TABLE>
____________________
Source: Australian Bureau of Statistics, Balance of Payments; SBC Australia
Limited.
Public Finance. The following table summarizes the
outstanding direct debt (National Debt) of the Australian Commonwealth, State
Governments and Northern Territories on the dates indicated.
Government Securities on Issue at June 30, 1990 to 1994
(Australian $ in Millions)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C>
A$52,118 A$50,095 A$60,855 A$79,109 A$93,910
</TABLE>
- -----------------------
- 13 -
<PAGE> 51
Source: Australian Government Budget Papers; Budget Related Paper No. 1,
1992-93, 1993-94.
SUMMARY OF AUSTRALIAN GOVERNMENT BUDGET TRANSACTIONS
(AUSTRALIAN $ IN MILLIONS)
<TABLE>
<CAPTION>
1989-90 1990-91 1991-92 1992-93 1993-94
<S> <C> <C> <C> <C> <C>
Total Revenue . . . . . . . . . . . . . . . . . . . . . A$95,942 A$97,986 A$93,358 A$94,858 A$100,920
Total outlays . . . . . . . . . . . . . . . . . . . . . A$87,905 A$96,079 A$102,698 A$109,429 A$114,513
Surplus (deficit) . . . . . . . . . . . . . . . . . . . 8,036 1,907 (9,339) (14,571) (13,593)
</TABLE>
- ---------------------------
Source: Australian Government Budget Papers, Budget Related Paper No. 1,
1994-95.
AUSTRALIAN DEBT SECURITIES
(AUSTRALIAN $ IN BILLIONS AS OF FEBRUARY 28, 1995)
<TABLE>
<CAPTION>
NOMINAL VALUE MARKET VALUE
------------- ------------
<S> <C> <C>
Commonwealth Government . . . . . . . . . . . . . . . . . . . . . . A$76.764 A$76.983
Semi-government . . . . . . . . . . . . . . . . . . . . . . . . . . 52.953 54.204
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.248 8.893
Asset Backed . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.013 1.099
------------- ------------
Total. . . . . . . . . . . . . . . . . . . . . . . A$138.978 A$141.179
</TABLE>
- 14 -
<PAGE> 52
Source: SBC Australia Limited Monthly Index Update, March 1995.
INVESTMENT RESTRICTIONS
The following are fundamental investment restrictions and are in
addition to the investment restrictions set forth in the Prospectus. Under
these restrictions a Fund may not:
1. Underwrite securities issued by other persons, except to the
extent that a Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities";
2. Purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of the Funds;
3. Purchase or sell real estate (although investments in
marketable securities of companies engaged in such activities are not
prohibited by this restriction);
4. Except for the Ernst Australia-New Zealand Fixed Income Fund,
Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, with respect to 75% of its total assets, more
than 5% of the value of the total assets of the Fund would be invested in such
issuer, or the Fund would hold more than 10% of any class of securities of the
issuer or more than 10% of the outstanding voting securities of the issuer.
5. Except for the Ernst Australia-New Zealand Fixed Income Fund,
purchase any securities which would cause more than 25% of the value of the
Fund's total assets at the time of purchase to be invested in securities of one
or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example,
gas, gas transmission, electric and
- 15 -
<PAGE> 53
gas, electric, and telephone will each be considered a separate industry.
6. Borrow money or issue senior securities, except that a Fund
may borrow from banks, including the Custodian, or brokers, for temporary
purposes in amounts up to 15% of the value of its total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 15% of the value of the Fund's total assets
at the time of its borrowing.
7. Make loans, except that a Fund may purchase or hold debt or
other securities and lend portfolio securities in accordance with its
investment objective and policies, and may make time deposits with financial
institutions and enter into repurchase agreements.
The following additional investment restrictions are not fundamental
and may be changed with respect to a particular Fund without the vote of a
majority of the outstanding Shares of that Fund. A Fund may not:
1. Invest in excess of 15% of its net assets in securities that
are not readily marketable or are otherwise illiquid.
2. Purchase securities on margin, except for use of short-term
credit necessary for clearance of purchases of portfolio securities;
3. Engage in any short sales;
4. Purchase participation or direct interests in oil, gas or
other mineral exploration or development programs (although investments in
marketable securities of companies engaged in such activities are not
prohibited by this restriction);
5. Purchase securities of other investment companies, except (a)
in connection with a merger, consolidation, acquisition or reorganization, and
(b) a Fund may invest in other investment companies, including other Funds for
which the Adviser acts as investment adviser, as specified in the Prospectus
subject to such restrictions as may be imposed by the 1940 Act or any state
laws.
6. Invest more than 5% of total assets in securities of issuers
which together with any predecessors have a record of less than three years
continuous operation.
- 16 -
<PAGE> 54
If any percentage restriction described above is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in asset value will not constitute a violation of such restriction.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less. Portfolio turnover for the Funds may vary
greatly from year to year as well as within a particular year. High turnover
rates will generally result in higher transaction costs to a Fund. Portfolio
turnover will not be a limiting factor in making investment decisions.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Time
applicable to such Fund on each Business Day of the Group. A "Business Day"
constitutes any day on which the New York Stock Exchange (the "NYSE") is open
for trading except days on which there are not sufficient changes in the value
of a Fund's portfolio securities that the Fund's net asset value might be
materially affected and days on which no Shares of a Fund are tendered for
redemption and no order to purchase any Shares is received. Currently, the
NYSE is closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
VALUATION OF THE FUNDS
Portfolio securities for which market quotations are readily available
are valued based upon their current available bid prices in the principal
market (closing sales prices if the principal market is an exchange) in which
such securities are normally traded. Unlisted securities for which market
quotations are readily available will be valued at the current quoted bid
prices. Other securities and assets for which quotations are not readily
available, including restricted securities and securities purchased in private
transactions, are valued at their fair value in the Adviser's best judgement
under the supervision of the Group's Board of Trustees. Investments in debt
securities with remaining maturities of 60 days or less may be valued based
upon the amortized cost method.
- 17 -
<PAGE> 55
Among the factors that will be considered, if they apply, in valuing
portfolio securities held by the Funds are the existence of restrictions upon
the sale of the security by the Fund, the absence of a market for the security,
the extent of any discount in acquiring the security, the estimated time during
which the security will not be freely marketable, the expenses of registering
or otherwise qualifying the security for public sale, underwriting commissions
if underwriting would be required to effect a sale, the current yields on
comparable securities for debt obligations traded independently of any equity
equivalent, changes in the financial condition and prospects of the issuer, and
any other factors affecting fair value. In making valuations, opinions of
counsel may be relied upon as to whether or not securities are restricted
securities and as to the legal requirements for public sale.
The Group may use a pricing service to value certain portfolio
securities where the prices provided are believed to reflect the fair market
value of such securities. A pricing service would normally consider such
factors as yield, risk, quality, maturity, type of issue, trading
characteristics, special circumstances and other factors it deems relevant in
determining valuations of normal institutional trading units of debt securities
and would not rely exclusively on quoted prices. The methods used by the
pricing service and the valuations so established will be reviewed by the Group
under the general supervision of the Group's Board of Trustees. Several
pricing services are available, one or more of which may be used by the Adviser
from time to time.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
MATTERS AFFECTING REDEMPTION
Shares in each of the Group's Funds are sold on a continuous basis by
BISYS Fund Services, Limited Partnership (the "Distributor") and the
Distributor has agreed to use appropriate efforts to solicit all purchase
orders.
The Group may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension for
the protection of security holders of the Group, or (d) the Commission has
determined that an emergency exists as a result of which (i) disposal by the
Group of securities owned by it is not reasonably practical, or (ii) it is not
reasonably
- 18 -
<PAGE> 56
practical for the Group to determine the fair value of its net assets.
The Group may redeem Shares of each of the Funds involuntarily if
redemption appears appropriate in light of the Group's responsibilities under
the 1940 Act. See "NET ASSET VALUE" in this Statement of Additional
Information.
MANAGEMENT OF THE GROUP
TRUSTEES AND OFFICERS
Overall responsibility for management of the Group rests with its
Board of Trustees, which is elected by the Shareholders of the Group. The
Trustees elect the officers of the Group to supervise actively its day-to-day
operations.
The names of the Trustees and officers of the Group, their addresses,
ages and principal occupations during the past five years are as follows:
<TABLE>
<CAPTION>
Position(s) Principal
Held with Occupation
Name, Address and Age The Company During Past 5 Years
- --------------------- ----------- -------------------
<S> <C> <C>
Walter B. Grimm* Chairman, President and From June 1992 to present, employee of from
3435 Stelzer Road Trustee 1987 to June 1992, President of Leigh
Columbus, Ohio 43219 Investments (investment firm).
Age: 50
Maurice G. Stark Trustee Retired. Until December 31, Vice
505 King Avenue President-Finance and Treasurer, Battelle
Columbus, Ohio 43201 Memorial Institute (scientific research and
Age: 60 development service corporation).
Michael M. Van Buskirk Trustee From June 1991 to present, Executive Vice
37 West Broad Street President of The
Suite 1001 Ohio Bankers' Association (trade
Columbus, Ohio 43215-4162 association); from September 1987 to June
Age: 49 1991, Vice President -Communications, TRW
Information Systems Group (electronic and
space engineering).
Chalmers P. Wylie Trustee From April 1993 to present, Of Counsel,
754 Stonewood Court Kegler Brown Hill & Ritter; from January
Columbus, Ohio 43235 1993 to present, Adjunct Professor, Ohio
Age: 75
</TABLE>
- 19 -
<PAGE> 57
<TABLE>
<CAPTION>
Position(s) Principal
Held with Occupation
Name, Address and Age The Company During Past 5 Years
- --------------------- ----------- -------------------
<S> <C> <C>
State University; from January 1967 to
January 1993, member of the United States
House of Representatives for the 15th
District of Ohio.
Nancy E. Converse * Trustee From July 1990 to present, employee of BISYS
3435 Stelzer Road Fund Services.
Columbus, Ohio 43219
Age: 46
J. David Huber Vice President From June 1987 to present, employee of BISYS
3435 Stelzer Road Fund Services.
Columbus, Ohio 43219
Age: 50
William J. Tomko Treasurer From April 1987 to present, employee of
3435 Stelzer Road BISYS Fund Services.
Columbus, Ohio 43219
Age: 37
George Stevens Secretary From September 1996 to present, employee of
3435 Stelzer Road BISYS Fund Services; September 1995 to
Columbus, Ohio 43219 September 1996, Independent Consultant;
Age: 45 September 1995 to September 1989, Senior
Vice President, Amsouth Bank N.A.
Alaina V. Metz Assistant Secretary From June 1995 to present, employee of BISYS
3435 Stelzer Road Fund Services; from May 1989 to June 1995,
Columbus, Ohio 43219 employee of Alliance Capital Management.
Age: 28
Richard B. Ille Assistant Secretary From July 1990 to present, employee of BISYS
3435 Stelzer Road Fund Services.
Columbus, Ohio 43219
Age: 31
James E. White Assistant Secretary From December 1995 to present, employee of
3435 Stelzer Road BISYS Fund Services; from 1991 to 1995,
Columbus, Ohio 43219 employee of Financial Horizons; from 1988 to
Age: 41 1991, employee of INVEST Corporation.
</TABLE>
- 20 -
<PAGE> 58
<TABLE>
<CAPTION>
Position(s) Principal
Held with Occupation
Name, Address and Age The Company During Past 5 Years
- --------------------- ----------- -------------------
<S> <C> <C>
Brenda J. Bittermann Assistant Secretary From February 1996 to
3435 Stelzer Road present, employee of BISYS
Columbus, Ohio 43219 Fund Services; August 1992
Age: 44 to January 1996, Manager,
Banc One Securities Corp.;
November 1990 to August
1992, employee of BISYS
Fund Services.
</TABLE>
_______________________
*Mr. Grimm and Ms. Converse are each considered to be an "interested
person" of the Group as defined in the 1940 Act.
As of the date of this Statement of Additional Information, the
Group's officers and Trustees, as a group, own less than 1% of the Funds'
outstanding Shares.
The officers of the Group receive no compensation directly from the
Group for performing the duties of their offices. BISYS Fund Services receives
fees from the Funds for acting as Administrator. BISYS Fund Services Ohio,
Inc. receives fees from the Funds for acting as transfer agent and for
providing certain fund accounting services. Messrs. Huber, Grimm, Ille, White,
Tomko and Stevens and Ms. Converse, Ms. Bittermann and Ms. Metz are employees
of BISYS Fund Services.
Trustees of the Group not affiliated with BISYS Fund Services receive
from the Group an annual retainer of $1,250 and a fee of $250 for each Board of
Trustees meeting attended and are reimbursed for all out-of-pocket expenses
relating to attendance at such meetings. Trustees who are affiliated with
BISYS Fund Services do not receive compensation from the Group.
For the fiscal year ended March 31, 1996, the Trustees received the
following compensation from the Group and from certain other investment
companies (if applicable) that have the same investment adviser as the Funds or
an investment adviser that is an affiliated person of the Group's investment
adviser:
<TABLE>
<CAPTION>
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Est. Annual From Registrant
Name of Compensation As Part of Fund Benefits Upon and Fund Complex
Trustee from the Funds Expenses Retirement Paid to Trustees
- ------- -------------- ---------------- ------------- --------------------
<S> <C> <C> <C> <C>
Roy E. Rogers* $0 $0 $0 $0
Nancy C. Converse** $0 $0 $0 $0
Walter B. Grimm $0 $0 $0 $0
Maurice G. Stark $0 $0 $0 $6,000
</TABLE>
- 21 -
<PAGE> 59
<TABLE>
<S> <C> <C> <C> <C>
Michael Van Buskirk $0 $0 $0 $6,000
Chalmers P. Wylie $0 $0 $0 $6,000
</TABLE>
______________________
* Mr. Rogers resigned his position as an officer and Trustee of
the Group effective February 26, 1996.
** Ms. Converse became a Trustee effective April 22, 1996.
INVESTMENT ADVISER AND SUB-ADVISERS
Investment advisory services are provided by Ernst & Company, One
Battery Park Plaza, New York, New York 10004 (the "Adviser"), pursuant to an
Investment Advisory Agreement dated as of October 27, 1995 (the "Investment
Advisory Agreement"). National Mutual Funds Management (Global), Ltd., 447
Collins Street, Melbourne, Australia 3000 ("NMFM") provides sub-investment
advisory services to the Funds pursuant to a Sub-Advisory Agreement dated as of
October 27, 1995. (The Investment Advisory Agreement and each of the
Sub-Advisory Agreements are referred to collectively as the "Advisory
Agreements").
Under the Investment Advisory Agreement, the Adviser has agreed to
provide investment advisory services as described in the Prospectus of the
Funds. For the services provided pursuant to the Investment Advisory
Agreement, the Global Asset Allocation and Global Smaller Companies Funds pay
the Adviser a fee computed daily and paid monthly, at the annual rate of one
and one tenth percent (1.10%) of each Fund's average daily net assets. Under
the Sub-Advisory Agreements entered into with the Adviser, NMFM have agreed to
provide sub-investment advisory services as described in the Prospectus. The
Adviser is responsible at all times for supervising the activities of the
Sub-Advisers. For the services provided pursuant to each respective
Sub-Advisory Agreement, the Adviser pays the Sub-Adviser seven-tenths of one
percent (.70%) of the average daily net assets of the respective fund it
advises. The Australia New Zealand Fund pays the Adviser a fee of .60% of that
Fund's average daily net assets and the Adviser pays the Sub-Adviser a fee of
0.40%.
Unless sooner terminated, the Investment Advisory Agreements will
continue in effect as to each Fund until October 27, 1997 and from year to year
thereafter, if such continuance is approved at least annually by the Group's
Board of Trustees or by vote of a majority of the outstanding Shares of the
relevant Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Funds' Prospectus), and a majority of the Trustees who are not parties to the
Investment Advisory Agreements or interested persons (as defined in the 1940
Act) of any party to the Investment Advisory Agreements by votes cast in person
at a meeting called for such
- 22 -
<PAGE> 60
purpose. The Investment Advisory Agreements are terminable as to a Fund at any
time on 60 days' written notice without penalty by the Trustees, by vote of a
majority of the outstanding Shares of that Fund, or by the Adviser or
Sub-Adviser, as applicable. The Investment Advisory Agreements also terminate
automatically in the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreements provide that neither the Adviser
nor a Sub-Adviser shall be liable for any error of judgment or mistake of law
or for any loss suffered by a Fund in connection with the performance of the
Investment Advisory Agreements, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of either party in the performance of its duties, or from reckless
disregard by their duties and obligations thereunder.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreements, the Adviser and/or
Sub-Advisers, determine, subject to the general supervision of the Board of
Trustees of the Group and in accordance with each Fund's investment objective
and restrictions, which securities are to be purchased and sold by a Fund, and
which brokers are to be eligible to execute such Fund's portfolio transactions.
Purchases and sales of portfolio securities with respect to the Funds usually
are principal transactions in which portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. Purchases from underwriters of portfolio securities generally
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers may include the spread between
the bid and asked price. Transactions on stock exchanges involve the payment
of negotiated brokerage commissions. Transactions in the over-the-counter
market are generally principal transactions with dealers. With respect to the
over-the-counter market, the Adviser and/or Sub-Adviser, where possible, will
deal directly with dealers who make a market in the securities involved except
in those circumstances where better price and execution are available
elsewhere.
The Group, on behalf of the Funds, will not acquire portfolio
securities issued by, or make deposits in, the Adviser, the Sub-Advisers, the
Distributor, or their affiliates, and will not give preference to the Adviser's
or a Sub-Adviser's affiliates with respect to such transactions.
- 23 -
<PAGE> 61
Investment decisions for each Fund are made independently from those
for the other Fund or any other account managed by the Adviser and/or the
Sub-Advisers. When a purchase or sale of the same security is made by a
Sub-Adviser at substantially the same time on behalf of a Fund and another
account, the transaction will be averaged as to price, and available
investments will be allocated as to amount in a manner which the Adviser and/or
the Sub-Advisers believe to be equitable to the Fund(s) and such other account.
In some instances, this investment procedure may adversely affect the price
paid or received by a Fund or the size of the position obtained by a Fund. To
the extent permitted by law, the Adviser and/or the Sub-Advisers may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for other accounts in order to obtain best execution. As provided by
the Investment Advisory Agreements, in making investment recommendations for
the Funds, the Adviser and/or the Sub-Advisers will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Funds is a customer of the Adviser and/or the Sub-Advisers or their
subsidiaries or affiliates and, in dealing with its customers, the Adviser, the
Sub-Advisers, their subsidiaries and affiliates will not inquire or take into
consideration whether securities of such customers are held by the Funds.
ADMINISTRATOR
BISYS Fund Services, Limited Partnership ("BISYS Fund Services")
serves as administrator (the "Administrator") to the Funds pursuant to a
Management and Administration Agreement dated October 27, 1995 (the
"Administration Agreement"). The Administrator assists in supervising all
operations of each Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, the Sub-Advisers under the Sub-Advisory
Agreements, the Custodian under the Custodian Agreement and by BISYS Fund
Services Ohio, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement). The Administrator is a broker-dealer registered with the
Commission, and is a member of the National Association of Securities Dealers,
Inc.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities; furnish statistical and research data, clerical,
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Commission on Form N-SAR or any replacement forms
therefor; compile data for, file all of the Funds' federal and state tax
returns and required tax filings other than those required to be made by the
Funds' Custodian and Transfer Agent; prepare compliance filings pursuant to
state securities laws with the advice of the Group's counsel; assist to the
extent requested by
- 24 -
<PAGE> 62
the Funds with each Fund's preparation of its Annual and Semi-Annual Reports to
Shareholders and its Registration Statement; compile data for, prepare and file
timely Notices to the Commission required pursuant to Rule 24f-2 under the 1940
Act; keep and maintain the financial accounts and records of each Fund,
including calculation of daily expense accruals; and generally assists in all
aspects of the Funds' operations other than those performed by the Adviser, the
Sub-Advisers, the Custodian and by BISYS Fund Services Ohio, Inc. under the
Transfer Agency Agreement and Fund Accounting Agreement. Under the
Administration Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
which fee is calculated daily and paid periodically, at an annual rate equal to
seventeen one-hundredths of one percent (.17%) of each Fund's first $500
million in average daily net assets, and this fee is reduced on a sliding scale
to 0.05% of assets in excess of $1 billion.
Unless sooner terminated as provided therein, the Administration
Agreement will continue in effect until October 26, 2000. The Administration
Agreement thereafter shall be renewed automatically for successive one-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party
alleging cause, on not less than 60 days' notice by the Group's Board of
Trustees or by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
any of the Funds in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or from the reckless
disregard by the Administrator of its obligations and duties thereunder.
EXPENSES
The Adviser, Sub-Advisers and the Administrator each bear all expenses
in connection with the performance of their services as investment advisers and
administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Funds. Each Fund will bear expenses
relating
- 25 -
<PAGE> 63
to its respective operations including the following: taxes, interest,
brokerage fees and commissions, fees and travel expenses of the Trustees,
Securities and Exchange Commission fees, state securities qualification
expenses, costs of preparing and printing prospectuses for regulatory purposes
and for distribution to current Shareholders, outside auditing and legal
expenses, advisory and administration fees, fees and out-of-pocket expenses of
the custodian and transfer agent, expenses incurred for pricing securities
owned by each respective Fund, insurance premiums, costs of maintenance of the
Group's existence, costs of Shareholders' reports and meetings, proxy
solicitation expenses, costs of Board of Trustees meetings and any
extraordinary expenses incurred in each Fund's operation.
DISTRIBUTOR
BISYS Fund Services serves as distributor to the Funds pursuant to the
Distribution Agreement dated October 27, 1995, as amended (the "Distribution
Agreement"). Unless otherwise terminated, the Distribution Agreement will
continue in effect from year to year if its continuance is approved at least
annually (i) by the Group's Board of Trustees or by the vote of a majority of
the outstanding Shares of the Funds and (ii) by the vote of a majority of the
Trustees of the Group who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
In its capacity as Distributor, BISYS Fund Services solicits orders
for the sale of Shares, advertises and pays the costs of advertising, office
space and the personnel involved in such activities. The Distributor receives
no compensation under the Distribution Agreement with the Group, but may
receive compensation under the Distribution and Shareholder Service Plan
described below.
As described in the Prospectus, the Group has adopted a Distribution
and Shareholder Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act under which the Funds are authorized to pay the Distributor for payments it
makes to banks, other institutions and broker-dealers, and for expenses the
Distributor and any of its affiliates or subsidiaries incur (with all of the
foregoing organizations being referred to as "Participating Organizations") for
providing administration, distribution or shareholder service assistance.
Payments to such Participating Organizations may be made pursuant to agreements
entered into with the Distributor. The Plan authorizes the Funds
- 26 -
<PAGE> 64
to make payments to the Distributor in an amount not to exceed, on an annual
basis, .25% of the average daily net assets of a Fund. As required by Rule
12b-1, the Plan was approved by the sole Shareholder of each Fund and by the
Board of Trustees, including a majority of the Trustees who are not interested
persons of the Funds and who have no direct or indirect financial interest in
the operation of the Plan (the "Independent Trustees"). The Plan may be
terminated with respect to a Fund by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding Shares of the Fund. The
Trustees review quarterly a written report of such costs and the purposes for
which such costs have been incurred. The Plan may be amended by vote of the
Trustees including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose. However, any change in the Plan that would
materially increase the distribution cost to a Fund requires Shareholder
approval. For so long as the Plan is in effect, selection and nomination of
the Independent Trustees shall be committed to the discretion of such
disinterested persons. All agreements with any person relating to the
implementation of the Plan may be terminated, with respect to a Fund, at any
time on 60 days' written notice without payment of any penalty, by vote of a
majority of the Independent Trustees or by vote of a majority of the
outstanding Shares of the Fund. The Plan will continue in effect for
successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Independent
Trustees, and (ii) by the vote of a majority of the entire Board of Trustees
cast in person at a meeting called for that purpose. The Board of Trustees has
a duty to request and evaluate such information as may be reasonably necessary
for it to make an informed determination of whether the Plan should be
implemented or continued. In addition the Trustees in approving the Plan must
determine that there is a reasonable likelihood that the Plan will benefit each
Fund and its Shareholders.
The Board of Trustees of the Group believes that the Plan is in the
best interests of each of the Funds since it encourages Fund growth. As a Fund
grows in size, certain expenses, and therefore total expenses per Share, may be
reduced and overall performance per Share may be improved.
CUSTODIAN
The Bank of California, N.A., through its Mitsubishi Global Custody
Division serves as custodian (the "Custodian") to the Funds pursuant to the
Custodian Agreement dated as of October 27, 1995, between the Group and the
Custodian (the "Custodian Agreement"). The Custodian's responsibilities
include safeguarding and controlling each Fund's cash and securities, handling
the receipt and delivery of securities, and collecting
- 27 -
<PAGE> 65
interest on each Fund's investments. In consideration of such services, each
of the Funds pays the Custodian an annual asset-based fee plus, under certain
circumstances, fixed fees charged for certain portfolio transactions and
out-of-pocket expenses. Unless sooner terminated, the Custodian Agreement will
continue in effect until terminated by either party upon 60 days' advance
written notice to the other party.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. serves as transfer agent and dividend
disbursing agent (the "Transfer Agent") for the Funds, pursuant to the Transfer
Agency Agreement dated October 27, 1995. Pursuant to such Agreement, the
Transfer Agent, among other things, performs the following services in
connection with each of the Funds' Shareholders of record: maintenance of
shareholder records for each of the Fund's Shareholders of record; processing
shareholder purchase and redemption orders; processing transfers and exchanges
of Shares of the Funds on the shareholder files and records; processing
dividend payments and reinvestments; and assistance in the mailing of
shareholder reports and proxy solicitation materials. For such services the
Transfer Agent receives a fixed fee, a fee based on the number of shareholders
of record and out of pocket expenses.
In addition, BISYS Fund Services Ohio, Inc. provides certain fund
accounting services to the Funds pursuant to a Fund Accounting Agreement dated
October 27, 1995. BISYS Fund Services Ohio, Inc. receives a fee from each Fund
for such services equal to a fee computed daily and paid periodically at an
annual rate of three one-hundredths of one percent (.03%) of each Fund's first
$500 million in average daily net assets, and this fee is reduced on a sliding
scale to 0.01% of assets in excess of $1 billion (subject to a minimum annual
fee of $40,000). Under such Agreement, BISYS Fund Services Ohio, Inc.
maintains the accounting books and records for each Fund, including journals
containing an itemized daily record of all purchases and sales of portfolio
securities, all receipts and disbursements of cash and all other debits and
credits, general and auxiliary ledgers reflecting all asset, liability,
reserve, capital, income and expense accounts, including interest accrued and
interest received, and other required separate ledger accounts; maintains a
monthly trial balance of all ledger accounts; performs certain accounting
services for the Fund, including calculation of the net asset value per Share,
calculation of the dividend and capital gain distributions, if any, and of
yield, reconciliation of cash movements with the Custodian, affirmation to the
Custodian of all portfolio trades and cash settlements, verification and
reconciliation with the Custodian of all daily trade activity; provides certain
reports; obtains dealer
- 28 -
<PAGE> 66
quotations, prices from a pricing service or matrix prices on all portfolio
securities in order to mark the portfolio to the market; and prepares an
interim balance sheet, statement of income and expense, and statement of
changes in net assets for each Fund.
INDEPENDENT AUDITORS
Coopers & Lybrand, L.L.P., 100 East Broad Street, Columbus, Ohio
43215, has been selected as independent auditors for the Funds for the fiscal
year ended March 31, 1997. Coopers & Lybrand will perform an annual audit of
each Fund's financial statements and provide other services related to filings
with respect to securities regulations. Reports of their activities will be
provided to the Group's Board of Trustees.
LEGAL COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C. 20005,
is counsel to the Group and will pass upon the legality of the Shares offered
hereby.
ADDITIONAL INFORMATION
DESCRIPTION OF SHARES
The Group is a Massachusetts business trust, organized on January 8,
1992. The Group's Declaration of Trust is on file with the Secretary of State
of Massachusetts. The Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of shares, which are shares of beneficial interest,
with a par value of $0.01 per share. The Group consists of several funds
organized as separate series of shares. The Group's Declaration of Trust
authorizes the Board of Trustees to divide or redivide any unissued shares of
the Group into one or more additional series by setting or changing in any one
or more respects their respective preferences, conversion or other rights,
voting power, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the
- 29 -
<PAGE> 67
respective funds, of any general assets not belonging to any particular fund
which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding Shares of
each Fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding Shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding Shares of such Fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of Trustees may be
effectively acted upon by Shareholders of the Group voting without regard to
series.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Group.
However, the Declaration of Trust disclaims liability of the Shareholders,
Trustees or officers of the Group for acts or obligations of the Group, which
are binding only on the assets and property of the Group, and requires that
notice of the disclaimer be given in each contract or obligation entered into
or executed by the Group or the Trustees. The Declaration of Trust provides
for indemnification out of Group property for all loss and expense of any
shareholder held personally liable for the obligations of the Group. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Group itself would be unable to meet
its obligations, and thus should be considered remote.
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
As used in the Prospectus and this Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of a Fund means
the affirmative vote, at a meeting of Shareholders duly called, of the lesser
of (a) 67% or more of the votes of Shareholders of that Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
Shareholders of record of that Fund are represented in person or by proxy, or
(b) the holders of more than 50% of the outstanding votes of Shareholders of
that Fund.
- 30 -
<PAGE> 68
ADDITIONAL TAX INFORMATION
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Such qualification does not involve supervision of management or investment
practices or policies by any governmental agency or bureau.
As a regulated investment company required under Subchapter M of the
Code to distribute at least 90% of its taxable net investment income and net
short-term capital gain in excess of net long-term capital losses (and at
least 90% of net tax-exempt interest income), each Fund generally will not be
subject to federal income on any of its net investment income or net realized
capital gains which are timely distributed to Shareholders. Provided that each
Fund qualifies as a regulated investment company, it generally will not be
subject to any excise or income taxes in Massachusetts.
The Funds are potentially subject to a 4% nondeductible excise tax on
amounts required to be but are not distributed under a prescribed formula. The
formula generally requires payment to Shareholders during a calendar year of
distributions representing at least 98% of each Fund's ordinary income for the
calendar year and at least 98% of the excess of its capital gains over capital
losses realized during the one-year period ending October 31 during such year.
The Funds have adjusted their distribution policies to minimize any adverse
impact from this tax or eliminate its application.
Passive Foreign Investment Companies. The Funds may invest in shares
of foreign corporations which may be classified under the Code as passive
foreign investment companies ("PFICs"). In general, a foreign corporation is
classified as a PFIC if at least one-half of its assets constitute
investment-type assets or 75% or more of its gross income is investment-type
income. If a Fund receives a so-called "excess distribution" with respect to
PFIC stock, the Fund itself may be subject to a tax on a portion of the excess
distribution, whether or not the corresponding income is distributed by the
Fund to Shareholders. In general, under the PFIC rules, an excess distribution
is treated as having been realized ratably over the period during which the
Fund held the PFIC shares. The Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. Certain distributions from a
PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
- 31 -
<PAGE> 69
though, absent application of the PFIC rules, certain excess distributions
might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross
income its share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market a Fund's PFIC
shares at the end of each taxable year (and on certain other dates prescribed
in the Code), with the result that unrealized gains are treated as though they
were realized. If this election were made, tax at the fund level under the
PFIC rules would generally be eliminated, but a Fund could, in limited
circumstances, incur nondeductible interest charges. In addition, other
elections may become available that would affect the tax treatment of PFIC
shares held by the Fund. Each Fund's intention to qualify annually as a
regulated investment company may limit its elections with respect to PFIC
shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of
the recognition of income with respect to PFIC shares, as well as subject the
Fund itself to tax on certain income from PFIC shares, the amount that must be
distributed to Shareholders, and which will be taxed to Shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a Fund that did not invest in PFIC shares.
Foreign Taxation. Investment income and gains received by a Fund from
sources outside the United States may be subject to foreign taxes withheld at
the source. If the percentage of a Fund's total assets invested in foreign
corporate securities is not more than 50% at the close of the Fund's taxable
year, any foreign tax credits or deductions associated with such foreign taxes
will not be available for use by its Shareholders. The effective rate of
foreign taxes to which a Fund will be subject depends on the specific countries
in which each Fund's assets will be invested and the extent of the assets
invested in each such country and therefore cannot be determined in advance.
The Funds may each qualify for and make the election permitted under
Section 853 of the Code so that Shareholders will be able to claim a credit or
deduction on their federal income tax returns for, and will be required to
treat as part of the amounts distributed to them, their pro rata portion of
qualified
- 32 -
<PAGE> 70
taxes paid by the Fund to foreign countries (which taxes relate primarily to
investment income). The U.S. shareholders of a Fund may claim a foreign tax
credit or deduction by reason of the Fund's election under Section 853 of the
Code, provided that more than 50% of the value of the total assets of the Fund
at the close of the taxable year consists of securities of foreign
corporations. The foreign tax credit available to Shareholders is subject to
certain limitations imposed by the Code. Also, under Section 63 of the Code,
no deduction for foreign taxes may be claimed by Shareholders who do not
itemize deductions on their federal income tax returns, although any such
Shareholder may claim a credit for foreign taxes and in any event will be
treated as having taxable income in respect to the Shareholder's pro rata share
of foreign taxes paid by the Fund. It should also be noted that a tax-exempt
Shareholder, like other Shareholders, will be required to treat as part of the
amounts distributed its pro rata portion of the income taxes paid by the Fund
to foreign countries. However, that income will generally be exempt from
taxation by virtue of such Shareholder's tax-exempt status, and such a
Shareholder generally will not be entitled to either a tax credit or a
deduction with respect to such income. The foreign tax credit generally may
offset only up to 90% of the alternative minimum tax in any given year.
Foreign taxes generally are not deductible in computing alternative minimum
taxable income.
Foreign Currency Transactions. Under the Code, gains or losses
attributable to fluctuations in exchange rates which occur between the time a
Fund accrues income or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
and certain other instruments denominated in a foreign currency, gains or
losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition also are
treated as ordinary gain or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its Shareholders
as ordinary income. If section 988 losses exceed other net investment income
during a taxable year, a Fund generally would not be able to make ordinary
dividend distributions, or distributions made before the losses were realized
would be recharacterized as return of capital to Shareholders for Federal
income tax purposes, rather than as an ordinary dividend, reducing each
Shareholder's basis in his Fund Shares, or as capital gain.
Options, Futures and Forward Contracts. Many of the options, futures
contracts and forward contracts entered into by
- 33 -
<PAGE> 71
the Funds will be classified as "Section 1256 contracts." Generally, gains or
losses on Section 1256 contracts are considered 60% long-term and 40%
short-term capital gains or losses ("60/40"). Also, certain Section 1256
contracts held by a Fund are "marked to market" at the times required pursuant
to the Code with the result that unrealized gains or losses are treated as
though they were realized and the resulting gain or loss generally is treated
as 60/40 gain or loss, except for foreign currency gain or loss on such
contracts, which generally is ordinary in character.
The 30% limit on gains from the disposition of certain assets held
less than three months and the diversification requirements applicable to a
Fund's status as a regulated investment company may limit the extent to which a
Fund will be able to engage in transactions in options, futures contracts or
forward contracts.
Obligations Originally Issued at a Discount. Certain of the bonds
purchased by the Funds, such as zero coupon bonds, may be treated as bonds that
were originally issued at a discount. Original issue discount represents
interest for federal income tax purposes and can generally be defined as the
difference between the price at which a security was issued and its stated
redemption price at maturity. Original issue discount, although no cash is
actually received by a Fund until the maturity of the bond, is treated for
federal income tax purposes as income earned by a Fund over the term of the
bond, and therefore is subject to the distribution requirements of the Code.
The annual amount of income earned on such a bond by a Fund generally is
determined on the basis of a constant yield to maturity which takes into
account the semiannual compounding of accrued interest.
In addition, some of the bonds may be purchased by a Fund at a
discount which exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax purposes.
The gain realized on the disposition of any bond having market discount,
generally will be treated as ordinary income to the extent it does not exceed
the accrued market discount on such bond (unless a Fund elects to include
market discount in income in tax years to which it is attributable).
Generally, market discount accrues on a daily basis for each day the bond is
held by a Fund at a constant rate over the time remaining to the bond's
maturity. In the case of any debt security having a fixed maturity date of not
more than one year from date of issue, the gain realized on disposition will be
treated as short-term capital gain.
Distributions. Assuming a Fund qualifies as a regulated investment
company, distributions of net investment income and
- 34 -
<PAGE> 72
net short-term capital gains in excess of net long-term capital losses will be
treated as ordinary income in the hands of Shareholders. Distributions of the
excess of net long-term capital gain over net short-term capital loss are
taxable to Shareholders as long-term capital gain, if such distributions are
designated as capital gain dividends, regardless of the length of time the
Shares of a Fund have been held by such Shareholders. Such distributions are
not eligible for the dividends-received deduction.
If any net long-term capital gains in excess of net short-term capital
losses are retained by a Fund for reinvestment, requiring federal income taxes
to be paid thereon by a Fund, the Fund may elect to treat such capital gains as
having been distributed to Shareholders. As a result, such amounts would be
taxable as long-term capital gains in the hands of the Shareholders.
Shareholders would be able to claim their proportionate share of the federal
income taxes paid by a Fund on such gains as a credit against their own federal
income tax liabilities and would be entitled to increase the adjusted tax basis
of the relevant Fund Shares by the difference between their pro-rata share of
such gains and their tax credit.
Distributions by a Fund result in a reduction in the net asset value
of a Fund's Shares. Should a distribution reduce the net asset value below a
Shareholder's cost basis, such distribution nevertheless would be taxable to
the Shareholder as ordinary income or capital gain as described above, even
though, from an investment standpoint, it may constitute a partial return of
investment. In particular, investors should be careful to consider the tax
implications of buying Shares just prior to a distribution. The price of
Shares purchased at that time includes the amount of the forthcoming
distribution. Those investors purchasing hares just prior to a distribution
will then receive a partial return of their investment upon such distribution,
which will nevertheless be taxable to them.
Distributions of net investment income and net realized capital gains
will be taxable as described above, whether received in Shares or in cash.
Shareholders electing to receive distributions in the form of additional Shares
will have a cost basis for federal income tax purposes in each Share so
received equal to the net asset value of such Share on the reinvestment date.
Any distributions that are not from a Fund's net investment income or net
realized capital gains may be characterized as a return of capital to
Shareholders or, in some cases, as capital gain.
All distributions, whether received in Shares or cash, must be
reported by each Shareholder on his or her federal income tax
- 35 -
<PAGE> 73
return. Dividends declared and payable to Shareholders of record on a
specified date in October, November or December, if any, will be deemed to have
been received by Shareholders on December 31 if paid during January of the
following year. The Funds will provide a statement of the federal income tax
status of all distributions to Shareholders annually.
Sales of Shares. Upon the sale, exchange or other taxable disposition
of Shares of a Fund, a Shareholder may realize a capital gain or loss which
will be long-term or short-term, generally depending upon the shareholder's
holding period for the Shares. Any loss realized on a sale or exchange will be
disallowed to the extent the Shares disposed of are replaced (including
replacement through the reinvestment of dividends and capital gain
distributions in a Fund) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the Shares. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any
loss realized by a Shareholder on a disposition of Fund Shares held by the
Shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of capital gain dividends received by the
Shareholder with respect to such Shares.
Under certain circumstances, the sales charge incurred in acquiring
Shares of a Fund may not be taken into account in determining the gain or loss
on the disposition of those Shares. This rule applies if (1) the Shareholder
incurs a sales charge in acquiring stock of a Fund, (2) Shares of the Fund are
exchanged within 90 days after the date they were purchased, and (3) the new
shares are acquired without a sales charge or at a reduced sales charge under a
"reinvestment right" received upon the initial purchase of Fund Shares. In
that case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the Shares exchanged all or a portion of the
amount of sales charge incurred in acquiring the Shares. This exclusion
applies to the extent that the otherwise applicable sales charge with respect
to the newly acquired shares is reduced as a result of having incurred the
sales charge initially. Instead, the portion of the sales charge affected by
this rule will be treated as an amount paid for the new shares.
Backup Withholding. A Fund will be required to report to the IRS all
distributions of income and capital gains as well as gross proceeds from the
redemption or exchange of Fund Shares, except in the case of certain exempt
Shareholders. Under the backup withholding provisions of Section 3406 of the
Code, all such distributions and proceeds from the redemption or exchange of a
Fund's Shares may be subject to withholding of federal income tax at the rate
of 31% in the case of nonexempt
- 36 -
<PAGE> 74
Shareholders who fail to furnish a Fund with their taxpayer identification
number and with required certifications regarding their status under the
federal income tax law or if the IRS or a broker notifies a Fund that the
number furnished by the Shareholder is incorrect. In addition, both the Fund
and the Shareholder are potentially subject to a $50 penalty imposed by the IRS
if a correct, certified taxpayer identification number is not furnished and
used on required information returns. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in Shares, will be reduced by the amounts required to be withheld.
Backup withholding is not an additional tax and any amounts withheld are
creditable against the Shareholder's U.S. Federal tax liability.
Investors may wish to consult their tax advisers about the
applicability of the backup withholding provisions.
Other Taxation. The foregoing discussion relates only to U.S. Federal
income tax law as applicable to U.S. persons (i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates).
The tax consequences to a foreign Shareholder of an investment in the Funds may
differ from those described herein. Distributions by the Funds also may be
subject to state, local and foreign taxes, and their treatment under state and
local income tax laws may differ from U.S. Federal income tax treatment.
Shareholders should consult their tax advisors with respect to their individual
tax situation.
YIELDS AND TOTAL RETURNS OF THE FUNDS
Yield Calculations. As summarized in the Prospectus of the Funds
under the heading "PERFORMANCE INFORMATION", yields of each of the Funds will
be computed by dividing the net investment income per share (as described
below) earned by the Fund during a 30-day (or one month) period by the maximum
offering price per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. A Fund's net investment income per share earned during the period
is based on the average daily number of Shares outstanding during the period
entitled to receive dividends and includes dividends and interest earned during
the period minus expenses accrued for the period, net of reimbursements. This
calculation can be expressed as follows:
a - b 6
Yield = 2 [(------- + 1) - 1]
cd
- 37 -
<PAGE> 75
Where: a = dividends and interest earned during
the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Shares
outstanding during the period that were
entitled to receive dividends.
d = maximum offering price per Share on the
last day of the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in that Fund. Interest earned on any
debt obligations held by a Fund is calculated by computing the yield to
maturity of each obligation held by that Fund based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last Business Day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and
dividing the result by 360 and multiplying the quotient by the market value of
the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by that Fund. For purposes of this calculation, it is
assumed that each month contains 30 days. The maturity of an obligation with a
call provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.
Undeclared earned income will be subtracted from the net asset value
per share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the base period, has not been declared
as a dividend, but is reasonably expected to be and is declared as a dividend
shortly thereafter.
During any given 30-day period, the Adviser or Administrator may
voluntarily waive all or a portion of its fees with respect to a Fund. Such
waiver would cause the yield of that Fund to be higher than it would otherwise
be in the absence of such a waiver.
- 38 -
<PAGE> 76
Total Return Calculations. As summarized in the Prospectus of the
Funds under the heading "PERFORMANCE INFORMATION", average annual total return
is a measure of the change in value of an investment in a Fund over the period
covered, which assumes any dividends or capital gains distributions are
reinvested in the Fund immediately rather than paid to the investor in cash.
Aggregate total return is calculated similarly to average annual total return
except that the return figure is aggregated over the relevant period instead of
annualized.
The Funds compute their average annual total returns by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
Average Annual ERV 1/n
Total Return = [(------) - 1]
P
Where: ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed
in terms of years.
The Funds compute their aggregate total returns by determining the
aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
Aggregate Total ERV
Return = [(------] - 1]
P
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
- 39 -
<PAGE> 77
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations.
With respect to the Global Asset Allocation Fund, based upon the
period beginning with the Fund's commencement of operations (July 2, 1996)
through September 30, 1996, the aggregate total return for the Fund, assuming
the imposition of the maximum applicable sales charge, was (4.16)%. Assuming
that the maximum applicable sales charge had not been imposed, the Fund's
aggregate total return for this same period would have been 1.40%.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Funds by comparing them to
the performance of other mutual funds with comparable investment objectives and
policies through various mutual fund or market indices such as those prepared
by Dow Jones & Co., Inc., Standard & Poor's Corporation and Morningstar, Inc.
and to data prepared by Lipper Analytical Services, Inc., a widely recognized
independent service which monitors the performance of mutual funds or Ibbotson
Associates, Inc. Comparisons may also be made to indices or data published in
Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business Week, American Banker, Fortune, Institutional Investor,
CDA/Wiesberger, Pensions and Investments, U.S.A. Today, Investor's Business
Daily, Value Line, MICROPAL and local newspapers. In addition to performance
information, general information about the Funds that appears in a publication
such as those mentioned above may be included in advertisements and in reports
to Shareholders. The Funds may also include in advertisements and reports to
Shareholders information comparing the performance of the Adviser or
Sub-Advisers or their predecessors to other investment advisers; such
comparisons may be published by or included in Nelsons Directory of Investment
Managers, Roger's, Casey/PIPER Manager Database or CDA/Cadence.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield
or performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of a Fund's quality, composition and maturity, as
well as expenses allocated to the Fund.
- 40 -
<PAGE> 78
From time to time, a Fund may include general comparative information,
such as statistical data regarding inflation, securities indices or the
features or performance of alternative investments, in advertisements, sales
literature and reports to shareholders. The Funds may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of any Fund.
PRINCIPAL SHAREHOLDERS
As of December 1, 1996, Ernst & Company, One Battery Park Plaza, New
York, New York 10004, owned beneficially or of record 98% of the Global Asset
Allocation Fund's shares.
MISCELLANEOUS
The Funds may include information in their Annual Reports and
Semi-Annual Reports to Shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for
a fund within the Group or (4) describes investment management strategies for
such funds. Such information is provided to inform Shareholders of the
activities of the Funds for the most recent fiscal year or half-year and to
provide the views of the Adviser and/or Group officers regarding expected
trends and strategies.
Individual Trustees are elected by the Shareholders and, subject to
removal by the vote of two-thirds of the Board of Trustees, serve for a term
lasting until the next meeting of Shareholders at which Trustees are elected.
Such meetings are not required to be held at any specific intervals.
Shareholders owning not less than 10% of the outstanding Shares of the Group
entitled to vote may cause the Trustees to call a special meeting, including
for the purpose of considering the removal of one or more Trustees. Any
Trustee may be removed at any meeting of Shareholders by vote of two-thirds of
the Group's outstanding shares. The Declaration of Trust provides that the
Trustees will assist shareholder communications to the extent required by
Section 16(c) of the 1940 Act in the event that a shareholder request to hold a
special meeting is made.
The Prospectuses and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Commission. Copies of such information may be obtained from the Commission
upon payment of the prescribed fee.
- 41 -
<PAGE> 79
The Prospectuses and this Statement of Additional Information are not
an offering of the securities herein described in any state in which such
offering may not lawfully be made. No salesman, dealer, or other person is
authorized to give any information or make any representation other than those
contained in the Prospectuses and this Statement of Additional Information.
FINANCIAL STATEMENTS
Unaudited financial statements for the period from commencement of the
Global Asset Allocation Fund's operations through September 30, 1996, are
incorporated by reference in this Statement of Additional Information from that
Fund's Semi-Annual Report to Shareholders.
- 42 -
<PAGE> 80
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights
Incorporated by Reference in Part B:
Statement of Assets and Liabilities dated
September 30, 1996 (unaudited)
Statement of Operations for the Period Ended
September 30, 1996 (unaudited)
Statement of Changes in Net Assets for the Period
Ended September 30, 1996 (unaudited)
Schedule of Portfolio Investments as of
September 30, 1996 (unaudited)
Notes to Financial Statements
Financial Highlights
(b) Exhibits
(1) Declaration of Trust(1)
(2) (a) By-Laws(1)
(b) Establishment and Designation of a
Series of Shares (Ernst Global Asset
Allocation Fund)(2)
_____________________
(1) Filed with initial Registration Statement on January 8, 1992.
(2) Filed with Post-Effective Amendment No. 24 filed February 2, 1996.
<PAGE> 81
(3) Not Applicable
(4) Certificates for Shares are not issued.
Articles IV, V, VI and VII of the Declaration
of Trust, previously filed as Exhibit 1
hereto, define rights of holders of Shares.
(5) (a) Investment Advisory Agreement
between Registrant and Ernst &
Company (with respect to Ernst
Global Asset Allocation Fund)(2)
(b) Sub-Investment Advisory Agreement
between Ernst & Company and National
Mutual Funds Management (Global)
Ltd. (with respect to Ernst Global
Asset Allocation Fund)(2)
(6) Distribution Agreement between Registrant and
BISYS Fund Services(2)
(7) Not Applicable
(8) Custodian Agreement between Registrant and
The Bank of California, N.A. (with respect to
Ernst Global Asset Allocation Fund)(2)
(9) (a) Management and Administration
Agreement between the Registrant and
BISYS Fund Services (with respect to
Ernst Global Asset Allocation
Fund)(2)
(b) Fund Accounting Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc. (with respect to
Ernst Global Asset Allocation
Fund)(2)
(c) Transfer Agency Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc. (with respect to
Ernst Global Asset Allocation
Fund)(2)
(10) Opinion and Consent of Counsel(3)
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
C-2
<PAGE> 82
(14) Not Applicable
(15) Distribution and Shareholder Service Plan(2)
(16) Schedules for Computation of Performance Data
(27) Financial Data Schedules
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 26. Number of Record Holders
As of November 30, 1996, the number of record holders of the
series of the Registrant was as follows:
<TABLE>
<S> <C>
AMCORE Vintage U.S. Government Obligations Fund 1298
AMCORE Vintage Fixed Income Fund 277
AMCORE Vintage Intermediate Tax-Free Fund 128
AMCORE Vintage Equity Fund 1530
AMCORE Vintage Balanced Fund 277
AMCORE Vintage Aggressive Growth Fund 628
AMCORE Vintage Fixed Total Return Fund 123
Brenton U.S. Government Money Market Fund 279
Brenton Intermediate U.S. Government 24
Securities Fund
Brenton Intermediate Tax-Free Fund 13
Brenton Value Equity Fund 339
The Shelby Fund 14
Ernst Asia Fund 87
Ernst Global Resources Fund 41
Ernst Global Asset Allocation Fund 9
Ernst Global Smaller Companies Fund 0
Ernst Australia-New Zealand Fund 0
</TABLE>
_____________________
3 Filed with Rule 24f-2 Notice on May 24, 1996.
C-3
<PAGE> 83
Item 27. Indemnification
Article IV of the Registrant's Declaration of Trust states as
follows:
Section 4.3. Mandatory Indemnification.
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust shall be indemnified by the Trust to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof; and
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative or other, including appeals),
actual or threatened; and the words "liability" and "expenses"
shall include, without limitation, attorneys fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a Series thereof, or
the Shareholders by reason of a final adjudication by a court
or other body before which a proceeding was brought that he
engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office;
(ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in
the reasonable belief that his action was in the best interest
of the Trust; or
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i)
or (b)(ii) resulting in a payment by a Trustee or officer,
unless there has been a determination that such Trustee or
officer did not
C-4
<PAGE> 84
engage in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct
of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (1) vote
of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the
Disinterested Trustees then in office acts on the
matter) or (2) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the
heirs, executors, administrators and assigns of such person. Nothing
contained herein shall affect any rights to indemnification to which
personnel of the Trust other than Trustees and officers may be
entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 4.3 may be advanced by the Trust prior
to final disposition thereof upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification under this
Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the
Trust shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
acts on the matter) or an independent legal counsel in a
written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
C-5
<PAGE> 85
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an Interested Person of the Trust (including anyone who has
been exempted from being an Interested Person by any rule, regulation
or order of the Commission), or (ii) involved in the claim, action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers
or controlling persons of the Registrant in connection with
the successful defense of any act, suit or proceeding) is
asserted by such trustees, officers or controlling persons in
connection with the shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issues.
Item 28. Business and Other Connections of Investment Adviser and its
Officers and Directors
Ernst & Company is the investment adviser for the Ernst Global
Asset Allocation Fund. The business and other connections of
Ernst & Company are set forth in the Uniform Application for
Investment Adviser Registration ("Form ADV") of Ernst &
Company as currently filed with the SEC and which is
incorporated by reference herein. National Mutual Funds
Management (Global) ("NMFM") is the sub-investment adviser to
the Ernst Global Asset Allocation Fund. The business and
other connections of NMFM are set forth in its Form ADV as
currently filed with the SEC and which is incorporated by
reference herein.
Item 29. Principal Underwriter
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") acts as distributor and administrator for
C-6
<PAGE> 86
Registrant. BISYS Fund Services also distributes the securities of
the American Performance Funds, the AmSouth Mutual Funds, The ARCH
Fund, Inc., The BB&T Mutual Funds Group, First Choice Funds Trust,
Fountain Square Funds, HSBC Family of Funds, The HighMark Group, The
Infinity Mutual Funds, Inc., The Kent Funds, Marketwatch Funds, MMA
Praxis Mutual Funds, M.S.D.&T Funds, Pacific Capital Funds, Parkstone
Group of Funds, the Parkstone Advantage Funds, Pegasus Funds,
Qualivest Funds, The Republic Funds Trust, The Republic Advisors Funds
Trust, The Riverfront Funds, Inc., SBSF Funds, Inc. dba Key Mutual
Funds, The Sessions Group, Summit Investment Trust, The Time Horizon
Funds and The Victory Portfolios.
(b) Partners of BISYS Fund Services as of November 30, 1996, were
as follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
- ---------------- ------------------- ----------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, New Jersey 07424
The BISYS Group, Inc. Sole Shareholder None
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Ernst & Company, One
Battery Park Plaza, New York, New York 10004 (records relating
to its function as adviser for the Ernst Global Asset
Allocation Fund), National Mutual Funds Management (Global)
Ltd., 525 Collins Street, Melbourne, Australia 3000 (records
relating to its function as sub- investment adviser to the
Ernst
C-7
<PAGE> 87
Global Asset Allocation Fund), BISYS Fund Services, 3435
Stelzer Road, Columbus, Ohio 43219 (records relating to its
functions as administrator and distributor), and BISYS Fund
Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as transfer agent).
Item 31. Management Services
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish each person to whom
a prospectus is delivered a copy of the Registrant's
latest annual report to shareholders, upon request
and without charge, in the event that the information
called for by Item 5A of Form N-1A has been presented
in the Registrant's latest annual report to
shareholders.
(d) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10% of
the Registrant's outstanding shares of beneficial
interest and in connection with such meeting to
comply with the shareholders communications
provisions of Section 16(c) of the Investment Company
Act of 1940.
C-8
<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 29 to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Washington in the
District of Columbia on the 27th day of December, 1996.
THE COVENTRY GROUP
By:
-----------------------------------
Walter B. Grimm, President***
By: Jeffrey L. Steele
--------------------------------------
Jeffrey L. Steele, as attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
Signature Title Date
- --------- ----- ----
______________________ Chairman, President December 27, 1996
Walter B. Grimm*** and Trustee
(Principal Executive
Officer)
______________________ Trustee December 27, 1996
Chalmers P. Wylie**
______________________ Trustee December 27, 1996
Maurice G. Stark*
______________________ Trustee December 27, 1996
Michael M. Van Buskirk*
<PAGE> 89
______________________ Trustee December 27, 1996
Nancy E. Converse***
______________________ Treasurer December 27, 1996
William J. Tomko* (Principal
Financial and
Accounting Officer)
By: Jeffrey L. Steele
-------------------------------
Jeffrey L. Steele,
as attorney-in-fact
* Pursuant to power of attorney filed with Pre-Effective Amendment No. 3
on April 6, 1992.
** Pursuant to power of attorney filed with Post-Effective Amendment No.
6 on May 4, 1993.
*** Pursuant to power of attorney filed with Post-Effective Amendment No.
26 on May 1, 1996.
<PAGE> 90
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED
WITH
POST-EFFECTIVE AMENDMENT NO. 29
TO THE
REGISTRATION STATEMENT
OF
THE COVENTRY GROUP
<PAGE> 91
INDEX TO EXHIBITS
(FOR POST-EFFECTIVE AMENDMENT NO. 29)
<TABLE>
<CAPTION>
EXHIBIT NO.
UNDER PART C
NAME OF EXHIBIT OF FORM N-1A
- --------------- ------------
<S> <C>
Schedules for Computation of 16
Performance Data
Financial Data Schedules 27
</TABLE>
<PAGE> 1
EXHIBIT 16
SCHEDULES FOR COMPUTATION OF PERFORMANCE DATA
<PAGE> 2
ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
EXHIBIT 16
TOTAL RETURN
VARIABLE FUNDS
NO LOAD CALCULATIONS
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
<TABLE>
<S> <C> <C>
SINCE INCEPTION: ( 07/02/96 TO 09/30/96 ):
( 1,014.0 /1,000) - 1 = 1.40%
YEAR TO DATE: ( 07/02/96 TO 09/30/96 ):
( 1,014.0 /1,000) - 1 = 1.40%
QUARTERLY: ( 07/02/96 TO 09/30/96 ):
( 1,014.0 /1,000) - 1 = 1.40%
MONTHLY: ( 09/01/96 TO 09/30/96 ):
( 1,037.9 /1000) - 1 = 3.79%
</TABLE>
<PAGE> 3
ERNST WORLD FUNDS
ERNST GLOBAL ASSET ALLOCATION FUND
EXHIBIT 16
TOTAL RETURN
VARIABLE FUNDS
LOAD CALCULATIONS
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 5.50%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
<TABLE>
<S> <C> <C>
SINCE INCEPTION: ( 07/02/96 TO 09/30/96 ):
( 958.4 /1,000) - 1 = -4.16%
YEAR TO DATE: ( 07/02/96 TO 09/30/96 ):
( 958.4 /1,000) - 1 = -4.16%
QUARTERLY: ( 07/02/96 TO 09/30/96 ):
( 958.4 /1,000) - 1 = -4.16%
MONTHLY: ( 09/01/96 TO 09/30/96 ):
( 980.7 /1,000) - 1 = -1.93%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000882748
<NAME> THE COVENTRY GROUP
<SERIES>
<NUMBER> 151
<NAME> ERNST GLOBAL ASSET ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 5,107,156
<INVESTMENTS-AT-VALUE> 5,104,294
<RECEIVABLES> 50,225
<ASSETS-OTHER> 31,541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,186,060
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,959
<TOTAL-LIABILITIES> 28,959
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,086,349
<SHARES-COMMON-STOCK> 508,819
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 4,158
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 42,625
<ACCUM-APPREC-OR-DEPREC> 117,535
<NET-ASSETS> 5,157,101
<DIVIDEND-INCOME> 1,064
<INTEREST-INCOME> 58,905
<OTHER-INCOME> 0
<EXPENSES-NET> 64,127
<NET-INVESTMENT-INCOME> (4,158)
<REALIZED-GAINS-CURRENT> (42,625)
<APPREC-INCREASE-CURRENT> 117,535
<NET-CHANGE-FROM-OPS> 70,752
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,618
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (693,141)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27,293
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 80,927
<AVERAGE-NET-ASSETS> 4,962,222
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> .15
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.14
<EXPENSE-RATIO> 2.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
