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As filed with the Securities and Exchange Commission on May 22, 1998
Registration No. 33-44964
Investment Company Act File No. 811-6526
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. __ / /
Post-Effective Amendment No. 36 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 38 / 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 Office)
Registrant's Telephone Number: (614) 470-8000
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Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1775 Eye Street, NW
Washington, DC 20006
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(Name and Address of Agent for Services)
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)
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[X] Immediately upon filing pursuant to [X] on May 22, 1998 pursuant
paragraph (b), or to paragraph (b), or
[ ] 60 days after filing pursuant to [ ] on the 75th day after filing
paragraph (a), or pursuant to paragraph (a) of Rule 485
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CROSS REFERENCE SHEET
The enclosed materials relate only to the Willamette Value Fund, a separate
investment series of the Coventry Group (the "Group"). Information relating to
the Group's other investment series, consisting of AMCORE Mutual Fund, Brenton
U.S. Government Money Market Fund; Brenton Intermediate U.S. Government
Securities Fund; Brenton Value Equity Fund; Ernst Asia Fund; Ernst Global
Resources Fund; Ernst Global Asset Allocation Fund; Ernst Global Smaller
Companies Fund; Ernst Australia-New Zealand Fixed Income Fund; and The Shelby
Fund, as well as proposed new Stewardship Funds (formerly Family Values
Portfolios), is contained in previously filed Post-Effective Amendments.
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Form N-1A Part A Item Prospectus Caption
PART A: INFORMATION REQUIRED IN A PROSPECTUS
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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 Provided in Registrant's Annual Report to Shareholders
Performance
6. Capital Stock and Other Securities How to Purchase and Redeem Shares; Dividends and Taxes;
General Information - Description of the Group and Its
Shares; General Information - Miscellaneous
7. Purchase of Securities Being Offered Valuation of Shares; How to Purchase and Redeem Shares
8. Redemption or Repurchase How to Purchase and Redeem Shares
9. Pending Legal Proceedings Inapplicable
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Form N-1A Part B Item Statement of Additional Information
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Coventry Group; Additional Information
13. Investment Objectives and Policies Investment Objectives and Policies
14. Management of the Fund Management of the Group - Trustees and Officers
15. Control Persons and Principal Additional Information - Description of Shares
Holders of Securities
16. Investment Advisory and Other Management of the Group
Services
17. Brokerage Allocation Management of the Group - Portfolio Transactions
18. Capital Stock and Other Securities Additional Information - Description of Shares
19. Purchase, Redemption and Pricing of Additional Purchase and Redemption Information
Securities Being Offered
20. Tax Status Additional Information - Additional Tax Information
21. Underwriters Management of the Group - Distributor
22. Calculation of Performance Data Additional Information
23. Financial Statements Financial Statements
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WILLAMETTE VALUE FUND
(A SERIES OF THE COVENTRY GROUP)
For current yield, purchase,
and redemption information,
call (800) 713-4276.
WILLAMETTE VALUE FUND ("Fund") is a separate series of the Coventry Group (the
"Group"). The Fund is advised by Willamette Asset Managers, Inc. ("Adviser"), of
Portland, Oregon. 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 Fund seeks to provide above average total return through a combination of
capital appreciation and dividend income. The Fund pursues this objective by
investing, under normal market conditions, primarily in equity securities that
have a record of paying dividends and which the Adviser believes are priced low
relative to their earnings and/or prices of comparable securities. There can be
no assurance that the Fund will achieve its objective.
BISYS Fund Services Limited Partnership, Columbus, Ohio ("the Distributor")
acts as the Fund's administrator and distributor. BISYS Fund Services Ohio Inc.,
Columbus, Ohio, 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, 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 bears the same date as this Prospectus
and is incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference.
------------------------
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 May 22, 1998.
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PROSPECTUS SUMMARY
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The Fund............................... Willamette Value Fund ("Fund"), a diversified
investment portfolio of The Coventry Group, an
open-end management investment company organized
as a Massachusetts business trust.
Shares Offered......................... The Fund offers one class of shares of
beneficial interest ("Shares").
Offering Price......................... The public offering price of the Fund's Shares
is equal to the net asset value per Share plus a
maximum front-end sales charge of 4.50%.
Minimum Purchase....................... $1,000 minimum for the initial investment ($250
for IRA and other retirement plan investments)
with a $100 minimum for subsequent investments.
(See "HOW TO PURCHASE AND REDEEM
SHARES--Purchases of Shares and Auto Invest
Plan" for a discussion of lower minimum purchase
amounts).
Investment Objective and Policies...... The investment objective of the Fund is to seek
above average total return through a combination
of capital appreciation and dividend income. The
Fund pursues this objective by investing, under
normal market conditions, primarily in equity
securities that have a record of paying
dividends and that the Adviser believes are
priced low relative to their earnings and/or
comparable securities. There can be no assurance
the Fund will achieve its objective.
Investment Adviser..................... Willamette Asset Managers, Inc., a registered
investment adviser, acts as the Fund's
investment adviser. The Adviser is an affiliate
of Phillips and Company Securities, Inc., a
registered broker-dealer.
Dividends.............................. The Fund intends to declare dividends with
respect to its Shares from net investment income
and pay such dividends quarterly.
Distributor............................ BISYS Fund Services Limited Partnership,
Columbus, Ohio.
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FEE TABLE
The following table is designed to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly.
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SHAREHOLDER TRANSACTION EXPENSES (1)
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)......................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as
a percentage of
offering price)...................................... None
Maximum Deferred Sales Load (as a percentage of
original purchase price or redemption proceeds, as
applicable)........................................... None
Redemption Fees (as a percentage of amount redeemed, if
applicable)........................................... None
Exchange Fee........................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................................ 1.00%
12b-1 Fees(2).......................................... 0.50%
Other Expenses (estimated)(3).......................... 1.40%
Total Fund Operating Expenses (estimated)(3)........... 2.90%
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(1) A Participating Organization (as defined in this Prospectus) may charge a
customer's account fees for automatic investment and other investment
management services provided in connection with investment in the Fund. (See
"HOW TO PURCHASE AND REDEEM INVESTOR SHARES--Purchases of Shares.")
(2) The Group has adopted a Distribution and Shareholder Service Plan (the
"Plan") pursuant to which the Fund is authorized to pay or reimburse the
Distributor a periodic amount calculated at an annual rate not to exceed
0.50% of its average daily net assets. As a result of expenses payable in
connection with the 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. The Fund is
also authorized to pay up to 0.25% of its average daily net assets under an
Administrative Services Plan.
(3) Amounts shown are based on estimated amounts for the current fiscal year.
EXAMPLE
You would pay the following expenses on a $1,000, investment, assuming
(1) 5% annual return (2) reinvestment of all dividends and distributions,
and (3) redemption at the end of each time period:
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1 Year....................................... $ 73
3 Years...................................... $131
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INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS OF THE FUND
The Fund's investment objective and policies 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 (see "Investment Restrictions"). 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.
The Fund seeks to provide above average total return through a combination of
capital appreciation and dividend income. In pursuit of this objective, the
Adviser will follow a "value" investment strategy--i.e., under normal market
conditions, the Fund will invest primarily in equity securities that have a
record of paying dividends and that the Adviser believes are priced low relative
to their earnings and/or comparable securities. There can be no assurance the
Fund will achieve its objective. Investors should understand that the value of
the Fund's portfolio securities, and of the Fund's shares, will fluctuate.
As a diversified fund, the Fund's investments in securities of any particular
issuer are subject to certain limits. Subject to these requirements, the Adviser
normally expects to allocate about one-half of the Fund's total assets to the
ten highest dividend-yielding stocks in the Dow Jones Industrial Average
("DJIA"). The other half of the Fund's total assets will normally be allocated
to certain New York Stock Exchange ("NYSE") listed issuers that are not included
in the DJIA. Stocks in this group will be selected by identifying the 400
largest capitalized NYSE stocks that are not included in the DJIA, removing the
50 highest dividend yielding stocks from that group and purchasing the next 25
highest dividend yielding stocks. Each such portion of the Fund's portfolio will
be rebalanced annually, using the same criteria. In the event of bankruptcy,
pending bankruptcy, a dividend cut, or other major significant event affecting a
portfolio security, the Adviser may, but is not required to, replace the
security with the next highest dividend paying stock. The portions allocated to
either category of security may be reduced to the extent needed to maintain some
portion of the Fund's total assets in cash or cash equivalents to satisfy
redemption requests, to pay Fund expenses and for other contingencies. However,
under normal market conditions, the Fund will have at least 65%, and generally
more substantial portions, of its total assets invested in these two categories
of securities. The Fund reserves the right, under abnormal market conditions, to
invest, for temporary defensive purposes, without limit in debt securities,
including U.S. Government securities; certificates of deposit, bankers'
acceptances and other short-term debt obligations of banks having total assets
of at least $1 billion; corporate debt instruments; commercial paper; and
repurchase agreements concerning securities in which the Fund is authorized to
invest. Debt obligations in which the Fund invests will, at the time of
investment, be rated in the three highest rating categories by a nationally
recognized statistical rating organization or deemed by the Adviser to be of
comparable quality. If the quality of a debt obligation held by the Fund
declines below the third highest category, the Fund will sell the security
unless the Adviser determines a sale is not in the best interests of the Fund.
CERTAIN OTHER PORTFOLIO STRATEGIES. The Fund's principal investments will be
in common stock of U.S. companies. However, the Fund is authorized also to
invest in certain other types of securities, which are described below.
Additionally, in managing the Fund's portfolio, the Adviser may employ certain
strategies including put and call options, futures contracts and options on
futures, lending of portfolio securities, and investing in securities of other
investment companies.
DEPOSITARY RECEIPTS. The Fund's investments may include securities of foreign
issuers in the form of sponsored or unsponsored American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs") and European Depositary Receipts
("EDRs"). ADRs are depositary receipts typically issued by a United States bank
or trust company which evidence ownership of underlying securities issued by a
foreign
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corporation. EDRs and GDRs are typically issued by foreign banks or trust
companies, although they also may be issued by United States 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 United States 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. Ownership of unsponsored depositary receipts may not entitle
the Fund to financial or other reports from the issuer of the underlying
security, to which it would be entitled as the owner of sponsored depositary
receipts.
RISKS ASSOCIATED WITH INVESTING IN FOREIGN COMPANIES. Investing in non-U.S.
securities carries risks in addition to those associated with domestic
investments. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may adversely
affect the payment of principal or interest, foreign withholding or other taxes
on interest income, difficulties in obtaining or enforcing a judgment against
the issuing entity, and the possible impact of currency fluctuations and of
interruptions in the flow of international currency transactions. Risks may also
exist for ECDs, ETDs, Yankee CDs (see "Bank Instruments," below), because the
banks issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Adviser in selecting investments for
the Fund.
GOVERNMENT OBLIGATIONS. Some obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government are backed by the full faith and credit
of the U.S. Treasury. No assurances can be given that the U.S. Government will
provide financial support to other agencies or instrumentalities, since it is
not obligated to do so. These instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- the discretionary authority of the U.S. Government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
CORPORATE BONDS. The Fund may invest in issues of corporate debt obligations
which are rated in one of the three highest categories by a nationally
recognized statistical rating organization (rated Aaa, Aa, or A by Moody's
Investors Service, Inc. ("Moody's"); AAA, AA, or A by Standard & Poor's ("S&P")
for example, or, if unrated, which are of comparable quality in the judgment of
the Adviser.
BANK INSTRUMENTS. The Fund may invest only in Bank Instruments that are
either issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). In addition to domestic instruments such as
bankers' acceptances and certificates of deposit, Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs").
RESTRICTED AND ILLIQUID SECURITIES. Restricted securities are subject to
restrictions on resale under federal securities law. Under criteria established
by the Fund's Trustees, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be
liquid, the Fund will limit their purchase, together with other illiquid
securities including non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to no more than
15% of its net assets.
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Restricted securities in which the Fund may invest may include commercial
paper issued in reliance on the exemption from registration afforded by Section
4(2) of the Securities Act of 1933. Section 4(2) commercial paper is restricted
as to disposition under federal securities law, and is generally sold to
institutional investors, such as the Fund, who agree that they are purchasing
the paper for investment purposes and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2)
commercial paper is normally resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) commercial paper, thus providing liquidity. The Adviser
believes that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity established by the
Trustees of the Fund are quite liquid. The Fund intends, therefore, to treat the
restricted securities which meet the criteria for liquidity established by the
Trustees, including Section 4(2) commercial paper, as determined by the Adviser,
as liquid and not subject to the investment limitations applicable to illiquid
securities.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase the securities from the Fund. These transactions permit the Fund to
earn income for periods as short as overnight. The Fund could receive less than
the repurchase price on any sale of such securities. Although the agreements are
fully collateralized, there may be some risk to the Fund in the event of
bankruptcy of the other party. To minimize this risk, the Fund may enter into
repurchase agreements only with an approved list of firms, which are regularly
monitored as to their financial health.
FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may invest in futures
contracts and options on futures contracts to the extent permitted by the
Commodity Futures Trading Commission ("CFTC") and the Commission. Such
transactions, which may include stock index futures contracts, or options
thereon, will generally be intended to act as a hedge to protect the Fund from
fluctuations in the value of its securities caused by anticipated changes in
market conditions without necessarily buying or selling the securities. Hedging
is a specialized investment technique that entails skills different from other
investment management. A stock index futures contract is an agreement in which
one party agrees to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the index value (which
assigns relative values to the common stocks included in the index) at the close
of the last trading day of the contract and the price at which the agreement is
originally made. No physical delivery of the underlying stock in the index is
contemplated.
The purchase and sale of futures contracts or related options will not be a
primary investment technique of the Fund. The Fund will not purchase or sell
futures contracts (or related options thereon) if, immediately after the
transaction, the aggregate initial margin deposits and premiums paid by the Fund
on its open futures and options positions that do not constitute bona fide
hedging transactions, as defined by applicable rules, exceed 5% of the
liquidation value of the Fund after taking into account any unrealized profits
and unrealized losses on any such futures or related options contracts into
which it has entered.
CALL OPTIONS. The Fund may earn premium income by writing covered call
options on securities owned by the Fund. Such instruments may also be referred
to as equity derivatives. Derivatives generally are instruments whose value is
derived from or related to the value of some other instrument, asset or
specified benchmark, such as a specific stock or stock 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 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 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
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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 a particular security. 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 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.
LENDING OF PORTFOLIO SECURITIES. From time to time in order to generate
additional income, the Fund may lend its portfolio securities, provided such
action is consistent with its investment objective, policies, and restrictions.
During the time portfolio securities are on loan, the borrower will pay the Fund
any dividends or interest paid on the securities. In addition, loans will be
subject to termination by the Fund or the borrower at any time.
The Fund will enter into loan arrangements only with broker-dealers, banks or
other institutions that are not affiliated directly or indirectly with the Group
and which the Adviser has determined are creditworthy under guidelines
established by the Group's Board of Trustees. While the lending of securities
may subject the Fund to certain risks, such as delays or an inability to regain
the securities in the event the borrower defaults on its lending agreement or
enters into bankruptcy, the Fund will receive 100% collateral on loaned
securities in the form of cash or eligible liquid securities. This collateral
will be valued daily by the Adviser and, should the market value of the loaned
securities increase, the borrower will be required to furnish additional
collateral to the Fund. Although the Fund does not expect to do so on a regular
basis, it may lend portfolio securities in amounts representing up to one-third
of the value of the Fund's total assets.
OTHER INVESTMENT COMPANIES. The Fund may also 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 investment companies. Additional restrictions on the Fund's investments
in the securities of other investment companies are contained in the Statement
of Additional Information.
AFFILIATED TRANSACTIONS. The Fund is authorized to execute portfolio
transactions through, and to pay commissions to, Phillips & Company Securities,
Inc. ("Phillips"), a broker-dealer affiliated with the Adviser, and to purchase
securities in underwritings in which Phillips is a member of the underwriting
syndicate. The Fund will not acquire portfolio securities issued by, or enter
into repurchase agreements or reverse repurchase agreements with, the Adviser,
the Distributor or their affiliates.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of the Fund and
may not be changed without approval by vote of a majority of the outstanding
shares of the Fund. For this purpose such a majority vote means the lesser of
(1) 67% or more of the voting securities present at an annual or special meeting
of Shareholders, if holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy or (2) more than 50%
of the outstanding voting securities of the Fund.
The Fund has elected to be qualified as a diversified series of the Group.
The Fund may not:
borrow money, except as permitted under the Investment Company Act of 1940, as
amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time;
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issue senior securities, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
concentrate its investments in a particular industry, as that term is used in
the Investment Company Act of 1940, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time;
engage in the business of underwriting securities issued by others, except to
the extent that the Fund may be deemed to be an underwriter in connection with
the disposition of portfolio securities;
purchase or sell real estate, which does not include securities of companies
which deal in real estate or mortgages or investments secured by real estate or
interests therein, except that the Fund reserves freedom of action to hold and
to sell real estate acquired as a result of the Fund's ownership of securities;
purchase physical commodities or contracts relating to physical commodities;
make loans to other persons, except (i) loans of portfolio securities, and
(ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
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 Shares are tendered for redemption
and no orders to purchase Shares are received. Currently, the NYSE is closed on
New Year's Day, Martin Luther King, Jr. Day, Presidents' 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 securities in the Fund's portfolio 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.
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PRICING OF FUND SHARES
Orders for the purchase of Shares will be executed at the net asset value per
Share next determined after an order has been received, plus any applicable
sales charge (the "public offering price"). The sales charge on purchases of
Shares of the Fund unless reduced or waived (see below), is as follows:
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SALES CHARGE AS A PERCENTAGE OF AMOUNT OF SALES CHARGE
------------------------------- REALLOWED TO DEALER
NET AMOUNT AS A PERCENTAGE OF
AMOUNT OF INVESTMENT: PUBLIC OFFERING INVESTED PUBLIC OFFERING PRICE*
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Less than $100,000............. 4.50% 4.71% 4.00%
$100,000 but less than
$250,000..................... 3.75% 3.90% 3.35%
$250,000 but less than
$500,000..................... 2.50% 2.56% 2.20%
$500,000 but less than
$750,000..................... 2.00% 2.04% 1.75%
$750,000 but less than
$1,000,000................... 1.00% 1.01% 0.90%
$1,000,000 or more**........... 0.00% 0.00% 0.00%
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* The Distributor may reallow up to 100% of the sales charge to Phillips &
Company Securities, Inc., an affiliate of the Adviser. The staff of the
Securities and Exchange Commission has indicated that dealers who receive
more than 90% of the sales charge may be considered underwriters. The
Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of Shares of the Fund.
** In the case of investments of $1 million or more, a 0.25% redemption fee will
be assessed on shares redeemed within 12 months of purchase (excluding shares
purchased with reinvested dividends and/or distributions).
The sales charge will not apply to purchases of Shares by: (a) trust,
investment management and other fiduciary accounts managed by the Adviser
pursuant to a written agreement; (b) any person purchasing Shares with the
proceeds of a distribution from a trust, investment management or other
fiduciary account managed by the Adviser pursuant to a written agreement; (c)
BISYS or any of its affiliates; (d) Trustees or officers of the Fund; (e)
directors or officers of BISYS, the Adviser or affiliates or bona fide full-time
employees of the foregoing who have acted as such for not less than 90 days
(including members of their immediate families and their retirement accounts or
plans) for which there is a written service agreement between the Group and the
plan sponsor, so long as such Shares are purchased through the Fund; or (g) any
person purchasing shares within an approved asset allocation program sponsored
by a financial services organization. The sales charge also does not apply to
shares sold to representatives of selling brokers and members of their immediate
families that have signed a selling group agreement with the Fund. In addition,
the sales charge does not apply to sales to bank trust departments, acting on
behalf of one or more clients, of Shares having an aggregate value equal to or
exceeding $200,000. Finally, up to 50% of applicable sales charges may be waived
for customers of Phillips & Co. Securities, Inc., a broker-dealer affiliate of
the Adviser.
QUANTITY DISCOUNTS IN THE SALES CHARGES
RIGHT OF ACCUMULATION
The Fund permits sales charges on its Shares to be reduced through rights of
accumulation. The schedule of reduced sales charges will be applicable once the
accumulated value of the account has reached $100,000. For this purpose, the
dollar amount of the qualifying concurrent or subsequent purchase is added to
the net asset
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<PAGE> 12
value of any other Shares of the Fund owned at the time by the investor. The
sales charge imposed on the Shares being purchased will then be at the rate
applicable to the aggregate of shares purchased. For example, if the investor
held Shares valued at $100,000 and purchased an additional $20,000 of Shares
(totalling an investment of $120,000), the sales charge for the $20,000 purchase
would be at the next lower sales charge on the schedule (i.e., the sales charge
for purchases over $100,000 but less than $250,000). There can be no assurance
that investors will receive the cumulative discounts to which they may be
entitled unless, at the time of placing their purchase order, the investors,
their dealers, or a firm acting pursuant to the Fund's Distribution and
Shareholder Services Plan (see "Management of the Group" below) ("Participating
Organization") make a written request for the discount. The cumulative discount
program may be amended or terminated at any time. This particular privilege does
not entitle the investor to any adjustment in the sales charge paid previously
on purchases of Shares. If the investor knows that he will be making additional
purchases of Shares in the future, he may wish to consider executing a Letter of
Intent.
LETTER OF INTENT
The schedule of reduced sales charges is also available to investors who enter
into a written Letter of Intent providing for the purchase, within a 13-month
period, of a specified amount of Shares. Shares previously purchased during a
90-day period prior to the date of receipt by the Fund of the Letter of Intent
which are still owned by the shareholder may also be included in determining the
applicable reduction, provided the shareholder, dealer, or Participating
Organization notifies the Fund of such prior purchases.
A Letter of Intent permits an investor to establish a total investment goal to
be achieved by any number of investments over a 13-month period. Each investment
made during the period will receive the reduced sales commission applicable to
the amount represented by the goal as if it were a single investment. A number
of Shares totalling 5% of the dollar amount of the Letter of Intent will be held
in escrow by the Fund in the name of the shareholder. The initial purchase under
a Letter of Intent must be equal to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, or the Fund
to sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. The Fund is authorized by
the shareholder to liquidate a sufficient number of escrowed Shares to obtain
such difference. If the goal is exceeded and purchases pass the next sales
charge level, the sales charge on the entire amount of the purchase that results
in passing that level and on subsequent purchases will be subject to further
reduced sales charges in the same manner as set forth under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. At any time while a Letter of Intent is in effect, a
shareholder may, by written notice to the Fund, increase the amount of the
stated goal. In that event, shares purchased during the previous 90-day period
and still owned by the investor will be applicable to the new stated goal.
Investors electing to purchase Fund Shares pursuant to a Letter of Intent should
carefully read the application for Letter of Intent which is available from the
Fund.
MINIMUM PURCHASE REQUIREMENTS
The minimum initial investment in the Fund is $1,000, except that the minimum
investment required for an IRA or other qualified retirement plan is $250. Any
subsequent investments must be at least $100, except for an IRA or qualified
retirement plan investment. All initial investments should be accompanied by a
completed Purchase Application unless otherwise agreed upon when purchases are
made through an authorized securities dealer or financial institution. A
Purchase Application accompanies this Prospectus. However, a separate
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application is required for IRA and other qualified retirement plan investments.
The Fund reserves the right to reject purchase orders.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Fund are sold on a continuous basis by the Fund's Distributor,
BISYS Fund Services Limited Partnership. The principal office of the distributor
is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares,
contact the Fund at (877) 945-3863.
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.
Purchasers of Fund Shares 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 any applicable sales charge ("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 based on the net asset value as
so determined, 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.
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 Fund Shares, complete an Account Application and return it along
with a check (or other negotiable bank draft or money order) in at least the
minimum initial purchase amount, made payable to the Fund to:
Willamette Value Fund
P.O. Box 182301
Columbus, OH 43218-2301
The Fund reserves the right to reject any order for the purchase of Shares in
whole or in part including purchases made with foreign and third party checks.
An Account Application form can be obtained by calling the number on front of
the prospectus. 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
Fund Shares may be purchased by calling the number on the front of the
prospectus if your Account Application has been previously received by the
Distributor. Payment for Shares ordered by telephone is made
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<PAGE> 14
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
Investors who purchase Fund Shares through fiduciary or other accounts may
incur a charge imposed by the entity managing that account. Information
concerning these services and any charges will be provided by such entity. This
Prospectus should be read in conjunction with any such information.
The Fund reserves the right to reject any order for the purchase of 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 Fund Shares owned
by the Shareholder. Sending confirmations for purchases and redemptions of
Shares held in an account managed by another entity on behalf of its Customer
will be the responsibility of that entity. Shareholders may rely on these
statements in lieu of certificates. Certificates representing Shares of the Fund
will not be issued.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS")
An IRA enables individuals, even if they participate in an employer-sponsored
retirement plan, to establish their own retirement program. IRA contributions
may be tax deductible and earnings are tax-deferred. Under applicable federal
tax law, the tax deductibility of IRA contributions may be 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 IRA distribution requests must be made in writing to the Distributor. Any
additional deposits to an IRA must distinguish the type and year of the
contribution.
Individuals may make contributions to Roth IRAs which are non-deductible but
distributions from which may, under certain conditions, be tax free.
Non-deductible contributions of up to $500 per year per beneficiary may be made
to an Education IRA. To the extent distributions from an Education IRA do not
exceed a beneficiary's "qualified higher education expenses," they are not
taxable. Both Roth IRAs and Education IRAs are subject to certain income limits.
For more information on IRA accounts call the number on the front of the
prospectus. Shareholders are advised to consult a tax adviser on IRA
contribution and withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Fund Shareholders to make regular monthly or
quarterly purchases of Shares through automatic deductions from their bank
accounts (the bank 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 $250; the minimum amount for subsequent investments in the Fund
is $25. To participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the
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account application which can be acquired by calling the number on the front of
the prospectus. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Distributor.
REDEMPTION OF SHARES
Shareholders may redeem their Shares on any day that net asset value is
calculated (see "VALUATION OF SHARES"). Redemptions may ordinarily be requested
by mail or by telephone.
Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received by the applicable Fund.
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: P.O. Box 182301, Columbus, Ohio
43218-2301. 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 Fund receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Fund cannot
execute the order. In such cases, the Fund 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 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 number on the front of the
prospectus. For a wire redemption, the then-current wire redemption charge may
be deducted from the proceeds of a wire redemption. This charge, if applied,
will vary depending on the receiving institution 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, the
Adviser, nor the Fund 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
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<PAGE> 16
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.
This option will be suspended for a period of 30 days following a telephonic
address change.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders to make regular monthly or
quarterly redemptions of Shares. With Shareholder authorization, the Transfer
Agent will automatically redeem Shares at the net asset value on the dates of
the withdrawal and have a check in the amount specified mailed to the
Shareholder. The required minimum withdrawal is $100. To participate in the Auto
Withdrawal Plan, Shareholders should call the number on the front of the
prospectus for more information. Purchases of additional Shares concurrent with
withdrawals may be disadvantageous to certain Shareholders because of tax
liabilities and sales charges. For a Shareholder to change the Auto Withdrawal
instructions the request must be made in writing to the Distributor.
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 within the
settlement requirements defined in the Securities Exchange Act of 1934 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 upon redemption if the request is 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 its Shareholders 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 its
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
Fund may, under applicable law and regulation, suspend the right of redemption
if it appears appropriate to do so in light of the Fund's responsibilities under
the 1940 Act.
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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 ex-dividend date, 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
P.O. Box 182301, Columbus, Ohio 43218-2301, and will become effective with
respect to dividends and distributions having record dates after its receipt by
the Transfer Agent. Dividends are paid in cash no later than seven business days
after a Shareholder's complete redemption of his or her Shares.
If a shareholder elects to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
such cash election will be changed automatically and future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
FEDERAL TAXES
The following discussion is intended for general information only. Investors
should consult with their tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund
under applicable state or local law.
The Fund intends to qualify annually and elect to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify, the Fund must meet certain income, distribution and
diversification requirements. In any year in which the Fund qualifies as a
regulated investment company and timely distributes all of its income, the Fund
generally will not pay any U.S. federal income or excise tax.
Dividends paid out of the Fund's investment company taxable income (including
dividends, taxable interest and net short-term capital gains), whether received
in cash or reinvested in additional shares, will be taxable to a U.S.
Shareholder as ordinary income. A portion of the Fund's income may consist of
dividends paid by U.S. corporations. Therefore, a portion of the dividends paid
by the Fund may be eligible for the corporate dividends-received deduction.
Properly designated distributions of net capital gains will generally be taxable
to Shareholders at a maximum 20% or 28% capital gains rate (depending on the
Fund's holding period for the assets giving rise to the gain), regardless of how
long a shareholder has held Fund shares.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by the Fund in October, November or December of that year
to shareholders of record on a date in such a month and paid by the Fund during
January of the following calendar year. Such distributions will be treated as
received by Shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Each year the Fund will notify Shareholders of the tax status of dividends and
distributions.
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Investments in securities that are issued at a discount will result each year
in income to the Fund equal to a portion of the excess of the face value of the
securities over their issue price, even though the Fund receives no cash
interest payments from the securities. Such income generally will, however, have
to be distributed to shareholders on a timely basis.
Any gain or loss realized by a Shareholder upon the sale or other disposition
of Shares of the Fund, or upon receipt of a distribution in complete liquidation
of the Fund, generally will be a taxable capital gain or loss which may be
eligible for reduced capital gains tax rates, generally depending upon the
Shareholder's holding period for the Shares. In some cases, Shareholders will
not be permitted to take sales charges into account in determining the amount of
gain or loss realized on the disposition of their shares. See "Additional Tax
Information" in the Statement of Additional Information.
The Fund may be required to withhold U.S. federal income tax at the rate of
31% of all reportable dividends and capital gain distributions (as well as
redemptions), payable to Shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the IRS that they are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld may be
credited against the Shareholder's U.S. federal income tax liability.
Further information relating to tax consequences is contained in the Statement
of Additional Information.
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 the Fund 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.
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 four Trustees, of whom one is an "interested person" of the Group
within the meaning of that term under the 1940 Act. The Group will be 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, 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 Inc.
receives fees from the Fund for acting as administrator and,
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<PAGE> 19
as the Fund's distributor, may receive fees for certain distribution services.
BISYS Fund Services Ohio, Inc. receives fees from the Fund for acting as
Transfer Agent and for providing certain fund accounting services.
INVESTMENT ADVISER
Willamette Asset Managers, Inc., 220 NW 2nd Avenue, Suite 950, Portland,
Oregon 97209, is the investment adviser for the Fund. The Adviser is an
affiliate of Phillips & Company Securities, Inc. ("Phillips"), a registered
broker-dealer. The Adviser has not previously managed a registered investment
company.
James Todd Smith serves as portfolio manager for the Fund and is primarily
responsible for the day-to-day management of the Fund's portfolio. Mr. Smith has
served as Compliance Officer of Phillips since 1995, Chief Financial Officer of
Phillips since 1997 and has over 13 years experience.
Subject to the general supervision of the Group's Board of Trustees and in
accordance with the Fund's investment objective and restrictions, the Adviser
manages the investments of the Fund and makes decisions with respect to and
places orders for purchases and sales of the Fund's portfolio securities.
For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Group, the Adviser receives a fee computed daily and
paid monthly, at the annual rate of 1.00% of the Fund's average net assets. The
Adviser may periodically waive all or a portion of its advisory fee to increase
the net income of the Fund available for distribution as dividends. The Adviser
may not seek reimbursement of any such waived fees at a later date. The waiver
of such fee will cause the yield of the Fund to be higher than it would
otherwise be in the absence of such a waiver.
ADMINISTRATOR AND DISTRIBUTOR
BISYS 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 L.P. is wholly-owned by The BISYS Group,
Inc. 150 Clove Road, Little Falls, New Jersey 07424, a publicly owned company
engaged in information processing, loan servicing and 401(k) administration and
recordkeeping services to and through banking and other financial organizations.
The Administrator generally assists in all aspects of the 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 0.20%, based on the Fund's average daily net
assets. The Administrator may periodically waive all or a portion of its
administrative fee to increase the net income of the Fund available for
distribution as dividends. The Administrator may not seek reimbursement of such
waived fees at a later date. The waiver of such fee 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 their Shares
and, in such capacity, solicits orders for the sale of Shares, advertises, and
pays the costs of advertising, office space and its personnel involved in such
activities. The Distributor receives certain fees pursuant to the Fund's
Distribution and Shareholder Services Plan (see "Distribution Plan," below).
EXPENSES AND PORTFOLIO TRANSACTIONS
The Adviser 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
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brokerage commissions, if any) purchased for the Fund. The Fund bears all its
expenses, including organization costs; costs of securities and brokerage; costs
of issuing and redeeming shares; fees to the Adviser, Administrator, Fund
Accounting Agent, Transfer Agent and Custodian; legal and independent auditor
fees; fees and costs of regulatory compliance; taxes, insurance and interest
expenses; printing, communication and other general operating expenses; and any
litigation and other extraordinary costs related to its operation. The Fund also
bears an allocated portion of Trust expenses, including a portion of independent
Trustees' fees.
The policy of the Fund, regarding placing orders for 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 Adviser effects transactions with
those brokers and dealers whom the Adviser believes provide the most favorable
prices and are capable of providing efficient executions. Subject to the
foregoing, transactions for the Fund may be executed through Phillips & Company
Securities, Inc., an affiliate of the Adviser, and sales of Fund shares may be
used as a factor in placing Fund portfolio transaction orders. 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 Fund or
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 Adviser in serving both the
Fund and other clients and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Adviser 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
and its other clients. 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 Limited Partnership, as
Distributor, a periodic amount calculated at an annual rate not to exceed fifty
one hundredths of one percent (0.50%) of the average daily net assets of the
Fund. Such amount may be used to pay broker-dealers and other institutions for
administrative and shareholder services, and for distribution services (each
such institution is hereafter referred to as a "Participating Organization"),
pursuant to an agreement between BISYS Fund Services, Limited Partnership and
the Participating Organization. Under the Plan, a Participating Organization may
include BISYS Fund Services, Inc., its subsidiaries and its affiliates.
ADMINISTRATIVE SERVICES PLAN
The Group has adopted an Administrative Services Plan (the "Services Plan")
pursuant to which the Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include the
Adviser, its affiliates, and BISYS Fund Services Limited Partnership, which
agree to provide certain ministerial, recordkeeping and/or administrative
support services for their customers or
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<PAGE> 21
account holders (collectively, "customers") who are the beneficial or record
owner of Shares of the Fund. In consideration for such services, a Service
Organization receives a fee from the Fund, computed daily and paid monthly, at
an annual rate of up to 0.25% of the average daily net asset value of Shares of
that Fund owned beneficially or of record by such Service Organization's
customers for whom the Service Organization provides such services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, recordkeeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Fund,
such as processing dividend and distribution payments from the Fund on behalf of
customers, providing periodic statements to customers showing their positions in
the Shares of the Fund, providing sub-accounting with respect to Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Shares of the Fund pursuant to specific
or pre-authorized instructions.
CUSTODIAN AND SUBCUSTODIAN
Union Bank of California, 475 Sansome Street, San Francisco, California 94111,
will act as the Fund's custodian.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, Inc. ("BISYS Fund Services" 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 also provides certain accounting services
for the Fund pursuant to the Fund Accounting Agreement. See "MANAGEMENT OF THE
COMPANY--Transfer Agency and Fund Accounting Services" in the Statement of
Additional Information for further information.
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 the 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 fund except as otherwise expressly required by law. For
example, shareholders of each fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees. Funds with
the same independent auditors may also vote as a group to ratify the selection
of those auditors. However, shareholders of a particular fund will vote as a
fund, and not in the aggregate with other shareholders of the Group, for
purposes of approval of that fund's investment advisory agreement.
Overall responsibility for the management of the funds is vested in the Board
of Trustees of the Group. See "MANAGEMENT OF THE GROUP--Trustees of the Group."
Individual Trustees are elected by the
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<PAGE> 22
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 distribution rate 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 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 of
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, to 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. Any fees charged by broker-dealers or other
third parties with respect to customer accounts for investing in shares of the
Fund will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted.
20
<PAGE> 23
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.
THE YEAR 2000 ISSUE
The Fund relies extensively on various computer systems in carrying out its
business activities, including the computer systems employed by the Adviser, the
Administrator and Distributor, the Transfer Agent, the Fund Accounting Agent and
the Custodian (collectively, the "Service Providers"). In this connection, the
Fund is aware of the so-called "Year 2000 Issue" which involves the potential
problems that may be confronted by computer systems users the day after December
31, 1999, when computers using date-sensitive software must be able to properly
identify the year 2000 and subsequent dates in their systems. In the event that
a computer system fails to make the proper identification of the year 2000 and
subsequent dates, this could result in a system failure or miscalculations
causing disruptions of operations such as pricing errors and account maintenance
failures. The Fund is working with the Service Providers to take steps that are
reasonably designated to address the Year 2000 Issue with respect to the
computer systems relied upon by the Fund. The Fund has no reason to believe that
these steps will not be sufficient to avoid any material adverse impact on the
Fund, although there can be no assurance of this. The costs or consequences of
incomplete or untimely resolution of the Year 2000 Issue are unknown to the Fund
and the Service Providers at this time but could have a material adverse impact
on the operations of the Fund and the Service Providers.
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 the Fund" means the consideration received by the Fund upon
the issuance or sale of its shares, 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, as well as expenses that are not specific to
one or more funds, in any manner it deems fair and equitable among all funds of
the Group. 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.
Inquiries regarding the Fund may be directed in writing to the Fund at 3435
Stelzer Road, Columbus, Ohio 43219.
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<PAGE> 26
INVESTMENT ADVISER
Willamette Asset Managers, Inc.
220 NW 2nd Avenue, Suite 950
Portland, Oregon 97209
ADMINISTRATOR AND
DISTRIBUTOR
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
Ernst & Young LLP
10 West Broad Street
Suite 2300
Columbus, Ohio 43215
CUSTODIAN
Union Bank of California
475 Sansome Street, 15th Floor
San Francisco, California 94111
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................... 2
Fee Table.................................... 3
Investment Objectives, Policies and
Risk Factors of the Fund................... 4
Investment Restrictions...................... 7
Valuation of Shares.......................... 8
Pricing of Fund Shares....................... 9
Quantity Discounts in the Sales Charges...... 9
Minimum Purchase Requirements................ 10
How To Purchase and Redeem Shares............ 11
Dividends and Taxes.......................... 15
Management of the Group...................... 16
General Information.......................... 19
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE GROUP OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE GROUP OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
WIL0001
WILLAMETTE
VALUE
FUND
---------------
PROSPECTUS DATED MAY 22, 1998
---------------
BISYS FUND SERVICES, INC.
ADMINISTRATOR AND DISTRIBUTOR
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<PAGE> 27
SUBJECT TO COMPLETION
WILLAMETTE VALUE FUND
An Investment Portfolio of
The Coventry Group
Statement of Additional Information
May 22, 1998
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the prospectus for the Willamette Value Fund ("Fund").
The Fund is a separate investment portfolio of The Coventry Group (the "Group"),
an open-end management investment company. This Statement of Additional
Information is incorporated in its entirety into the Prospectus. Copies of the
Prospectus may be obtained by writing the Fund at 3435 Stelzer Road, Columbus,
Ohio 43219, or by telephoning toll free (800) 713-4276.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement becomes
effective.
<PAGE> 28
TABLE OF CONTENTS
-----------------
Page
----
THE COVENTRY GROUP . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . 1
Additional Information on Portfolio Instruments . . . . 1
Investment Restrictions . . . . . . . . . . . . . . . . 15
Portfolio Turnover . . . . . . . . . . . . . . . . . . . 17
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . 17
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . 19
Matters Affecting Redemption . . . . . . . . . . . . . . 19
MANAGEMENT OF THE GROUP . . . . . . . . . . . . . . . . . . . . . 20
Trustees and Officers . . . . . . . . . . . . . . . . . 20
Investment Adviser . . . . . . . . . . . . . . . . . . . 24
Portfolio Transactions . . . . . . . . . . . . . . . . . 26
Banking Laws . . . . . . . . . . . . . . . . . . . . . . 28
Administrator . . . . . . . . . . . . . . . . . . . . . 28
Distributor . . . . . . . . . . . . . . . . . . . . . . 32
Administrative Services Plan . . . . . . . . . . . . . . 34
Custodian . . . . . . . . . . . . . . . . . . . . . . . 35
Transfer Agency and Fund Accounting Services . . . . . . 36
Independent Auditors . . . . . . . . . . . . . . . . . . 37
Legal Counsel . . . . . . . . . . . . . . . . . . . . . 37
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 37
Description of Shares . . . . . . . . . . . . . . . . . 37
Vote of a Majority of the Outstanding Shares . . . . . . 38
Additional Tax Information . . . . . . . . . . . . . . . 38
Yields and Total Returns . . . . . . . . . . . . . . . . 48
Performance Comparisons . . . . . . . . . . . . . . . . 51
Principal Shareholders . . . . . . . . . . . . . . . . . 52
Miscellaneous . . . . . . . . . . . . . . . . . . . . . 52
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 53
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
<PAGE> 29
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 of Shares
relates to a separate portfolio of assets. This Statement of Additional
Information deals with the portfolio called "Willamette Value Fund ("Fund"),
which is advised by Willamette Asset Managers, Inc. ("Adviser"). Much of the
information contained in this Statement of Additional Information expands upon
subjects discussed in the Prospectus of the Fund. Capitalized terms not defined
herein are defined in such Prospectus. No investment in Shares of the Fund
should be made without first reading the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objective and policies of
the Fund as set forth in its Prospectus.
BANK OBLIGATIONS. The Fund 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 Fund 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 and foreign banks and savings and loan
associations, provided that (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 Bank Insurance Fund or the Savings Association Insurance Fund.
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 Fund may purchase commercial paper consisting of issues rated at the
time of purchase within the three highest rating categories by a nationally
recognized statistical rating organization (an "NRSRO"). The Fund may also
invest in commercial paper 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.
VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand notes
are unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic readjustments in the interest rate according to the terms
of the instrument. They are also referred to as variable rate demand notes.
Because master demand notes are direct lending arrangements between the Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, the Fund may demand payment of principal and accrued interest at
any time or during specified periods not exceeding one year, depending upon the
instrument involved, and may resell the note at any time to a third party. The
Adviser will consider the earning power, cash flow, and other liquidity ratios
of the issuers of such notes and will continuously monitor their financial
status and ability to meet payment on demand.
VARIABLE AND FLOATING RATE NOTES. A variable rate note is one whose terms
provide for the readjustment of its interest rate on set dates and which, upon
such readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate note is one whose terms provide for
the readjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by the
Fund will be determined by the Adviser under guidelines approved by the Group's
Board of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Fund's investment policies. In
making such determinations, the Adviser will consider the earning power, cash
flow and other liquidity ratios of the issuers of such notes (such issuers
include financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by the Fund, the Fund may resell the note at any time to a third
party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating rate note in the
<PAGE> 30
event the issuer of the note defaulted on its payment obligations and the Fund
could, as a result or for other reasons, suffer a loss to the extent of the
default. Variable or floating rate notes may be secured by bank letters of
credit.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in U.S. Treasury bills,
notes and other obligations issued or guaranteed by the U.S. Government or 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 Fund will invest
in the obligations of such agencies or instrumentalities only when the Adviser
believes that the credit risk with respect thereto is minimal.
FOREIGN INVESTMENTS. The Fund may invest in certain obligations or
securities of foreign issuers, including American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"),
other similar depositary receipts, Yankee Obligations, and U.S. dollar
denominated securities issued by foreign branches of U.S. and foreign banks.
These investments may subject the 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 or other taxes, 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. Certain of these investments may
subject the Fund to currency fluctuation risks.
FUTURES CONTRACTS. As discussed in the Prospectus, the Fund may invest in
futures contracts and options thereon (stock index futures contracts or interest
rate futures or options) to hedge or manage risks associated with the Fund's
securities investments. To enter into a futures contract, an amount of cash and
cash equivalents, equal to the market value of the futures contract, is
deposited in a segregated account with the Fund's Custodian and/or in a margin
account with a broker to collateralize the position and thereby ensure that the
use of such futures is unleveraged. Positions in futures contracts may be closed
out only on an exchange that provides a secondary market for such futures.
However, there can be no assurance that a liquid secondary market will exist for
any particular futures contract at any specific time. Thus, it may not be
possible to close a futures position. In the event of adverse price movements,
the Fund would continue to be required to make daily cash payments to maintain
its required margin. In such situations, if the Fund had insufficient cash, it
might have to sell portfolio securities to meet daily margin requirements at a
time when it would be disadvantageous to do so. In addition, the Fund might be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the Fund's ability to hedge or manage risks effectively.
Successful use of futures by the Fund is also subject to the Adviser's
ability to predict movements correctly in the direction of the market. There is
typically an imperfect correlation between movements in the price of the future
and movements in the price of the securities that are the subject of the hedge.
In addition, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Due to the possibility of
price distortion in the futures market and because of the imperfect correlation
between the movements in the cash market and movements in the price of futures,
a correct forecast of general market trends or interest rate movements by the
Adviser may still not result in a successful hedging transaction over a short
time frame.
The trading of futures contracts is also subject to the risk of trading
halts, suspension, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruption of normal trading activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
CALL OPTIONS. The Fund may write (sell) "covered" call options and purchase
options to close out options previously written by it. Such options must be
listed on a National Securities Exchange and issued by the Options Clearing
Corporation. The purpose of writing covered call options is to generate
additional premium income for the Fund. This premium income will serve to
enhance the Fund's total return and will reduce the effect of any price decline
<PAGE> 31
of the security involved in the option. Covered call options will generally be
written on securities which, in the opinion of the Adviser, are not expected to
make any major price moves in the near future but which, over the long term, are
deemed to be attractive investments for the Fund.
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. The Fund will write only covered call options and will
normally not write a covered call option if, as a result, the aggregate market
value of all portfolio securities covering all call options would exceed 15% of
the market value of its net assets.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with the Fund's
investment objective. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options, which the Fund will not do), but
capable of enhancing the Fund's total return. When writing a covered call
option, the 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, the 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 the Fund has written expires, the 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 the 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 anticipated premium and the likelihood that a liquid
secondary market will exist for such option. The premium received by the Fund
for writing covered call options will be recorded as a liability in the Fund's
statement of assets and liabilities. This liability will be adjusted daily to
the option's current market value, which will be the latest sale price at the
time at which the net asset value per share of the Fund is computed (close of
the New York Stock Exchange), or, in the absence of such sale, the latest asked
price. The liability will be extinguished upon expiration of the option, the
purchase of an identical option in a closing transaction, or delivery of the
underlying security upon the exercise of the 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 the 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 the Fund will be able to effect such closing transactions at a favorable
price. If the 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. The 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 the 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 Fund 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 Fund 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.
<PAGE> 32
SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in securities
issued by the other investment companies. The Fund currently intends to limit
its investments in accordance with applicable law. Among other things, such law
would limit these investments so that, as determined immediately after a
securities purchase is made: (a) not more than 5% of the value of its total
assets will be invested in the securities of any one investment company; (b) not
more than 10% of the value of its total assets will be invested in the aggregate
in securities of investment companies as a group; and (c) not more than 3% of
the outstanding voting stock of any one investment company will be owned by the
Fund. As a shareholder of another investment company, the 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 the 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 Fund and, therefore, will be borne directly by Shareholders.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the Fund would
acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser deems creditworthy
under guidelines approved by the Group's Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain continually the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). If the seller were to default on its
repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Additionally, there is no controlling legal
precedent confirming that the Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although the Board of Trustees of the Group believes that, under the
regular procedures normally in effect for custody of the Fund's securities
subject to repurchase agreements and under federal laws, a court of competent
jurisdiction would rule in favor of the Group if presented with the question.
Securities subject to repurchase agreements will be held by the Fund's custodian
or another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by the Fund under the
1940 Act.
Investment Restrictions
- -----------------------
The following are fundamental investment restrictions of the Fund.
The Fund has elected to qualify as a diversified series of the Trust.
Additionally, the Fund may not:
borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time;
issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time;
engage in the business of underwriting securities issued by others, except
to the extent that the Fund may be deemed to be an underwriter in connection
with the disposition of portfolio securities;
purchase or sell real estate, which does not include securities of
companies which deal in real estate or mortgages or investments secured by real
estate or interests therein, except that the Fund reserves freedom of action to
hold and to sell real estate acquired as a result of the Fund's ownership of
securities;
purchase physical commodities or contracts relating to physical
commodities;
make loans to other persons, except (i) loans of portfolio securities, and
(ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with the Fund's
investment objective and policies may be deemed to be loans.
Portfolio Turnover
- ------------------
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
<PAGE> 33
all securities whose remaining maturities at the time of acquisition were one
year or less. The turnover rate for the Fund is not expected to exceed 75%.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of Shares of the Fund
is determined and the Shares are priced as of the Valuation Time on each
Business Day of the Company. A "Business Day" constitutes any day on which the
New York Stock Exchange (the "NYSE") is open for trading and any other day
except days on which there are not sufficient changes in the value of the Fund's
portfolio securities that the Fund's net asset value might be materially
affected and days during which no Shares are tendered for redemption and no
orders to purchase Shares are received. Currently, the NYSE is closed on New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio equity securities for which market quotations are readily
available are valued based upon their last sales prices in their principal
market. Lacking any sales, these securities are valued at the mean between the
most recent bid and asked quotations. Debt securities with remaining maturities
of 60 days or less will be valued at their amortized cost. Other debt securities
are generally valued by pricing agents based on valuations supplied by
broker-dealers or calculated by electronic methods. 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 best judgment of the Adviser under the supervision of the Group's Board
of Trustees.
Among the factors that will be considered, if they apply, in valuing
portfolio securities held by the Fund 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.
As noted, 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
- ----------------------------
Fund Shares are sold on a continuous basis by BISYS Fund Services Limited
Partnership d/b/a BISYS Fund Services (the "Distributor") and BISYS Fund
Services 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 with respect to the Fund 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
the Fund, or (d) the Commission has determined that an emergency exists as a
result of which (i) disposal by the Group or the Fund of securities owned by it
is not reasonably practical, or (ii) it is not reasonably practical for the
Group or the Fund to determine the fair value of its net assets.
The Group may redeem Shares of the Fund involuntarily if redemption appears
appropriate in light of the Group's responsibilities under the 1940 Act. See
"HOW TO PURCHASE AND REDEEM SHARES" in the Prospectus.
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:
<PAGE> 34
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name, Address and Age the Group During Past 5 Years
--------------------- ----------- -------------------
<S> <C> <C>
Walter B. Grimm* Chairman, President and From June 1992 to present,
3435 Stelzer Road Trustee employee of BISYS Fund Services,
Columbus, Ohio 43219 from 1987 to June 1992, President
Age: 51 of Leigh Investments (investment
firm).
Maurice G. Stark Trustee Retired. Until December 31,
505 King Avenue 1994, Vice President-Finance and
Columbus, Ohio 43201 Treasurer, Battelle Memorial
Age: 61 Institute (scientific research
and development service
corporation).
Michael M. Van Buskirk Trustee From June 1991 to present,
37 West Broad Street Executive Vice President of The
Suite 1001 Ohio Bankers' Association (trade
Columbus, Ohio 43215 association); from September 1987
Age: 49 to June 1991, Vice President -
Communications, TRW Information
Systems Group (electronic and
space engineering).
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name, Address and Age the Group During Past 5 Years
--------------------- ----------- -------------------
<S> <C> <C>
Chalmers P. Wylie Trustee From April 1993 to present, Of
754 Stonewood Court Counsel, Kegler Brown Hill &
Columbus, Ohio 43235 Ritter; from January 1993 to
Age: 76 present, Adjunct Professor, Ohio
State University; from January
1967 to January 1993, member of
the United States House of
Representatives for the 15th
District of Ohio.
J. David Huber Vice President From June, 1987 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 50
Jeffrey Cusick Vice President From July 1995 to present,
3435 Stelzer Road employee of BISYS Fund Services;
Columbus, Ohio 43219 from September 1993 to July 1995,
Age: 38 Assistant Vice President, from 1989 to
September 1993, Manager -- Client Services,
of Federated Administrative Services.
Paul Kane Treasurer From December 1997 to present, employee
3435 Stelzer Road of BISYS Fund Services; from March 1985 to
Columbus, Ohio 43219 December 1997, Director of Shareholder
Age: 41 Reporting for Fidelity Investments.
George L. Stevens Secretary From September 1996 to present,
3435 Stelzer Road employee of BISYS Fund Services;
Columbus, Ohio 43219 from September 1995 to September
Age: 45 1996, Independent Consultant;
from September 1989 to September
1995, Senior Vice President, AmSouth
Bank, N.A.
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name, Address and Age the Group During Past 5 Years
--------------------- ----------- -------------------
<S> <C> <C>
Alaina V. Metz Assistant Secretary From 1995 to present, employee of
3435 Stelzer Road BISYS Fund Services; from May
Columbus, Ohio 43219 1989 to June 1995, employee of
Age: 29 Alliance Capital Management.
Richard B. Ille Assistant Secretary From July 1990 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 32
<FN>
- ----------------------------
*Mr. Grimm is 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 Fund's outstanding
Shares.
</FN>
</TABLE>
The officers of the Group receive no compensation directly from the Group
for performing the duties of their offices. BISYS FS receives fees from the Fund
for acting as Administrator and may receive fees pursuant to the Distribution
and Shareholder Services Plan and the Administrative Services Plan. BISYS Fund
Services Ohio, Inc. receives fees from the Fund for acting as transfer agent and
for providing certain fund accounting services. Messrs. Huber, Cusick, Kane,
Stevens, Grimm, Ille, and Ms. Metz are employees of BISYS.
Trustees of the Group not affiliated with BISYS Fund Services receive from
the Group an annual fee of $1,000, plus $2,250 for each regular meeting of the
Board of Trustees attended and $1,000 for each special meeting of the Board
attended in person and $500 for other special meetings of the Board attended by
telephone, 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.
Investment Adviser
- ------------------
Investment advisory services are provided by Willamette Asset Managers,
Inc., 220 NW 2nd Avenue, Suite 950, Portland, Oregon 97209, pursuant to an
Investment Advisory Agreement dated as of May 22, 1998 (the "Investment
Advisory Agreement").
Under the Investment Advisory Agreement, the Adviser has agreed to provide
investment advisory services as described in the Prospectus of the Fund. For the
services provided pursuant to the Investment Advisory Agreement, the Fund pays
the Adviser a fee computed daily and paid monthly, at an annual rate, calculated
as a percentage of the Fund's average daily net assets, of 1.00%. The Adviser
may periodically waive all or a portion of its advisory fee to increase the net
income of the Fund available for distribution as dividends.
Unless sooner terminated, the Investment Advisory Agreement will continue
in effect until May 22, 2000 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 Fund (as defined under
"INVESTMENT RESTRICTIONS" in the Fund's Prospectus), and a majority of the
Trustees who are not parties to the Investment Advisory Agreement or interested
persons (as defined in the 1940 Act) of any party to the Investment Advisory
Agreement by votes cast in person at a meeting called for such purpose. The
Investment Advisory Agreement is terminable at any time on 60 days' written
notice without penalty by the Trustees, by vote of a majority of the outstanding
Shares of the Fund, or by the Adviser. The Investment Advisory Agreement also
terminates automatically in the event of any assignment, as defined in the 1940
<PAGE> 37
Act.
The Investment Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of the Investment Advisory
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
duties and obligations thereunder.
Portfolio Transactions
- ----------------------
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Board of Trustees of the Group and in
accordance with the Fund's investment objective and restrictions, which
securities are to be purchased and sold by the Fund, and which brokers are to be
eligible to execute the Fund's portfolio transactions. Certain purchases and
sales of portfolio securities with respect to the Fund 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, 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.
Investment decisions for the Fund are made independently from those for
other accounts managed by the Adviser. Any such account may also invest in the
same securities as the Fund. When a purchase or sale of the same security is
made at substantially the same time on behalf of the 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 believes to be equitable to
the Fund and such other account. In some instances, this investment procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained by the Fund. To the extent permitted by law, the Adviser may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for the other accounts in order to obtain best execution.
Administrator
- -------------
BISYS serves as administrator (the "Administrator") to the Fund pursuant to
a Management and Administration Agreement dated May 22, 1998 (the
"Administration Agreement"). The Administrator assists in supervising all
operations of the Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, the Custodian under the Custodian Agreement and
by BISYS Fund Services Ohio 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. The Administrator provides financial services to institutional clients.
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, prepare for execution by the Fund and file all of
the Fund's federal and state tax returns and required tax filings other than
those required to be made by the Fund's Custodian and Transfer Agent; prepare
compliance filings pursuant to state securities laws with the advice of the
Group's counsel; assist to the extent requested by the Fund with the 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 the Fund, including calculation of daily
expense accruals; and generally assist in all aspects of the Fund's operations
other than those performed by the Adviser, under the Investment Advisory
Agreement, by the Custodian under the Custodian Agreement or by BISYS Fund
Services Ohio, Inc. under the Transfer Agency Agreement or 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 the Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
equal to the lesser of (1) a fee calculated daily and paid periodically, at the
annual rate equal to 0.13% of the first $250 million, 0.115% of the next $250
million, 0.095% of the next $250 million, and 0.08% over $750 million of the
Fund's average daily net assets or (2) such other fee as may be agreed upon in
writing by the Group and the Administrator. The Administrator may periodically
waive all or a portion of its fee with respect to the Fund in order to increase
the net income of the Fund available for distribution as dividends.
Unless sooner terminated as provided therein, the Administration Agreement
<PAGE> 38
will continue in effect until May 31, 2001. The Administration Agreement
thereafter shall be renewed automatically for successive three-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 the
Fund 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.
Distributor
- -----------
BISYS Fund Services L.P. serves as distributor to the Fund pursuant to the
Distribution Agreement dated May 22, 1998, (the "Distribution Agreement").
Unless otherwise terminated, the Distribution Agreement will continue in effect
until May 31, 2000, if such 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 Fund 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 will terminate automatically in the event of any assignment, as
defined in the 1940 Act.
In its capacity as Distributor, BISYS 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 Fund is 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 Fund to make payments
to the Distributor in an amount not to exceed, on an annual basis, 0.50% of the
Fund's average daily net assets. The Fund is authorized to pay a shareholder
service fee of up to 0.25% of its average daily net assets. As required by Rule
12b-1, the Plan was approved by the Board of Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan (the "Independent
Trustees") at a meeting held February 19, 1998. The Plan may be terminated 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 the
Fund requires approval by Shareholders. For so long as the Plan is in effect,
selection and nomination of the Independent Trustees shall be committed to the
discretion of such Independent Trustees. All agreements with any person relating
to the implementation of the Plan may be terminated 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 the Fund and its Shareholders.
The Board of Trustees of the Group believes that the Plan is in the best
interests of the Fund since it encourages Fund growth. As the Fund grows in
size, certain expenses, and therefore total expenses per Share, may be reduced
and overall performance per Share may be improved.
Administrative Services Plan
- ----------------------------
The Group has adopted an Administrative Services Plan (the "Services Plan")
pursuant to which the Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include the
Adviser, its affiliates, and the Distributor, which agree to provide certain
<PAGE> 39
ministerial, recordkeeping and/or administrative support services for their
customers or account holders (collectively, "customers") who are the beneficial
or record owner of Shares of the Fund. In consideration for such services, a
Service Organization receives a fee from the Fund, computed daily and paid
monthly, at an annual rate of up to .25% of the average daily net asset value of
Shares of the Fund owned beneficially or of record by such Service
Organization's customers for whom the Service Organization provides such
services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, recordkeeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Fund,
such as processing dividend and distribution payments from the Fund on behalf of
customers, providing periodic statements to customers showing their positions in
the Shares of the Fund, providing sub-accounting with respect to Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Shares of the Fund pursuant to specific
or pre-authorized instructions.
Custodian
- ---------
Union Bank of California, 475 Sansome Street, San Francisco, California
94111, serves as the Fund's custodian.
Transfer Agency and Fund Accounting Services
- --------------------------------------------
BISYS Fund Services Ohio, Inc. serves as transfer agent and dividend
disbursing agent ("BISYS Fund Services Ohio" or the "Transfer Agent") for the
Fund, pursuant to the Transfer Agency Agreement dated May 22, 1998. Pursuant to
such Agreement, the Transfer Agent, among other things, performs the following
services in connection with the Fund's 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 Fund 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 fee based, in part, on the number of shareholders of record.
In addition, BISYS Fund Services Ohio provides certain fund accounting
services to the Fund pursuant to the Fund Accounting Agreement dated May 22,
1998. BISYS Fund Services Ohio receives a fee from the 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 the Fund's average daily net assets.
Under such Agreement, BISYS Fund Services Ohio maintains the accounting books
and records for the Fund, including journals containing an itemized daily record
of all purchases and sales of portfolio securities, all receipts and
disbursements of cash and all other debits and credits, general and auxiliary
ledgers reflecting all asset, liability, reserve, capital, income and expense
accounts, including interest accrued and interest received, and other required
separate ledger accounts; maintains a monthly trial balance of all ledger
accounts; performs certain accounting services for the Fund, including
calculation of the net asset value per Share, calculation of the dividend and
capital gain distributions, if any, and of yield, reconciliation of cash
movements with the Custodian, affirmation to the Custodian of all portfolio
trades and cash settlements, verification and reconciliation with the Custodian
of all daily trade activity; provides certain reports; obtains dealer
quotations, prices from a pricing service or matrix prices on all portfolio
securities in order to mark the portfolio to the market; and prepares an interim
balance sheet, statement of income and expense, and statement of changes in net
assets for the Fund.
Independent Auditors
- --------------------
Ernst & Young LLP, 10 West Broad Street, Suite 2300, Columbus, Ohio 43215,
has been selected as independent auditors for the Fund for the fiscal year ended
March 31, 1999. William R. Wasco will perform an annual audit of the 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, 1775 Eye Street, N.W., Washington, D.C. 20006, is
counsel to the Group.
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,
<PAGE> 40
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, and to establish separate classes of Shares.
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 Prospectus 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 the Fund are
entitled to receive the assets available for distribution belonging to that
fund, and a proportionate distribution, based upon the relative asset values of
the respective funds, of any general assets not belonging to any particular fund
which are available for distribution, subject to any differential class
expenses.
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 the Fund will be required in
connection with a matter, the 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 the Fund only if approved
by a majority of the outstanding Shares of the Fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants (for funds
having the same independent 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 individual funds. Rule 18f-3
under the 1940 Act provides that shareholders of each class shall have exclusive
voting rights on matters submitted to shareholders relating solely to
distribution and shareholder service arrangements.
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 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.
Additional Tax Information
- --------------------------
TAXATION OF THE FUND. The Fund intends to qualify annually and to elect to
be treated as a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code").
To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) diversify its holdings so that, at the end of each
quarter of each taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items (including receivables), U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets and not greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities (other than U.S. Government securities or
the securities of other regulated investment companies) of any one issuer, or of
two or more issuers which the Fund controls and which are determined to be
engaged in the same or similar trades or businesses or related trades or
businesses; and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net
<PAGE> 41
short-term capital gains in excess of net long-term capital losses) and any net
tax-exempt interest income each taxable year.
As a regulated investment company, the Fund generally will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to Shareholders. The Fund intends
to distribute to its Shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts 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 the
excise tax, the Fund must distribute during each calendar year an amount equal
to the sum of (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses, as prescribed by the Code) for the one-year period ending on October 31
of the calendar year, and (3) any ordinary income and capital gains for previous
years that were not distributed during those years. A distribution will be
treated as paid on December 31 of the current calendar year if it is declared by
the Fund in October, November or December to shareholders of record on a date in
such a month and paid by the Fund during January of the following calendar year.
Such distributions will be treated as received by Shareholders in the calendar
year in which the distributions are declared, rather than the calendar year in
which the distributions are received. To prevent application of the excise tax,
the Fund intends to make its distributions in accordance with the calendar year
distribution requirement.
DISTRIBUTIONS. Dividends paid out of the Fund's investment company taxable
income generally will be taxable to a U.S. Shareholder as ordinary income. A
portion of the Fund's income may consist of dividends paid by U.S. corporations
and, accordingly, a portion of the dividends paid by the Fund may be eligible
for the corporate dividends-received deduction. Properly designated
distributions of net capital gains, if any, generally are taxable at a maximum
20% or 28% capital gains tax rate (depending upon the Fund's holding period for
the assets giving rise to the gain), regardless of how long the Shareholder has
held the Fund's Shares, and are not eligible for the dividends-received
deduction. Shareholders receiving distributions in the form of additional
Shares, rather than cash, generally will have a cost basis in each such Share
equal to the net asset value of a Share of the Fund on the reinvestment date.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and Shareholders receiving distributions in the form of
additional Shares will receive a report as to the net asset value of those
Shares.
Distributions by the Fund reduce the net asset value of Fund shares. Should
a taxable distribution reduce the net asset value below a Shareholder's cost
basis, the 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 capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Fund. The price of shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
DISCOUNT SECURITIES. Investments by the Fund in securities that are issued
at a discount will result in income to the Fund equal to a portion of the excess
of the face value of the securities over their issue price (the "original issue
discount") each year that the securities are held, even though the Fund receives
no cash interest payments. This income is included in determining the amount of
income which the Fund must distribute to maintain its status as a regulated
investment company and to avoid the payment of federal income tax and the 4%
excise tax.
Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes.
Generally, the gain realized on the disposition of any debt security acquired
after April 30, 1993 having market discount will be treated as ordinary income
to the extent it does not exceed the accrued market discount on such debt
security.
OPTIONS AND HEDGING TRANSACTIONS. The taxation of equity options and
over-the-counter options on debt securities is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by the Fund for selling a
call option is not included in income at the time of receipt. If the option
expires, the premium is short-term capital gain to the Fund. If the Fund enters
into a closing transaction, the difference between the amount paid to close out
its position and the premium received is short-term capital gain or loss. If a
call option written by the Fund is exercised, thereby requiring the Fund to sell
the underlying security, the premium will increase the amount realized upon the
sale of such security and any resulting gain or loss will be a capital gain or
loss, and will be long-term or short-term depending upon the holding period of
the security. With respect to a call option that is purchased by the Fund, if
the option is sold, any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term, depending upon the holding period of the
option. If the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the option. If the
option is exercised, the cost of the option is added to the basis of the
purchased security.
<PAGE> 42
Certain options in which the Fund may invest are "section 1256 contracts."
Gains or losses on section 1256 contracts generally are considered 60% long-term
and 40% short-term capital gains or losses; however, foreign currency gains or
losses (as discussed below) arising from certain Section 1256 contracts may be
treated as ordinary income or loss. Also, section 1256 contracts held by the
Fund at the end of each taxable year (and, generally, for purposes of the 4%
excise tax, on October 31 of each year) are "marked-to-market" (that is, treated
as sold at fair market value), resulting in unrealized gains or losses being
treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Fund which is taxed as
ordinary income when distributed to Shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle positions, the amount which may be distributed to
Shareholders, and which will be taxed to them as ordinary income or capital
gain, may be increased or decreased as compared to the Fund that did not engage
in such hedging transactions.
Notwithstanding any of the foregoing, a Fund may recognize gain (but not
loss) from a constructive sale of certain "appreciated financial positions" if
the Fund enters into a short sale, offsetting notional principal contract or
forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options and forward
contracts and short sales) in stock, partnership interests, certain actively
traded trust instruments and certain debt instruments. Constructive sale
treatment does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the taxable year, if certain
conditions are met.
Unless certain constructive sales rules (discussed more fully above) apply,
a Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender.
Pursuant to Code Section 1233, all or a portion of any gain arising from a short
sale may be treated as short-term capital gain, regardless of the period for
which the Fund held the security used to close the short sale. In addition, the
Fund's holding period of any security which is substantially identical to that
which is sold short may be reduced or eliminated as a result of the short sale.
Recent legislation, however, alters this treatment by treating certain short
sales against the box and other transactions as a constructive sale of the
underlying security held by the Fund, thereby requiring current recognition of
gain, as described more fully above. Similarly, if a Fund enters into a short
sale of property that becomes substantially worthless, the Fund will recognize
gain at that time as though it had closed the short sale. Future Treasury
regulations may apply similar treatment to other transactions with respect to
property that becomes substantially worthless.
The diversification requirements applicable to the Fund's assets may limit
the extent to which the Fund will be able to engage in transactions in options
and other hedging transactions.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or 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 denominated in a
foreign currency and on disposition of certain options and futures contracts,
gains or losses attributable to fluctuations in the value of foreign currency
between the date of acquisition of the security or contract 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.
The Fund may invest in shares of foreign corporations (including through
ADRs) 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 the Fund receives a
so-called "excess distribution" with respect to PFIC stock, the Fund itself may
<PAGE> 43
be subject to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to Shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which the Fund held the PFIC shares. The Fund
itself will be subject to tax on the portion, if any, of an excess distribution
that is so allocated to prior Fund taxable years and an interest factor will be
added to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to
PFIC shares. Under an election that currently is available in some
circumstances, the 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 would
involve marking to market the Fund's PFIC shares at the end of each taxable
year, with the result that unrealized gains are treated as though they were
realized and reported as ordinary income. Any mark-to-market losses and any loss
from an actual disposition of PFIC shares would be deductible as ordinary losses
to the extent of any net mark-to-market gains included in income in prior years.
SALE OF SHARES. Upon the sale or other disposition of Fund Shares, or upon
receipt of a distribution in complete liquidation of the Fund, a Shareholder
generally will realize a taxable capital gain or loss which may be eligible for
reduced capital gains tax rates, 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 Shares
acquired pursuant to a dividend reinvestment plan) 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 net capital gains
received by the Shareholder with respect to such Shares.
In some cases, Shareholders will not be permitted to take sales charges
into account for purposes of determining the amount of gain or loss realized on
the disposition of their Shares. This prohibition generally applies where (1)
the Shareholder incurs a sales charge in acquiring the stock of a regulated
investment company, (2) the stock is disposed of before the 91st day after the
date on which it was acquired, and (3) the Shareholder subsequently acquires
Shares of the same or another regulated investment company and the otherwise
applicable sales charge is reduced or eliminated under a "reinvestment right"
received upon the initial purchase of Shares of stock. In that case, the gain or
loss recognized will be determined by excluding from the tax basis of the Shares
exchanged all or a portion of the sales charge incurred in acquiring those
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 a sales charge initially. Sales charges affected by this rule
are treated as if they were incurred with respect to the stock acquired under
the reinvestment right. This provision may be applied to successive acquisitions
of stock.
FOREIGN WITHHOLDING TAXES. Income received by the Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries.
BACKUP WITHHOLDING. The Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all reportable payments, including dividends,
capital gain distributions and redemptions payable to Shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the IRS that they are
subject to backup withholding. Corporate Shareholders and certain other
Shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the Shareholder's U.S. federal income tax liability.
FOREIGN SHAREHOLDERS. The tax consequences to a foreign Shareholder of an
investment in the Fund may be different from those described herein. Foreign
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund.
OTHER TAXATION. The Group is organized as a Massachusetts business trust
and, under current law, neither the Group nor any fund is liable for any income
or franchise tax in the Commonwealth of Massachusetts, provided that each fund
continues to qualify as a regulated investment company under Subchapter M of the
Code.
Fund Shareholders may be subject to state and local taxes on their Fund
distributions. In many states, Fund distributions which are derived from
interest on certain U.S. Government obligations may be exempt from taxation.
Yields and Total Returns
- ------------------------
<PAGE> 44
YIELD CALCULATIONS. As summarized in the Prospectus of the Fund under the
heading "PERFORMANCE INFORMATION", yields on Fund Shares 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. The 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
Yield = 2 [(------- + 1)exp(6) - 1]
cd
Where: a = dividends and interest earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of Shares
outstanding during the period that were
entitled to receive dividends.
d = maximum offering price per Share on the last
day of the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by the Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the Fund. Interest earned on any debt
obligations held by the Fund is calculated by computing the yield to maturity of
each obligation held by the 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 the 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, Administrator or Distributor
may voluntarily waive all or a portion of their fees with respect to the Fund.
Such waiver would cause the yield of the Fund to be higher than it would
otherwise be in the absence of such a waiver.
TOTAL RETURN CALCULATIONS. As summarized in the Prospectus of the Fund
under the heading "PERFORMANCE INFORMATION", average annual total return is a
measure of the change in value of an investment in the Fund over the period
covered, which assumes any dividends or capital gains distributions are
reinvested in Shares immediately rather than paid to the investor in cash. The
Fund computes the average annual total return 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:
<PAGE> 45
Average Annual ERV
Total Return = [(------)exp (1/n) - 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 Fund computes its aggregate total return by determining the aggregate
compounded rate of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total ERV
Return = [(------] - 1]
P
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Performance Comparisons
- -----------------------
Investors may judge the Fund's performance by comparing it to the
performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies through various mutual fund or market indices
such as those prepared by Dow Jones & Co., Inc. and Standard & Poor's
Corporation 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 IBC/Donaghue's MONEY FUND REPORT, a nationally recognized money
market fund reporting service, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The New York Times, Business Week, and U.S.A. Today. In addition to
performance information, general information about the Fund that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to Shareholders. The Fund may also include in advertisements and
reports to Shareholders information comparing the performance of the Adviser to
other investment advisers; such comparisons may be published by or included in
Nelsons Directory of Investment Managers, Roger's, Casey/PIPER Manager Database,
CDA/Cadence, or Chase Global Data and Research.
Current yields or performance will fluctuate from time to time and are not
necessarily representative of future results. Accordingly, the Fund's yield or
performance may not be directly comparable to bank deposits or other investments
that pay a fixed return for a stated period of time. Yield and performance are
functions of the quality, composition and maturity of the Fund's portfolio, as
well as expenses allocated to the Fund. Fees imposed upon customer accounts by
third parties for cash management services will reduce the Fund's effective
yield to customers.
From time to time, the 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 Fund 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 the
Fund.
Miscellaneous
- -------------
The Fund may include information in its 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 the Fund
or (4) describes investment management strategies for the Fund. Such information
is provided to inform Shareholders of the activities of the Fund for the most
recent fiscal year or half-year and to provide the views of the Adviser and/or
<PAGE> 46
Group officers regarding expected trends and strategies.
Individual Trustees are elected by the Shareholders and, subject to removal
by the vote of two-thirds of the Board of Trustees, serve for a term lasting
until the next meeting of Shareholders at which Trustees are elected. Such
meetings are not required to be held at any specific intervals. Shareholders
owning not less than 10% of the outstanding Shares of the Group entitled to vote
may cause the Trustees to call a special meeting, including for the purpose of
considering the removal of one or more Trustees. Any Trustee may be removed at
any meeting of Shareholders by vote of two-thirds of the Group's outstanding
shares. The Declaration of Trust provides that the Trustees will assist
shareholder communications to the extent required by Section 16(c) of the 1940
Act in the event that a shareholder request to hold a special meeting is made.
The Prospectus and this Statement of Additional Information omit certain of
the information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the Commission upon
payment of any prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectuses and this Statement of Additional Information.
<PAGE> 47
APPENDIX
The nationally recognized statistical rating organizations (individually,
an "NRSRO") that may be utilized by the Adviser with regard to portfolio
investments for the Fund include Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") and Duff & Phelps, Inc. ("D&F"). Set forth
below is a description of the relevant ratings of each such NRSRO. The
description of each NRSRO's ratings is as of the date of this Statement of
Additional Information, and may subsequently change.
LONG TERM DEBT RATINGS (may be assigned, for example, to corporate and municipal
bonds)
Description of the three highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the Fundamentally
strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the future.
Description of the three highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Description of the three highest long-term debt ratings by D&P;
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods of
A- economic stress.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term promissory
obligations. Prime-1 repayment capacity will normally be
evidenced by many of the following characteristics:
- Leading market positions in well-established
industries.
<PAGE> 48
- High rates of return on Fund employed.
- Conservative capitalization structures with
moderate reliance on debt and ample asset protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash generation.
- Well-established access to a range of
financial markets and assured sources of alternate
liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayments of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a plus
sign (+).
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated "A-1".
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
D&P's description of the short-term debt ratings (D&P incorporates
gradations of "1+" (one plus) and "1-" (one minus) to assist investors in
recognizing quality differences within the highest rating category);
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
<PAGE> 49
PART C
------
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements
--------------------
1.
<PAGE> 50
<PAGE> 51
(b) Exhibits
--------
(1) Declaration of Trust(1)
(2) (a) By-Laws(1)
(b) Establishment and Designation of
Series of Shares(2)
(3) Not Applicable
(4) Certificates for Shares are not issued.
Articles IV, V, VI and VII of the Declaration
of Trust, previously filed as Exhibit 1
hereto, define rights of holders of Shares.
(5) Investment Advisory Agreement
between Registrant and Willamette Asset
Managers, Inc.(2)
(6) Distribution Agreement between Registrant and
BISYS Fund Services, Limited Partnership(2)
(7) Not Applicable
(8) Custodian Agreement between Registrant and
Union Bank of California.(1)
(9) (a) Administration Agreement between the
Registrant and BISYS Fund Services,
Limited Partnership.(2)
(b) Fund Accounting Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.(2)
(c) Transfer Agency Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.(2)
(10) Opinion and Consent of Counsel(2)
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) (a) Service and Distribution Plan
(b) Administrative Services Plan - To be
added by Post-Effective Amendment
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------
Not applicable.
Item 26. Number of Record Holders
- -------- ------------------------
None.
- ------------------
1. Filed with initial Registration Statement on January 8, 1992.
2. Incorporated by reference to Post-Effective Amendment No. 33 to Registrant's
Registration Statement (File No. 33-44964) filed electronically with the
Securities and Exchange Commission on March 13, 1998.
<PAGE> 52
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 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
<PAGE> 53
acts on the matter) or an independent legal counsel in a
written opinion shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the recipient ultimately will
be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is
not (i) an Interested Person of the Trust (including anyone who has
been exempted from being an Interested Person by any rule, regulation
or order of the Commission), or (ii) involved in the claim, action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers
or controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted
by such trustees, officers or controlling persons in connection
with the shares being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against 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
----------------------
<TABLE>
<S> <C> <C>
Name & Address Position with WAM Principal Occ. for past 5 yrs.
-------------- ----------------- ------------------------------
James T. Smith CEO Compliance Officer(1995)
220 NW 2nd #950 and CFO(1997) for Phillips
Portland, OR 97209 & Co. Securities, Inc. Joined
Phillips & Co. in 10/94. From
10/92 to 9/94 was the Sup. of
payroll & billing services for
Interim Services, Inc.
S. Christopher Clark Director/Owner Executive VP(1993) and
220 NW 2nd #950 Managing Director(1997) for
Portland, OR 97209 Phillips & Co. Securities, Inc.
Timothy C. Phillips Director/Owner CEO of Phillips & Co.
220 NW 2nd #950 Securities, Inc. since
Portland, OR 97209 February 1992.
<FN>
* The business address of Phillips & Co. Securities, Inc. is 220 N.W. 2nd
#950, Portland, Oregon 97209
</FN>
</TABLE>
<PAGE> 54
Item 29. Principal Underwriter
- -------- ---------------------
(a) BISYS Fund Services, Limited Partnership ("BISYS Fund
Services") acts as distributor and administrator for
Registrant. BISYS Fund Services also distributes the
securities of The Riverfront Funds, Inc., The Victory
Portfolios, AmSouth Mutual Funds, The Parkstone Group of
Funds, The Sessions Group, the MarketWatch Funds, the BB&T
Mutual Funds Group, The Coventry Group, Pacific Capital
Funds, The ARCH Fund, Inc., M.S.D. & T. Funds, Inc., MMA
Praxis Mutual Funds, Summit Investment Trust, the Fountain
Square Funds, HSBC Family of Funds, The Infinity Mutual
Funds, Inc., The Kent Funds, the Parkstone Advantage Funds,
Pegasus Funds, the Republic Funds Trust, The Republic
Adviser Funds Trust, SBSF Funds, Inc., First Choice Funds
Trust, Intrust Fund Trusts, Empire Builder Tax Free Bond
each of which is an open-end management investment company.
(b) Partners of BISYS Fund Services, as of June 30, 1997, 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 Willamette Asset Managers, Inc.
<PAGE> 55
220 NW 2nd Avenue, Suite 950, Portland, Oregon 97209, (records
relating to its function as adviser), BISYS Fund Services,
Limited Partnership, 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as general manager,
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.
<PAGE> 56
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. 36 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 22nd day of May, 1998.
THE COVENTRY GROUP
By: WALTER B. GRIMM
-----------------------------
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
- --------- ----- ----
WALTER B. GRIMM Chairman, President May 22, 1998
- --------------------- and Trustee
Walter B. Grimm*** (Principal Executive
Officer)
CHALMERS P. WYLIE Trustee May 22, 1998
- ---------------------
Chalmers P. Wylie**
MAURICE G. STARK Trustee May 22, 1998
- ---------------------
Maurice G. Stark*
MICHAEL M. VAN BUSKIRK Trustee May 22, 1998
- ----------------------
Michael M. Van Buskirk*
<PAGE> 57
PAUL KANE Treasurer
- --------------------- (Principal
Paul Kane 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> 1
Exhibit 15
WILLAMETTE VALUE FUND
SERVICE AND DISTRIBUTION PLAN
Introduction: It has been determined that Willamette Value Fund (the
"Fund"), a series of The Coventry Group, will pay for certain costs and expenses
incurred in connection with the distribution of its shares and servicing of its
shareholders and adopt the Service and Distribution Plan (the "Plan") set forth
herein pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Act").
The Board of Trustees, in considering whether the Fund should implement
the Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented and
has considered such pertinent factors as it deemed necessary to form the basis
for a decision to use assets of the Fund for such purposes.
In voting to approve the implementation of the Plan, the Trustees have
concluded, in the exercise of their reasonable business judgment and in light of
their respective fiduciary duties, that there is a reasonable likelihood that
the Plan will benefit the Fund and its existing and future shareholders.
The Plan: The material aspects of the financing by the Fund of
distribution expenses to be incurred in connection with securities of which it
is the issuer are as follows:
1. The Fund will compensate the distributor for services provided and
expenses incurred in connection with the distribution and marketing of shares of
the Fund and servicing of
-1-
<PAGE> 2
Fund shareholders. Distribution and servicing costs and expenses may include (1)
printing and advertising expenses; (2) payments to employees or agents of the
distributor who engage in or support distribution of the Fund's shares,
including salary, commissions, travel and related expenses; (3) the costs of
preparing, printing and distributing prospectuses and reports to prospective
investors; (4) expenses of organizing and conducting sales seminars; (5)
expenses related to selling and servicing efforts, including processing new
account applications, transmitting customer transaction information to the
Fund's transfer agent and answering questions of shareholders; (6) payments of
fees to one or more broker-dealers (which may include the distributor itself),
financial institutions or other industry professionals, such as investment
advisers, accountants and estate planning firms (severally, a "Service
Organization"), in respect of the average daily value of the Fund's shares owned
by shareholders for whom the Service Organization is the dealer of record or
holder of record, or owned by shareholders with whom the Service Organization
has a servicing relationship; (7) costs and expenses incurred in implementing
and operating the Plan; and (8) such other similar services as the Fund's Board
of Trustees determines to be reasonably calculated to result in the sale of Fund
shares.
Subject to the limitations of applicable law and regulation, including
rules of the National Association of Securities Dealers ("NASD"), the
distributor will be compensated monthly for such costs, expenses or payments at
an annual rate of up to but not more than 0.50% of the average daily net assets
of the Fund. Up to 0.25% of such amount may be used as a "service fee," as
defined in applicable rules of the NASD.
-2-
<PAGE> 3
2. The distributor may periodically pay to one or more Service
Organizations (which may include the distributor itself) a fee in respect of the
Fund's shares owned by shareholders for whom the Service Organizations are the
dealers of record or holders of record, or owned by shareholders with whom the
Service Organizations have servicing relationships. Such fees will be computed
daily and paid quarterly by the distributor at an annual rate not exceeding
0.25% of the average net asset value of the Fund's shares owned by shareholders
for whom the Service Organizations are the dealers of record or holders of
record, or owned by shareholders with whom the Service Organizations have
servicing relationships. Subject to the limits herein and the requirements of
applicable law and regulations, including rules of the NASD, the distributor may
designate as "Service Fees," as that term is defined by applicable rules and
regulatory interpretations applicable to payments under a plan such as the Plan,
some or all of any payments made to Service Organizations (including the
distributor itself) for services that may be covered by "Service Fees," as so
defined.
The payment to a Service Organization is subject to compliance by the
Service Organization with the terms of a Service Agreement or Dealer Agreement
between the Service Organization and the distributor (the "Agreement"). If a
shareholder of the Fund ceases to be a client of a Service Organization that has
entered into an Agreement with the distributor, but continues to hold shares of
the Fund, the distributor will be entitled to receive a similar payment in
respect of the servicing provided to such investors. For the purposes of
determining the fees payable under the Plan, the average daily net asset value
of the Fund's shares shall be computed
-3-
<PAGE> 4
in the manner specified in the Declaration of Trust of The Coventry Group and
current prospectus for the computation of the value of the Fund's net asset
value per share.
3. The Plan will become effective immediately upon approval by a
majority of the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the Act) of the Fund and have no direct
or indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan (the "Plan Trustees"), pursuant to a
vote cast in person at a meeting called for the purpose of voting on the
approval of the Plan
4. The Plan shall continue for a period of one year from its effective
date, unless earlier terminated in accordance with its terms, and thereafter
shall continue automatically for successive annual periods, provided such
continuance is approved by a majority of the Board of Trustees, including a
majority of the Plan Trustees pursuant to a vote cast in person at a meeting
called for the purpose of voting on the continuance of the Plan.
5. The Plan may be amended at any time by the Board of Trustees
provided that (a) any amendment to increase materially the costs which the Fund
or a series may bear for distribution pursuant to the Plan shall be effective
only upon approval by a vote of a majority of the outstanding voting securities
of the Fund and (b) any material amendments of the terms of the Plan shall
become effective only upon approval as provided in paragraph 3(b) hereof.
6. The Plan is terminable without penalty at any time by (a) vote of a
majority of the Plan Trustees, or (b) vote of a majority of the outstanding
voting securities of the Fund.
-4-
<PAGE> 5
7. Any person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or any agreement entered into in
connection with the Plan shall provide to the Board of Trustees, and the Board
of Trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made.
8. While the Plan is in effect, the selection and nomination of
Trustees who are not "interested persons" (as defined in the Act) of the Fund
shall be committed to the discretion of the Trustees who are not "interested
persons".
9. The Fund shall preserve copies of the Plan, any agreement in
connection with the Plan, and any report made pursuant to paragraph 7 hereof,
for a period of not less than six years from the date of the Plan of such
agreement or report, the first two years in an easily accessible place.
Willamette Value Fund
Date: By:
------------------------- ---------------------------
President
Attest:
-------------------------
Secretary
-5-
