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As filed with the Securities and Exchange Commission on April 1, 1999
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. 45 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 47 / X /
(Check appropriate box or boxes)
THE COVENTRY GROUP
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Office)
Registrant's Telephone Number: (614) 470-8000
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Jeffrey L. Steele, Esq.
Dechert Price & Rhoads
1775 Eye Street, NW
Washington, DC 20006
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(Name and Address of Agent for Services)
Copies to:
Walter B. Grimm
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
It is proposed that this filing will become effective (check appropriate box)
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[X] Immediately upon filing pursuant to [ ] on _______, 1998 pursuant
paragraph (b), or to paragraph (b), or
[ ] 60 days after filing pursuant to [ ] on the 75th day after filing
paragraph (a), or pursuant to paragraph (a) of Rule 485
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CROSS REFERENCE SHEET
The enclosed materials relate only to the Willamette Small Cap Growth Fund,
a separate investment series of the Coventry Group ("Group"). Information
relating to the Group's other investment series, consisting of Brenton U.S.
Government Money Market Fund; Brenton Intermediate U.S. Government Securities
Fund; Brenton Value Equity Fund; The Shelby Fund; and Willamette Value Fund 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
Performance Annual Report to Shareholders
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 -
Holders of Securities Description of Shares
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
Securities Being Offered Redemption Information
20. Tax Status Additional Information -
Additional Tax Information
21. Underwriters Management of the Group -
Distributor
22. Calculation of Performance Data Additional Information
23. Financial Statements Financial Statements
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WILLAMETTE SMALL CAP GROWTH FUND
(A SERIES OF THE COVENTRY GROUP)
For current yield, purchase,
and redemption information,
call (800) 713-4276.
WILLAMETTE SMALL CAP GROWTH FUND ("Fund"), is a series of the Coventry Group
("Group"). The Fund is advised by Willamette Asset Managers, Inc. ("Adviser"),
of Portland, Oregon and The Bank of New York serves as Sub-Adviser. 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 long-term capital appreciation. It pursues this
objective by investing primarily in securities of small domestic and foreign
issuers -- currently, those with market capitalization of $1.5 billion or less
at the time of purchase. There can be no assurance that the Fund will achieve
its objective.
BISYS Fund Services Limited Partnership, Columbus, Ohio ("Distributor") acts
as the Fund's administrator and distributor. BISYS Fund Services Inc., Columbus,
Ohio, acts as the Fund's transfer agent ("Transfer Agent"). BISYS Fund Services
Ohio, Inc. 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
("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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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THE DATE OF THIS PROSPECTUS IS APRIL 1, 1999.
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PROSPECTUS SUMMARY
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The Fund............................... The Fund is 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 Fund Shares is
equal to the net asset value per Share of the
Fund plus a maximum front-end sales charge of
4.50%.
Minimum Purchase....................... $1,000 minimum for the initial investment in the
Fund ($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 Fund's investment objective is to provide
long-term capital appreciation. It pursues this
objective by investing, under normal market
conditions, primarily in equity securities of
small domestic and foreign issuers -- currently,
those with market capitalization of $1.5 billion
or less. There can be no assurance that the Fund
will achieve its objective.
Investment Adviser and Sub-Adviser.....
Willamette Asset Managers, Inc., a registered
investment adviser, acts as the Fund's
investment adviser. The Adviser is an affiliate
of Phillips & Company Securities, Inc. and
Willamette Securities, Inc., each a registered
broker-dealer. Bank of New York, a large
commercial bank, acts as Sub-Adviser.
Dividends.............................. The Fund intends to declare dividends with
respect to its Shares from net investment income
and pay such dividends annually.
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 (after waiver) (2).................. 1.00%
12b-1 Fees(3)....................................... 0.50%
Other Expenses (estimated)(4)....................... 1.48%
Total Fund Operating Expenses (estimated)(4)........ 2.98%
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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 Adviser is entitled to annual fees of 1.20% of Fund average daily net
assets but will voluntarily waive amounts over 1.00% of such assets.
(3) The Group has adopted a Service and Distribution Plan ("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.
(4) Amounts shown are based on estimated amounts for the current fiscal year.
Absent the reduction of investment advisory fees, "Total Fund Operating
Expenses" as a percentage of average daily net assets would be 3.18%.
EXAMPLE
You would pay the following expenses on a $1,000, investment, assuming the Fund
Operating Expenses are at the level above and also assuming, (1) 5% annual
return (2) reinvestment of all dividends and distributions, and (3) redemption
at the end of each time period. The expense computation does not represent past
or future expenses, actual expenses may be greater or less than shown.
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1 Year...................................................... $ 74
3 Years..................................................... $133
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INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS OF THE FUND
The Fund seeks to provide long-term capital appreciation. The Fund, under
normal market conditions, will invest primarily (at least 65% of the value of
its total assets) in equity securities of small domestic and foreign issuers.
The Fund currently considers "small" issuers to be those with market
capitalization of $1.5 billion or less at the time of purchase by the Fund. The
Sub-Adviser will select investments it believes have potential for rapid growth
in earnings or revenues due to circumstances such as expanded operations, new
products, new technologies, new channels of distribution, revitalized management
or general industry conditions. Current income will not be a factor in selecting
investments for the Fund. 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.
The Fund is also authorized to invest in U.S. and foreign government
obligations and money market instruments, and may invest without limit in these
securities for temporary defensive purposes under unusual market conditions.
While such investments can protect the Fund against loss, they can also prevent
the Fund from enjoying the benefits of a market recovery.
There is no assurance that the Fund will be successful in achieving its
investment objective. The Fund's investment objective is a fundamental policy
and, as such, may not be changed without a vote of the holders of a majority of
the Fund's outstanding Shares (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.
DESCRIPTION OF PRINCIPAL INVESTMENTS
EQUITY SECURITIES. The Fund may invest in common stocks, which includes the
common stock of any class or series of domestic or foreign corporations or any
similar equity interest, such as a trust or partnership interest. These
investments may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities,
including debt securities or preferred stock that may be converted into common
stock or that carry the right to purchase common stock. Convertible securities
entitle the holder to exchange the securities for a specified number of shares
of common stock, usually of the same company, at specified prices within a
certain period of time. They also entitle the holder to receive interest or
dividends until the holder elects to exercise the conversion privilege.
The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are generally subordinate to the claims
of other creditors, and senior to the claims of preferred and common
stockholders. In the case of convertible preferred stock, the holder's claims on
assets and earnings are subordinate to the claims of all creditors and are
senior to the claims of common stockholders. As a result of their ranking in a
company's capitalization, convertible securities that are rated by nationally
recognized securities rating organizations are generally rated below other
securities of the company and many convertible securities are not rated. The
Fund does not have any rating criteria applicable to its investments in any
securities, convertible or otherwise.
FOREIGN INVESTMENTS. The Fund may invest in the securities of foreign issuers.
The Fund may invest up to 15% of its foreign investments in securities that are
not listed on a securities exchange or, in the case of debt securities, that are
not United States dollar-denominated. Foreign investments may be made directly
in securities of foreign issuers or in the form of American Depositary Receipts
("ADRs") and Global Depositary
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Receipts ("GDRs"). Generally, ADRs and GDRs are receipts issued by a bank or
trust company that evidence ownership of underlying securities issued by a
foreign corporation and that are designed for use in the domestic, in the case
of ADRs, or global, in the case of GDRs, securities markets. The Fund expects to
invest only in ADRs and GDRs which are initiated and maintained by the issuers
of the underlying securities (so-called "sponsored" ADRs and GDRs).
Since investments in foreign securities may involve foreign currencies, the
value of the Fund's assets as measured in United States dollars may be affected
by changes in currency rates and in exchange control regulations, including
currency blockage. The Fund may enter into forward commitments for the purchase
or sale of foreign currencies to close out or offset existing foreign securities
positions or to hedge the underlying currency exposure related to foreign
investments, but the Fund will not enter into such commitments for speculative
purposes. In addition, to the extent that the Fund invests in foreign commercial
paper, the paper must not be subject to foreign withholding tax at the time of
purchase.
For a description of additional risks associated with investing in foreign
securities, see "Additional Investment Information and Risk Considerations --
Foreign Investment Risk."
ADDITIONAL INVESTMENT INFORMATION AND RISK CONSIDERATIONS
Following is information regarding other types of securities transactions in
which the Fund may engage, as well as information on particular risks associated
with the Fund's investments.
UNITED STATES GOVERNMENT OBLIGATIONS
The Fund may invest in obligations issued or guaranteed by the United States
Government, or by its agencies or instrumentalities. Obligations issued or
guaranteed by federal agencies or instrumentalities may or may not be backed by
the "full faith and credit" of the United States. Securities that are backed by
the full faith and credit of the United States include Treasury bills, Treasury
notes, Treasury bonds, and obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank. In the
case of securities not backed by the full faith and credit of the United States,
the Fund must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitments. Securities that are not backed by the full faith and
credit of the United States include, but are not limited to, obligations of the
Tennessee Valley Authority, the Federal National Mortgage Association and the
United States Postal Service, each of which has the right to borrow from the
United States Treasury to meet its obligations, and obligations of the Federal
Farm Credit System and the Federal Home Loan Banks, both of whose obligations
may be satisfied only by the individual credits of each issuing agency.
FOREIGN GOVERNMENT OBLIGATIONS
The Fund may also invest in short-term obligations of foreign sovereign
governments or of their agencies, instrumentalities, authorities or political
subdivisions. These securities may be denominated in United States dollars or in
another currency. See "Foreign Investment Risk."
BANK OBLIGATIONS
The Fund may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks that have more than $2 billion in total assets and
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are organized under the laws of the United States or any state, (ii) foreign
branches of these banks or of foreign banks of equivalent size ("Euros") and
(iii) United States branches of foreign banks of equivalent size ("Yankees").
The Fund will not invest in obligations for which the Sub-Adviser, or any of its
affiliated persons, is the ultimate obligor or accepting bank. The Fund may also
invest in obligations of international banking institutions designated or
supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the European Investment Bank, the
Inter-American Development Bank, or the World Bank).
COMMERCIAL PAPER
The Fund may invest in commercial paper, including Master Notes. Master Notes
are obligations that provide for a periodic adjustment in the interest rate paid
and permit daily changes in the amount borrowed. Master Notes are governed by
agreements between the issuer and the Sub-Adviser acting as agent, for no
additional fee, in its capacity as sub-adviser to the Fund and as fiduciary for
other clients for whom it exercises investment discretion. The monies loaned to
the borrower come from accounts maintained with or managed by the Sub-Adviser or
its affiliates pursuant to arrangements with such accounts. Interest and
principal payments are credited to such accounts.
The Sub-Adviser, acting as a fiduciary on behalf of its clients, has the right
to increase or decrease the amount provided to the borrower under an obligation.
The borrower has the right to pay without penalty all or any part of the
principal amount then outstanding on an obligation together with interest to the
date of payment.
Since these obligations typically provide that the interest rate is tied to
the Treasury bill auction rate, the rate on Master Notes is subject to change.
Repayment of Master Notes to participating accounts depends on the ability of
the borrower to pay the accrued interest and principal of the obligation on
demand which is continuously monitored by the Sub-Adviser. Since Master Notes
typically are not rated by credit rating agencies, the Fund may invest in such
unrated obligations only if at the time of an investment the obligation is
determined by the Sub-Adviser to have a credit quality that satisfies the Fund's
quality restrictions. See "Quality Requirements". Although there is no secondary
market for Master Notes, such obligations are considered by the Fund to be
liquid because they are payable immediately upon demand. The Fund does not have
any specific percentage limitation on investments in Master Notes.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery of and payment for these securities may take as long as a month or more
after the date of the purchase commitment. The value of these securities is
subject to market fluctuation during this period and no interest or income
accrues to the Fund until settlement. The Fund will maintain with its custodian
a separate account with a segregated portfolio of liquid assets consisting of
cash, U.S. Government securities or other liquid high-grade debt securities in
an amount at least equal to these commitments. When entering into a when-issued
or delayed delivery transaction, the Fund will rely on the other party to
consummate the transaction; if the other party fails to do so, the Fund may be
disadvantaged. It is the current policy of the Fund not to enter into when-
issued commitments exceeding in the aggregate 25% of the market value of the
Fund's total assets, less liabilities other than the obligations created by
these commitments.
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REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with brokers, dealers or banks
that meet the credit guidelines established by the Trustees. In a repurchase
agreement, the Fund buys a security from a seller that has agreed to repurchase
it at a mutually agreed upon date and at a price reflecting the interest rate
effective for the term of the agreement. The term of these agreements is usually
from overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Fund to the seller. The Fund always
receives, as collateral, securities with a market value at least equal to
purchase price plus accrued interest and this value is maintained during the
term of the agreement. If the seller defaults and the collateral value declines,
the Fund might incur a loss. If bankruptcy proceedings are commenced with
respect to the seller, the Fund's realization upon the collateral may be delayed
or limited. Investments in certain repurchase agreements and certain other
investments that may be considered illiquid are limited as set forth under
"Investment Restrictions".
LOANS OF PORTFOLIO SECURITIES
Subject to applicable investment restrictions, the Fund is permitted to lend
its securities. These loans must be secured continuously by cash or liquid
securities in an account segregated by the custodian or by a letter of credit at
least equal to the market value of the securities loaned plus accrued interest
or income.
REVERSE REPURCHASE AGREEMENTS
The Fund is permitted to enter into reverse repurchase agreements. In a
reverse repurchase agreement, the Fund sells a security and agrees to repurchase
it at a mutually agreed upon date and at a price reflecting the interest rate
effective for the term of the agreement. This may also be viewed as the
borrowing of money by the Fund. The Fund will not invest the proceeds of a
reverse repurchase agreement for a period which exceeds the duration of the
reverse repurchase agreement. The Fund may not enter into reverse repurchase
agreements exceeding in the aggregate one-third of the market value of its total
assets, less liabilities other than the obligations created by reverse
repurchase agreements. The Fund will establish and maintain with its custodian a
separate account with a segregated portfolio of liquid assets consisting of cash
or liquid securities in an amount at least equal to its purchase obligations
under its repurchase agreements.
Reverse repurchase agreements involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities it
has sold but is obligated to repurchase under the agreement. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, the Fund's use of proceeds from the agreement may be
restricted pending a determination by the other party or its trustee or receiver
whether to enforce the Fund's obligation to repurchase the securities.
INVESTMENT COMPANY SECURITIES
The Fund may invest in the securities of other investment companies to the
extent permitted under the 1940 Act. These limits require that, as determined
immediately after a purchase is made, (i) not more than 5% of the value of the
Fund's total assets will be invested in the securities of any one investment
company, (ii) not more than 10% of the value of the Fund's total assets will be
invested in the aggregate in securities of investment companies as a group, and
(iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund, and (iv) not more than 10% of the outstanding
voting stock of any one closed-end investment company will be owned by the Fund
together with other investment companies that have the same investment adviser.
Under certain conditions, other sets of restrictions may be
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applicable. As a Shareholder of another investment company, the Fund would bear,
along with other Shareholders, its pro rata portion of the other investment
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.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES
The Fund may acquire, in privately negotiated transactions, restricted
securities that cannot be offered for public sale in the United States without
first being registered under the Securities Act of 1933, as amended ("Securities
Act"). The price the Fund pays for these securities, or receives upon resale,
may be lower than the price the Fund would pay or receive for similar securities
with a more liquid market. Accordingly, the valuation of these securities by the
Fund will reflect any limitations on their liquidity. The Fund may also purchase
certain unregistered securities sold to institutional investors under Rule 144A
of the Securities Act ("Rule 144A Securities"). Rule 144A Securities that have a
readily available market may be deemed to be liquid for purposes of the Fund's
15% limitation on investments in illiquid securities. The Sub-Adviser will
monitor the liquidity of such restricted securities under the supervision of,
and pursuant to guidelines established by, the Trustees. Under these guidelines,
account is given to factors such as trading activity, availability of reliable
price information and other relevant information. Investing in Rule 144A
Securities could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities. The Fund's illiquid
investments (any investment that cannot be disposed of within seven (7) business
days in the normal course of business at approximately the amount at which it
was valued by a Fund) is limited to 15% of the Fund's net assets.
HEDGING
Hedging is a means of transferring risk that an investor does not wish to
assume during an uncertain market environment. The Fund is permitted to enter
into these transactions solely: (a) to hedge against changes in the market value
of portfolio securities and against changes in the market value of securities
intended to be purchased or (b) to close out or offset existing positions.
Hedging activity in the Fund may include selling futures contracts on stock
indexes, options on stock index futures traded on a national exchange or board
of trade and options on securities and on stock indexes traded on national
securities exchanges or through private transactions directly with a
broker-dealer. The Fund may also hedge a portion of its portfolio by selling
stock index futures contracts or purchasing puts on these contracts to limit
exposure to an actual or anticipated market decline. All hedging transactions
must be appropriate for reduction of risk; they cannot be for speculation.
Under regulations of the Commodity Exchange Act of 1936, as amended
("Commodity Exchange Act"), an investment company registered under the 1940 Act
is exempt from the definition of "commodity pool operator", and, therefore, is
not subject to regulation under the Commodity Exchange Act, provided that the
entity agrees to restrict its investments in commodity futures and commodity
options contracts to: (i) bona fide hedging transactions within the meaning of
the Commodity Futures Trading Commission's regulations, without any limitation
on quantity, and (ii) other futures and options transactions in which the
aggregate initial margin and premiums do not exceed 5% of the liquidation value
of the entity's portfolio after taking into account unrealized profits and
unrealized losses on any such contracts. The Fund will use commodity futures and
commodity options contracts only in a manner consistent with these requirements.
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STOCK INDEX FUTURES
The Fund may purchase and sell stock index futures contracts as a hedge
against changes resulting from market conditions in the values of securities
that are held in its portfolio or that it intends to purchase or when such
purchase or sale is economically appropriate for the reduction of risks inherent
in the ongoing management of the Fund. A stock index futures contract is an
agreement in which one party agrees to deliver to the other an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. When the contract is executed, each
party deposits with a broker or in a segregated custodial account a specified
percentage of the contract amount, called the initial margin, and during the
term of the contract, the amount of the deposit is adjusted based on the current
value of the futures contract by payments of variation margin to or from the
broker or segregated account. In the case of options on stock index futures, the
holder of the option pays a premium and receives the right, upon exercise of the
option at a specified price during the option period, to assume the option
writer's position in a stock index futures margin account; if exercised on the
last trading day, cash in an amount equal to the difference between the option
exercise price and the closing level of the relevant index on the expiration
date is delivered.
The Fund may hedge a portion of its portfolio by selling stock index futures
contracts or purchasing puts on these contracts to limit exposure to an actual
or anticipated market decline. This provides an alternative to liquidation of
securities positions. Conversely, during a market advance or when the investment
adviser anticipates an advance, the Fund may hedge a portion of its portfolio by
purchasing stock index futures, or options on these futures. This affords a
hedge against the Fund not participating in a market advance when it is not
fully invested and serves as a temporary substitute for the purchase of
individual securities which may later be purchased in a more advantageous
manner. The Fund will not sell stock index futures unless the amount resulting
from the multiplication of the then current level of the indexes upon which the
Fund's futures contracts are based by the number of futures contracts which
would be outstanding does not exceed one-third of the value of its net assets.
Also, the Fund may not purchase or sell stock index futures or purchase options
on futures if, immediately thereafter, the sum of the amount of margin deposits
on its existing futures positions and premiums paid for such options would
exceed 5% of the market value of its total assets. When the Fund purchases stock
index futures contracts, it will deposit an amount of liquid assets consisting
of cash, U.S. Government securities, or other liquid securities equal to the
market value of the futures contracts in a segregated account with its
custodian.
The Fund's successful use of stock index futures contracts depends upon the
Sub-Adviser's ability to predict the direction of the market and is subject to
various additional risks. The correlation between movement in the price of the
stock index future and the price of the securities being hedged is imperfect and
the risk from imperfect correlation increases as the composition of the Fund's
portfolio diverges from the composition of the relevant index. In addition, if
the Fund purchases futures to hedge against market advances before it can invest
in common stock in an advantageous manner and the market declines, there may be
a loss on the futures contracts. In addition, the ability of the Fund to close
out a futures position or an option on futures depends on a liquid secondary
market. There is no assurance that liquid secondary markets will exist for any
particular futures contract or option on a futures contract at any particular
time. The risk of loss to the Fund is theoretically unlimited when the Fund
sells an uncovered futures contract because there is an obligation to make
delivery unless the contract is closed out, regardless of fluctuations in the
price of the underlying security. The Fund's ability to engage in hedging
activities may be limited by certain federal income tax considerations. See
"Additional Information -- Additional Tax Information" in the Statement of
Additional Information.
9
<PAGE> 12
OPTIONS ON SECURITIES
The Fund may purchase put options only on equity securities held in its
portfolio and write call options and put options on stocks only if they are
covered, as described below, and such call options must remain covered so long
as the Fund is obligated as a writer. Option transactions can be executed either
on a national exchange or through a private transaction with a broker-dealer (an
"over-the-counter" transaction). The Fund does not presently intend to purchase
put options and write call options on stocks that are not traded on national
securities exchanges or listed on the Nasdaq National Market(R). Put options
purchased and call options written by the Fund are considered to be illiquid
securities as they may be difficult to convert into cash during volatile market
conditions.
The Fund may, from time to time, write call options on its portfolio
securities. The Fund may only write call options that are "covered", meaning
that it either owns the underlying security or has an absolute and immediate
right to acquire that security, without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian),
upon conversion or exchange of other securities currently held in its portfolio.
In addition, the Fund will not permit the call to become uncovered prior to the
expiration of the option or termination through a closing purchase transaction
as described below. If the Fund writes a call option, the purchaser of the
option has the right to buy (and the Fund has the obligation to sell) the
underlying security at the exercise price throughout the term of the option. The
initial amount paid to the Fund by the purchaser of the option is the "premium".
The Fund's obligation to deliver the underlying security against payment of the
exercise price will terminate either upon expiration of the option or earlier if
the Fund is able to effect a "closing purchase transaction" through the purchase
of an equivalent option. There can be no assurance that a closing purchase
transaction can be effected at any particular time or at all. The Fund would not
be able to effect a closing purchase transaction after it had received notice of
exercise.
In order to write a call option, the Fund is required to comply with the rules
of The Options Clearing Corporation and the various exchanges with respect to
collateral requirements. The Fund may not purchase call options on individual
stocks except in connection with a closing purchase transaction. It is possible
that the cost of effecting a closing transaction may be greater than the premium
received by the Fund for writing the option.
The Fund may also purchase put options so long as they are listed on an
exchange. If the Fund purchases a put option, it has the option to sell the
subject security at a specified price at any time during the term of the option.
Purchasing put options may be used as a portfolio investment strategy when the
Sub-Adviser perceives significant short-term risk but substantial long-term
appreciation for the underlying security. The put option acts as an insurance
policy, as it protects against significant downward price movement while it
allows full participation in any upward movement. If the Fund is holding a stock
that the Sub-Adviser feels has strong fundamentals, but for some reason may be
weak in the near term, it may purchase a listed put on such security, thereby
giving itself the right to sell such security at a certain strike price
throughout the term of the option. Consequently, the Fund will exercise the put
only if the price of such security falls below the strike price of the put. The
difference between the put's strike price and the market price of the underlying
security on the date the Fund exercises the put, less transaction costs, will be
the amount by which the Fund will be able to hedge against a decline in the
underlying security. If, during the period of the option the market price for
the underlying security remains at or above the put's strike price, the put will
expire worthless, representing a loss of the price the Fund paid for the put,
plus transaction costs. If the price of the underlying security increases, the
profit the Fund realizes on the sale of the security will be reduced by the
premium paid for the put option less any amount for which the put may be sold.
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<PAGE> 13
The Fund may write put options on a fully covered basis on a stock the Fund
intends to purchase. If the Fund writes a put option, the purchaser of the
option has the right to sell (and the Fund has the obligation to buy) the
underlying security at the exercise price throughout the term of the option. The
initial amount paid to the Fund by the purchaser of the option is the "premium".
The Fund's obligation to purchase the underlying security against payment of the
exercise price will terminate either upon expiration of the option or earlier if
the Fund is able to effect a "closing purchase transaction" through the purchase
of an equivalent option. There can be no assurance that a closing purchase
transaction can be effected at any particular time or at all. In all cases where
a put option is written, the Fund will segregate or put into escrow with its
custodian, or pledge to a broker as collateral any combination of "qualified
securities" (which consists of cash, U.S. Government securities or other liquid
securities) with a market value at the time the option is written of not less
than 100% of the exercise price of the put option multiplied by the number of
options contracts written times the option multiplier.
The Fund may purchase a call option in a stock it intends to purchase at some
point in the future. The purchase of a call option is viewed as an alternative
to the purchase of the actual stock. The number of option contracts purchased
multiplied by the exercise price times the option multiplier will not be any
greater than the number of shares that would have been purchased had the
underlying security been purchased. If the Fund purchases a call option, it has
the right but not the obligation to purchase (and the seller has the obligation
to sell) the underlying security at the exercise price throughout the term of
the option. The initial amount paid by the Fund to the seller of the call option
is known as the "premium". If during the period of the option the market price
of the underlying security remains at or below the exercise price, the Fund will
be able to purchase the security at the lower market price. The profit or loss
the Fund may realize on the eventual sale of a security purchased by means of
the exercise of a call option will be reduced by the premium paid for the call
option.
STOCK INDEX OPTIONS
Except as described below, the Fund will write call options on indexes only if
on such date it holds a portfolio of stocks at least equal to the value of the
index times the multiplier times the number of contracts. When the Fund writes a
call option on a broadly-based stock market index, it will segregate or put into
escrow with its custodian, or pledge to a broker as collateral for the option,
any combination of "qualified securities" (which consists of cash, U.S.
Government securities or other liquid securities) with a market value at the
time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts.
If the Fund has written an option on an industry or market segment index, it
will segregate or put into escrow with its custodian, or pledge to a broker as
collateral for the option, one or more "qualified securities", all of which are
stocks of issuers in such industry or market segment, with a market value at the
time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts.
If at the close of business on any business day the market value of such
qualified securities so segregated, escrowed, or pledged falls below 100% of the
current index value times the multiplier times the number of contracts, the Fund
will so segregate, escrow or pledge an amount in cash, Treasury bills or other
liquid securities equal in value to the difference. In addition, when the Fund
writes a call on an index that is in-the-money at the time the call is written,
it will segregate with its custodian or pledge to the broker as collateral cash,
U.S. Government or other liquid securities equal in value to the amount by which
the call is in-the-money times the multiplier times the number of contracts. Any
amount segregated pursuant to the foregoing
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<PAGE> 14
sentence may be applied to the Fund's obligation to segregate additional amounts
in the event that the market value of the qualified securities falls below 100%
of the current index value times the multiplier times the number of contracts.
However, if the Fund holds a call on the same index as the call written where
the exercise price of the call held is equal to or less than the exercise price
of the call written or greater than the exercise price of the call written if
the difference is maintained in cash, short-term U.S. Government securities, or
other liquid securities in a segregated account with its custodian, it will not
be subject to the requirements described in this paragraph.
RISKS OF TRANSACTIONS IN STOCK OPTIONS
Purchase and sales of options involves the risk that there will be no market
in which to effect a closing transaction. An option position may be closed out
only on an exchange that provides a secondary market for an option of the same
series or if the transaction was an over-the-counter transaction, through the
original broker-dealer. Although the Fund will generally buy and sell options
for which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
option, or at any particular time, and for some options no secondary market on
an exchange may exist. If the Fund, as a covered call or put option writer, is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers or purchases the underlying security upon exercise.
RISKS OF OPTIONS ON INDEXES
The Fund's purchase and sale of options on indexes will be subject to risks
described above under "Risks of Transactions in Stock Options". In addition, the
distinctive characteristic of options on indexes creates certain risks that are
not present with stock options.
Since the value of an index option depends upon the movements in the level of
the index, rather than the price of a particular stock, whether the Fund will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of stock prices in the stock market generally or in
an industry or market segment rather than movements in the price of a particular
stock. Accordingly, successful use by the Fund of options on indexes would be
subject to the Sub-Adviser's ability to correctly predict movements in the
direction of the stock market generally or of a particular industry. This
requires skills and techniques different than predicting changes in the price of
individual stocks.
Index prices may be distorted if trading of certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options that it had purchased or written and, if restrictions on
exercise were imposed, might not be able to close out options that it had
purchased or written and, if restrictions on exercise were imposed, might not be
able to exercise an option that it was holding, which could result in
substantial losses to the Fund. It is the Fund's policy to purchase or write
options only on indexes that include a number of stocks sufficient to minimize
the likelihood of a trading halt in the index, for example, the S&P 100 or S&P
500 index option.
Trading in index options commenced in April 1993 with the S&P 100 option
(formerly called the CBOE 100). Since that time, a number of additional index
option contracts have been introduced, including options on industry indexes.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. The Fund will not
purchase or sell index option
12
<PAGE> 15
contracts unless and until, in the Sub-Adviser's opinion, the market for such
options has developed sufficiently that the risk in connection with these
transactions is no greater than the risk in connection with options on stock.
For further information about the Fund's hedging activities, see "Investment
Objectives and Policies", "Futures Contracts" and "Call Options" in the
Statement of Additional Information.
FOREIGN INVESTMENT RISK
The Fund may invest in certain foreign securities. Investment in obligations
of foreign issuers and in foreign branches of domestic banks involves somewhat
different investment risks from those affecting obligations of United States
domestic issuers. There may be limited publicly available information with
respect to foreign issuers, and foreign issuers are not generally subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and issuers
than in the United States. Foreign securities markets have substantially less
volume than domestic securities exchanges, and securities of some foreign
issuers are less liquid and more volatile than securities of comparable domestic
issuers. Brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States. Dividends paid by
foreign issuers may be subject to withholding and other foreign taxes that may
decrease the net return on foreign investments as compared to dividends and
interest paid to the Fund by domestic companies. Additional risks include future
political and economic developments, the possibility that a foreign jurisdiction
might impose or change withholding taxes on income payable with respect to
foreign securities, the possible seizure, nationalization or expropriation of
the foreign issuer or foreign deposits, and the possible adoption of foreign
governmental restrictions, such as exchange controls. Since investments in
foreign securities involve foreign currencies, the value of their assets
measured in United States dollars may be affected by changes in currency rates
and in exchange control regulations, including currency blockage.
HIGH YIELD/ HIGH RISK BONDS (COMMONLY KNOWN AS "JUNK BONDS")
Since the Fund has no pre-established minimum quality standards, a portion of
the securities, particularly high-yield/high-risk securities, may be subject to
additional risk. Corporate debt securities that are below investment grade
(securities rated Ba or lower by Moody's Investor Services or BB or lower by
Standard & Poor's Corporation) and unrated securities, which the Fund may
purchase and hold, are subject to higher risk of non-payment of principal or
interest, or both, than higher grade debt securities. This greater degree of
risk generally offers higher potential yields.
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.
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<PAGE> 16
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.
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 of the Fund 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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<PAGE> 17
PRICING OF FUND SHARES
Orders for the purchase of Shares of the Fund will be executed at the net
asset value per Share of the Fund next determined after an order has been
received, plus any applicable sales charge ("public offering price"). The sales
charge on purchases of Shares of the Fund, unless reduced or waived (see below),
is as follows:
<TABLE>
<CAPTION>
SALES CHARGE
TO DEALER AMOUNT OF
PERCENTAGE OF AMOUNT INVESTMENT: NET AMOUNT REALLOWED
OFFERING PRICE* PUBLIC OFFERING INVESTED AS A PUBLIC
-------------------------------- --------------- ---------- -----------
<S> <C> <C> <C>
Less than $100,000........................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000.............. 3.75% 3.90% 3.35%
$250,000 but less than $500,000.............. 2.50% 2.56% 2.20%
$500,000 but less than $750,000.............. 2.00% 2.04% 1.75%
$750,000 but less than $1,000,000............ 1.00% 1.01% 0.90%
$1,000,000 or more**......................... 0.00% 0.00% 0.00%
</TABLE>
- ---------------
*The Distributor may reallow up to 100% of the sales charge to Phillips &
Company Securities, Inc., and Willamette, Securities, Inc., affiliates of the
Adviser. The staff of the Securities and Exchange Commission has indicated
that dealers who receive more than 90% of the sales charge may be considered
underwriters. The Distributor, at its expense, may also provide additional
compensation to dealers in connection with sales of Shares of the Fund.
** In the case of investments of $1 million or more, a 0.25% redemption fee will
be assessed on shares redeemed within 12 months of purchase (excluding shares
purchased with reinvested dividends and/or distributions).
The sales charge will not apply to purchases of Shares by: (a) trust,
investment management and other fiduciary accounts managed by the Adviser or the
Sub-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 or the Sub-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, the Sub-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. and Willamette Securities, Inc.,
broker-dealer affiliates of the Adviser.
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<PAGE> 18
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, including shares of both the Fund and
Willamette Value Fund ("Value Fund"), another registered investment company
advised by the Adviser (collectively, "Funds"), 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 Funds owned at the
time by the investor. The sales charge imposed on the Shares being purchased
will then be at the rate applicable to the aggregate of shares purchased. For
example, if the investor held Shares valued at $100,000 and purchased an
additional $20,000 of Shares (totalling an investment of $120,000), the sales
charge for the $20,000 purchase would be at the next lower sales charge on the
schedule (i.e., the sales charge for purchases over $100,000 but less than
$250,000). There can be no assurance that investors will receive the cumulative
discounts to which they may be entitled unless, at the time of placing their
purchase order, the investors, their dealers, or a firm acting pursuant to the
Funds' 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 of the Fund. Shares of the Fund
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.
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<PAGE> 19
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 in the Fund must be at least $100, except for an IRA or
qualified retirement plan investment. All initial investments should be
accompanied by a completed Account Application, unless otherwise agreed upon
when purchases are made through an authorized securities dealer or financial
institution. An Account 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.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares of the Fund are sold on a continuous basis by the Fund's Distributor,
BISYS Fund Services Limited Partnership. The principal office of the distributor
is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares,
contact the Fund at (877) 945-3863.
PURCHASES OF SHARES
Shares of the Fund are continuously offered and may be purchased directly
either by mail, by telephone or by electronic transfer. Shares may also be
purchased through a broker-dealer who has established a dealer agreement with
the Distributor.
Purchasers of Fund Shares will pay the sum of the next calculated net asset
value per Share after the Distributor's receipt of an order to purchase Shares
in good form plus any applicable sales charge ("public offering price") (see
"HOW TO PURCHASE AND REDEEM SHARES" below).
In the case of orders for the purchase of Shares placed through a
broker-dealer, the public offering price will be based on the Fund's 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 rights 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 Willamette Small Cap Growth
Fund to:
Willamette Small Cap Growth Fund
P.O. Box 182301
Columbus, OH 43218-2301
An Account Application form can be obtained by calling the number on front of
the prospectus. Subsequent purchases of Shares of the Fund may be made at any
time by mailing a check payable to the Fund, to the above address.
17
<PAGE> 20
PURCHASES BY TELEPHONE
Fund Shares may be purchased by calling the number on the front of the
prospectus if your Account Application has been previously received by the
Distributor. Payment for Shares ordered by telephone is made by electronic
transfer to the Fund's custodian. Prior to wiring funds and in order to ensure
that wire orders are invested promptly, investors must call the Fund at the
number above to obtain instructions regarding the bank account number to which
the funds should be wired and other pertinent information.
OTHER INFORMATION REGARDING PURCHASES
Investors who purchase Fund Shares through fiduciary or other accounts may
incur a charge imposed by the entity managing that account. Information
concerning these services and any charges will be provided by such entity. This
Prospectus should be read in conjunction with any such information.
The Fund reserves the right to reject any order for the purchase of Shares in
whole or in part including purchases made with foreign and third party checks.
Every Shareholder of record will receive a confirmation of each transaction in
his or her account, which will also show the total number of Shares of each Fund
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 investor may establish an individual retirement account ("IRA") to invest
in the Fund. An IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
IRA contributions may be tax deductible and earnings are tax-deferred. Under
applicable federal tax law, the tax deductibility of IRA contributions may be
restricted or eliminated for individuals who participate in certain employer
pension plans and whose annual income exceeds certain limits. Existing IRAs and
future contributions up to the IRA maximums, whether deductible or not, still
earn income on a tax-deferred basis.
All IRA distribution requests must be made in writing to the Distributor. Any
additional deposits to an IRA must distinguish the type and year of the
contribution.
Individuals may make contributions to Roth IRAs which are non-deductible but
distributions from which may, under certain conditions, be tax free.
Non-deductible contributions of up to $500 per year per beneficiary may be made
to an Education IRA. To the extent distributions from an Education IRA do not
exceed a beneficiary's "qualified higher education expenses", they are not
taxable. Both Roth IRAs and Education IRAs are subject to certain income limits.
For more information on IRA accounts call the number on the front of the
prospectus. Shareholders are advised to consult a tax adviser on IRA
contribution and withdrawal requirements and restrictions.
AUTO INVEST PLAN
The Auto Invest Plan enables Fund Shareholders to make regular monthly or
quarterly purchases of Shares through automatic deductions from their bank
accounts (the bank must be with a domestic member of the Automatic Clearing
House). With Shareholder authorization, the Transfer Agent will deduct the
amount
18
<PAGE> 21
specified from the Shareholder's bank account which will automatically be
invested in Shares of the Fund 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 the number on the front of the prospectus. For a Shareholder
to change the Auto Invest instructions, the request must be made in writing to
the Distributor.
EXCHANGE PRIVILEGE
The Funds offer an exchange program whereby Shareholders are entitled to
exchange their Shares for Shares of the other Fund. Such exchanges will be
executed on the basis of the relative net asset values of the Shares exchanged.
Exchanges will be subject to a sales charge, representing the difference between
the sales charge already paid, if any, on a Fund held and the sales charge
applicable to a direct purchase of the Fund being exchanged into. Under such
circumstances, in order to receive a reduced sales charge, the Shareholder must
notify the Transfer Agent or Distributor that a sales charge was originally paid
and provide the Transfer Agent or the Distributor with sufficient information to
permit confirmation of qualification.
The Shares exchanged must have a current value that equals or exceeds the
minimum investment that is required (either the minimum amount required for
initial or subsequent investments as the case may be) for the Fund whose Shares
are being acquired. The exchange privilege is only available in states where the
exchange may legally be made. An exchange is considered to be a sale of Shares
for federal income tax purposes on which a Shareholder may realize a taxable
gain or loss. A Shareholder may make an exchange request by calling the Funds at
(877) 945-3863 or by providing written instructions to the Funds. An investor
should consult the Distributor for further information regarding exchanges.
During periods of significant economic or market change, telephone exchanges may
be difficult to complete. If a shareholder is unable to contact the Funds by
telephone, a shareholder may also mail the exchange request to the Distributor
at the address listed under "HOW TO PURCHASE AND REDEEM SHARES". The Funds
reserve the right to modify or terminate the exchange privilege described above
at any time and to reject any exchange request. If an exchange request in good
order is received by the Funds by the last Valuation Time, on any Business Day,
the exchange usually will occur on that day. Any shareholder who wishes to make
an exchange should obtain and review the current prospectus of the Fund in which
he or she wishes to invest before making the exchange. This option will be
suspended for a period of 30 days following a telephonic address change.
The Funds' exchange privilege is not intended to afford shareholders a way to
speculate on short-term movements in the market. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Funds and increase transaction costs, the Funds have
established a policy of limiting excessive exchange activity. Exchange activity
will not be deemed excessive if limited to four substantive exchange redemptions
from a Fund during any calendar year.
REDEMPTION OF SHARES
Shareholders may redeem their Fund 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 Fund.
19
<PAGE> 22
REDEMPTION BY MAIL
A written request for redemption must be received by the Fund in order to
honor the request. The Fund's address is: P.O. Box 182301, Columbus, Ohio
43218-2301. The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The
Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption check is payable to the Shareholder(s) of record and (2) the
redemption check is mailed to the Shareholder(s) at the address of record or the
proceeds are either mailed or wired to a commercial bank account previously
designated on the Account Application. There is no charge for having redemption
requests mailed to a designated bank account.
If the Fund receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Fund cannot
execute the order. In such cases, the Fund will request the missing information
and process the order on the day such information is received.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that option on
the Account Application. The Shareholder may have the proceeds mailed to his or
her address or mailed or sent electronically to a commercial bank account
previously designated on the Account Application. Electronic payment requests
may be made by the Shareholder by telephone to the number on the front of the
prospectus. For a wire redemption, the then-current wire redemption charge may
be deducted from the proceeds of a wire redemption. This charge, if applied,
will vary depending on the receiving institution for each wire redemption. It is
not necessary for Shareholders to confirm telephone redemption requests in
writing. During periods of significant economic or market change, telephone
redemptions may be difficult to complete. If a Shareholder is unable to contact
the Fund by telephone, a Shareholder may also mail the redemption request to the
Distributor at the address listed above under "HOW TO PURCHASE AND REDEEM
SHARES--Redemption by Mail". Neither the Distributor, the Transfer Agent, the
Adviser, nor the Fund will be liable for any losses, damages, expense or cost
arising out of any telephone transaction (including exchanges and redemptions)
effected in accordance with the Fund's telephone transaction procedures, upon
instructions reasonably believed to be genuine. The Fund will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, the Fund or its service
contractors may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all phone conversations,
sending confirmations to shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account.
This option will be suspended for a period of 30 days following a telephonic
address change.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders to make regular monthly or
quarterly redemptions of Shares. With Shareholder authorization, the Transfer
Agent will automatically redeem Shares at the net asset value on the dates of
the withdrawal and have a check in the amount specified mailed to the
Shareholder. The
20
<PAGE> 23
required minimum withdrawal for the Fund is $100. To participate in the Auto
Withdrawal Plan, Shareholders should call the number on the front of the
prospectus for more information. Purchases of additional Shares concurrent with
withdrawals may be disadvantageous to certain Shareholders because of tax
liabilities and sales charges. For a Shareholder to change the Auto Withdrawal
instructions the request must be made in writing to the Distributor.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share of the Fund
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 15 days. 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
(other than a retirement 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.
DIVIDENDS AND TAXES
DIVIDENDS
The Fund intends to declare its net investment income annually as a dividend
to Shareholders at the close of business on the day of declaration, and
generally will pay such dividends annually. The Fund also intends to distribute
its capital gains, if any, at least annually, normally in December of each year.
A Shareholder will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of the Fund at net asset
value as of the ex-dividend date, unless the Shareholder elects to receive
dividends or distributions in cash. Such election must be made on the Account
Application; any change in such election must be made in writing to the Fund at
P.O. Box 182301, Columbus, Ohio 43218-2301, and will
21
<PAGE> 24
become effective with respect to dividends and distributions having record dates
after its receipt by the Transfer Agent. Dividends for the Fund are paid in cash
no later than seven business days after a Shareholder's complete redemption of
his or her Shares of the Fund.
If a Shareholder elects to receive distributions from the Fund 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 as long-term capital 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.
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. 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
22
<PAGE> 25
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.
23
<PAGE> 26
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, LP
receives fees from the Fund for acting as Administrator and, as the Fund's
Distributor, may receive fees for certain distribution services. BISYS Fund
Services Ohio, Inc. receives fees from the Fund for providing certain fund
accounting services and BISYS Fund Services, Inc. receives fees for acting as
Transfer Agent.
INVESTMENT ADVISER
Willamette Asset Managers, Inc., 220 NW 2nd Avenue, Suite 950, Portland,
Oregon 97209, is the investment adviser for the Fund and supervises the
portfolio management services provided by the Sub-Adviser. The Adviser is an
affiliate of Phillips & Company Securities, Inc. ("Phillips"), and Willamette
Securities, Inc., registered broker-dealers. The Adviser provides portfolio
management services to Willamette Value Fund, another series of the Group that
commenced operations in May, 1998.
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 daily net
assets, reflecting a voluntary waiver. Without that waiver, the Adviser would be
entitled to fees at an annual rate of 1.20% based on the Fund's average daily
net assets. Out of this fee, the Adviser pays the fees of the Sub-Adviser. 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.
SUB-ADVISER
The Bank of New York is the Fund's Sub-Adviser. The Sub-Adviser, which has its
principal offices at 1 Wall Street, New York, NY 10286, is New York's first
bank, founded by Alexander Hamilton in 1784, and is one of the largest
commercial banks in the United States, having over $66.6 billion in assets at
December 31, 1998. It is the leading retail bank in the greater New York
suburban area, having 363 branches as of December 31, 1998. As of December 31,
1998, the Sub-Adviser provided administrative or advisory services for
approximately $48.4 billion in assets.
John C. Lui, Vice President, is responsible for the day-to-day portfolio
management of the Fund. Mr. Lui has been employed by the Adviser for the past
four years as an institutional equity manager, and is responsible for managing
various investments in equity securities on behalf of the Sub-Adviser's
institutional clients. He also serves as portfolio manager to the Small Cap
Growth Fund, a series of BNY Hamilton Funds. From 1993 to 1995, Mr. Lui was
employed by Barclays Global Asset Management, where he managed global equity and
bond portfolios. For 13 years prior to 1993, Mr. Lui was employed by the
Sub-Adviser as a Group Head of its
24
<PAGE> 27
International Personal Asset Management division. He was responsible for
managing the assets of foreign high net worth individuals, institutional
investors, and Far Eastern clients in the United States securities markets.
The Sub-Adviser manages the investments of the Fund, subject to supervision by
the Adviser and the Trustees. The Sub-Adviser is responsible for all purchases
and sales of the Fund's portfolio securities. The Sub-Adviser's fee accrues
daily and is payable by the Adviser monthly at the annual rate of 0.45% of the
Fund's average daily net assets.
ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for the Fund and also acts as the Fund's principal
underwriter and distributor ("Administrator" or "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 with respect to the Fund 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 its Shares
and, in such capacity, solicits orders for the sale of Shares, advertises, and
pays the costs of advertising, office space and its personnel involved in such
activities. The Distributor receives certain fees pursuant to the Fund's Service
and Distribution Plan (see "Distribution Plan", below).
EXPENSES AND PORTFOLIO TRANSACTIONS
The Adviser, the Sub-Adviser and the Administrator each bear all expenses in
connection with the performance of their services as investment adviser,
sub-adviser and administrator, respectively, other than the cost of securities
(including brokerage commissions, if any) purchased for the Fund. The Adviser
pays the fees of the Sub-Adviser. The Fund bears all its expenses, including
organization costs; costs of securities and brokerage; distribution plan fees;
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 Sub-Adviser effects transactions
with those brokers and dealers whom the Sub-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
Sub-Adviser believes such price and executions are obtainable
25
<PAGE> 28
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 to the Adviser or Sub-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 or Sub-Adviser in serving the Fund and
other clients and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the Adviser or Sub-
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 Sub-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 Sub-Adviser's overall responsibilities
to the Fund and its other clients. In reaching this determination, the
Sub-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 Service and
Distribution Plan ("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 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.
CUSTODIAN
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, 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 Ohio, Inc. 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.
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<PAGE> 29
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as a Massachusetts business trust on January 8, 1992.
The Group consists of several funds organized as separate series of shares. Each
share represents an equal proportionate interest in the fund with other shares
of the same fund, and is entitled to such dividends and distributions out of the
income earned on the assets belonging to that fund as are declared at the
discretion of the Trustees (see "Miscellaneous" below).
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held, and will vote in
the aggregate and not by fund except as otherwise expressly required by law. For
example, shareholders of each fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees. Funds with
the same independent auditors may also vote as a group to ratify the selection
of those auditors. However, shareholders of a particular fund will vote as a
fund, and not in the aggregate with other shareholders of the Group, for
purposes of approval of that fund's investment advisory agreement.
Overall responsibility for the management of the funds is vested in the Board
of Trustees of the Group. See "MANAGEMENT OF THE GROUP--Trustees of the Group."
Individual Trustees are elected by the 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 its maximum offering price per share. The
distribution rate includes both income and capital gain
27
<PAGE> 30
dividends and does not reflect unrealized gains or losses. The distribution rate
differs from the yield, because it includes capital items which are often
non-recurring in nature, whereas yield does not include such items.
Investors may also judge the performance of the Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies, to various mutual fund or market indices and to data
prepared by various services which may be published by such services or by other
services or publications. In addition to performance information, general
information about the Fund that appears in such publications may be included in
advertisements, sales literature and in reports to Shareholders.
Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results. Any fees charged by broker-dealers or other
third parties with respect to customer accounts for investing in shares of the
Fund will not be included in performance calculations; such fees, if charged,
will reduce the actual performance from that quoted.
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.
RELATED PERFORMANCE
The Fund's investment objectives and policies are substantially similar to
those of BNY Small Cap Growth Fund ("BNY Fund"), a series of BNY Hamilton Funds
which is the successor (through an acquisition of all the assets) to CIF
Emerging Growth Fund ("CIF Fund"), a private trust fund that was advised by the
Sub-Adviser. The following chart shows the comparison of the performance of BNY
Fund (including its predecessor CIF Fund) and a comparable index. The average
annual total return figures for BNY Fund have not been audited.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
40.00%............................
30.00%............................
20.00%............................ 17.14%* 14.74%**
10.00%............................ 13.02%* 10.22%**
0.00%............................ 7.55%* 1.23%**
ONE YEAR FIVE YEARS SINCE INCEPTION
------------------ ----------------- ------------------
</TABLE>
- ---------------
* BNY Fund
** Russell 2000 Index
<TABLE>
<CAPTION>
RUSSELL 2000
BNY FUND GROWTH INDEX
-------- ------------
<S> <C> <C>
Average annual total return after one year................. 7.55% 1.23%
Average annual total return after five years............... 13.02% 10.22%
Average annual total return since inception*............... 17.14% 14.74%
</TABLE>
- ---------------
* The CIF Fund changed its investment objective in the fourth quarter of 1990.
Historical return prior to that time would not be representative of its
current management style of BNY Fund.
The performance results presented above are those of BNY Fund (including its
predecessor CIF Fund) and are not performance results of the Fund. These results
should not be interpreted as indicative of the future performance of the Fund.
The investment objective, policies and strategies of BNY Fund (including its
predecessor) are substantially similar to those of the Fund, although unlike the
Fund, and BNY Fund since it acquired the assets of CIF Fund on 4/1/97, CIF Fund
was not subject to certain investment limitations, tax restrictions,
diversification requirements and other restrictions imposed by law upon mutual
funds, which, if applicable to CIF Fund, might have adversely affected
performance.
28
<PAGE> 31
CIF Fund's performance results reflect reinvestment of dividends. In addition,
because CIF Fund was not subject to advisory or administrative expenses usually
associated with mutual funds, the performance results for the period from 1990
to the transfer to BNY Fund on 4/1/97 have been adjusted to reflect the
deduction of the aggregate advisory, administrative and other expenses described
in this prospectus as being applicable to the Fund. Performance shown conforms
to the standards established by the Association for Investment Management and
Research.
The Russell 2000 Index is an unmanaged index of common stocks, and cannot be
invested in directly. The Index does not take into account fees and expenses.
THE YEAR 2000 ISSUE
The Fund relies extensively on various computer systems in carrying out their
business activities, including the computer systems employed by the Adviser, the
Sub-Adviser, Administrator and Distributor, the Transfer Agent, the Fund
Accounting Agent and the Custodian (collectively, "Service Providers"). In this
connection, the Fund is aware of the so-called "Year 2000 Issue" which involves
the potential problems that may be confronted by computer systems users
commencing on the day after December 31, 1999, when computers using
date-sensitive software must be able to properly identify the year 2000 and
subsequent dates in their systems. In the event that a computer system fails to
make the proper identification of the year 2000 and subsequent dates, this could
result in a system failure or miscalculations causing disruptions of operations
such as pricing errors and account maintenance failures. The Fund is working
with the Service Providers to take steps that are reasonably designated to
address the Year 2000 Issue with respect to the computer systems relied upon by
the Fund. The Fund has no reason to believe that these steps will not be
sufficient to avoid any material adverse impact on the Fund, although there can
be no assurance of this. The costs or consequences of incomplete or untimely
resolution of the Year 2000 Issue are unknown to the Fund and the Service
Providers at this time but could have a material adverse impact on the
operations of the Fund and the Service Providers.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent auditors.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to the Fund" means the consideration received by the Fund upon
the issuance or sale of its shares, together with all income, earnings, profits,
and proceeds derived from the investment thereof, including any proceeds from
the sale, exchange, or liquidation of such investments, and any funds or amounts
derived from any reinvestment of such proceeds, and any general assets of the
Group not readily identified as belonging to a particular fund that are
allocated to the Fund by the Group's Board of Trustees. The Board of Trustees
may allocate such general assets, as well as expenses that are not specific to
one or more funds, in any manner it deems fair and equitable among all funds of
the Group. Determinations by the Board of Trustees of the Group as to the timing
of the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to the Fund are conclusive.
Inquiries regarding the Funds may be directed in writing to the Fund at 3435
Stelzer Road, Columbus, Ohio 43219.
29
<PAGE> 32
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<PAGE> 33
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 34
INVESTMENT ADVISER
Willamette Asset Managers, Inc.
220 NW 2nd Avenue, Suite 950
Portland, Oregon 97209
SUB-ADVISER
The Bank of New York
1 Wall Street
New York, New York 10286
ADMINISTRATOR AND
DISTRIBUTOR
BISYS Fund Services, LP
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
Ernst & Young LLP
10 West Broad Street
Suite 2300
Columbus, Ohio 43215
CUSTODIAN
Union Bank of California
475 Sansome Street, 15th Floor
San Francisco, California 94111
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................... 2
Fee Table.................................... 3
Investment Objectives, Policies and
Risk Factors of the Fund................... 4
Investment Restrictions...................... 13
Valuation of Shares.......................... 14
Pricing of Fund Shares....................... 15
Quantity Discounts in the Sales Charges...... 16
Minimum Purchase Requirements................ 17
How to Purchase and Redeem Shares............ 17
Dividends and Taxes.......................... 21
Management of the Group...................... 24
General Information.......................... 27
</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.
WIL0002
WILLAMETTE
SMALL CAP
GROWTH
FUND
WILLAMETTE ASSET MANAGERS LOGO
---------------
PROSPECTUS DATED APRIL 1, 1999
---------------
BISYS FUND SERVICES, LP
ADMINISTRATOR AND DISTRIBUTOR
<PAGE> 35
WILLAMETTE VALUE FUND
WILLAMETTE SMALL CAP GROWTH FUND
Investment Portfolios of
The Coventry Group
Statement of Additional Information
April 1, 1999
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the prospectuses for the Willamette Value Fund and
Willamette Small Cap Growth Fund ("Funds") dated May 22, 1998 and
April 1, 1999, respectively ("Prospectuses"). Each 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 Prospectuses. Copies of the Prospectuses may be obtained
by writing the Funds at 3435 Stelzer Road, Columbus, Ohio 43219, or by
telephoning toll free (800) 713-4276.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement becomes
effective.
<PAGE> 36
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 and Sub-Adviser . . . . . . . . . . . 24
Portfolio Transactions . . . . . . . . . . . . . . . . . 26
Banking Laws . . . . . . . . . . . . . . . . . . . . . . 28
Administrator . . . . . . . . . . . . . . . . . . . . . 28
Distributor . . . . . . . . . . . . . . . . . . . . . . 32
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> 37
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 portfolios called Willamette Value Fund ("Value
Fund") and Willamette Small Cap Growth Fund ("Growth Fund") (collectively,
"Funds"). Willamette Asset Managers, Inc. ("Adviser") serves as investment
adviser to both Funds. The Bank of New York ("Sub-Adviser") manages the assets
of Growth Fund. Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the Prospectuses of
the Funds. Capitalized terms not defined herein are defined in the Prospectuses.
No investment in Shares of the Funds should be made without first reading the
Prospectuses.
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objective and policies of
the Funds as set forth in the Prospectuses.
BANK OBLIGATIONS. Each 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 Funds will be those guaranteed by domestic and foreign banks
having, at the time of investment, capital, surplus, and undivided profits in
excess of $100,000,000 (as of the date of their most recently published
financial statements).
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. Certificates of deposit and time
deposits will be those of domestic 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.
A 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"). A Fund may also invest
in commercial paper that is not rated but is determined by the Adviser or
Sub-Adviser under guidelines established by the Group's Board of Trustees, to be
of comparable quality.
<PAGE> 38
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 a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a 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 or Sub-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 a Fund
will be determined by the Adviser or Sub-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 or Sub-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 a Fund, a 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 a Fund to dispose of a variable or floating
rate note in the event the issuer of the note defaulted on its payment
obligations and a 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 Funds 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 Funds will invest
in the obligations of such agencies or instrumentalities only when the Adviser
or Sub-Adviser believes that the credit risk with respect thereto is minimal.
FOREIGN INVESTMENTS. The Funds 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
<PAGE> 39
denominated securities issued by foreign branches of U.S. and foreign banks.
These investments may subject a Fund to investment risks that differ in some
respects from those related to investment in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
possible seizure, nationalization, or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source 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 that 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 Funds to currency fluctuation risks.
FUTURES CONTRACTS. As discussed in the Prospectus, each 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, a
Fund would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if a 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, a 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 a Fund's ability to hedge or manage risks effectively.
Successful use of futures by a Fund is also subject to the Adviser's or
Sub-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 or Sub-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
<PAGE> 40
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. Each 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 a Fund. This premium income will serve to enhance
a Fund's total return and will reduce the effect of any price decline of the
security involved in the option. Covered call options will generally be written
on securities which, in the opinion of the Adviser or Sub-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 particular 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. A 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 a 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 Funds will not do), but
capable of enhancing a Fund's total return. When writing a covered call option,
a Fund, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but retains
the risk of loss should the price of the security decline. Unlike one who owns
securities not subject to an option, a Fund has no control over when it may be
required to sell the underlying securities, since it may be assigned an exercise
notice at any time prior to the expiration of its obligation as a writer. If a
call option which a Fund has written expires, 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 Funds' Custodian.
The premium received is the market value of an option. The premium a Fund
will receive from writing a call option will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
<PAGE> 41
underlying security, and the length of the option period. Once the decision to
write a call option has been made, the Adviser or Sub-Advisr, 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 a 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 a Fund to write another call option on the underlying
security with either a different exercise price or expiration date or both. If a
Fund desires to sell a particular security from its portfolio on which it has
written a call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security. There is, of course, no assurance
that a Fund will be able to effect such closing transactions at a favorable
price. If a Fund cannot enter into such a transaction, it may be required to
hold a security that it might otherwise have sold, in which case it would
continue to be at market risk on the security. A Fund will pay transaction costs
in connection with the writing of options to close out previously written
options. Such transaction costs are normally higher than those applicable to
purchases and sales of portfolio securities.
Call options written by a Fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
at the time the options are written. From time to time, a 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.
A 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 a Fund.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Funds may invest in
securities issued by the other investment companies. Each 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 by a Fund: (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; and (d) not more than 10% of the outstanding
voting stock of any one closed-end investment company will be owned by the Fund
together with all other investment companies that have the same investment
adviser. As a shareholder of another investment company, a Fund
<PAGE> 42
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 a Fund bears directly in connection with
its own operations. Investment companies in which a Fund may invest may also
impose a sales or distribution charge in connection with the purchase or
redemption of their Shares and other types of commissions or charges. Such
charges will be payable by the Fund and, therefore, will be borne directly by
Shareholders.
REPURCHASE AGREEMENTS. Securities held by a Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser or Sub-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 a 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 a 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 Funds' 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 Funds' custodian
or another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend securities if such loans
are secured continuously by liquid assets consisting of cash, U.S. Government
securities or other liquid, high-grade debt securities or by a letter of credit
in favor of the Fund at least equal at all times to 100% of the market value of
the securities loaned, plus accrued interest. While such securities are on loan,
the borrower will pay the Fund any income accruing thereon. Loans will be
subject to termination by the Fund in the normal settlement time, currently
three Business Days after notice, or by the borrower on one day's notice (as
used herein, "Business Day" shall denote any day on which the New York Stock
Exchange and the custodian are both open for business). Any gain or loss in the
market price of the borrowed securities that occurs during the term of the loan
inures to the lending Fund and its shareholders. The Funds may pay reasonable
finders' and custodial fees in connection with loans. In addition, the Funds
will consider all facts and circumstances including the creditworthiness of the
borrowing financial institution, and the Funds will not lend their securities to
any director, officer, employee, or affiliate of the Adviser, the Sub-Adviser,
the Administrator or the Distributor, unless permitted by applicable law.
Investment Restrictions
<PAGE> 43
- -----------------------
The following are fundamental investment restrictions of each Fund.
Each Fund has elected to qualify as a diversified series of the Trust.
Additionally, neither Fund may:
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 a 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 each 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 a Fund's
investment objective and policies may be deemed to be loans.
Portfolio Turnover
- ------------------
The portfolio turnover rate for each 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
all securities whose remaining maturities at the time of acquisition were one
year or less. The turnover rate for each Fund is not expected to exceed 75%.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of Shares of each 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 a 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
<PAGE> 44
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 or Sub-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 a 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 or Sub-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 a 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
<PAGE> 45
customary weekend and holiday closings, (c) the Commission has by order
permitted such suspension for the protection of security holders of the Group or
a Fund, or (d) the Commission has determined that an emergency exists as a
result of which (i) disposal by the Group or a Fund of securities owned by it is
not reasonably practical, or (ii) it is not reasonably practical for the Group
or a Fund to determine the fair value of its net assets.
The Group may redeem Shares of a 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:
<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: 52 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: 62 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: 50 to June 1991, Vice President -
Communications, TRW Information Systems
Group (electronic and space engineering).
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
Position(s)
Held With Principal Occupation
Name, Address and Age the Group During Past 5 Years
--------------------- ----------- -------------------
<S> <C> <C>
John H. Ferring IV Trustee From 1979 to present,
105 Bolte Lane President and owner of Plaze, Inc.,
St. Clair, Missouri 63077 St. Clair, Missouri
Age: 45
J. David Huber Vice President From June, 1987 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 51
Jennifer J. Brooks Vice President From October, 1988 to present,
3435 Stelzer Road employee of BISYS Fund Services.
Columbus, Ohio 43219
Age: 32
Paul Kane Treasurer From December 1997 to present, employee
3435 Stelzer Road of BISYS Fund Services; from March 1985 to
Columbus, Ohio 43219 December 1997, Director of Shareholder
Age: 41 Reporting for Fidelity Investments.
George L. Stevens Secretary From September 1996 to present,
3435 Stelzer Road employee of BISYS Fund Services;
Columbus, Ohio 43219 from September 1995 to September
Age: 47 1996, Independent Consultant;
from September 1989 to September
1995, Senior Vice President, AmSouth
Bank, N.A.
</TABLE>
<PAGE> 47
<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: 30 Alliance Capital Management.
<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 either Fund's outstanding
Shares.
</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
Funds 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 Funds for acting as
transfer agent and for providing certain fund accounting services. Messrs.
Huber, Kane, Stevens, Grimm, Ms. Metz and Ms. Brooks 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 and Sub-Adviser
- ----------------------------------
Investment advisory services for the Funds are provided by Willamette Asset
Managers, Inc., 220 NW 2nd Avenue, Suite 950, Portland, Oregon 97209. Pursuant
to an Investment Advisory Agreement dated as of May 22, 1998 (the "Value
Agreement"), the Adviser has agreed to provide investment advisory services to
Value Fund as described in the Prospectus of Value Fund. For the services
provided pursuant to the Value Agreement, Value Fund pays the Adviser a fee
computed daily and paid monthly, at an annual rate, calculated as a percentage
of Value 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 Value
Fund available for distribution as dividends.
The Adviser provides general management supervision to Growth Fund pursuant
to an Investment Advisory Agreement dated as of April 1, 1999 ("Growth
Agreement"). For services provided under the Growth Agreement, Growth Fund pays
the Adviser a fee computed daily and paid monthly at an annual rate, as
calculated a percentage of Growth Fund's average daily net assets, of 1.20%. Out
of its fees from Growth Fund, the Adviser pays the fee of the Sub-Adviser.
Unless sooner terminated, the Value Agreement and the Growth Agreement will
continue in effect until May 22, 2000 and March 31, 2001, respectively, and
<PAGE> 48
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 applicable Fund (as defined under "INVESTMENT RESTRICTIONS" in the
Prospectuses), and a majority of the Trustees who are not parties to the
Agreement or interested persons (as defined in the 1940 Act of any party to the
Agreement by votes cast in person at a meeting called for such purpose. Each
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 Value Fund,
or by the Adviser. Each Agreement also terminates automatically in the event of
any assignment, as defined in the 1940 Act.
Each 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 applicable Fund in
connection with the performance of the 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.
The Bank of New York, 48 Wall Street, New York, New York 10286, provides
portfolio management services, as Sub-Adviser, to Growth Fund pursuant to a
Sub-Investment Advisory Agreement with the Group and the Adviser, dated as of
April 1, 1999. For its services to Growth Fund, the Adviser pays the Sub-Adviser
a fee computed daily and paid monthly at an annual rate calculated as a
percentage of Growth Fund's average daily net assets, of 0.45%. The
Sub-Investment Advisory AGreement will continue in effect, unless sooner
terminated, until March 31, 2001, and has provisions for continuation and
termination similar to those of the Investment Advisory Agreements. The
Sub-Investment Advisory Agreement may also be terminated by the Adviser.
The Value Agreement was approved by both the Trustees and the independent
Trustees at a meeting held February 28, 1998. The Growth Agreement and the
Sub-Investment Advisory Agreement were so approved at a meeting held November
13, 1998.
Portfolio Transactions
- ----------------------
Pursuant to the Investment Advisory Agreements and the Sub-Investment
Advisory Agreement, the Adviser and Sub-Adviser determine, subject to the
general supervision of the Board of Trustees of the Group and in accordance with
each Fund's investment objective and restrictions, which securities are to be
purchased and sold by the Funds, and which brokers are to be eligible to execute
the Funds' portfolio transactions. Certain purchases and sales of portfolio
securities with respect to the Funds are principal transactions in which
portfolio securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from underwriters of
portfolio securities generally include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
may include the spread between the bid and asked price. Transactions on stock
exchanges involve the payment of negotiated brokerage commissions. Transactions
in the over-the-counter market are generally principal transactions with
dealers. With respect to the over-the-counter market, the Adviser and
Sub-Adviser, where possible, will deal directly with dealers who make a market
in the securities involved except in those circumstances where better price and
execution are available elsewhere.
<PAGE> 49
Investment decisions for the Funds are made independently from those for
other accounts managed by the Adviser and the Sub-Adviser. Any such account may
also invest in the same securities as a Fund. When a purchase or sale of the
same security is made at substantially the same time on behalf of a Fund and
another account, the transaction will be averaged as to price, and available
investments will be allocated as to amount in a manner which the Adviser or
Sub-Adviser believes to be equitable to the applicable Fund and such other
account. In some instances, this investment procedure may adversely affect the
price paid or received by a Fund or the size of the position obtained by a Fund.
To the extent permitted by law, the Adviser or Sub-Adviser may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for the other accounts in order to obtain best execution.
Administrator
- -------------
BISYS serves as administrator ("Administrator") to the Funds pursuant to a
Management and Administration Agreement dated May 22, 1998 (the "Administration
Agreement"). The Administrator assists in supervising all operations of the
Funds (other than those performed by the Adviser and Sub-Adviser under the
Investment Advisory Agreement and Sub-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 Funds and file all of
the Funds' federal and state tax returns and required tax filings other than
those required to be made by the Funds' Custodian and Transfer Agent; prepare
compliance filings pursuant to state securities laws with the advice of the
Group's counsel; assist to the extent requested by the Funds with the Funds'
preparation of their Annual and Semi-Annual Reports to Shareholders and their
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 Funds, including calculation of daily
expense accruals; and generally assist in all aspects of the Funds' operations
other than those performed by the Adviser, under the Investment Advisory
Agreements, by the Sub-Adviser under the Sub-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 each 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 each
<PAGE> 50
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 each 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
will continue in effect until May 31, 2001. The Administration Agreement
thereafter shall be renewed automatically for successive three-year terms,
unless written notice not to renew is given by the non-renewing party to the
other party at least 60 days prior to the expiration of the then-current term.
The Administration Agreement is terminable with respect to a particular Fund
only upon mutual agreement of the parties to the Administration Agreement and
for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than 60 days' notice by the Group's Board of Trustees or by
the Administrator.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by a
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 Funds pursuant to the
Distribution Agreement dated May 22, 1998, (the "Distribution Agreement").
Unless otherwise terminated, the Distribution Agreement will continue in effect
with respect to a Fund until May 31, 2000, if such continuance is approved at
least annually (i) by the Group's Board of Trustees or by the vote of a majority
of the outstanding Shares of the Fund and (ii) by the vote of a majority of the
Trustees of the Group who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the Distribution
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement will terminate automatically in the event
of any assignment, as defined in the 1940 Act.
In its capacity as Distributor, BISYS solicits orders for the sale of
Shares, advertises and pays the costs of advertising, office space and the
personnel involved in such activities. The Distributor receives no compensation
under the Distribution Agreement with the Group, but may receive compensation
from each Fund under the Service and Distribution Plan described below.
As described in the Prospectus, the Group has adopted a Service and
Distribution Plan for each Fund (the "Plan") pursuant to Rule 12b-1 under the
1940 Act under which each 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 each 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. Each Fund is authorized to pay a
Shareholder Service Fee of up to 0.25% of its average daily net assets. As
<PAGE> 51
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 Funds
and who have no direct or indirect financial interest in the operation of the
Plan ("Independent Trustees") at meetings held on February 19, 1998 (Value Fund)
and November 13, 1998 (Growth Fund). The Plan may be terminated with respect to
a Fund by vote of a majority of the Independent Trustees, or by vote of a
majority of the outstanding Shares of the Fund. The Trustees review quarterly a
written report of such costs and the purposes for which such costs have been
incurred. The Plan may be amended by vote of the Trustees including a majority
of the Independent Trustees, cast in person at a meeting called for that
purpose. However, any change in the Plan that would materially increase the
distribution cost to a Fund requires approval by that Fund's 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, with respect to a
Fund, by vote of a majority of the outstanding Shares of that Fund. The Plan
will continue in effect with respect to a Fund 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, for each Fund, 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 each 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.
Custodian
- ---------
Union Bank of California, 475 Sansome Street, San Francisco, California
94111, serves as the Funds' custodian.
Transfer Agency and Fund Accounting Services
- --------------------------------------------
BISYS Fund Services, Inc. serves as Transfer Agent and Dividend Disbursing
Agent ("BISYS Fund Services Ohio" or the "Transfer Agent") for the Funds,
pursuant to the Transfer Agency Agreement dated May 22, 1998. Pursuant to such
Agreement, the Transfer Agent, among other things, performs the following
services in connection with the Funds' Shareholders of record: maintenance of
shareholder records for each of the Funds' Shareholders of record; processing
shareholder purchase and redemption orders; processing transfers and exchanges
of Shares of the Funds on the shareholder files and records; processing dividend
payments and reinvestments; and assistance in the mailing of shareholder reports
and proxy solicitation materials. For such services the Transfer Agent receives
a fee based, in part, on the number of shareholders of record.
In addition, BISYS Fund Services Ohio, Inc. provides certain fund
accounting services to the Funds pursuant to the Fund Accounting Agreement dated
<PAGE> 52
May 22, 1998. BISYS Fund Services Ohio receives a fee from each Fund for such
services in an amount 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 each Fund, including journals containing an itemized daily
record of all purchases and sales of portfolio securities, all receipts and
disbursements of cash and all other debits and credits, general and auxiliary
ledgers reflecting all asset, liability, reserve, capital, income and expense
accounts, including interest accrued and interest received, and other required
separate ledger accounts; maintains a monthly trial balance of all ledger
accounts; performs certain accounting services for the Funds, including
calculation of the net asset value per Share, calculation of the dividend and
capital gain distributions, if any, and of yield, reconciliation of cash
movements with the Custodian, affirmation to the Custodian of all portfolio
trades and cash settlements, verification and reconciliation with the Custodian
of all daily trade activity; provides certain reports; obtains dealer
quotations, prices from a pricing service or matrix prices on all portfolio
securities in order to mark the portfolio to the market; and prepares an interim
balance sheet, statement of income and expense, and statement of changes in net
assets for each Fund.
Independent Auditors
- --------------------
Ernst & Young LLP, 10 West Broad Street, Suite 2300, Columbus, Ohio 43215,
has been selected as independent auditors for the Funds for the fiscal year
ended March 31, 1999. William R. Wasco will perform an annual audit of each
Fund's financial statements and provide other services related to filings with
respect to securities regulations. Reports of their activities will be provided
to the Group's Board of Trustees.
Legal Counsel
- -------------
Dechert Price & Rhoads, 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,
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
<PAGE> 53
Additional Information, the shares will be fully paid and non-assessable. In the
event of a liquidation or dissolution of the Group, Shareholders of each 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 a fund will be required in
connection with a matter, a fund will be deemed to be affected by a matter
unless it is clear that the interests of each fund in the matter are identical,
or that the matter does not affect any interest of the fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a fund only if approved
by a majority of the outstanding Shares of that 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 a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of a Fund present at a meeting at which the holders
of more than 50% of the votes attributable to Shareholders of record of the Fund
are represented in person or by proxy, or (b) the holders of more than 50% of
the outstanding votes of Shareholders of the Fund.
Additional Tax Information
- --------------------------
TAXATION OF THE FUND. Each Fund intends to qualify annually and to elect to
be treated as a regulated investment company under the Internal Revenue Code of
<PAGE> 54
1986, as amended (the "Code").
To qualify as a regulated investment company, each 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
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, a 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. Each 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, a 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 a 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, each
Fund intends to make its distributions in accordance with the calendar year
distribution requirement.
DISTRIBUTIONS. Dividends paid out of a Fund's investment company taxable
income generally will be taxable to a U.S. Shareholder as ordinary income. A
portion of each Fund's income may consist of dividends paid by U.S. corporations
and, accordingly, a portion of the dividends paid by a Fund may be eligible for
the corporate dividends-received deduction. Properly designated distributions of
net capital gains, if any, generally are taxable to Shareholders as long-term
capital gains, 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,
<PAGE> 55
generally will have a cost basis in each such Share equal to the net asset value
of a Share of the particular 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 a Fund reduce the net asset value of the Fund's 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 a 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 a 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 a 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 a 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 a 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 a 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 a 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.
Certain options in which a 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 a Fund
<PAGE> 56
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 a 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 a Fund. In addition, losses
realized by a 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 a Fund of engaging in hedging transactions
are not entirely clear. Hedging transactions may increase the amount of
short-term capital gain realized by a Fund which is taxed as ordinary income
when distributed to Shareholders.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a 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 a 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 a Fund held the security used to close the short sale. In addition, a
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 a 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
<PAGE> 57
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 each Fund's assets may limit
the extent to which a 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.
Each 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 a Fund receives a
so-called "excess distribution" with respect to PFIC stock, the Fund itself may
be subject to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to Shareholders. In general,
under the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which a Fund held the PFIC shares. The Fund
itself will be subject to tax on the portion, if any, of an excess distribution
that is so allocated to prior Fund taxable years and an interest factor will be
added to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect to
PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC in a given year. If this election were
made, the special rules, discussed above, relating to the taxation of excess
distributions, would not apply. In addition, another election would involve
marking to market a 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 a 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
<PAGE> 58
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 a Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by such
countries.
BACKUP WITHHOLDING. A 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 a 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 a 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> 59
- ------------------------
YIELD CALCULATIONS. As summarized in the Prospectus of the Funds 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 a
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 a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is held by the Fund. Interest earned on any
debt obligations held by a 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.
<PAGE> 60
During any given 30-day period, the Adviser, the Sub-Adviser, Administrator
or Distributor may voluntarily waive all or a portion of their fees with respect
to a Fund. Such waiver would cause the yield of that Fund to be higher than it
would otherwise be in the absence of such a waiver.
TOTAL RETURN CALCULATIONS. As summarized in the Prospectus of the Funds
under the heading "PERFORMANCE INFORMATION", average annual total return is a
measure of the change in value of an investment in a Fund over the period
covered, which assumes any dividends or capital gains distributions are
reinvested in Shares immediately rather than paid to the investor in cash. A
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:
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.
A 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
<PAGE> 61
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Performance Comparisons
- -----------------------
Investors may judge a 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 Funds that appears in a publication,
such as those mentioned above, may be included in advertisements and in reports
to Shareholders. The Funds may also include in advertisements and reports to
Shareholders information comparing the performance of the Adviser or the
Sub-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, a 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 a Fund's portfolio, as
well as expenses allocated to a Fund. Fees imposed upon customer accounts by
third parties for cash management services will reduce a Fund's effective yield
to customers.
From time to time, the Funds may include general comparative information,
such as statistical data regarding inflation, securities indices or the features
or performance of alternative investments, in advertisements, sales literature
and reports to shareholders. The Funds may also include calculations, such as
hypothetical compounding examples, which describe hypothetical investment
results in such communications. Such performance examples will be based on an
express set of assumptions and are not indicative of the performance of a Fund.
Miscellaneous
- -------------
The Funds may include information in their Annual Reports and Semi-Annual
Reports to Shareholders that (1) describes general economic trends, (2)
describes general trends within the financial services industry or the mutual
fund industry, (3) describes past or anticipated portfolio holdings for the
Funds or (4) describes investment management strategies for the Funds. Such
information is provided to inform Shareholders of the activities of the Funds
for the most recent fiscal year or half-year and to provide the views of the
Adviser, the Sub-Adviser, and/or Group officers regarding expected trends and
strategies.
The Financial Statements of the Willamette Value fund appearing in the
Semi-Annual (unaudited) report to Shareholders for the period ended
September 30, 1998, are incorporated herein by reference.
<PAGE> 62
Individual Trustees are elected by the Shareholders and, subject to removal
by the vote of two-thirds of the Board of Trustees, serve for a term lasting
until the next meeting of Shareholders at which Trustees are elected. Such
meetings are not required to be held at any specific intervals. Shareholders
owning not less than 10% of the outstanding Shares of the Group entitled to vote
may cause the Trustees to call a special meeting, including for the purpose of
considering the removal of one or more Trustees. Any Trustee may be removed at
any meeting of Shareholders by vote of two-thirds of the Group's outstanding
shares. The Declaration of Trust provides that the Trustees will assist
shareholder communications to the extent required by Section 16(c) of the 1940
Act in the event that a Shareholder request to hold a special meeting is made.
The Prospectuses and this Statement of Additional Information omit certain
of the information contained in the Registration Statement filed with the
Commission. Copies of such information may be obtained from the Commission upon
payment of any prescribed fee.
The Prospectuses and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectuses and this Statement of Additional Information.
APPENDIX
The nationally recognized statistical rating organizations (individually,
an "NRSRO") that may be utilized by the Adviser with regard to portfolio
investments for the Funds 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
<PAGE> 63
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> 64
- 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> 65
PART C
------
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements
--------------------
1.
Statement of Assets and Liabilities (unaudited)
dated September 30, 1998
Statement of Operations (unaudited) dated September
30, 1998
Statement of Changes in Net Assets (unaudited)
dated September 30, 1998
<PAGE> 66
(b) Exhibits
--------
(1) Declaration of Trust(1)
(2) (a) By-Laws(1)
(b) Form of Establishment and Designation
of Series of Shares(3)
(3) Not Applicable
(4) Certificates for Shares are not issued.
Articles IV, V, VI and VII of the Declaration
of Trust, previously filed as Exhibit 1
hereto, define rights of holders of Shares.
(5) (a) Investment Advisory Agreement between
Registrant and Willamette Asset
Managers, Inc.
(b) Sub-Advisory Agreement between
Willamette Asset Managers and
Bank of New York.
(6) Distribution Agreement between Registrant and
BISYS Fund Services, Limited Partnership(2)
(7) Not Applicable
(8) Custodian Agreement between Registrant and
Union Bank of California.(1)
(9) (a) Administration Agreement between the
Registrant and BISYS Fund Services,
Limited Partnership.(2)
(b) Fund Accounting Agreement between
the Registrant and BISYS Fund
Services Ohio, Inc.(2)
(c) Transfer Agency Agreement between
the Registrant and BISYS Fund
Services, Inc.(2)
(10) Opinion and Consent of Counsel(2)
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Amended Service and Distribution Plan(3)
(16) Not Applicable
(17) The Financial Data Schedule regarding the
Willamette Value Funds Semi-Annual (unaudited)
report dated September 30, 1998.
(18) Not Applicable
- ------------------
1. Filed with initial Registration Statement on January 8, 1992.
2. Incorporated by reference to Post-Effective Amendment No. 33 to Registrant's
Registration Statement (File No. 33-44964) filed electronically with the
Securities and Exchange Commission on March 13, 1998.
3. Incorporated by reference to Post-Effective Amendment No. 43 to Registrant's
Registration Statement (File No. 33-44964) filed electronically with the
Securities and Exchange Commission on December 17, 1998.
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------
Not applicable.
Item 26. Number of Record Holders
- -------- ------------------------
Not applicable.
<PAGE> 67
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> 68
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>
<CAPTION>
Name & Address Position with WAM Principal Occ. for past 5 yrs.
-------------- ----------------- ------------------------------
<S> <C> <C>
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
</TABLE>
Business and Other Connections of Sub-Adviser
---------------------------------------------
Name Title/Company
- ---- -------------
Richard Barth.................. Retired; Formerly Chairman and Chief Executive
Officer of Ciba-Geigy Corporation (diversified
chemical products)
Frank J. Biondi, Jr............ Chairman and Chief Executive Office of
Universal Studios (diversified entertainment
operator)
Harold E. Sells................ Retired; Formerly Chairman and Chief Executive
Office of Woolworth Corporation (retailing)
William R. Chaney.............. Chairman and Chief Executive Officer of
Tiffany & Co., (international designers,
manufacturers and distributors of jewelry and
fine goods)
Ralph E. Gomory................ President of Alfred P. Sloan Foundation, Inc.
(private foundation)
Richard J. Kogan............... President and Chief Executive Officer of
Schering-Plough Corporation (manufacturer of
pharmaceutical and consumer products)
John A. Luke, Jr............... Chairman, President and Chief Executive
Officer of Westvaco Corporation (manufacturer
of paper, packaging, and specialty chemicals)
John C. Malone................. President and Chief Executive Officer of
Tele-Communications, Inc., (cable television
multiple system operator)
Donald L. Miller............... Chief Executive Officer and Publisher of Our
World News, LLC (media)
H. Barclay Morley.............. Retired; Formerly Chairman and Chief Executive
Officer of Stauffer Chemical Company
(chemicals)
Catherine A. Rein.............. Senior Executive Vice President of
Metropolitan Life Insurance Company (insurance
and financial services)
<PAGE> 69
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 Alpine Equity Trust, The ARCH Fund, Inc.,
American Performance Funds, AmSouth Mutual Funds, The BB&T
Mutual Funds Group, The Coventry Group, ESC Strategic
Funds, Inc., The Eureka Funds, Governor Funds, Gradison
Custodian Trust, Gradison Growth Trust, Gradison-McDonald
Cash Reserves Trust, Gradison-McDonald Municipal Custodian
Trust, Fifth Third Funds, Hirtle Callaghan Trust, HSBC
Funds Trust and HSBC Mutual Funds Trust, INTRUST Funds
Trust, The Infinity Mutual Funds, Inc., The Kent Funds,
Magna Funds, Meyers Investment Trust, MMA Praxis Mutual
Funds, M.S.D.& T. Funds, Pacific Capital Funds, The
Parkstone Advantage Funds, Pegasus Funds, Puget Sound
Alternative Investment Series Trust, Republic Advisor Funds
Trust, Republic Funds Trust, Sefton Funds Trust, SSgA
International Liquidity Fund, Summit Investment Trust,
Variable Insurance Funds, The Victory Portfolios, The
Victory Variable Insurance Funds, Vintage Mutual Funds,
Inc., 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> 70
220 NW 2nd Avenue, Suite 950, Portland, Oregon 97209, (records
relating to its function as Adviser), The Bank of New York, 1
Wall Street, New York, New York 10286 (records relating to its
functions as Sub-Adviser), BISYS Fund Services, Limited
Partnership, 3435 Stelzer Road, Columbus, Ohio 43219 (records
relating to its functions as General Manager, Administrator and
Distributor), and BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219 (records relating to its functions as
Transfer Agent).
Item 31. Management Services
- -------- -------------------
Not Applicable.
Item 32. Undertakings.
- -------- -------------
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge, in the event that the information called for by Item
5A of Form N-1A has been presented in the Registrant's
latest annual report to shareholders.
(d) Registrant undertakes to call a meeting of Shareholders for
the purpose of voting upon the question of removal of a
Trustee or Trustees when requested to do so by the holders
of at least 10% of the Registrant's outstanding shares of
beneficial interest and in connection with such meeting to
comply with the shareholders communications provisions of
Section 16(c) of the Investment Company Act of 1940.
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this filing
satisfies the requirements for filing pursuant to rule 485(b) and duly caused
this Post-Effective Amendment No. 45 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 30th day of March, 1999.
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 30, 1999
- --------------------- and Trustee
Walter B. Grimm*** (Principal Executive
Officer)
JOHN H. FERRING IV Trustee March 30, 1999
- ---------------------
John H. Ferring IV**
MAURICE G. STARK Trustee March 30, 1999
- ---------------------
Maurice G. Stark*
MICHAEL M. VAN BUSKIRK Trustee March 30, 1999
- ----------------------
Michael M. Van Buskirk*
PAUL KANE Treasurer
- --------------------- (Principal
Paul Kane Financial and
Accounting Officer)
By: Jeffrey L. Steele
---------------------------
Jeffrey L. Steele, as attorney-in-fact
- --------------------------------------
* Pursuant to power of attorney filed with Pre-Effective Amendment No. 3
on April 6, 1992.
** Pursuant to power of attorney filed with Post-Effective Amendment No.
39 on July 31, 1998.
*** Pursuant to power of attorney filed with Post-Effective
Amendment No. 26 on May 1, 1996.
<PAGE> 1
THE COVENTRY GROUP
ON BEHALF OF
WILLAMETTE SMALL CAP GROWTH FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on April 1, 1999 between Willamette Asset
Managers, Inc. (the "Adviser") and The Coventry Group. (the "Trust") on behalf
of Willamette Small Cap Growth Fund (the "Fund").
WHEREAS, the Trust is a Massachusetts business trust of the series type
organized under a Declaration of Trust dated January 8, 1992, (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
ibetween 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; AUTHORITY TO DELEGATE TO SUB-ADVISER.
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. The
Adviser is authorized, at its own expense, to delegate to a sub-adviser such of
its responsibilities hereunder as may be specified in an agreement with such
sub-adviser, subject to such approvals by the Trustees and shareholders of the
Fund as are required by the 1940 Act. In the event the Adviser does so delegate
to a sub-adviser, the Adviser is further responsible for supervising the
activities and performance of the sub-adviser, for taking reasonable steps to
assure that the sub-adviser complies with the Fund's
<PAGE> 2
investment policies and procedures and with applicable legal requirements, and
for reporting to the Trustees regarding these matters.
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. Subject to the
Fund's investment objective and policies, 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 or Administrator 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
-2-
<PAGE> 3
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;
(g) in making investment decisions for the Fund, use no inside information
that may be in its possession, 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 also pay the fees of any
sub-adviser.
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
-3-
<PAGE> 4
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.
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 1.20% 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.
5. 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.
6. 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 to the Sub-Adviser, the Trust, the Fund or to
any holder of the Fund's shares, 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
-4-
<PAGE> 5
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
include any officers, directors, employees or other affiliates of the Adviser
performing services with respect to the Fund.
7. 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 directors or officers (or persons acting in similar capacities)
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.
8. DURATION AND TERMINATION. This Agreement shall continue until March 31,
2001, 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).
9. 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
-5-
<PAGE> 6
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.
10. 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.
11. 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 the Fund. 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, the Trust
shall, upon request of the Adviser, cease to use the term "Willamette" as part
of the name of the Fund, or in connection with the Trust or any series of the
Trust. 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."
12. MISCELLANEOUS.
a. This Agreement shall be governed by the laws of the State of Oregon,
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.
e. The names "The Coventry Group" and "Trustees of the Coventry Group"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of January 8,
-6-
<PAGE> 7
1992 to which reference is hereby made and a copy of which is on file at
the office of the Secretary of State of the Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Coventry Group" entered into in the
name or on behalf thereof, or in the name or on behalf of any series or class of
shares of the Trust, by any of the Trustees, representatives or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with any series or class of
shares of the Trust must look solely to the assets of the Trust belonging to
such series or class for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of April 1, 1999.
THE COVENTRY GROUP
By /s/ Walter B. Grimm
---------------------------
President
WILLAMETTE ASSET MANAGERS, Inc.
By: /s/ Timothy C. Phillips
---------------------------
President
-7-
<PAGE> 1
THE COVENTRY GROUP
ON BEHALF OF
WILLAMETTE SMALL CAP GROWTH FUND
SUB-INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on April 1, 1999 among Willamette
Asset Managers, Inc. (the "Adviser"), The Bank of New York ("Sub-Adviser"), and
The Coventry Group (the "Trust") on behalf of Willamette Small Cap Growth Fund
(the "Fund").
WHEREAS, the Trust is a Massachusetts business trust of the series
type organized under a Declaration of Trust dated January 8, 1992, (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 and the Adviser wish to retain the Sub-Adviser to
render sub-investment advisory services to the Fund, and the Sub-Adviser is
willing to furnish such services to the Fund;
WHEREAS, the Sub-Adviser is a bank under the laws of the State of New
York, as defined in Section 202(a)(2) of 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 among the Adviser, the Trust and the Sub-Adviser
as follows:
1. APPOINTMENT. The Trust and the Adviser hereby appoint the
Sub-Adviser to act as sub-investment adviser to the Fund for the periods and on
the terms set forth in this Agreement. The Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth, for the compensation herein
provided.
2. SUB-INVESTMENT ADVISORY DUTIES. Subject to the supervision of
the Adviser and the Trustees of the Trust, the Sub-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 and to the Sub-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
Sub-Adviser, in accordance with the directions of the Adviser, will provide the
Fund with ongoing
<PAGE> 2
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. Subject to the Fund's investment objective and policies, the
Sub-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 Sub-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 Sub-Adviser acknowledges that, pursuant to the Investment Advisory
Agreement between the Adviser and the Trust with respect to the Fund, the
Adviser is responsible for supervising the activities and performance of the
Sub-Adviser, for taking reasonable steps to assure that the Sub-Adviser complies
with the Fund's investment policies and procedures and with applicable legal
requirements, and for reporting to the Trustees of the Trust regarding these
matters. In this regard, the Sub-Adviser agrees to facilitate the Adviser's
implementation of its "Supervisory Procedures for Sub-Advisors" attached hereto
as Exhibit A.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder, 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, the Adviser, or to the Fund's administrator,
BISYS Fund Services, ("Administrator") if so directed, whatever statistical
information the Trust, Adviser or Administrator may reasonably request with
respect to the Fund's assets or contemplated investments. In addition, the
Sub-Adviser will keep the Adviser, the Trust and the Trustees informed of
developments materially affecting the Fund's portfolio and shall, on the
Sub-Adviser's own initiative, furnish to the Adviser and the Trust from time to
time whatever information the Sub-Adviser believes appropriate for this purpose;
(e) make available to the Adviser, 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 Adviser, the
Administrator and the Trust in their compliance with
-2-
<PAGE> 3
applicable laws and regulations. The Sub-Adviser will furnish the Adviser and
the Trustees with such periodic and special reports regarding the Fund as they
may reasonably request.
(f) immediately notify the Adviser and the Trust in the event that the
Sub-Adviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as
sub-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
Sub-Adviser further agrees to notify the Trust immediately of any material fact
known to the Sub-Adviser respecting or relating to the Sub-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 therein,
and of any statement contained therein that becomes untrue in any material
respect; and
(g) in making investment decisions for the Fund, use no inside information
that may be in its possession, nor will the Sub-Adviser seek to obtain any such
information.
3. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this section 3, the Sub-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 Sub-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 Sub-Adviser shall not be required to pay any expenses of the Fund or
Trust other than those specifically allocated to the Sub-Adviser in this section
3. In particular, but without limiting the generality of the foregoing, the
Sub-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 Sub-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 Sub-Adviser's overhead and employee costs); fees
payable to the Adviser and Sub-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
-3-
<PAGE> 4
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," as defined in Section 2(a)(19) of the
1940 Act, of the Sub-Adviser; and travel expenses (or an appropriate portion
thereof) of officers or Trustees of the Trust who are officers, Trustees or
employees of the Sub-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.
4. COMPENSATION. As compensation for the services provided and expenses
assumed by the Sub-Adviser under this Agreement, the Adviser will pay to the
Sub-Adviser, out of the Adviser's own resources at no additional cost to the
Fund, at the end of each calendar month a sub-advisory fee computed daily at an
annual rate equal to 0.45% 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 Sub-Adviser's compensation is payable pursuant to this section,
then the Sub-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.
5. BOOKS AND RECORDS. The Sub-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.
-4-
<PAGE> 5
The Sub-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 Sub-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.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best judgment in rendering the services provided by it under this
Agreement. The Sub-Adviser shall not be liable to the Adviser, the Trust, the
Fund or to any holder of the Fund's shares, 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
Sub-Adviser against any liability to the Adviser, the Trust, the Fund or to
holders of the Fund's shares to which the Sub-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 Sub-Adviser's reckless
disregard of its obligations and duties under this Agreement. As used in this
Section 6, the term "Sub-Adviser" shall include any officers, directors,
employees or other affiliates of the Sub-Adviser performing services with
respect to the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Sub-Adviser are not exclusive, and that nothing in this Agreement shall prevent
the Sub-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 Sub-Adviser's ability to meet its obligations to the Fund hereunder. When
the Sub-Adviser recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Sub-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 Sub-Adviser nor any of its directors or officers (or
persons acting in similar capacities) or employees shall act as a principal or
agent or receive any commission. If the Sub-Adviser provides any advice to its
clients concerning the shares of the Fund, the Sub-Adviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Trust or
the Fund.
8. DURATION AND TERMINATION. This Agreement shall continue until March 31,
2001, 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 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
-5-
<PAGE> 6
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 Adviser or
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 Sub-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).
9. 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.
10. PROXIES. Unless the Trust or the Adviser gives written instructions to
the contrary, the Sub-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 Sub-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.
11. NAME RESERVATION. The Sub-Adviser acknowledges and agrees that the
Adviser has property rights relating to the use of the terms "Willamette,"
"Willamette Family of Funds," "Willamette Value Fund" and "Willamette Small Cap
Growth Fund" ("Willamette Names") and has permitted the use of the Willamette
Names by the Trust and its series. The Sub-Adviser 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 any Willamette Name; and (iii)
the Adviser may use or grant to others the right to use a Willamette Name, 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, the Sub-Adviser shall,
at the request of the Adviser, cease to use all Willamette Names in any of its
materials or in any manner except with the consent of the Adviser, which shall
not be unreasonably withheld. In the event of any such request by the Adviser
that use by the Sub-Adviser of a Willamette Name shall cease and in the absence
of any such consent, the Sub-Adviser shall cause its officers, directors and
employees to take any and all such actions which the Adviser may reasonably
request to effect such request.
-6-
<PAGE> 7
12. MISCELLANEOUS.
--------------
a. This Agreement shall be governed by the laws of the State of New York,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 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 Sub-Adviser as an
agent of the Adviser, the Trust or the Fund.
e. The names "The Coventry Group" and "Trustees of the Coventry Group"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated as of January 8, 1992 to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
the Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of "The
Coventry Group" entered into in the name or on behalf thereof, or in the name or
on behalf of any series or class of shares of the Trust, by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series or class of shares of the Trust must look solely to the assets
of the Trust belonging to such series or class for the enforcement of any claims
against the Trust.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of April 1, 1999.
THE COVENTRY GROUP
By /s/ Walter B. Grimm
----------------------------
President
WILLAMETTE ASSET MANAGERS, Inc.
By: /s/ Timothy C. Phillips
----------------------------
President
THE BANK OF NEW YORK
By: /s/ Joseph E. Serzan
----------------------------
Title: Vice President/Division Manager
3/9/99
-8-
<PAGE> 9
Exhibit A
WILLAMETTE ASSET MANAGERS
SUPERVISORY PROCEDURES FOR SUB-ADVISERS
STATEMENT OF PURPOSE:
Willamette Asset Managers (Adviser) will coordinate and oversee the activities
of Investment Sub-Advisers (Sub-Advisers), who will be responsible for the daily
investment operations of individual mutual funds in the Willamette Family of
Funds (Funds).
SUPERVISORY PROCEDURES FOR SUB-ADVISERS
Each Sub-Adviser will be monitored on an on-going basis by Adviser. The
oversight responsibilities will include, but not be limited to, the following
areas:
1. COMPLIANCE WITH STATED FUND OBJECTIVES, POLICIES AND RISK FACTORS
Adviser will review each Sub-Adviser's compliance with stated investment
objectives and policies of the particular Fund(s) as set forth in the current
Prospectus of the Fund(s) on a daily basis by reviewing the Valuation Comparison
Report. The information used to determine the appropriateness of current
investments will be provided by BISYS Fund Services. Adviser retains the right
to restrict purchases of securities it believes do not meet the investment
objectives of a Fund. A report will be made to Board of Trustees (Board)
quarterly.
2. PERFORMANCE
Adviser will monitor the performance of the Funds on an on-going basis.
This will be based on a comparison of similar funds' performance as well as
specific Fund goals as stated in the prospectus. Adviser will use Bloomberg,
Morningstar, or similar independent monitoring services to review funds of
similar investment styles. In addition, the quarterly review will include
overall commissions paid and their reasonableness in relation to the benefits to
the particular Funds. Transactions that are effected through an affiliated
broker-dealer on a national securities exchange will be in accordance with
Section 11(a) of the Securities Exchange Act of 1934, as amended. Reports will
be made to the Board at least quarterly.
3. ANNUAL ON-SITE VISITS
At least annually, Adviser will conduct an on-site visit of each
Sub-Adviser, interview the investment personnel of the Sub-Adviser and obtain a
level of assurance as to the general operations of the Sub-Adviser, as such
relate to the operations of the particular Fund. The first audit will be made no
later than six months after initiation of a Fund, with annual audits scheduled
thereafter. If concerns with a Sub-Adviser's performance or compliance arise,
more
<PAGE> 10
frequent audits may be warranted. Audits will be conducted by Adviser, or may be
delegated. Reports of all audits will be made to the Board as soon as possible
after a visit.
4. FINANCIAL AUDITS
Annually, Sub-Advisers will provide audited financial statements to Adviser
for review. Adviser will review the books and records of each Sub-Adviser
relating to the Fund(s) that are maintained pursuant to Rule 204-2 of the
Investment Advisers Act of 1940 and Section 31 of the Investment Company Act of
1940. Adviser will also review and maintain the current copy of each
Sub-Adviser's Form ADV and Code of Ethics.
5. PRESENTATIONS TO BOARD OF TRUSTEES AND TO BROKER-DEALER AFFILIATES OF
ADVISER
Periodically, each Sub-Adviser will be expected to make a formal
presentation to the Board. The meeting will be coordinated by Adviser, and be a
part of the annual review of the Adviser's and Sub-Adviser's performance.
Each Sub-Adviser will make presentations quarterly to the broker-dealer
affiliates of Adviser, Phillips & Company Securities, Inc. and Willamette
Securities, Inc. ("Affiliated Broker-Dealers"), regarding Sub-Adviser's
investment process, with one such presentation each year to be by
representatives of Sub-Adviser in person at the offices of such Affiliated
Broker-Dealers in Portland, Oregon.
6. BROKERAGE ALLOCATION PROCEDURES
On an on-going basis, at least quarterly, Adviser will review the brokerage
allocation procedures and practices of each Sub-Adviser relating to the Fund(s)
as well as the Sub-Adviser's soft dollar practices. Findings will be reported in
the annual report to the Board. Each Sub-Adviser will provide necessary
information each quarter for review.
7. PERFORMANCE INFORMATION
Each Sub-Adviser will provide Adviser with such information regarding the
performance of other accounts of Sub-Adviser that are managed with a style
similar to that of the Fund(s) for use in the prospectus and registration
statement of the Fund(s) filed with the Securities and Exchange Commission, as
amended from time to time, and in any other manner permitted by applicable law,
rule or regulatory policy.
8. OTHER SERVICE PROVIDERS TO THE FUND
The Adviser will coordinate and facilitate to the extent necessary, the
interaction between the Sub-Adviser and all other service providers to the Fund.
2
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<ARTICLE> 6
<CIK> 0000882748
<NAME> THE COVENTRY GROUP
<SERIES>
<NUMBER> 18
<NAME> WILLAMETTE VALUE FUND
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> MAY-26-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 11218583
<INVESTMENTS-AT-VALUE> 10585069
<RECEIVABLES> 191302
<ASSETS-OTHER> 4725
<OTHER-ITEMS-ASSETS> 39116
<TOTAL-ASSETS> 10820212
<PAYABLE-FOR-SECURITIES> 501322
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25146
<TOTAL-LIABILITIES> 526468
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<PAID-IN-CAPITAL-COMMON> 10933996
<SHARES-COMMON-STOCK> 1124832
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (6738)
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<ACCUM-APPREC-OR-DEPREC> (633514)
<NET-ASSETS> 10293744
<DIVIDEND-INCOME> 76745
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 83483
<NET-INVESTMENT-INCOME> (6738)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (633514)
<NET-CHANGE-FROM-OPS> (640252)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1169097
<NUMBER-OF-SHARES-REDEEMED> 44265
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10293744
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83483
<AVERAGE-NET-ASSETS> 6846728
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> (.84)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
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<PER-SHARE-NAV-END> 9.15
<EXPENSE-RATIO> 3.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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