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As filed with the Securities and Exchange Commission on March 13, 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. 33 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 35 / 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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[ ] Immediately upon filing pursuant to [ ] on ( ) pursuant
paragraph (b), or to paragraph (b), or
[ ] 60 days after filing pursuant to [ x] 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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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
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION; DATED MARCH 13, 1998
WILLAMETTE VALUE FUND
(SERIES OF THE COVENTRY GROUP)
For current yield, purchase,
and redemption information,
call (800) 438-6375.
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.
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The date of this Prospectus is , 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.
In selecting securities for the Fund's portfolio, the Adviser normally expects
to allocate about one-half of the Fund's total assets to the ten highest
dividend-paying 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 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;
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;
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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% 4.17% 3.35%
$250,000 but less than
$500,000..................... 2.50% 3.09% 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.
** 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 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,
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<PAGE> 12
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
application is required for IRA and other qualified retirement plan investments.
The Fund reserves the right to reject purchase orders.
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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 (800) 438-6375.
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
Department L-1392
Columbus, OH 43260-1392
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 Fund at (800)
438-6375. 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 Fund at (800) 438-6375, if your
Account Application has been previously received by the Distributor. Payment for
Shares ordered by telephone is made by electronic transfer to the Fund's
custodian. Prior to wiring funds and in order to ensure that wire orders are
invested promptly, investors must call the Fund at the number above to obtain
instructions regarding the bank account number to which the funds should be
wired and other pertinent information.
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<PAGE> 14
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 Fund at (800) 438-6375.
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 account application which can be acquired by calling
(800) 438-6375. For a Shareholder to change the Auto Invest instructions, the
request must be made in writing to the Distributor.
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<PAGE> 15
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: Dept. L-1392, Columbus, Ohio
43260-1392. 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 Fund at (800) 438-6375. 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
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.
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<PAGE> 16
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 (800) 438-6375 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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<PAGE> 17
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
Dept. L-1392, Columbus, Ohio 43260-1392, 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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<PAGE> 18
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).
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<PAGE> 20
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 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.
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<PAGE> 21
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 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
19
<PAGE> 22
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 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.
20
<PAGE> 23
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.
Additional information regarding the investment performance of the Fund will
be contained in the annual report of the Fund which, when available, may be
obtained without charge by writing or calling the Fund.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent auditors.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to 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, or by calling toll free (800) 438-6375.
21
<PAGE> 24
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<PAGE> 25
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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
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.
WILLAMETTE
VALUE
FUND
---------------
PROSPECTUS DATED , 1998
---------------
BISYS FUND SERVICES, INC.
ADMINISTRATOR AND DISTRIBUTOR
<PAGE> 27
SUBJECT TO COMPLETION
WILLAMETTE VALUE FUND
An Investment Portfolio of
The Coventry Group
Preliminary Statement of Additional Information
[ date ]
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) 438-6375.
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
PRELIMINARY 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 ___%.
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
Nimish Bhatt Treasurer From July 1996 to present,
3435 Stelzer Road employee of BISYS Fund Services,
Columbus, Ohio 43219 from January 1995 to July 1996,
Age: 34 Assistant Vice President, Evergreen
Funds, First Union Bank, from September 1990
to December 1994, Senior Tax Consultant,
Price Waterhouse.
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.
D'Ray Moore Assistant Secretary From February 1990 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 38
Richard B. Ille Assistant Secretary From July 1990 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 32
James L. Smith Assistant Secretary From October 1996 to present, employee
3435 Stelzer Road of BISYS Fund Services; from October 1995
Columbus, Ohio 43219 to October 1996, employee of Davis Graham
Age: 37 & Stubbs LLP, from June 1990 to October 1995,
Compliance Officer for ALPS Mutual Fund
Services, Inc.
<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, Stevens, Grimm,
Ille, and Young and Ms. Moore, Mr. Bhatt, Mr. Smith 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 ________________ (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 [__________] 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 __________ (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 ______. 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 [DATE}, (the "Distribution Agreement"). Unless
otherwise terminated, the Distribution Agreement will continue in effect until
______, 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 ______. 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 ______.
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
- --------------------
[INSERT NAME AND ADDRESS OF AUDITORS], has been selected as independent
auditors for the Fund for the fiscal year ended March 31, 1999. [NAME OF
AUDITOR] 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
(b) Exhibits
--------
(1) Declaration of Trust(1)
(2) (a) By-Laws(1)
(b) Establishment and Designation of
Series of Shares
- ------------------
1 Filed with initial Registration Statement on January 8, 1992.
<PAGE> 51
(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.
(6) Distribution Agreement between Registrant and
BISYS Fund Services, Limited Partnership
(7) Not Applicable
(8) Custodian Agreement between Registrant and
Union Bank of California.
(9) (a) Administration Agreement between the
Registrant and BISYS Fund Services,
Limited Partnership.
(b) Fund Accounting Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.
(c) Transfer Agency Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.
(10) Opinion and Consent of Counsel
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Services and Distribution
(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.
* Filed with Rule 24f-2 Notice on May 29, 1997.
<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) Registrant undertakes to file a post-effective amendment,
using financial statements with respect to Willamette Value
Fund, which need not be certified within four to six months
from the effective date of this Post-Effective Amendment No.
33 to Registrant's registration statement
under the Securities Act of 1933.
(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. 33 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 13th day of March, 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 March 13, 1998
- --------------------- and Trustee
Walter B. Grimm*** (Principal Executive
Officer)
CHALMERS P. WYLIE Trustee March 13, 1998
- ---------------------
Chalmers P. Wylie**
MAURICE G. STARK Trustee March 13, 1998
- ---------------------
Maurice G. Stark*
MICHAEL M. VAN BUSKIRK Trustee March 13, 1998
- ----------------------
Michael M. Van Buskirk*
<PAGE> 57
NIMISH BHATT Treasurer
- --------------------- (Principal
Nimish Bhatt 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 2(b)
THE COVENTRY GROUP
Establishment and Designation of Series of Shares
of Beneficial Interest, Par Value $0.01 Per Share
RESOLVED, that pursuant to Section 5.11 of the Declaration of Trust of
The Coventry Group (the "Trust") dated January 8, 1992, ("Declaration"), a
separate series of the shares of beneficial interest of the Trust shall hereby
be established, relating to the Trust's new investment portfolio (the "Fund");
and
FURTHER RESOLVED, that the Fund shall have the following designation
and Shares of the Fund shall have the following special and relative rights:
1. The Fund shall be designated "Willamette Value Fund."
2. The Fund shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Fund's then
currently effective prospectus and registration statement under the Securities
Act of 1933. Each share of beneficial interest ("Share") of the Fund shall be
redeemable. Each Share of a Fund shall be entitled to one vote (or fraction
thereof in respect of a fractional Share) on matters on which Shares of the Fund
shall be entitled to vote. Each Share of the Fund shall represent a pro rata
beneficial interest in the assets allocated to the Fund and shall be subject to
a pro rata share of expenses allocated to the Fund; and shall be entitled to
receive its pro rata share of net assets of the Fund upon liquidation of the
Fund, all as provided in the Declaration or in accordance with applicable law,
regulation or regulatory policy
3. Each Share of the Fund shall have the voting rights provided to
shareholders in the Declaration and shall vote with shareholders of other series
of the Trust with respect to matters affecting the Trust generally. To the
extent required by the Declaration or applicable law, regulation or regulatory
policy, and with respect to matters concerning the Fund, but not shareholders of
other series of the Trust, or that affect shareholders of other series
differently, Shares of the Fund shall vote separately as a group. In each case
of separate voting, the Trustees shall determine whether, for the matter to be
effectively acted upon in accordance with the Declaration, or applicable law,
rule or regulatory policy, as applicable, as to the Fund, the applicable
percentage (as specified in the Declaration, or the Act and the rules
thereunder) of the shares of the Fund alone must be voted in favor of the
matter, or whether the required favorable vote of such applicable percentage of
the shares must include shares of other series of the Trust , as well.
4. The assets and liabilities of the Trust shall be allocated among the
Fund and other series of the Trust as set forth in Section 5.11 of the
Declaration; except that costs of establishing the Fund and of the registration
and public offering of the Fund's Shares shall be amortized for the Fund over
the period beginning on the date such costs become payable and ending sixty
months thereafter.
<PAGE> 2
5. The Trustees shall have the right at any time and from time to time
to reallocate assets and expenses or to change the designation of the Fund
hereby created, or to otherwise change the special and relative rights of the
Fun, provided that such change shall not adversely affect the rights of the
Shareholders of the Fund.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
____ day of February, 1998.
/s/Walter B. Grimm
--------------------------
Walter B. Grimm
/s/Maurice G. Stark
--------------------------
Maurice G. Stark
/s/Michael M. Van Buskirk
--------------------------
Michael M. Van Buskirk
/s/Chalmers P. Wylie
--------------------------
Chalmers P. Wylie
-2-
<PAGE> 1
Exhibit 5
THE COVENTRY GROUP
ON BEHALF OF
WILLAMETTE VALUE FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on __________________________, 1998
between Willamette Asset Managers, Inc. (the "Adviser") and The Coventry Group.
(the "Trust") on behalf of Willamette Value Fund (the "Fund").
WHEREAS, the Trust is a Massachusetts business trust of the series type
organized under a Declaration of Trust dated __________________________, 199_,
(the "Declaration") and is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, diversified management investment
company, and the Fund is a new series of the Trust;
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as
investment adviser to the Fund for the periods and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the
Trustees of the Trust, the Adviser will (a) provide a program of continuous
investment management for the Fund in accordance with the Fund's investment
objectives, policies and limitations as stated in the Fund's prospectus and
Statement of Additional Information included as part of the Trust's Registration
Statement filed with the Securities and Exchange Commission, as they may be
amended from time to time, copies of which shall be provided to the Adviser by
the Trust; (b) make investment decisions for the Fund; and (c) place orders to
purchase and sell securities for the Fund.
In performing its investment management services to the Fund hereunder,
the Adviser will provide the Fund with ongoing investment guidance and policy
direction, including oral and written research, analysis, advice, statistical
and economic data and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy.
<PAGE> 2
The Adviser will determine the securities, instruments, repurchase agreements,
options and other investments and techniques that the Fund will purchase, sell,
enter into or use, and will provide an ongoing evaluation of the Fund's
portfolio. The Adviser will determine what portion of the Fund's portfolio shall
be invested in securities and other assets, and what portion if any, should be
held uninvested.
The Adviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code") and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Trustees;
(b) use reasonable efforts to manage the Fund so that it will qualify,
and continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for the Fund
directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements;
(d) furnish to the Trust, or to the Fund's administrator, BISYS Fund
Services, ("Administrator") if so directed, whatever statistical information the
Trust may reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Trust and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Adviser's own initiative, furnish to the Trust from time to time whatever
information the Adviser believes appropriate for this purpose;
(e) make available to the Administrator, and the Trust, promptly upon
their request, such copies of its investment records and ledgers with respect to
the Fund as may be required to assist the Administrator and the Trust in their
compliance with applicable laws and regulations. The Adviser will furnish the
Trustees with such periodic and special reports regarding the Fund as they may
reasonably request;
(f) immediately notify the Trust in the event that the Adviser or any
of its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Adviser further agrees to
notify the Trust immediately of any material fact known to the Adviser
respecting or relating to the Adviser that is not contained in the Trust's
Registration Statement regarding the Fund, or any amendment or supplement
thereto, but that is required to be disclosed thereon, and of any statement
contained therein that becomes untrue in any material respect;
-2-
<PAGE> 3
(g) in making investment decisions for the Fund, use no inside
information that may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such information.
3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 3, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as officers and executive
employees of the Trust or Fund (including the Trust's or Fund's share of payroll
taxes), and the Adviser shall make available, without expense to the Fund, the
service of its directors, officers and employees who may be duly elected
officers of the Trust, subject to their individual consent to serve and to any
limitations imposed by law.
The Adviser shall not be required to pay any expenses of the Fund or
Trust other than those specifically allocated to the Adviser in this section 3.
In particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Trust's or Fund's employees as are officers or employees of the
Adviser whose services may be involved, for any expenses of other series of the
Trust or for the following expenses of the Fund or Trust: organization and
certain offering expenses of the Fund (including out-of-pocket expenses, but not
including the Adviser's overhead and employee costs); fees payable to the
Adviser and to any other Fund advisers or consultants; legal expenses; auditing
and accounting expenses; interest expenses; telephone, telex, facsimile, postage
and other communications expenses; taxes and governmental fees; fees, dues and
expenses incurred by or with respect to the Fund in connection with membership
in investment company trade organizations; cost of insurance relating to
fidelity coverage for the Trust's officers and employees; fees and expenses of
the Fund's Administrator or of any custodian, subcustodian, transfer agent, fund
accounting agent, registrar, or dividend disbursing agent of the Fund; payments
for portfolio pricing or valuation services to pricing agents, accountants,
bankers and other specialists, if any; expenses of preparing share certificates,
if any; other expenses in connection with the issuance, offering, distribution
or sale of securities issued by the Fund; expenses relating to investor and
public relations; expenses of registering shares of the Fund for sale and of
compliance with applicable state notice filing requirements; freight, insurance
and other charges in connection with the shipment of the Fund's portfolio
securities; brokerage commissions or other costs of acquiring or disposing of
any portfolio securities or other assets of the Fund, or of entering into other
transactions or engaging in any investment practices with respect to the Fund;
expenses of printing and distributing prospectuses, Statements of Additional
Information, reports, notices and dividends to shareholders; costs of stationery
or other office supplies; any litigation expenses; costs of shareholders' and
other meetings; the compensation and all expenses (specifically including travel
expenses relating to the Fund's business) of officers, Trustees and employees of
the Trust who are not interested persons of the Adviser; and travel expenses (or
an appropriate portion thereof) of officers or Trustees of the Trust who are
officers, Trustees or employees of the Adviser to the extent that such expenses
relate to attendance at meetings of the Board of Trustees of the Trust with
respect to matters concerning the Fund, or any committees thereof or advisers
thereto.
-3-
<PAGE> 4
Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Trust will arrange for the Fund
to pay the Adviser at the end of each calendar month an advisory fee computed
daily at an annual rate equal to 1.00% of the Fund's average daily net assets.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such other time. The value of net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of the New York Stock
Exchange, or as of such other time as the value of the net assets of the Fund's
portfolio may lawfully be determined, on that day. If the determination of the
net asset value of the shares of the Fund has been so suspended for a period
including any month end when the Adviser's compensation is payable pursuant to
this section, then the Adviser's compensation payable at the end of such month
shall be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month). If the Fund determines
the value of the net assets of its portfolio more than once on any day, then the
last such determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this section 4.
4. Books and Records. The Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and Rule
31a-2 under the 1940 Act and otherwise in connection with its services hereunder
are the property of the Trust and will be surrendered promptly to the Trust upon
its request. And the Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
5. Standard of Care and Limitation of Liability. The Adviser shall
exercise its best judgment in rendering the services provided by it under this
Agreement. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund or the holders of the Fund's shares
in connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Trust, the Fund or to holders of the Fund's
shares to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Adviser's reckless disregard of its obligations and
duties under this Agreement. As used in this Section 6, the term "Adviser" shall
-4-
<PAGE> 5
include any officers, directors, employees or other affiliates of the Adviser
performing services with respect to the Fund.
6. Services Not Exclusive. It is understood that the services of the
Adviser are not exclusive, and that nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies or to
other series of investment companies, including the Trust (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities, provided such other services and activities do
not, during the term of this Agreement, interfere in a material manner with the
Adviser's ability to meet its obligations to the Fund hereunder. When the
Adviser recommends the purchase or sale of a security for other investment
companies and other clients, and at the same time the Adviser recommends the
purchase or sale of the same security for the Fund, it is understood that in
light of its fiduciary duty to the Fund, such transactions will be executed on a
basis that is fair and equitable to the Fund. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its Trustees, officers or employees shall act as a principal or agent
or receive any commission. If the Adviser provides any advice to its clients
concerning the shares of the Fund, the Adviser shall act solely as investment
counsel for such clients and not in any way on behalf of the Trust or the Fund.
7. Duration and Termination. This Agreement shall continue until ,
2000, and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Trustees or (ii) a vote of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities (as defined in the 1940 Act), provided that
in either event the continuance is also approved by a majority of the Trustees
who are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated: (a) at any time without penalty by
the Fund upon the vote of a majority of the Trustees or by vote of the majority
of the Fund's outstanding voting securities, upon sixty (60) days' written
notice to the adviser or (b) by the Adviser at any time without penalty, upon
sixty (60) days' written notice to the Trust. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
8. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Trustees, including a
majority of Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
-5-
<PAGE> 6
9. Proxies. Unless the Trust gives written instructions to the
contrary, the Adviser shall vote all proxies solicited by or with respect to the
issuers of securities in which assets of the Fund may be invested. The Adviser
shall use its best good faith judgment to vote such proxies in a manner which
best serves the interests of the Fund's shareholders.
10. Name Reservation. The Trust acknowledges and agrees that the
Adviser has property rights relating to the use of the term "Willamette" and has
permitted the use of such term by the Trust and its Funds. The Trust agrees
that:, unless otherwise authorized by the Adviser, (i) it will use the term
"Willamette" only as a component of the name of the Fund and for no other
purposes; (ii) it will not purport to grant to any third party any rights in
such name; (iii) at the request of the Adviser, the Trust will take such action
as may be required to provide its consent to use of the term by the Adviser, or
any affiliate of the Adviser to whom the Adviser shall have granted the right to
such use; and (iv) the Adviser may use or grant to others the right to use the
term, or any abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company. Upon termination of this Agreement as to the Trust
or any Fund, the Trust shall, upon request of the Adviser, cease to use the term
"Willamette as part of the name of the Trust and its Funds, or of any Fund as to
which the Agreement is terminated, as applicable. In the event of any such
request by the Adviser that use of the term "Willamette" shall cease, the Trust
shall cause its officers, directors and shareholders to take any and all such
actions which the Adviser may request to effect such request and to reconvey to
the Adviser any and all rights to the term "Willamette."
11. Miscellaneous.
a. This Agreement shall be governed by the laws of the State of Ohio,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
b. The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
c. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
d. Nothing herein shall be construed as constituting the Adviser as an
agent of the Trust or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of ___________________, 1998.
THE COVENTRY GROUP
-6-
<PAGE> 7
By
---------------------------
President
WILLAMETTE ASSET MANAGERS, Inc.
By:
---------------------------
President
-7-
<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
AGREEMENT made this __ day of ____________, _____, between The Coventry
Group (the "Trust"), a Massachusetts business trust having its principal place
of business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS FUND SERVICES
LIMITED PARTNERSHIP d/b/a BISYS FUND SERVICES ("Distributor"), having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as a Massachusetts business trust and registered with the Securities
and Exchange Commission (the "Commission") under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Trust then in
effect under the Securities Act of 1933, as amended (the "Securities Act"). As
used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Trust understands that Distributor is now and may in the future be the
distributor of the shares of several investment companies or series (together,
"Companies") including Companies having investment objectives similar to those
of the Trust. The Trust further understands that investors and potential
investors in the Trust may invest in shares of such other Companies. The Trust
agrees that Distributor's duties to such Companies shall not be deemed in
conflict with its duties to the Trust under this paragraph 1.2.
<PAGE> 2
Distributor shall, at its own expense, finance
appropriate activities which it deems reasonable, which are primarily intended
to result in the sale of the Shares, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing and
mailing of prospectuses to other than current Shareholders, and the printing and
mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all
activities of Distributor and its partners, agents, and employees shall comply
with all applicable laws, rules and regulations, including, without limitation,
the 1940 Act, all rules and regulations promulgated by the Commission thereunder
and all rules and regulations adopted by any securities association registered
under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during
normal business hours, to respond to telephone questions with respect to the
Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by
unusual market, economic or political conditions, or by abnormal circumstances
of any kind, the Trust's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal
if it chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized list
of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to
the Shares, all registration statements and prospectuses filed by the Trust with
the Commission under the Securities Act have been carefully prepared in
conformity with requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and prospectus contain all
2
<PAGE> 3
statements required to be stated therein in conformity with said Act and the
rules and regulations of said Commission and all statements of fact contained in
any such registration statement and prospectus are true and correct.
Furthermore, neither any registration statement nor any prospectus includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
to a purchaser of the Shares. The Trust may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus as, in the light
of future developments, may, in the opinion of the Trust's counsel, be necessary
or advisable. If the Trust shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Trust of a
written request from Distributor to do so, Distributor may, at its option,
terminate this Agreement. The Trust shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.10 shall
not be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
3
<PAGE> 4
principal office in Columbus, Ohio and sent to the Trust by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Trust of any
such action shall not relieve the Trust from any liability which the Trust may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Trust's indemnity agreement contained in this
paragraph 1.11. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by Distributor, which approval shall not be unreasonably withheld. In
the event the Trust elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Trust does not elect to assume the defense of any
such suit, or in case Distributor reasonably does not approve of counsel chosen
by the Trust, the Trust will reimburse Distributor, its partners and employees,
or the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by Distributor or them.
The Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to
Distributor's benefit, to the benefit of its several partners and employees, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Trust agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Trust or any of its
officers or Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the
Trust, its several officers and Trustees and any person who controls the Trust
within the meaning of Section 15 of the Securities Act free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) which the Trust, its officers or
Trustees or any such controlling person, may incur under the Securities Act or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Trust, its officers or Trustees or such controlling
person resulting from such claims or demands, shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by Distributor to the Trust and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the
Trust required to be stated in such answers or necessary to make such
information not misleading. Distributor's agreement to indemnify the Trust, its
officers and Trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon Distributor being notified of any action brought
against the Trust, its officers or Trustees, or any such controlling person,
such notification to be given by letter or telegram addressed to Distributor at
its principal office in Columbus, Ohio, and sent to Distributor by the person
against whom such action is brought, within
4
<PAGE> 5
10 days after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Trustees, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this paragraph 1.13 shall in any way restrict
or have an application to or bearing upon the Trust's obligation to repurchase
Shares from any Shareholder in accordance with the provisions of the Trust's
prospectus, Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as
reasonably practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for
amendments to the registration statement or
prospectus then in effect or for additional
information;
(b) in the event of the issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement
or prospectus then in effect or the
initiation by service of process on the
Trust of any proceeding for that purpose;
(c) of the happening of any event that makes
untrue any statement of a material fact made
in the registration statement or prospectus
then in effect or which requires the making
of a change in such registration statement
or prospectus in order to make the
statements therein not misleading; and
5
<PAGE> 6
(d) of all action of the Commission with respect
to any amendment to any registration
statement or prospectus which may from time
to time be filed with the Commission.
For purposes of this section, informal requests by or
acts of the Staff of the Commission shall not be deemed actions of or requests
by the Commission.
1.15 Distributor agrees on behalf of itself and its partners
and employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential Shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except, after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be withheld
where Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State
of Ohio.
1.17 In the event Distributor purchases the initial shares of
the Trust for purposes of satisfying the minimum net worth requirements set
forth in Section 14(a) of the 1940 Act, and a notice of termination is
subsequently given or this Agreement is otherwise terminated pursuant to Section
6 herein for any reason prior to the time that organizational expenses incurred
by the Trust have been fully amortized, then the Trust shall either (i) cause
the successor distributor of the shares (the "Successor Distributor") to pay to
Distributor, within ten (10) days prior to the termination of this Agreement, an
amount of cash that is sufficient to purchase the initial shares that are held
by Distributor or (ii) enable Distributor to redeem the initial shares of the
Trust that it holds by causing the Successor Distributor to contribute to the
Trust, within ten (10) days prior to the termination of this Agreement, any
unamortized organizational costs in the same proportion as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of such contribution. In the latter case, Distributor shall be entitled to
redeem any or all of the initial shares that it holds and receive redemption
proceeds without any reduction in the amount of such proceeds, prior to the
termination of this Agreement.
2. Fee.
Distributor shall receive from the Funds identified in the
Distribution and Shareholder Service Plan attached as Schedule A hereto (the
"Distribution Plan Funds") a distribution fee at the rate and upon the terms and
conditions set forth in such Plan. The distribution fee shall be accrued daily
and shall be paid on the first business day of each month, or at such time(s) as
the Distributor shall reasonably request.
3. Sale and Payment.
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<PAGE> 7
Shares of a Fund may be subject to a sales load and may be
subject to the imposition of a distribution fee pursuant to the Distribution and
Shareholder Service Plan referred to above. To the extent that Shares of a Fund
are sold at an offering price which includes a sales load or at net asset value
subject to a contingent deferred sales load with respect to certain redemptions
(either within a single class of Shares or pursuant to two or more classes of
Shares), such Shares shall hereinafter be referred to collectively as "Load
Shares" (in the case of Shares that are sold with a front-end sales load or
Shares that are sold subject to a contingent deferred sales load), "Front-End
Load Shares" or "CDSL Shares" and individually as a "Load Share," a "Front-End
Load Share" or a "CDSL Share." A Fund that contains Front-End Load Shares shall
hereinafter be referred to collectively as "Load Funds" or "Front-End Load
Funds" and individually as a "Load Fund" or a "Front-end Load Fund." A Fund that
contains CDSL Shares shall hereinafter be referred to collectively as "Load
Funds" or "CDSL Funds" and individually as a "Load Fund" or a "CDSL Fund." Under
this Agreement, the following provisions shall apply with respect to the sale
of, and payment for, Load Shares.
3.1 Distributor shall have the right to purchase Load Shares
at their net asset value and to sell such Load Shares to the public against
orders therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by Distributor, which concession shall not exceed the amount of the
sales charge or underwriting discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in Boston or New York clearing
house funds equal to the applicable net asset value of such Shares. Distributor
may retain so much of any sales charge or underwriting discount as is not
allowed by Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net
asset value of such Load Share, plus any applicable sales charge, all as set
forth in the current prospectus of the Load Fund. The net asset value of Shares
shall be determined in accordance with the provisions of the Agreement and
Declaration of Trust and Bylaws of the Trust and the then-current prospectus of
the Load Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Trust or the Load Fund(s) with any other investment company or the
acquisition by the Trust or the Load Fund(s) of all or substantially all of the
assets or of the outstanding Shares of any other investment company; (b) in
connection with a pro rata distribution directly to the holders of Shares in the
nature of a stock dividend or split; (c) upon the exercise of subscription
rights granted to the holders of Shares on a pro rata basis; (d) in
7
<PAGE> 8
connection with the issuance of Load Shares pursuant to any exchange and
reinvestment privileges described in any then-current prospectus of the Load
Fund; and (e) otherwise in accordance with any then-current prospectus of the
Load Fund.
6. Term, Duration and Termination.
This Agreement shall become effective with respect to each
Fund listed on Schedule A hereof as of the date first written above (or, if a
particular Fund is not in existence on such date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is executed) and, unless
sooner terminated as provided herein, shall continue until __________, 2000.
Thereafter, if not terminated, this Agreement shall continue with respect to a
particular Fund automatically for successive one-year terms, provided that such
continuance is specifically approved at least annually by (a) by the vote of a
majority of those members of the Trust's Board of Trustees who are not parties
to this Agreement or interested persons of any such party, cast in person at a
meeting for the purpose of voting on such approval and (b) by the vote of the
Trust's Board of Trustees or the vote of a majority of the outstanding voting
securities of such Fund. This Agreement is terminable without penalty, on not
less than sixty days' prior written notice, by the Trust's Board of Trustees, by
vote of a majority of the outstanding voting securities of the Trust or by the
Distributor. This Agreement will also terminate automatically in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meanings as ascribed to such terms in the 1940 Act.)
7. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
THE COVENTRY GROUP BISYS FUND SERVICES
8
<PAGE> 9
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: ______________________________ By: ___________________________
Title: ___________________________ Title: ________________________
Date: ____________________________ Date: _________________________
9
<PAGE> 10
Dated: ______________
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
A-1
<PAGE> 1
EXHIBIT 8
MUTUAL FUND CUSTODY AGREEMENT
This AGREEMENT is entered Into as of _____________, 199 _, between
___________________________________________________________________ (the
"Trust"), a Massachusetts business trust, having its principal office and place
of business at ____________________ and Union Bank of California, N.A. (the
"Bank"), a National Banking Association organized under the laws of the United
States with its principal place of business at 350 California Street, San
Francisco, CA 94104.
In consideration of the mutual promises set forth below, the Trust and the Bank
agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the words
and phrases set forth below shall have the following meanings, unless the
context otherwise requires:
1.1 "Authorized Person" shall be deemed to include the President, and
any Vice President, the Secretary, the Assistant Secretary, the Treasurer and
any Assistant Treasurer of the Trust, or any other person, including persons
employed by the Investment Adviser, whether or not any such person is an officer
of the Trust, duly authorized by the Board of Trustees of the Trust to give Oral
Instructions and Written Instructions on behalf of the Trust and listed in the
certification annexed hereto as Schedule A or such other successor certification
as may be received by the Bank from time-to-time.
1.2 "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
1.3 "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its successor
or successors and its nominee or nominees, in which the Bank is hereby
specifically authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in Written Instructions authorized
to act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees.
1.4 "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities thereof,
and repurchase and reverse repurchase agreements with respect to any of the
foregoing types of securities, commercial paper, bank certificates of deposit,
bankers' acceptances and short-term corporate obligations, where the purchase or
sale of such securities normally requires settlement in federal funds on the
same day as such purchase or sale.
1.5 "Prospectus" shall mean the Series' current prospectus and
statement of additional information relating to the registration of the Series'
Shares under the Securities Act of 1933, as amended.
1.6 "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time-to-time owned by each Series.
1.7 "Shares" refers to the shares of beneficial interest of a Series of
the Trust.
1.8 "Series" refers to Funds shown on Schedule B, attached hereto and
made a part hereof by this reference, and any such other Series as may from
time-to-time be created and designated in accordance with the provisions of the
Declaration of Trust.
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<PAGE> 2
1.9 "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Trust.
1.10 "Written Instructions" shall mean a written or electronic
communication actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by telex or
any other such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.
1.11 The "1940 Act" refers to the Investment Company Act of 1940, and
the rules and regulations thereunder, all as amended from time-to-time.
2. Appointment of Custodian.
2.1 The Trust hereby constitutes and appoints the Bank as Custodian of
all the Securities and moneys owned by or in the possession of the Trust during
the period of this Agreement.
2.2 The Bank hereby accepts appointment as Custodian for the Trust and
agrees to perform the duties thereof as hereinafter set forth.
3. Compensation.
3.1 The Trust will compensate the Bank for its services rendered under
this Agreement in accordance with the fees set forth in the Fee Schedule
attached as Schedule C and made a part of this Agreement by this reference.
3.2 The parties to this Agreement will agree upon the compensation for
acting as Custodian for any Series hereafter established and designated, and at
the time that the Bank commences serving as such for said Series, such agreement
shall be reflected in a Fee Schedule for the Trust, which shall be attached to
Schedule C of this Agreement.
3.3 Any compensation agreed to hereunder may be adjusted from
time-to-time by not less than 90 days advance written notice of such fee
increase from Bank to Trust.
3.4 The Bank will bill the Trust as soon as practicable after the end
of each month, and said billings will be detailed in accordance with the Fee
Schedule. The Trust will promptly pay to the Bank the amount of such billing. In
the event such bill is not promptly paid, the Bank may charge against any money
specifically allocated to the Trust such compensation and any expenses incurred
by the Bank in the performance of its duties pursuant to such agreement. The
Bank shall also be entitled to charge against any money held by it and
specifically allocated to the Trust the amount of any loss, damage, liability or
expense incurred with respect to such Trust, including counsel fees, for which
it shall be entitled to reimbursement under the provision of this Agreement.
The expenses which the Bank may charge against such account include,
but are not limited to, the expenses of Sub-Custodians and foreign branches of
the Bank incurred in settling transactions outside of San Francisco or New York
City involving the purchase and sale of Securities of the Trust.
4. Custody of Cash and Securities.
4.1 Receipt and Holding of Assets. The Trust will deliver or cause to
be delivered to the Bank all Securities and moneys owned by it, including cash
received from the issuance's of its Shares, at any time during the period of
this Agreement and shall specify the Series to which the Securities and moneys
are to be specifically allocated. The Bank shall physically segregate and keep
apart on its books, the assets of each Series, including separate identification
of Securities held in the Book-Entry System. The Bank will not be responsible
for such Securities and moneys until actually received by it. The Trust shall
instruct the Bank from time-to-time in its sole discretion, by means of Written
Instructions as to the manner in which and in what amounts Securities and moneys
of a Series are to be deposited on behalf of such Series in the Book-Entry
System or the Depository and specifically allocated on the books of the Bank to
such Series. Securities and moneys of the Trust deposited in the Book-Entry
System or the Depository will be represented in accounts
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which include only assets held by the Bank for customers, including but not
limited to accounts in which the Bank acts in a fiduciary or representative
capacity.
4.2 Accounts and Disbursements. The Bank shall establish and maintain a
separate account for each Series and shall credit to the separate account of
each Series all moneys received by it for the account of such Series and shall
disburse the same only:
4.2.1 In payment for Securities purchased for such Series, as
provided in Section 5 hereof;
4.2.2 In payment of dividends or distributions with respect to
the Shares of such Series;
4.2.3 In payment of original issue or other taxes with respect
to the Shares of such Series;
4.2.4 In payment for Shares which have been redeemed by such
Series;
4.2.5 Pursuant to Written Instructions, setting forth the name
of such Series, the name and address of the person to whom the payment is to be
made, the amount to be paid and the purpose for which payment is to be made; or
4.2.6 In payment of fees and in reimbursement of the expenses
and liabilities of the Bank attributable to such Series.
4.3 Confirmations and Statements. Promptly after the close of business
each day, the Bank shall make available to the Trust information with respect to
all transfers to and from the account of a Series during that day. The Bank need
not send written confirmation or a summary of all such transfers to or from the
account of each Series. Provided, however, that upon the written request of
Trust, Bank shall provide within 5 business days of such written request a copy
of any confirmations which include transactions of the Trust. At least monthly,
the Bank shall furnish the Trust with a detailed statement of the Securities and
moneys held for each Series under this Agreement.
4.4 Registration of Securities and Physical Separation.
All Securities held for a Series which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Bank in that form; all other Securities held for a Series may be
registered in the name of any duly appointed registered nominee of the Bank as
the Bank may from time-to-time determine, or in the name of the Book-Entry
System or the Depository of their successor or successors, or their nominee or
nominees. When a reference is made in this Agreement to an action to be taken by
Bank, it is understood by the parties that the action may be taken directly or
in the case of book-entry Securities, through the appropriate depository. The
Trust agrees to furnish to the Bank appropriate instruments to enable the Bank
to hold or deliver in proper form for transfer, or to register in the name of
its registered nominee or in the name of the Book-Entry System or the
Depository, any Securities which it may hold for the account of a Series. The
Bank (or its Sub-Custodians) shall hold all such Securities specifically
allocated to a Series which are not held in the Book-Entry System or the
Depository in a separate account for such Series in the name of such Series
physically segregated at all times from those of any other person or persons.
Where Securities purchased by a Series are in a fungible bulk of Securities
registered in the name of the Bank (or its nominee) or shown on the Bank's
account on the books of the Depository or the Book-Entry System, the Bank shall
by book entry or otherwise identify the quantity of those Securities belonging
to such Series.
4.5 Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by Written Instructions, the Bank shall
with respect to all Securities held for a Series in accordance with this
Agreement:
4.5.1 Collect all income due or payable and credit such income
promptly on the contractual settlement date, whether or not actually received,
to the account of the appropriate Series, except for income from foreign issues.
Income which has not been collected after reasonable effort, within a time
agreed upon between the parties, shall be repaid to the Bank pending final
collection at such date as may be mutually agreed upon by the Trust and the
Bank.
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<PAGE> 4
4.5.2 Present for payment and collect the amount payable upon
all Securities which may mature or be called, redeemed or retired, or otherwise
become payable. Bank shall make a good faith effort to inform Trust of any call,
redemption or retirement date with respect to Securities which are owned by a
Series and held by the Bank or its nominee. Notwithstanding the foregoing, the
Bank shall have no responsibility to the Trust or a Series for monitoring or
ascertaining of any call, redemption or retirement date with respect to
Securities which are held by a Series and held by Bank or its nominee. Nor shall
the Bank have any responsibility or liability to the Trust or to a Series for
any loss by a Series for any missed payment or other default resulting therefrom
unless the Bank received timely notification, which shall not be less than 5
business days, from the Trust or the Series specifying the time, place and
manner for the presentment of any put bond owned by a Series and held by the
Bank or its nominee. The Bank shall not be responsible and assumes no liability
to the Trust or a Series for the accuracy or completeness of any notification
the Bank shall provide to the Trust or a Series with respect to put Securities;
4.5.3 Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
4.5.4 Hold for the account of each Series all rights and other
Securities issued with respect to any Securities held by the Bank hereunder for
such Series.
4.6 Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions, the Bank shall:
4.6.1 Execute and deliver or cause to be executed and
delivered to such persons as may be designated in such Written Instructions,
proxies, consents, authorization, and any other instruments whereby the
authority of the Trust as owner of any Securities may be exercised;
4.6.2 Deliver or cause to be delivered any Securities held for
a Series in exchange for other Securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
4.6.3 Deliver or cause to be delivered any Securities held for
a Series to any protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate (bookkeeping) account for each
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
4.6.4 Make or cause to be made such transfers or exchanges of
the assets and take such steps as shall be stated in said Written Instructions
to be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Trust;
4.6.5 Deliver Securities owned by any Series upon sale of such
Securities for the account of such Series pursuant to Section 5;
4.6.6 Deliver Securities owned by any Series upon the receipt
of payment in connection with any repurchase agreement related to such
Securities entered into by such Series;
4.6.7 Deliver Securities owned by any Series to the issuer
thereof or its agent when such Securities are called, redeemed, retired or
otherwise become payable; provided, however, that in any such case the cash or
other consideration is be delivered to the Bank.
4.6.8 Deliver Securities owned by any Series in connection
with any loans of Securities made by such Series but only against receipt of
adequate collateral as agreed upon from time-to-time by the Bank and the Trust
which may be in any form permitted under the 1940 Act or any interpretations
thereof issued by the Securities and Exchange Commission or its staff;
4.6.9 Deliver Securities owned by any Series for delivery as
security in connection with any borrowings by such Series requiring a pledge of
Series assets, but only against receipt of amount borrowed;
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<PAGE> 5
4.6.10 Deliver Securities owned by any Series upon receipt of
instructions from such Series for delivery to the Transfer Agent or to the
holders of Shares of such Series in connection with distributions in kind, as
may be described from time-to-time in the Series' Prospectus, in satisfaction of
requests by holders of Shares for repurchase or redemption; and
4.6.11 Deliver Securities owned by any Series for any other
proper business purpose, but only upon receipt of, in addition to Written
Instructions, a certified copy of a resolution of the Board of Trustees signed
by an Authorized Person and certified by the Secretary or Assistant Secretary of
the Trust, specifying the Securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a proper
business purpose, and naming the person or persons to whom delivery of such
Securities shall be made.
4.7 Endorsement and Collection of Checks, Etc. The Bank is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the Bank for the account of a Series.
5. Purchase and Sale of Investments of the Series.
5.1 Promptly after each purchase of Securities for a Series, the Trust
shall deliver to the Bank Written Instructions specifying with respect to each
purchase: (1) the name of the Series to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or the principal amount purchased and
accrued interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such purchase; (7)
the name of the person from whom or the broker through whom the purchase was
made, if any; (8) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and (9) whether the Securities purchased
are to be deposited in the Book-Entry System or the Depository. The Bank shall
receive all Securities purchased by or for a Series and upon receipt of such
Securities shall pay out of the moneys held for the account of such Series the
total amount payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Written Instructions.
5.2 Promptly after each sale of Securities of a Series, the Trust shall
deliver to the Bank Written Instructions specifying with respect to such sale:
(1) the name of the Series to which the Securities sold were specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or principal amount sold, and accrued interest, if any; (4) the
date of sale; (5) the sale price per unit; (6) the total amount payable to the
Series upon such sale; (7) the name of the broker through whom or the person to
whom the sale was made; and (8) whether or not such sale is to be settled
through the Book-Entry System or the Depository. The Bank shall deliver or cause
to be delivered the Securities to the broker or other person designated by the
Trust upon receipt of the total amount payable to such Series upon such sale,
provided that the same conforms to the total amount payable to such Series as
set forth in such Written Instructions. Subject to the foregoing, the Bank may
accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
6. Payment of Dividends or Distributions.
6.1 The Trust shall furnish to the Bank the resolution of the Board of
Trustees of the Trust certified by the Secretary or Assistant Secretary (i)
authorizing the declaration of dividends or distribution with respect to a
Series on a specified periodic basis and authorizing the Bank to rely on Written
Instructions specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the total amount
payable per share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any dividend or distribution by a Series, the
date of payment thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per share to the shareholders of
record as of the record date and the total amount payable to the Transfer Agent
on the payment date.
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<PAGE> 6
6.2 Upon the payment date specified in such resolution or Written
Instructions the Bank shall pay out the moneys specifically allocated to and
held for the account of the appropriate Series the total amount payable to the
Transfer Agent of the Trust.
7. Sale and Redemption of Shares of a Series.
7.1 Whenever the Trust shall sell or redeem any Shares of a Series, the
Trust shall deliver or cause to be delivered to the Bank Written Instructions
duly specifying:
(1) The name of the Series whose Shares were sold or redeemed;
(2) The number of Shares sold or redeemed, trade date, and
price; and
(3) The amount of money to be received or paid by the Bank for
the sale or redemption of such Shares.
7.2 Upon receipt of such money from the Transfer Agent, the Bank shall
credit such money to the separate account of the Series.
7.3 Upon issuance of any Shares of a Series in accordance with the
foregoing provisions of this Section 7, the Bank shall pay, out of the moneys
specifically allocated and held for the account of such Series, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of Written Instructions specifying the amount to be paid.
7.4 Upon receipt from the Transfer Agent of advice setting forth the
number of Shares of a Series received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the Bank shall make
payment to the Transfer Agent out of the moneys specifically allocated to and
held for the account of the Series.
8. Indebtedness.
8.1 The Trust will cause to be delivered to the Bank by any bank
(excluding the Bank) from which the Trust borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Trust against
delivery of a stated amount of collateral. The Trust shall promptly deliver to
the Bank Written Instructions stating with respect to each such borrowing: (1)
the name of the Series for which the borrowing is to be made; (2) the name of
the bank; (3) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Trust, or other loan agreement; (4) the time and date, if known, on which the
loan is to be entered into (the "borrowing date"); (5) the date on which the
loan becomes due and payable; (6) the total amount payable to the Trust for the
separate account of the Series on the borrowing date; (7) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities; (8) whether the Bank is to deliver such collateral
through the Book-Entry System or the Depository; and (9) a statement that such
loan is in conformance with the 1940 Act and the Series' Prospectus.
8.2 Upon receipt of the Written Instructions referred to above, the
Bank shall deliver on the borrowing date the specified collateral and the
executed promissory note, if any, against delivery by the lending bank of the
total amount of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Written Instructions. The Bank may, at the
option of the lending bank, keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the lending bank by
virtue of any promissory note or loan agreement. The Bank shall deliver as
additional collateral in the manner directed by the Trust from time-to-time such
Securities specifically allocated to such Series as may be specified in Written
Instructions to collateralize further any transaction described in this Section
8. The Trust shall cause all Securities released from collateral status to be
returned directly to the Bank, and the Bank shall receive from time-to-time such
return of collateral as may be tendered to it. In the event that the Trust fails
to specify in Written Instructions all of the information required by this
Section 8, the Bank shall not be under any obligation
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<PAGE> 7
to deliver any Securities. Collateral returned to the Bank shall be held
hereunder as it was prior to being used as collateral.
9. Persons Having Access to Assets of the Series.
9.1 No Trustee, officer, employee or agent of the Trust, and no
officer, director, employee or agent of the Advisor, shall have physical access
to the assets of the Trust held by the Bank or be authorized or permitted to
withdraw any investments of the Trust, nor shall the Bank deliver any assets of
the Trust to any such person. No officer, director, employee or agent of the
Bank who holds any similar position with the Trust or the Advisor shall have
access to the assets of the Trust.
9.2 The individual employees of the Bank initially duly authorized by
the Board of Directors of the Bank to have access to the assets of the Trust are
listed on Schedule A which is attached and made a part of this Agreement by this
reference. The Bank shall advise the Trust of any change in the individuals
authorized to have access to the assets of the Trust by written notice to the
Trust.
9.3 Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Trust, or any officer, director, employee or agent of the Advisor,
from giving Written Instructions to the Bank so long as it does not result in
delivery of or access to assets of the Trust prohibited by this Section 9.
10. Concerning the Bank.
10.1 Standard of Conduct. The Bank shall not be responsible for the
title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement and reasonably
believed by it to be valid or genuine and shall be held harmless in acting upon
proper instructions, resolutions, any notice, request, consent, certificate or
other instrument reasonably believed by it to be genuine and to be signed by the
proper party or parties and shall be entitled to receive as conclusive proof of
any fact or matter required to be ascertained by it hereunder, a certificate
signed by the President, a Vice President, the Treasurer, the Secretary or an
Assistant Secretary of the Trust. The Bank may receive and accept a resolution
as conclusive evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any action by the Board of
Trustees pursuant to the Declaration of Trust as described in such vote, and
such vote may be considered as in full force and effect until receipt by the
Bank of written notice from the Secretary or an Assistant Secretary to the
contrary.
The Bank shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Provided, however, that if such reliance involves a potential material loss to
the Trust, the Bank shall advise the Trust of any such actions to be taken in
accordance with such advice of counsel to the Bank.
The Bank shall be held to the exercise of reasonable care in carrying
out the provisions of this Agreement but shall be liable only for its own
negligent or bad faith acts or wilful misconduct or wilful failures to act by
the Bank and its agents or Employees. Bank shall have no responsibility for
reviewing or questioning the acts or records of any prior Custodian. The Trust
shall indemnify the Bank and hold it harmless from and against all losses,
liabilities, demands, claims, actions, expenses, attorneys' fees, and taxes with
respect to each Series which the Bank may suffer or incur on account of being
Bank hereunder except to the extent that such losses, liabilities, demands,
claims, actions, expenses, attorneys fees or taxes arise from the Bank's own
gross negligence or bad faith. Notwithstanding the foregoing the Bank shall be
liable to the Trust for any loss or damage resulting from the use of the
Book-Entry System or the Depository arising by reason of any negligence,
misfeasance or misconduct on the part of the Bank or any of its employees or
agents.
If a Series requires the Bank to take any action with respect to
Securities, which action involves the payment of money or which action may, in
the opinion of the Bank, result in the Bank or its nominee assigned to such
Series being liable for the payment of money or incurring liability of some
other form, such Series, as a prerequisite to requiring the Bank to take such
action, shall, prior to the Bank taking such action, provide indemnity in
writing to the Bank in an amount and form satisfactory to it.
10.2 Limit of Duties. Without limiting the generality of the foregoing,
the Bank shall be under no duty or obligation to inquire into, and shall not be
liable for:
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<PAGE> 8
10.2.1 The validity of the issue of any Securities purchased
by any Series, the legality of the purchase thereof, the permissibility of the
purchase thereof under the Trust's governing documents, or the propriety of the
amount paid therefor;
10.2.2 The legality of the sale of any Securities by any
Series, the permissibility of such sale under the Trust's governing documents,
or the propriety of the amount for which the same are sold;
10.2.3 The legality of the issue or the sale of any Shares, or
the sufficiency of the amount to be received therefor;
10.2.4 The legality of the redemption of any Shares, or the
sufficiency of the amount to be paid therefor;
10.2.5 The legality of the declaration or payment of any
dividend or other distribution of any Series;
10.2.6 The legality of any borrowing for temporary or
emergency administrative purposes.
10.3 No Liability Until Receipt. The Bank shall not be liable for, or
considered to be the Custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of any Series until the Bank actually receives and collects such money
directly or by the final crediting of the account representing the Trust's
interest in the Book-Entry System or the Depository.
10.4 Collection Where Payment Refused. The Bank shall not be under any
duty or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by Written Instructions and (b) it shall be assured
to its satisfaction of reimbursement of its costs and expenses in connection
with any such action.
10.5 Appointment of Agents and Sub-Custodians. The Bank may appoint one
or more banking institutions, including but not limited to banking institutions
located in foreign countries, to act as Depository or Depositories or as
Sub-Custodian or as Sub-Custodians of Securities and moneys at any time owned by
any Series, upon terms and conditions specified in Written Instructions. The
Bank shall use reasonable care in selecting a Depository and/or Sub-Custodian
located in a country other than the United States ("Foreign Sub-Custodian"), and
shall oversee the maintenance of any Securities or moneys of the Trust by any
Foreign Sub-Custodian.
10.6 No Duty to Ascertain Authority. The Bank shall not be under any
duty or obligation to ascertain whether any Securities at any time delivered to
or held by it for the Trust and specifically allocated to a Series are such as
may properly be held by the Series and specifically allocated to such Series
under the provisions of the Declaration of Trust and the Series' Prospectus.
10.7 Reliance on Certificates and Instructions. The Bank shall be
entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Bank pursuant to the applicable Sections of this Agreement and
reasonably believed by the Bank to be genuine and to be given by an Authorized
Person. The Trust agrees to forward to the Bank Written Instructions from an
Authorized Person confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Bank, whether by hand delivery, telex,
or otherwise, by the close of business on the same day that such Oral
Instructions are given to the Bank. The Trust agrees that if such confirming
instructions are not received by the Bank that it shall in no way affect the
validity for the transactions or enforceability of the transactions hereby
authorized by the Trust. The Trust agrees that the Bank shall incur no liability
to the Trust in acting upon Oral Instructions given to the Bank hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from a duly Authorized Person.
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<PAGE> 9
10.8 Inspection of Books and Records. The books and records of the Bank
regarding the Trust shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Trust and by employees of the Securities
and Exchange Commission. The Bank shall provide the Trust, upon request, with
any report obtained by the Bank on the system of internal accounting control of
the Book-Entry System or the Depository and with such reports on its own systems
of internal accounting control as the Trust may reasonably request from
time-to-time. Provided, however, that in the event that the Trust shall require
a report of internal accounting control produced by the auditors of the Series
rather than of the Bank, then such report shall be prepared at the expense of
the Series, and the Series agrees to pay for the time expended by Bank on such
audit and report at the hourly rate set forth on the Fee agreement.
11. Term and Termination.
11.1 This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
11.2 Either of the parties hereto may terminate this Agreement with
respect to any Series by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than 90 days
after the date of receipt of such notice. In the event such notice is given by
the Trust, it shall designate a Successor Custodian or Custodians, which shall
be a person qualified to so act under the 1940 Act. In the event such notice is
given by the Bank, the Trust shall, on or before the termination date, deliver
to the Bank Written Instructions designating a Successor Custodian or
Custodians. In the absence of such designation by the Trust, the Bank may
designate a Successor Custodian, which shall be a person qualified to so act
under the 1940 Act. If the Trust fails to designate a Successor Custodian for
any Series, the Trust shall upon the date specified in the notice of termination
of this Agreement and upon the delivery by the Bank of all Securities (other
than Securities held in the Book-Entry Systems which cannot be delivered to the
Trust) and moneys then owned by such Series, be deemed to be its own Custodian,
and the Bank shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to Securities held
in the Book-Entry system which cannot be delivered to the Trust.
11.3 Upon the date set forth in such notice under paragraph (b) of this
Section, this Agreement shall terminate to the extent specified in such notice,
and the Bank shall upon receipt of a notice of acceptance by the Successor
Custodian on that date deliver directly to the Successor Custodian all
Securities and moneys then held by the Bank and specifically allocated to the
Series or Series specified, after deducting all fees, expenses and other amounts
for the payment or reimbursement of which it shall then be entitled with respect
to such Series or Series.
12. Additional Services by Bank.
12.1 If allowed by the prospectus, Investment Adviser may direct that
the assets of any Series be invested in deposits in Bank or its affiliates
bearing a reasonable rate of interest.
12.2 Other Bank Services. Any Authorized Person may direct Bank to
utilize other services or facilities provided by UnionBanCal Corporation
("UBCC"), its subsidiaries or affiliates including Bank. Such services shall
include, but not be limited to (1) the placing of orders for the purchase, sale
exchange, investment or reinvestment of Securities through any brokerage service
conducted by, or (2) the purchase of units of any investment company managed or
advised by Bank, UBCC, or their subsidiaries or affiliates and/or for which
Bank, UBCC, or their subsidiaries or affiliates act as Custodian or provide
investment advice or other services for a fee, including, without limitation,
the HighMark Funds. Trust hereby acknowledges that Bank, UBCC or their
subsidiaries or affiliates will receive fees for such services in addition to
the fees payable under this Agreement. Fee Schedules for such additional
directed services shall be delivered to the Authorized Person before provision
of such services.
13. Miscellaneous.
13.1 Annexed hereto as Schedule A is a certification signed by two of
the present Trustees of the Trust setting forth the names and the signatures of
the present Authorized Persons. The Trust agrees to furnish to the Bank a new
certification in similar form in the event that any such present Authorized
Person ceases to be such an Authorized Person or in the event that other or
additional Authorized Persons are elected or
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<PAGE> 10
appointed. Until such new certification shall be received, the Bank shall be
fully protected in acting under the provisions of this Agreement upon Oral
Instructions or signatures of the present Authorized Persons as set forth in the
last delivered certification.
13.2 Annexed hereto as Schedule D is a certification signed by two of
the present Trustees of the Trust setting forth the names and the signatures of
the present Trustees of the Trust. The Trust agrees to furnish to the Bank a new
certification in similar form in the event any such present Trustee ceases to be
a Trustee of the Trust or in the event that other or additional Trustees are
elected or appointed. Until such new certification shall be received, the Bank
shall be fully protected in acting under the provisions of this Agreement upon
the signature of the officers as set forth in the last delivered certification.
13.3 Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Bank, shall be sufficiently given if
addressed to the Bank and mailed or delivered to it at its offices at:
Union Bank of California, N.A.
Mutual Fund Services Dept., Trust Group
475 Sansome Street, 15th Floor
San Francisco, California 94111
or such other place as the Bank may from time-to-time designate in writing.
13.4 Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Trust, shall be sufficiently given if
addressed to the Trust and mailed or delivered to it at its offices at ________
_______________________________________________________________________________
or at such other place as the Trust may from time-to-time designate in writing.
13.5 This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement, and as may be permitted or required by the 1940 Act.
13.6 This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Trust without the written
consent of the Bank, or by the Bank without the written consent of the Trust
authorized or approved by a resolution of the Board of Trustees of the Trust,
and any attempted assignment without such written consent shall be null and
void.
13.7 This Agreement shall be construed in accordance with the laws of
the State of California.
13.8 It is expressly agreed to that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust, personally, but bind only the
property of the Trust, as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust and signed by an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
13.9 The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
13.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
14. Dispute Resolution Provision
14.1 Jury Waiver. The parties hereby waive their respective rights to a
jury trial in any litigation arising out of or relating to this Agreement or any
related agreements or instruments, including without limitation any claim based
on or arising out of an alleged tort.
-10-
<PAGE> 11
14.2 Judicial Reference. If any such litigation is commenced in a
California state court, any party may also elect to have all decisions of fact
and law determined by a referee appointed by the court in accordance with
applicable state reference procedures. The referee shall be a retired judge,
agreed upon by the parties, from either the American Arbitration Association
(AAA) or J.A.M.S./Endispute, Inc. (JAMS). If the parties cannot agree, the party
who initially selected the reference procedure shall request a panel of ten
retired judges from either AAA or JAMS and the court shall select the referee
from that panel. The costs of the reference procedure, including the fee for the
court reporter, shall be borne equally by all parties as the costs are incurred.
The Referee shall hear all pre-trial and post-trial matters, including requests
for equitable relief, conduct a non-jury trial, prepare an award with written
findings of fact and conclusions of law, and award attorney fees and costs to
the prevailing party. Judgment upon the award shall be entered in the court in
which such proceeding was commenced and all parties shall have full rights of
appeal.
15. Merger or Consolidation of Bank.
Any corporation or association (i) into which the Bank may be merged or
with which it may be consolidated, (ii) resulting from any merger,
consolidation, or reorganization to which the Bank may be a party, or (iii) to
which all or substantially all of the fiduciary business of the Bank may be
transferred shall become a Successor Custodian under this Agreement without the
necessity of executing any instrument or performing any further act subject to
the provision of this Agreement concerning resignation or removal of the
Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
____________________________ UNION BANK OF CALIFORNIA, N.A.
BY: ________________________ BY: _______________________________
, Vice President
DATE: ______________________ DATE: _____________________________
-11-
<PAGE> 12
Schedule A
Authorized Persons
Part I - Access Persons of Bank
Moon Shil Lee
Libby Thomas
Mark Peterson
Marlen Duque-Estrada
Annabelle Anonuevo
Phil Clarke
Part II - Authorized Persons of the Trust
Part III - Trustees
___________________________________
BY: _______________________________
DATE: _____________________________
UNION BANK OF CALIFORNIA, N.A.
BY: _______________________________
, Vice President
DATE: _____________________________
-12-
<PAGE> 13
Schedule B - Funds
_______________________________
BY: ___________________________
DATE: _________________________
UNION BANK OF CALIFORNIA, N.A.
BY: ___________________________
, Vice President
DATE: _________________________
-13-
<PAGE> 14
Schedule C
Mutual Fund Services
Schedule of Fees
Custody
Annual Fee
1 b.p. of net asset value of fund listed on Schedule B
Minimum $ 2,500.00
________________________________
BY: ____________________________
DATE: __________________________
UNION BANK OF CALIFORNIA, N.A.
BY: ____________________________
, Vice President
DATE: __________________________
-14-
<PAGE> 15
Schedule D
Certification
Names and Signatures of Current Trustees
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
__________________________________ _________________________________
(Typed name of Trustee) (Signature of Trustee)
-15-
<PAGE> 1
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this ____ day of ________, 1998, by and
between The Coventry Group, a Massachusetts business trust (the "Company"),
having its principal place of business at 3435 Stelzer Road, Columbus, Ohio
43219, and BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES
(the "Administrator"), an Ohio limited partnership and having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest ("Shares");
and
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Company as the Company and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. Retention of the Administrator. The Company hereby retains
the Administrator to act as the administrator of the Portfolios and to furnish
the Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Company in any way and shall
not be deemed an agent of the Company.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Company,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Trustees of the Company with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Company with regulatory reporting,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Trustees' meetings) for handling the
affairs of the Portfolios and such other services as the Administrator shall,
from time to time, determine to be necessary to perform its obligations under
<PAGE> 2
this Agreement. In addition, at the request of the Board of Trustees, the
Administrator shall make reports to the Company's Trustees concerning the
performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Company expenses and control all
disbursements for the Company, and as appropriate compute the
Company's yields, total return, expense ratios, portfolio,
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register the
Company's Shares with state securities authorities, monitor
the sale of Company Shares for compliance with state
securities laws, and file with the appropriate state
securities authorities the registration statements and reports
for the Company and the Company's Shares and all amendments
thereto, as may be necessary or convenient to register and
keep effective the Company and the Company's Shares with state
securities authorities to enable the Company to make a
continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's
investment adviser, communications to Shareholders, including
the annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Company Shareholders, and supervise and facilitate
the proxy solicitation process for all shareholder meetings,
including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among
others, the Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Company's transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination
to information services covering the investment company
industry;
(h) coordinate and supervise the preparation and filing of the
Company's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Company or any
Portfolio of the Company, including, without limitation, the
Company's investment adviser, distributor, custodian, fund
2
<PAGE> 3
accountant, transfer agent, outside legal counsel and
independent public accountants, and at the request of the
Board of Trustees, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of the Company's semi-annual and annual reports to
Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to the Company's
Board of Trustees to serve as officers of the Company, who
will be responsible for the management of certain of the
Company's affairs as determined by the Company's Board of
Trustees;
(m) advise the Company and its Board of Trustees on matters
concerning the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the
Company in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Company's Board of Trustees;
(o) monitor and advise the Company and its Portfolios on their
registered investment company status under the Internal
Revenue Code of 1986, as amended;
(p) perform all administrative services and functions of the
Company and each Portfolio to the extent administrative
services and functions are not provided to the Company or such
Portfolio pursuant to the Company's or such Portfolio's
investment advisory agreement, distribution agreement,
custodian agreement, transfer agent agreement and fund
accounting agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Company and the Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the
Company on Form N-SAR and all required notices pursuant to
Rule 24f-2.
The Administrator shall perform such other services for the Company
that are mutually agreed upon by the parties from time to time. Such services
may include performing internal audit examinations; mailing the annual reports
of the Portfolios; preparing an annual list of Shareholders; and mailing notices
of Shareholders' meetings, proxies and proxy statements, for all of which the
Company will pay the Administrator's out-of-pocket expenses.
3
<PAGE> 4
ARTICLE 3. Allocation of Charges and Expenses.
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all Trustees of the
Company who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Trustees of the
Company to perform services on behalf of the Company.
(B) The Company. The Company assumes and shall pay or cause to be paid
all other expenses of the Company not otherwise allocated herein, including,
without limitation, organization costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Trustees
who are not affiliated persons of the Administrator or the Investment Adviser to
the Company or any affiliated corporation of the Administrator or the Investment
Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Company.
ARTICLE 4. Compensation of the Administrator.
(A) Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Company shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Company
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day of
a month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
4
<PAGE> 5
ARTICLE 5. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. (As used in this Article 5, the term "Administrator" shall include
partners, officers, employees and other agents of the Administrator as well as
the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Company assumes full responsibility and shall
indemnify the Administrator and hold it harmless from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and against
any and all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of the
Administrator's actions taken or nonactions with respect to the performance of
services hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Company may be asked to indemnify or hold the
Administrator harmless, the Company shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Company promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Company, but failure to do so in good faith shall not affect the rights
hereunder.
The Company shall be entitled to participate at its own expense or, if
it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Company elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
Company and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Company elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Company does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Company at any time for instructions
and may consult counsel for the Company or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
5
<PAGE> 6
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Company until receipt of written notice thereof from the Company.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders of the Company are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Company, and that the Administrator may be or become
interested in the Company as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Trustees of the Company, and (ii) by the vote of a majority of
the Trustees of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Trustees meeting called
for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Company does not conflict with or violate any requirements of
its Declaration of Trust or then current prospectuses, or any rule, regulation
or requirement of any regulatory body.
ARTICLE 10. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
6
<PAGE> 7
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Company has agreed to indemnify the Administrator against such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Company, at 3435 Stelzer Road, Columbus, Ohio 43219,
Attention: ____________________; and if to the Administrator at 3435 Stelzer
Road, Columbus, Ohio 43219, Attention: J. David Huber.
ARTICLE 13. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 15. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Company hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Company personally, but shall bind only the trust property of
the Company. The execution and delivery of this Agreement have been authorized
by the Trustees, and this Agreement has been signed and delivered by an
authorized officer of the Company, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Company as provided in the Company's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
7
<PAGE> 8
THE COVENTRY GROUP
By: _______________________________
Title: ____________________________
BISYS FUND SERVICES LIMITED PARTNERSHIP
BY: BISYS FUND SERVICES, INC.,
GENERAL PARTNER
By: _______________________________
Title: ____________________________
8
<PAGE> 9
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF _________________________
BETWEEN THE COVENTRY GROUP
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios of the Company,
either now or hereafter created. The current Portfolios of the
Company are set forth below:
Willamette Value Fund
Fees: Pursuant to Article 4, in consideration of services rendered
and expenses assumed pursuant to this Agreement, the Company
will pay the Administrator on the first business day of each
month, or at such time(s) as the Administrator shall request
and the parties hereto shall agree, a fee computed daily at
the annual rate set forth below.
Twenty one-hundredths of one percent (.20%)
of the each Portfolio's average daily net
assets
The fee for the period from the day of the month this
Agreement is entered into until the end of that month shall be
prorated according to the proportion which such period bears
to the full monthly period. Upon any termination of this
Agreement before the end of any month, the fee for such part
of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the
Administrator, the value of the net assets of a particular
Fund shall be computed in the manner described in the Fund's
Declaration of Trust or in the Prospectus or Statement of
Additional Information respecting that Fund as from time to
time is in effect for the computation of the value of such net
assets in connection with the determination of the liquidating
value of the shares of such Fund.
The parties hereby confirm that the fees payable hereunder
shall be applied to each Portfolio as a whole, and not to
separate classes of shares within the Portfolios. The parties
further confirm that the fee schedule set forth above is based
upon the class structure in place as of the date of
commencement of this Agreement.
The fee payable by the Company hereunder shall be allocated to
each Portfolio based upon its pro rata share of the total fee
payable hereunder. Such fee as is attributable
A-1
<PAGE> 10
to each Portfolio shall be a separate (and not joint or joint
and several) obligation of each such Portfolio. The
Administrator may agree, from time to time, to waive any fees
payable under this Agreement. Such waiver shall be at the
Administrator's sole discretion.
Term: Pursuant to Article 7, the term of this Agreement shall
commence on _____________, 1998 and shall remain in effect
through ___________, 2001 ("Initial Term"). Thereafter, unless
otherwise terminated as provided herein, this Agreement shall
be renewed automatically for successive two-year periods
("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the
parties or (iii) for "cause," as defined below, upon the
provision of 60 days advance written notice by the party
alleging cause. Written notice of nonrenewal must be provided
within 60 days of the end of the Initial Term or any Rollover
Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) a
material breach of this Agreement that has not been cured
within thirty (30) days following written notice of such
breach from the non-breaching party; (b) a final, unappealable
judicial, regulatory or administrative ruling or order in
which the party to be terminated has been found guilty of
criminal or unethical behavior in the conduct of its business;
or (c) financial difficulties on the part of the party to be
terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case
under Title 11 of the United States Code, as from time to time
is in effect, or any applicable law, other than said Title 11,
of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration
of the rights of creditors.
Notwithstanding the foregoing, after such termination for so
long as the Administrator, with the written consent of the
Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any schedule or
exhibit hereto, the provisions of this Agreement, including
without limitation the provisions dealing with
indemnification, shall continue in full force and effect.
Compensation due the Administrator and unpaid by the Company
upon such termination shall be immediately due and payable
upon and notwithstanding such termination. The Administrator
shall be entitled to collect from the Company, in addition to
the compensation described in this Schedule A, the amount of
all of the Administrator's cash disbursements for services in
connection with the Administrator's activities in effecting
such termination, including without limitation, the delivery
to the Company and/or its designees of the Company's property,
records, instruments and documents, or any copies thereof.
Subsequent to such termination, for a reasonable fee, the
Administrator will provide the Company with reasonable access
to any Company documents or records remaining in its
possession.
A-2
<PAGE> 11
If, for any reason, the Administrator is replaced as fund
manager and administrator, or if a third party is added to
perform all or a part of the services provided by the
Administrator under this Agreement (excluding any
sub-administrator appointed by the Administrator as provided
in Article 7 hereof), then the Company shall make a one-time
cash payment, as liquidated damages, to the Administrator
equal to the balance due the Administrator for the remainder
of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Company
on the date the Administrator is replaced, or a third party is
added, will remain constant for the balance of the contract
term.
In the event the Portfolios are merged into another legal
entity in part or in whole pursuant to any form of business
reorganization or are liquidated in part or in whole prior to
the expiration of the then-current term of this Agreement, the
parties acknowledge and agree that (i) the liquidated damages
provision set forth above shall be applicable in those
instances in which the Administrator is not retained by the
surviving entity to provide administration services and (ii)
for purposes of calculating the payment amount representing
liquidated damages, the appropriate asset level of the
Portfolios shall be the greater of: (i) the asset level
calculated for the Portfolios at the time the Company's Board
of Trustees receives notification of an intention on the part
of Fund management to effect such a business reorganization;
(ii) the asset level calculated for the Portfolios at the time
the Company's Board of Trustees formally approves such a
business reorganization; or (iii) the asset level calculated
for the Portfolios on the day prior to the first day during
which assets are transferred by the Company to the surviving
entity pursuant to the plan of reorganization. The one-time
cash payment referenced above shall be due and payable on the
day prior to the first day during which assets are transferred
to the surviving entity pursuant to the plan of
reorganization.
The parties further acknowledge and agree that, in the event
the Administrator is replaced, or a third party is added, as
set forth above, (i) a determination of actual damages
incurred by the Administrator would be extremely difficult,
and (ii) the liquidated damages provision contained herein is
intended to adequately compensate the Administrator for
damages incurred and is not intended to constitute any form of
penalty.
A-3
<PAGE> 1
EXHIBIT 9(b)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this _____ day of _______________, 19_____, between The
Coventry Group (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES OHIO, INC. ("Fund Accountant"), a corporation organized
under the laws of the State of Delaware and having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Trust, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. Fund Accountant
will keep and maintain the following books and
records of each Fund pursuant to Rule 31a-1 under the
Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record
in detail of all purchases and sales of
securities, all receipts and disbursements
of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income
and expense accounts, including interest
accrued and interest received, as required
by subsection (b)(2)(I) of the Rule;
(iii) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the Rule;
and
(iv) A monthly trial balance of all ledger
accounts (except shareholder accounts) as
required by subsection (b)(8) of the Rule.
(b) Performance of Daily Accounting Services. In addition
to the maintenance of the books and records specified
above, Fund Accountant shall perform the following
accounting services daily for each Fund:
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(i) Calculate the net asset value per share
utilizing prices obtained from the sources
described in subsection 1(b)(ii) below;
(ii) Obtain security prices from independent
pricing services, or if such quotes are
unavailable, then obtain such prices from
each Fund's investment adviser or its
designee, as approved by the Trust's Board
of Trustees;
(iii) Verify and reconcile with the Funds'
custodian all daily trade activity;
(iv) Compute, as appropriate, each Fund's net
income and capital gains, dividend payables,
dividend factors, 7-day yields, 7-day
effective yields, 30-day yields, and
weighted average portfolio maturity;
(v) Review daily the net asset value calculation
and dividend factor (if any) for each Fund
prior to release to shareholders, check and
confirm the net asset values and dividend
factors for reasonableness and deviations,
and distribute net asset values and yields
to NASDAQ;
(vi) Report to the Trust the daily market pricing
of securities in any money market Funds,
with the comparison to the amortized cost
basis;
(vii) Determine unrealized appreciation and
depreciation on securities held in variable
net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than
face value, if requested by the Trust;
(ix) Update fund accounting system to reflect
rate changes, as received from a Fund's
investment adviser, on variable interest
rate instruments;
(x) Post Fund transactions to appropriate
categories;
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's
Administrator;
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2)
Fund share transactions and (3) income and
expense accounts;
(xiii) Provide accounting reports in connection
with the Trust's regular annual audit and
other audits and examinations by regulatory
agencies; and
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(xiv) Provide such periodic reports as the parties
shall agree upon, as set forth in a separate
schedule.
(c) Special Reports and Services.
(i) Fund Accountant may provide additional
special reports upon the request of the
Trust or a Fund's investment adviser, which
may result in an additional charge, the
amount of which shall be agreed upon between
the parties.
(ii) Fund Accountant may provide such other
similar services with respect to a Fund as
may be reasonably requested by the Trust,
which may result in an additional charge,
the amount of which shall be agreed upon
between the parties.
(d) Additional Accounting Services. Fund Accountant shall
also perform the following additional accounting
services for each Fund:
(i) Provide monthly a download (and hard copy
thereof) of the financial statements
described below, upon request of the Trust.
The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the
following:
(A) federal and state income tax
returns and federal excise tax
returns;
(B) the Trust's semi-annual reports
with the Securities and Exchange
Commission ("SEC") on Form N-SAR;
(C) the Trust's annual, semi-annual and
quarterly (if any) shareholder
reports;
(D) registration statements on Form
N-1A and other filings relating to
the registration of shares;
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(E) the Administrator's monitoring of
each Trust's status as a regulated
investment company under Subchapter
M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's
auditors; and
(G) examinations performed by the SEC.
2. Subcontracting.
Fund Accountant may, at its expense, subcontract with any
entity or person concerning the provision of the services contemplated
hereunder; provided, however, that Fund Accountant shall not be relieved of any
of its obligations under this Agreement by the appointment of such subcontractor
and provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 7 hereof, for all acts of such subcontractor as if such acts
were its own.
3. Compensation.
The Trust shall pay Fund Accountant for the services to be
provided by Fund Accountant under this Agreement in accordance with, and in the
manner set forth in, Schedule A hereto, as such Schedule may be amended from
time to time.
4. Reimbursement of Expenses.
In addition to paying Fund Accountant the fees described in
Section 3 hereof, the Trust agrees to reimburse Fund Accountant for its
out-of-pocket expenses in providing services hereunder, including without
limitation the following:
(a) All freight and other delivery and bonding charges incurred by
Fund Accountant in delivering materials to and from the Trust;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Fund
Accountant in communication with the Trust, the Trust's
investment advisor or custodian, dealers or others as required
for Fund Accountant to perform the services to be provided
hereunder;
(c) The cost of obtaining security market quotes pursuant to
Section l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) Any expenses Fund Accountant shall incur at the written
direction of an officer of the Trust thereunto duly
authorized; and
(f) Any additional expenses reasonably incurred by Fund Accountant
in the performance of its duties and obligations under this
Agreement.
5. Effective Date.
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This Agreement shall become effective with respect to a Fund
as of the date first written above (or, if a particular Fund is not in existence
on that date, on the date such Fund commences operation) (the "Effective Date").
6. Term.
This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until _____________, 2001 (the "Initial Term"). Thereafter, unless otherwise
terminated as provided herein, this Agreement shall be renewed automatically for
successive one-year periods ("Rollover Periods"). This Agreement may be
terminated without penalty (i) by provision of a notice of nonrenewal in the
manner set forth below, (ii) by mutual agreement of the parties or (iii) for
"cause," as defined below, upon the provision of 60 days advance written notice
by the party alleging cause. Written notice of nonrenewal must be provided
within 60 days of the end of the Initial Term or any Rollover Period, as the
case may be.
For purposes of this Agreement, "cause" shall mean (a) a
material breach if the Agreement that has not been cured within thirty (30) days
following written notice of such breach from the non-breaching party; (b) a
final, unappealable judicial, regulatory or administrative ruling or order in
which the party to be terminated has been found guilty of criminal or unethical
behavior in the conduct of its business; or (c) financial difficulties on the
part of the party to be terminated which are evidenced by the authorization or
commencement of, or involvement by way of pleading, answer, consent or
acquiescence in, a voluntary or involuntary case under Title 11 of the United
States Code, as from time to time is in effect, or any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors.
After such termination for so long as Fund Accountant, with
the written consent of the Trust, in fact continues to perform any one or more
of the services contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Fund Accountant and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Fund Accountant shall be entitled to collect from the Trust, in
addition to the compensation described under Section 3 hereof, the amount of all
of Fund Accountant's cash disbursements for services in connection with Fund
Accountant's activities in effecting such termination, including without
limitation, the delivery to the Trust and/or its designees of the Trust's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination, for a reasonable fee, Fund Accountant will provide the
Trust with reasonable access to any Trust documents or records remaining in its
possession.
If, for any reason, Fund Accountant is replaced as Fund
Accountant, or if a third party is added to perform all or a part of the
services provided by Fund Accountant under this Agreement (excluding any
sub-accountant appointed by Fund Accountant as provided in Section 2 hereof),
then the Trust shall make a one-time cash payment, as liquidated damages, to
Fund Accountant equal to
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the balance due Fund Accountant for the remainder of the term of this Agreement,
assuming for purposes of calculation of the payment that the asset level of the
Trust on the date Fund Accountant is replaced, or a third party is added, will
remain constant for the balance of the contract term.
In the event the Trust is merged into another legal entity in
part or in whole pursuant to any form of business reorganization or is
liquidated in part or in whole prior to the expiration of the then-current term
of this Agreement, the parties acknowledge and agree that (i) the liquidated
damages provision set forth above shall be applicable in those instances in
which Fund Accountant is not retained by the surviving entity to provide fund
accounting services and (ii) for purposes of calculating the payment amount
representing liquidated damages, the appropriate asset level of the Trust shall
be the greater of: (i) the asset level calculated for the Trust at the time the
Trust's Board of Trustees receives notification of an intention on the part of
Fund management to effect such a business reorganization; (ii) the asset level
calculated for the Trust at the time the Trust's Board of Trustees formally
approves such a business reorganization; or (iii) the asset level calculated for
the Trust on the day prior to the first day during which assets are transferred
by the Trust to the surviving entity pursuant to the plan of reorganization. The
one-time cash payment referenced above shall be due and payable on the day prior
to the first day during which assets are transferred to the surviving entity
pursuant to the plan of reorganization.
The parties further acknowledge and agree that, in the event
Fund Accountant is replaced, or a third party is added, as set forth above, (i)
a determination of actual damages incurred by Fund Accountant would be extremely
difficult, and (ii) the liquidated damages provision contained herein is
intended to adequately compensate Fund Accountant for damages incurred and is
not intended to constitute any form of penalty.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
Fund Accountant shall use its best efforts to insure the
accuracy of all services performed under this Agreement, but shall not be liable
to the Trust for any action taken or omitted by Fund Accountant in the absence
of bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to such Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to such
Fund given or made to Fund Accountant by a duly authorized representative of the
Trust; provided that this indemnification shall not apply to actions or
omissions of Fund Accountant in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties, and
further provided that prior to confessing any claim against it which may be the
subject of this indemnification, Fund Accountant shall give the Trust written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of Fund Accountant.
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8. Record Retention and Confidentiality.
Fund Accountant shall keep and maintain on behalf of the Trust
all books and records which the Trust or Fund Accountant is, or may be, required
to keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the maintenance of books
and records in connection with the services to be provided hereunder. Fund
Accountant further agrees that all such books and records shall be the property
of the Trust and to make such books and records available for inspection by the
Trust or by the Securities and Exchange Commission at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders; except when requested to divulge
such information by duly-constituted authorities or court process.
9. Uncontrollable Events.
Fund Accountant assumes no responsibility hereunder, and shall
not be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. Reports.
Fund Accountant will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto. The Trust agrees to examine each such report or copy promptly
and will report or cause to be reported any errors or discrepancies therein no
later than three business days from the receipt thereof. In the event that
errors or discrepancies, except such errors and discrepancies as may not
reasonably be expected to be discovered by the recipient within ten days after
conducting a diligent examination, are not so reported within the aforesaid
period of time, a report will for all purposes be accepted by and binding upon
the Trust and any other recipient, and, except as provided in Section 7 hereof,
Fund Accountant shall have no liability for errors or discrepancies therein and
shall have no further responsibility with respect to such report except to
perform reasonable corrections of such errors and discrepancies within a
reasonable time after requested to do so by the Trust.
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11. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by Fund Accountant under this Agreement are the
property of Fund Accountant. All records and other data except such computer
programs and procedures are the exclusive property of the Trust and all such
other records and data will be furnished to the Trust in appropriate form as
soon as practicable after termination of this Agreement for any reason.
12. Return of Records.
Fund Accountant may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
Fund Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund
Accountant in the performance of its services or for its legal protection. If
not so turned over to the Trust, such documents and records will be retained by
Fund Accountant for six years from the year of creation. At the end of such
six-year period, such records and documents will be turned over to the Trust
unless the Trust authorizes in writing the destruction of such records and
documents.
13. Representations of the Trust.
The Trust certifies to Fund Accountant that: (1) as of the
close of business on the Effective Date, each Fund that is in existence as of
the Effective Date has authorized unlimited shares, and (2) this Agreement has
been duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
14. Representations of Fund Accountant.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Trust and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. Insurance.
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Fund Accountant shall notify the Trust should any of its
insurance coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. Fund Accountant shall notify the Trust
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. Information to be Furnished by the Trust and Funds.
The Trust has furnished to Fund Accountant the following:
(a) Copies of the Declaration of Trust of the Trust and
of any amendments thereto, certified by the proper
official of the state in which such document has been
filed.
(b) Copies of the following documents:
(i) The Trust's Bylaws and any amendments
thereto; and
(ii) Certified copies of resolutions of the Board
of Trustees covering the approval of this
Agreement, authorization of a specified
officer of the Trust to execute and deliver
this Agreement and authorization for
specified officers of the Trust to instruct
Fund Accountant thereunder.
(c) A list of all the officers of the Trust, together
with specimen signatures of those officers who are
authorized to instruct Fund Accountant in all
matters.
(d) Two copies of the Prospectuses and Statements of
Additional Information for each Fund.
17. Information Furnished by Fund Accountant.
(a) Fund Accountant has furnished to the Trust the
following:
(i) Fund Accountant's Articles of Incorporation;
and
(ii) Fund Accountant's Bylaws and any amendments
thereto.
(b) Fund Accountant shall, upon request, furnish
certified copies of corporate actions covering the
following matters:
(i) Approval of this Agreement, and
authorization of a specified officer of Fund
Accountant to execute and deliver this
Agreement; and
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(ii) Authorization of Fund Accountant to act as
fund accountant for the Trust and to provide
accounting services for the Trust.
18. Amendments to Documents.
The Trust shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Trust agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Trust which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Trust first obtains Fund Accountant's approval of such
amendments or changes.
19. Compliance with Law.
Except for the obligations of Fund Accountant set forth in
Section 8 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to compliance with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Trust's
shares. The Trust represents and warrants that no shares of the Trust will be
offered to the public until the Trust's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
20. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
21. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
22. Assignment.
This Agreement and the rights and duties hereunder shall not
be assignable with respect to a Fund by either of the parties hereto except by
the specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. Governing Law.
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This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
24. Limitation of Liability of the Trustees and Shareholders.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Trust personally, but shall bind only the
trust property of the Trust. The execution and delivery of this Agreement have
been authorized by the Trustees, and this Agreement has been signed and
delivered by an authorized officer of the Trust, acting as such, and neither
such authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE COVENTRY GROUP
By: _______________________________
BISYS FUND SERVICES OHIO, INC.
By: _______________________________
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Dated: ____________________
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES OHIO, INC.
NAME OF FUND
- ------------
WILLAMETTE VALUE FUND
THE COVENTRY GROUP BISYS FUND SERVICES OHIO, INC.
By: _________________________________ By: _____________________________
Dated: _________________________
A-1
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SCHEDULE B
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND BISYS FUND SERVICES OHIO, INC.
FEES
Fund Accountant shall be entitled to receive a fee from each Fund listed on
Schedule A at an annual rate of three one-hundredths of one percent (.03%) of
the Fund's average daily net assets subject to a minimum of $35,000 per year. In
addition, Fund Accountant shall be reimbursed for reasonable out-of-pocket
expenses as set forth in Section 4 of this Agreement.
THE COVENTRY GROUP BISYS FUND SERVICES OHIO, INC.
By: ________________________________ By: _________________________________
B-1
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EXHIBIT 9(c)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this ___ day of ______________________, ___, between The
Coventry Group (the "Trust"), a Massachusetts business trust having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and
BISYS FUND SERVICES, INC. ("BISYS"), a Delaware corporation having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for each
series of the Trust (individually referred to herein as a "Fund" and
collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
BISYS shall perform for the Trust the transfer agent services
set forth in Schedule A hereto. BISYS also agrees to perform for the Trust such
special services incidental to the performance of the services enumerated herein
as agreed to by the parties from time to time. BISYS shall perform such
additional services as are provided on an amendment to Schedule A hereof, in
consideration of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. Fees.
The Trust shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in,
Schedule B hereto. Fees for any additional services to be provided by BISYS
pursuant to an amendment to Schedule A hereto shall be subject to mutual
agreement at the time such amendment to Schedule A is proposed.
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3. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 2
hereof, the Trust agrees to reimburse BISYS for BISYS' out-of-pocket expenses in
providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Trust and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Trust, the Trust's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction of
an officer of the Trust thereunto duly authorized.
4. Effective Date.
This Agreement shall become effective as of the date first
written above (the "Effective Date").
5. Term.
This Agreement shall continue in effect with respect to a Fund,
unless earlier terminated by either party hereto as provided hereunder, until
____________, 2001 (the "Initial Term"). Thereafter, unless otherwise terminated
as provided herein, this Agreement shall be renewed automatically for successive
one-year periods ("Rollover Periods"). This Agreement may be terminated without
penalty (i) by provision of a notice of nonrenewal in the manner set forth
below, (ii) by mutual agreement of the parties or (iii) for "cause," as defined
below, upon the provision of 60 days advance written notice by the party
alleging cause. Written notice of nonrenewal must be provided within 60 days of
the end of the Initial Term or any Rollover Period, as the case may be.
For purposes of this Agreement, "cause" shall mean (a) a
material breach of this Agreement that has not been cured within thirty (30)
days following written notice of such breach from the non-breaching party; (b) a
final, unappealable judicial, regulatory or administrative ruling
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or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; or (c) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading, answer,
consent or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors.
After such termination, for so long as BISYS, with the written
consent of the Trust, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' cash disbursements in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its distributor or investment adviser and/or other parties, of the
Trust's property, records, instruments and documents, or any copies thereof. To
the extent that BISYS may retain in its possession copies of any Trust documents
or records subsequent to such termination which copies had not been requested by
or on behalf of the Trust in connection with the termination process described
above, BISYS, for a reasonable fee, will provide the Trust with reasonable
access to such copies.
If, for any reason, BISYS is replaced as transfer agent, or if a
third party is added to perform all or a part of the services provided by BISYS
under this Agreement (excluding any sub-transfer agent appointed by BISYS as
provided in Section 1 hereof), then the Trust shall make a one-time cash
payment, as liquidated damages to, BISYS equal to the balance due BISYS for the
remainder of the term of this Agreement, assuming for purposes of calculation of
the payment that the number of shareholder accounts within the Trust on the date
BISYS is replaced, or a third party is added, will remain constant for the
balance of the contract term.
In the event the Trust is merged into another legal entity in
part or in whole pursuant to any form of business reorganization or is
liquidated in part or in whole prior to the expiration of the then-current term
of this Agreement, the parties acknowledge and agree that (i) the liquidated
damages provision set forth above shall be applicable in those instances in
which BISYS is not retained by the surviving entity to provide transfer agency
services and (ii) for purposes of calculating the payment amount representing
liquidated damages, the number of shareholder accounts within the Trust shall be
the greater of: (i) the number of shareholder accounts at the time the Trust's
Board of Trustees receives notification of an intention on the part of Fund
management to effect such a business reorganization; (ii) the number of
shareholder accounts at the time the Trust's Board of Trustees formally approves
such a business reorganization; or (iii) the number of shareholder accounts on
the day prior to the first day during which assets are transferred by the Trust
to the surviving entity pursuant to the plan of reorganization. The one-time
cash payment referenced above
3
<PAGE> 4
shall be due and payable on the day prior to the first day during which assets
are transferred to the surviving entity pursuant to the plan of reorganization.
The parties further acknowledge and agree that, in the event
BISYS is replaced, or a third party is added, as set forth above, (i) a
determination of actual damages incurred by BISYS would be extremely difficult,
and (ii) the liquidated damages provision contained herein is intended to
adequately compensate BISYS for damages incurred and is not intended to
constitute any form of penalty.
6. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be
liable for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
7. Legal Advice.
BISYS shall notify the Trust at any time BISYS believes that it
is in need of the advice of counsel (other than counsel in the regular employ of
BISYS or any affiliated companies) with regard to BISYS' responsibilities and
duties pursuant to this Agreement; and after so notifying the Trust, BISYS, at
its discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Trust or Funds
unless relating to a matter involving BISYS' willful misfeasance, bad faith,
gross negligence or reckless disregard with respect to BISYS' responsibilities
and duties hereunder and BISYS shall in no event be liable to the Trust or any
Fund or any shareholder or beneficial owner of the Trust for any action
reasonably taken pursuant to such advice.
8. Instructions.
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the Trust
or by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. Standard of Care; Reliance on Records and Instructions;
Indemnification.
4
<PAGE> 5
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of
1940, as amended (the "1940 Act"), relating to the maintenance of books and
records in connection with the services to be provided hereunder. BISYS further
agrees that all such books and records shall be the property of the Trust and to
make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders, except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder or shareholder's agent with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
11. Reports.
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule C attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
C. The Trust agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein not later than three
business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within three days after conducting a
diligent examination, are not so reported within the aforesaid period of time, a
report will for all purposes be accepted by
5
<PAGE> 6
and be binding upon the Trust and any other recipient, and BISYS shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
12. Rights of Ownership.
All computer programs and procedures developed to perform
services required to be provided by BISYS under this Agreement are the property
of BISYS. All records and other data except such computer programs and
procedures are the exclusive property of the Trust and all such other records
and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
13. Return of Records.
BISYS may at its option at any time, and shall promptly upon the
Trust's demand, turn over to the Trust and cease to retain BISYS' files, records
and documents created and maintained by BISYS pursuant to this Agreement which
are no longer needed by BISYS in the performance of its services or for its
legal protection. If not so turned over to the Trust, such documents and records
will be retained by BISYS for six years from the year of creation. At the end of
such six-year period, such records and documents will be turned over to the
Trust unless the Trust authorizes in writing the destruction of such records and
documents.
14. Bank Accounts.
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services shall require BISYS directly
to disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Trust and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. Representations of the Trust.
The Trust certifies to BISYS that: (a) as of the close of
business on the Effective Date, each Fund which is in existence as of the
Effective Date has authorized unlimited shares, and (b) by virtue of its
Declaration of Trust, shares of each Fund which are redeemed by the Trust may be
sold by the Trust from its treasury, and (c) this Agreement has been duly
authorized by the Trust and, when executed and delivered by the Trust, will
constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
16. Representations of BISYS.
6
<PAGE> 7
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, substantial compliance with all provisions of law,
including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties under
this Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. Insurance.
BISYS shall notify the Trust should its insurance coverage with
respect to professional liability or errors and omissions coverage be canceled
or reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Trust of any material claims against it with
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Trust from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. Information to be Furnished by the Trust and Funds.
The Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of
the state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of
Trustees covering the following matters:
A. Approval of this Agreement and authorization
of a specified officer of the Trust to
execute and deliver this Agreement and
authorization for specified officers of the
Trust to instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer
Agent for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
7
<PAGE> 8
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statement of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent (or
as of the date on which BISYS' services are commenced,
whichever is the later date) and as to receipt of full
consideration by the Trust for all shares outstanding,
such statement to be certified by the Treasurer of the
Trust.
19. Information Furnished by BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the
following matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for
the Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed
with the Commission pursuant to Rule 17Ad-13 under the
Exchange Act.
8
<PAGE> 9
20. Amendments to Documents.
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Trust first obtains
BISYS' written consent to and approval of such amendments or changes.
22. Compliance with Law.
Except for the obligations of BISYS set forth in Section 10
hereof, the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Trust's shares. The Trust
represents and warrants that no shares of the Trust will be offered to the
public until the Trust's registration statement under the 1933 Act and the 1940
Act has been declared or becomes effective.
23. Notices.
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail to the party required to be served with
such notice at the following address: 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
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<PAGE> 10
24. Headings.
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable by either of the parties hereto except by the specific written
consent of the other party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
26. Governing Law and Matters Relating to the Trust as a Massachusetts
Business Trust.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the
Trust personally, but shall bind only the trust property of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees,
and this Agreement has been signed and delivered by an authorized officer of the
Trust, acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the Trust's
Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE COVENTRY GROUP
By:________________________________
BISYS FUND SERVICES, INC.
By:________________________________
Dated: ________________
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<PAGE> 11
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
A-2
<PAGE> 12
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in
which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load
Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-3
<PAGE> 13
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
Annual Per Fund Fee:
$20,000/CUSIP(class)
Annual Per Shareholder Fee:
$25.00
Additional Services:
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
Multiple Classes of Shares:
Classes of shares which have different net asset values or pay different daily
dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
Out-of-pocket Expenses:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule B is attached.
B-1
<PAGE> 14
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
THE COVENTRY GROUP
AND
BISYS FUND SERVICES, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13 of
the Securities Exchange Act of 1934, as amended.
C-2
<PAGE> 1
Exhibit 15(a)
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
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<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.
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<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 in
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<PAGE> 4
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
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