-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JTTUAfnnVPGjGxaKjjmpCyhsGdB0S0BpN4PAIuWka9aWXdV8HfbWP/lp1uK+SUNM LCL8MV5fZc1zwqT+P/usZQ== 0000950152-07-004276.txt : 20070510 0000950152-07-004276.hdr.sgml : 20070510 20070510161407 ACCESSION NUMBER: 0000950152-07-004276 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20070510 DATE AS OF CHANGE: 20070510 EFFECTIVENESS DATE: 20070510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVENTRY FUNDS TRUST CENTRAL INDEX KEY: 0000927290 IRS NUMBER: 311642525 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08644 FILM NUMBER: 07837958 BUSINESS ADDRESS: STREET 1: 3435 STELZER ROAD CITY: COLUMBUS STATE: OH ZIP: 43219-3035 BUSINESS PHONE: 6144708000 MAIL ADDRESS: STREET 1: 3435 STELZER ROAD CITY: COLUMBUS STATE: OH ZIP: 43219-3035 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE INSURANCE FUNDS DATE OF NAME CHANGE: 19940721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVENTRY FUNDS TRUST CENTRAL INDEX KEY: 0000927290 IRS NUMBER: 311642525 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-81800 FILM NUMBER: 07837959 BUSINESS ADDRESS: STREET 1: 3435 STELZER ROAD CITY: COLUMBUS STATE: OH ZIP: 43219-3035 BUSINESS PHONE: 6144708000 MAIL ADDRESS: STREET 1: 3435 STELZER ROAD CITY: COLUMBUS STATE: OH ZIP: 43219-3035 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE INSURANCE FUNDS DATE OF NAME CHANGE: 19940721 0000927290 S000016942 EM Capital India Gateway Fund C000047129 Class A C000047130 Class C C000047131 Class I 485BPOS 1 l23639be485bpos.txt THE COVENTRY FUNDS TRUST 485BPOS As filed with the Securities and Exchange Commission on May 10, 2007 Securities Act No. 33-81800 Investment Company Act File No. 811-8644 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [ ] -- Post-Effective Amendment No. 33 [X] -- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 35 [X] -- THE COVENTRY FUNDS TRUST ------------------ (Exact Name of Registrant as Specified in Charter) 3435 Stelzer Road, Columbus, Ohio 43219 --------------------------------------- (Address of Principal Executive Offices) Registrant's Telephone Number: (614) 470-8000 ----------------- R. Jeffrey Young BISYS Fund Services 3435 Stelzer Road Columbus, Ohio 43219 ---------------------- (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on May 10, 2007 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on [ ] pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for post-effective amendment No. __ filed on [date]. QUESTIONS? Call 1-866-611-4967 or your investment representative. EM Capital India Gateway Fund --------------- PROSPECTUS DATED MAY 11, 2007 --------------- EM CAPITAL MANAGEMENT, LLC Investment Adviser www.emcapitalfunds.com THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS RISK/RETURN SUMMARY AND FUND EXPENSES [ICON] Carefully review this 3 EM Capital India Gateway Fund important section for a summary of the Fund's investments, risks and fees. INVESTMENT OBJECTIVE AND STRATEGIES [ICON] This section contains 6 EM Capital India Gateway Fund details on the Fund's 7 Investment Risks investment strategies and 8 Risks of Investing in Foreign Securities Generally risks. 8 Risks of Investing Primarily in India 9 Other Risks of Foreign Investment SHAREHOLDER INFORMATION [ICON] Consult this section to 10 Pricing of Fund Shares obtain details on how shares 10 Purchasing and Adding to Your Shares are valued, how to purchase, 13 Selling Your Shares sell and exchange shares, 15 Distribution Arrangements/Sales Charges related charges and payments 21 Dividends, Distributions and Taxes of dividends. FUND MANAGEMENT [ICON] Review this section for 23 The Investment Adviser details on the people and 23 Portfolio Managers organizations who oversee 24 The Distributor and Administrator the Fund and its investments.
2 [ICON] RISK/RETURN SUMMARY AND FUND EXPENSES RISK/RETURN SUMMARY OF THE FUND INVESTMENT OBJECTIVE The Fund seeks long-term capital growth and income by investing primarily in a diversified portfolio of securities issued by Indian and Indian-related companies. PRINCIPAL The Fund invests, under normal circumstances, at least 80% of its net assets INVESTMENT STRATEGIES plus the amount of any borrowings for investment purposes in publicly-traded common stocks, preferred stocks and convertible stocks of Indian companies listed on Indian stock exchanges. The Fund also may invest in Indian-related companies listed on global stock exchanges. Indian-related companies are those companies that derive 50% or more of their revenues or profits from operations in India. The Fund invests in companies with a broad range of market capitalizations which may include small and mid-cap Indian companies. The Fund expects to invest at least 50% of its assets in the securities of small and mid-cap companies. Small and mid-cap companies for these purposes are companies with market capitalizations at the time of investment of less than $1.5 billion. The Fund intends to make its investments in Indian companies by investing through EM Capital Gateway (Mauritius), Ltd., a special purpose limited liability corporation registered in Mauritius, that was formed solely for the purpose of facilitating the Fund's purchase of Indian securities and that is regulated by the Securities and Exchange Board of India ("SEBI"). The Fund also may invest indirectly in Indian companies through the purchase of participatory notes. The Fund will invest in participatory notes through EM Capital Gateway (Cayman) Ltd., a special purpose limited liability company organized in the Cayman Islands. PRINCIPAL Because the value of the Fund's investments will fluctuate with market INVESTMENT RISKS conditions, so will the value of your investment in the Fund. You could lose money on your investment in the Fund, or the Fund could underperform other investments. Some of the Fund's holdings may underperform its other holdings. In addition, because the Fund invests primarily in securities issued by Indian and Indian-related firms, the Fund is subject to the political and economic risks associated with investment in India. WHO MAY Consider investing in the Fund if you are: WANT TO INVEST? - investing for a long-term goal such as retirement (five year or longer investment horizon) - looking to add a growth component to your portfolio - willing to accept higher risks of investing in the stock market in exchange for potentially higher long term returns This Fund will not be appropriate for someone: - seeking monthly income - pursuing a short-term goal or investing emergency reserves - seeking safety of principal FUND PERFORMANCE Because the Fund only commenced investment operations on May , 2007, fund performance information is not yet presented.
3 RISK/RETURN SUMMARY AND FUND EXPENSES This table describes the FEES AND EXPENSES fees and expenses that you may pay if you buy and hold shares of the Fund. SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR CLASS CLASS CLASS INVESTMENT) A C I -------------------------------------------------------------------------------- Maximum sales charge (load) imposed on purchases 5.00%(1) None None -------------------------------------------------------------------------------- Maximum deferred sales charge (load) 1.00%(2) None None -------------------------------------------------------------------------------- Maximum sales charge (load) imposed on reinvested dividends None None None -------------------------------------------------------------------------------- Redemption fees(3) 2.00% 2.00% 2.00% -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) -------------------------------------------------------------------------------- Management Fees(4) 1.20% 1.20% 1.20% -------------------------------------------------------------------------------- Distribution and Service (12b-1) Fees 0.50% 1.00% 0.00% -------------------------------------------------------------------------------- Other Expenses(5) 1.75% 1.75% 1.75% -------------------------------------------------------------------------------- Total Fund Operating Expenses(6) 3.45% 3.95% 2.95% Fee Waiver and/or Expense Reimbursement(6) 1.15% 1.15% 1.15% -------------------------------------------------------------------------------- Net Expenses(6) 2.30% 2.80% 1.80% --------------------------------------------------------------------------------
(1.) The sales charge is eliminated in certain circumstances, such as for purchases of $1 million or more. See "Distribution Arrangements/Sales Charges." (2.) A contingent deferred sales charge of 1% applies to redemptions made within 12 months following certain purchases made without a sales charge. (3.) Charged to shares redeemed within 90 days of purchase. Certain exemptions may apply. Please see page 21 for more information. (4.) The Fund's investment management fee is reduced as net assets in the Fund increase, as follows: 1.20% of the first $500 million in net assets; 0.90% of the next $500 million; 0.80% of the next $500 million; 0.70% of the next $500 million; 0.65% of the next $1 billion; and 0.60% of net assets over $3 billion. (5.) "Other Expenses" are estimated for the Fund's current fiscal year. (6.) The Adviser has contractually agreed until April 30, 2008 to waive fees and/or reimburse the Fund certain expenses (excluding extraordinary expenses, brokerage costs, interest, taxes and dividends) to the extent necessary to maintain the Net Expenses for Class A, Class C and Class I Shares at 2.30%, 2.80% and 1.80%, respectively. The Fund has agreed to repay the Adviser for amounts waived or reimbursed by the Adviser pursuant to the expense limitation agreement provided that such repayment does not cause the Total Fund Operating Expenses for a class of shares to exceed the above limits and the repayment is made within three years after the year in which the Adviser incurred the expense. 4 RISK/RETURN SUMMARY AND FUND EXPENSES EXPENSE EXAMPLE 1 3 YEAR YEARS Class A $721 $1,405 -------------------------------------------------------------------------------- Class C $283 $1,099 -------------------------------------------------------------------------------- Class I $183 $ 804
Use this table to compare fees and expenses with those of other mutual funds. It illustrates the amount of fees and expenses you would pay, assuming the following: - $10,000 investment - 5% annual return - redemption at the end of each period - no changes in the Fund's operating expenses - reinvestment of dividends and distributions Because this example is hypothetical and for comparison purposes only, your actual costs will be different. 5 [ICON] INVESTMENT OBJECTIVE AND STRATEGIES EM CAPITAL INDIA GATEWAY FUND INVESTMENT OBJECTIVE The investment objective of the Fund is to seek long-term capital growth and income by investing primarily in a diversified portfolio of securities issued by Indian and Indian-related companies. POLICIES AND STRATEGIES The Fund invests, under normal circumstances, at least 80% of its net assets plus the amount of any borrowings for investment purposes in publicly-traded common stocks, preferred stocks and convertible stocks of Indian companies listed on Indian stock exchanges. The Fund also may invest in Indian-related companies listed on global stock exchanges. India-related companies are those companies that derive 50% or more of their revenues or profits from operations in India. The Fund invests in companies with a broad range of market capitalizations which may include small and mid-cap Indian companies. The Fund expects to invest at least 50% of its assets in the securities of small and mid-cap companies. Small and mid-cap companies for these purposes are companies with market capitalizations at the time of investment of less than $1.5 billion. EM Capital Management, LLC uses its proprietary Quantitative + Qualitative(TM) investment methodology that combines quantitative fundamental company valuation and portfolio risk management models with rigorous qualitative in-country research and due diligence, including as appropriate, company visits and management interviews. The Indian equity market currently comprises approximately 6,000 companies listed on the Indian stock exchanges. By allocating a portion of its assets to mid-cap and small-cap stocks, the Fund will invest in Indian companies that may experience higher growth rates than larger Indian companies and may provide the Fund with the opportunity to experience greater capital appreciation over time. The Fund intends to make its investments in Indian companies by investing through EM Capital Gateway (Mauritius), Ltd., a special purpose limited liability corporation, registered in Mauritius and regulated by the Mauritius Financial Services Commission. EM Capital Gateway (Mauritius), Ltd. was formed solely for the purpose of facilitating the Fund's investment in Indian securities and is regulated by the Securities and Exchange Board of India ("SEBI"). Investing through EM Capital Gateway (Mauritius) Ltd. provides the Fund with a tax efficient method of investing indirectly in the Indian stock market through local Indian brokers. Investing directly through Indian brokers provides the Fund access to a wide selection of small- and mid-cap Indian companies consistent with the Fund's investment strategies. The Fund also intends to invest through EM Capital Gateway (Cayman) Ltd., a special purpose limited liability company organized in the Cayman Islands. EM Capital Gateway (Cayman) Ltd. was formed solely for the purpose of facilitating the Fund's investments in participatory notes ("P-Note"). P-Notes, which are sold by major international securities firms, represent indirect investments in Indian securities. These indirect investments may provide tactical trading advantages to the Fund. Consistent with the Fund's investment objective, the Fund: - may invest in the following types of equity securities: common stocks, preferred stocks, securities convertible into or exchangeable for common stocks, warrants and any rights to purchase common stocks - may invest in fixed income securities consisting of corporate notes, bonds and debentures 6 INVESTMENT OBJECTIVE AND STRATEGIES - may invest in initial public offerings and shares offered prior to the commencement of public offerings - may invest in sponsored and unsponsored American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs) - may invest in participatory notes which are financial instruments issued by major international investment firms that represent interests in the securities of Indian issuers - may invest in private investment in public entity investments - may invest in foreign currency transactions including forward contracts, options and swaps - may invest in futures contracts and options thereon - may invest in foreign government obligations and supranational obligations - may invest in call options and put options - may invest in restricted and illiquid securities - may invest in commercial paper - may engage in repurchase transactions and reverse repurchase transactions - may invest in securities of other investment companies including exchange traded funds - may invest in short-term money market instruments and bank obligations - may invest in U.S. Treasury securities including Treasury bills, Treasury notes and Treasury bonds - may invest in obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government - may lend securities to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional income In the event that the Adviser determines that current market conditions are not suitable for the Fund's typical investments, the Adviser may instead, for temporary defensive purposes during such unusual market conditions, invest all or any portion of the Fund's assets in money market instruments and repurchase agreements. INVESTMENT RISKS RISK FACTORS An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (the "FDIC") or any other government agency. Generally, the Fund will be subject to the following risks: MARKET RISK: Market risk refers to the risk related to investments in securities in general and the daily fluctuations in the securities markets. The Fund's performance will change daily based on many factors, including fluctuation in interest rates, the quality of the instruments in the Fund's investment portfolio, national and international economic conditions and general market conditions. 7 INVESTMENT OBJECTIVE AND STRATEGIES SMALL AND MID-SIZED COMPANY RISK: Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Mid-sized company risk is the possibility that the securities of medium-sized companies may under certain market conditions be more volatile and more speculative than the securities of larger companies. Market capitalization of a company is determined by multiplying the number of its outstanding shares by the current market price per share. Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base and limited access to capital. Those factors also increase risks and make those companies more likely to fail than companies with larger market capitalizations. - - RISKS OF INVESTING IN FOREIGN SECURITIES GENERALLY Foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political, social and economic conditions, possible security illiquidity, a lack of adequate or accurate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, capital reinvestment, resources, self-sufficiency, and balance of payments position. Also, certain investments in foreign securities also may be subject to foreign withholding taxes. - - RISKS OF INVESTING PRIMARILY IN INDIA The Fund will invest primarily in Indian and Indian-related securities. The value of the Fund's investments may therefore be adversely affected by political and social instability in India and by changes in economic or taxation policies in the country. Investments in Indian securities will expose the Fund to the direct or indirect consequences of political, social or economic changes in India. India is considered to still be an emerging market nation and, as a result, has historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Emerging market nations may be characterized by political uncertainty and instability. In addition, there may be a risk of the possibility of expropriation of assets, confiscatory taxation, difficulty in obtaining or enforcing a court judgment, economic, political or social instability, and diplomatic developments that could affect investments in India. 8 INVESTMENT OBJECTIVE AND STRATEGIES OTHER RISKS OF FOREIGN INVESTMENT OVERSEAS EXCHANGES RISK: The Fund will engage in transactions on a number of overseas stock exchanges. It is possible that market practices relating to clearance and settlement of securities transactions and custody of assets can pose increased risk to the Fund and may involve delays in obtaining accurate information on the value of securities (which may, as a result affect the calculation of the Fund's net asset value per share ("NAV")). FOREIGN CURRENCY RISK: Although the Fund will report its net asset value and pay dividends in U.S. dollars, foreign securities often are purchased with and make interest payments in foreign currencies. Therefore, when the Fund invests in foreign securities, it will be subject to foreign currency risk, which means that the Fund's net asset value could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. CURRENCY HEDGING RISK: The Fund may engage in various investments that are designed to hedge the Fund's foreign currency risks. While these transactions will be entered into to seek to manage these risks, these investments may not prove to be successful or may have the effect of limiting the gains from favorable market movements. 9 [ICON] SHAREHOLDER INFORMATION PRICING OF FUND SHARES ---------------------------------------- HOW NAV IS CALCULATED The NAV is calculated by adding the total value of the Fund's investments and other assets, subtracting its liabilities and then dividing that figure by the number of outstanding shares of the Fund: NAV = Total Assets - Liabilities -------------------------- Number of Shares Outstanding You may find the Fund's NAV in certain newspapers. --------------------------- Per share net asset value (NAV) for the Fund is determined and its shares are priced at the close of regular trading on the New York Stock Exchange (the "NYSE"), normally at 4:00 p.m. Eastern time on days the Exchange is open for business. Your order for purchase, sale or exchange of shares is priced at the next NAV calculated after your order is accepted by the Fund plus any applicable sales charge. This is what is known as the offering price. The Fund's securities are generally valued at current market prices. If market quotations are not available, prices will be based on fair value as determined in accordance with procedures established by, and under the supervision of, the Fund's Trustees. PURCHASING AND ADDING TO YOUR SHARES You may purchase the Fund through the Distributor or through investment representatives, who may charge fees and may require higher minimum investments or impose other limitations on buying and selling shares. If you purchase shares through an investment representative, that party is responsible for transmitting orders by close of business and may have an earlier cut-off time for purchase and sale requests. Consult your investment representative for specific information.
CLASS A AND CLASS C SHARES* ----------------------- MINIMUM MINIMUM INITIAL SUBSEQUENT ACCOUNT TYPE INVESTMENT INVESTMENT Regular (non-retirement) $1,000 $100 ------------------------------------------------- Retirement $ 500 $100 ------------------------------------------------- Automatic Investment Plan Regular $1,000 $100 ------------------------------------------------- Automatic Investment Plan Retirement $ 500 $100
* The minimum initial investment for all account types in Class I shares is $100,000. All purchases must be in U.S. dollars. A fee will be charged for any checks that do not clear. Third-party checks, starter checks, traveler's checks, money orders, credit card convenience checks and cash are not accepted. The Fund may waive its minimum purchase requirement and it may reject a purchase order if it considers it in the best interest of the Fund and its shareholders. 10 SHAREHOLDER INFORMATION PURCHASING AND ADDING TO YOUR SHARES CONTINUED IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. What this means for you is that when you open an account, you are required to provide your name, residential address, date of birth, and identification number. We may require other information that will allow us to identify you. INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT BY REGULAR MAIL Initial Investment: 1. Carefully read and complete the application. Establishing your account privileges now saves you the inconvenience of having to add them later. 2. Make check or certified check payable to "EM Capital India Gateway Fund." 3. Mail to: EM Capital India Gateway Fund, P.O. Box 182626, Columbus, OH 43218-2626 Subsequent: 1. Use the investment slip attached to your account statement. Or, if unavailable, 2. Include the following information on a piece of paper: - Fund name - Amount invested - Account name - Account number Include your account number on your check. 3. Mail to: EM Capital India Gateway Fund, P.O. Box 182626, Columbus, OH 43218-2626 BY OVERNIGHT SERVICE SEE INSTRUCTIONS 1-2 ABOVE FOR SUBSEQUENT INVESTMENTS. 3. Send to: EM Capital India Gateway Fund, Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219. BY WIRE TRANSFER Note: Your bank may charge a wire transfer fee. Please call 1-866-611-4967 for instructions on opening an account or purchasing additional shares by wire transfer. 11 SHAREHOLDER INFORMATION PURCHASING AND ADDING TO YOUR SHARES CONTINUED You can add to your account by using the convenient options described below. The Fund reserves the right to change or eliminate these privileges at any time with 60 days notice. AUTOMATIC INVESTMENT PLAN You can make automatic investments in the Fund from your bank account. Automatic investments can be as little as $100, once you've invested the $1,000 minimum required to open the account. To invest regularly from your bank account: - Complete the Automatic Investment Plan portion on your Account Application. Make sure you note: - Your bank name, address and ABA number - Your checking or savings account number - The amount you wish to invest automatically (minimum $100) - How often you want to invest (monthly or quarterly) - Attach a voided personal check or savings deposit slip. PURCHASES MADE THROUGH CERTAIN SELECTED DEALERS Shares of the Fund may also be purchased through certain broker-dealers or other financial intermediaries that have entered into selling agreements or related arrangements with the Fund or the Distributor. If you invest through such entities, you must follow their procedures for buying and selling Fund shares. Please note that such financial intermediaries may charge you fees in connection with purchases of Fund shares. Such broker-dealers or financial intermediaries are authorized to designate other intermediaries to accept purchase and redemption orders on behalf of the Fund. If the broker-dealer or financial intermediary submits trades to the Fund, the Fund will use the time of day when such entity or its designee receives the order to determine the time of purchase or redemption, and will process the order at the next closing price computed after acceptance. The Adviser may make payments to such entities out of its own resources in connection with certain administrative services provided by them in connection with the Fund. ----------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS All dividends and distributions will be automatically reinvested unless you request otherwise. Capital gains are distributed at least annually. DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION AND MAY BE SUBJECT TO INCOME TAX. ----------------------------------------------------------------------------- 12 SHAREHOLDER INFORMATION SELLING YOUR SHARES INSTRUCTIONS FOR SELLING SHARES WITHDRAWING MONEY FROM YOUR FUND INVESTMENT As a mutual fund shareholder, you are technically selling shares when you request a withdrawal in cash. This is also known as redeeming shares or a redemption of shares. BY TELEPHONE (unless you have declined telephone sales privileges) 1. Call 1-866-611-4967 with instructions as to how you wish to receive your funds (check, wire, electronic transfer). BY MAIL 1. Call 1-866-611-4967 to request redemption forms or write a letter of instruction indicating: - your Fund and account number - amount you wish to redeem - address where your check should be sent - account owner signature 2. Mail to: EM Capital India Gateway Fund, P.O. Box 182626 Columbus, OH 43218-2626 BY OVERNIGHT SERVICE SEE INSTRUCTION 1 ABOVE UNDER "BY MAIL." 2. Send to: EM Capital India Gateway Fund, Attn: Shareholder Services, 3435 Stelzer Road, Columbus, OH 43219 WIRE TRANSFER You must indicate this option on your application. The Fund may charge a wire transfer fee. Note: Your financial institution may also charge a separate fee. Call 1-866-611-4967 to request a wire transfer. If you call by 4 p.m. Eastern time, your payment will normally be wired to your bank on the next business day. AUTOMATIC WITHDRAWAL PLAN You can receive automatic payments from your account on a monthly or quarterly basis. The minimum withdrawal is $100. To activate this feature: - Make sure you've checked the appropriate box and completed the Automatic Withdrawal section of the Account Application. Or call 1-866-611-4967. - Include a voided personal check. - Your account must have a value of $5,000 or more to start withdrawals. - If the value of your account falls below $500, you may be asked to add sufficient funds to bring the account back to $500, or the Fund may close your account and mail the proceeds to you. You may sell your shares at any time. Your sales price will be the next NAV after your sell order is received by the Fund, its transfer agent, or your investment representative. Normally you will receive your proceeds within a week after your request is received. See section on "General Policies on Selling Shares" below. 13 SHAREHOLDER INFORMATION GENERAL POLICIES ON SELLING SHARES REDEMPTIONS IN WRITING REQUIRED You must request redemptions in writing in the following situations: 1. Redemptions from Individual Retirement Accounts ("IRAs"). 2. Redemption requests requiring a signature guarantee. Signature guarantees are required in the following situations: - Your account address has changed within the last 15 business days - The check is not being mailed to the address on your account - The check is not being made payable to the owner(s) of the account - The redemption proceeds are being transferred to another Fund account with a different registration - The redemption proceeds are being wired to bank instructions currently not on your account A signature guarantee can be obtained from a financial institution, such as a bank, broker-dealer, or credit union, which are members of the STAMP (Securities Transfer Agents Medallion Program), MSP (New York Stock Exchange Medallion Program) or SEMP (Stock Exchanges Medallion Program), but not from a notary public. Members are subject to dollar limitations which must be considered when requesting their guarantee. The Transfer Agent may reject any signature guarantee if it believes the transaction would otherwise be improper. VERIFYING TELEPHONE REDEMPTIONS The Fund makes every effort to insure that telephone redemptions are only made by authorized shareholders. All telephone calls are recorded for your protection and you will be asked for information to verify your identity. Given these precautions, unless you have specifically indicated on your application that you do not want the telephone redemption feature, you may be responsible for any fraudulent telephone orders. If appropriate precautions have not been taken, the Transfer Agent may be liable for losses due to unauthorized transactions. REDEMPTIONS WITHIN 10 DAYS OF SHARES PURCHASED BY CHECK When you have made your investment by check, you cannot redeem any portion of it until the Transfer Agent is satisfied that the check has cleared (which may require up to 10 business days). You can avoid this delay by purchasing shares with a federal funds wire. REFUSAL OF REDEMPTION REQUEST Payment for shares may be delayed under extraordinary circumstances or as permitted by the SEC in order to protect remaining shareholders. REDEMPTION IN KIND The Fund reserves the right to make payment in securities rather than cash, known as "redemption in kind." This could occur under extraordinary circumstances, such as a very large redemption that could affect the Fund's operations (for example, more than 1% of the Fund's net assets). If the Fund deems it advisable for the benefit of all shareholders, redemption in kind will consist of securities equal in market value to your shares. When you convert these securities to cash, you will pay brokerage charges. 14 SHAREHOLDER INFORMATION GENERAL POLICIES ON SELLING SHARES CONTINUED CLOSING OF SMALL ACCOUNTS If your account falls below $500, the Fund may ask you to increase your balance. If it is still below $500 after 60 days, the Fund may close your account and send you the proceeds at the current NAV. UNDELIVERABLE DISTRIBUTION CHECKS For any shareholder who chooses to receive distributions in cash: If distribution checks are returned and marked as "undeliverable" or remain uncashed for six months, your account may be changed automatically so that all future distributions are reinvested in your account. DISTRIBUTION ARRANGEMENTS/SALES CHARGES This section describes the sales charges and fees you will pay as an investor in the Fund and ways to qualify for reduced sales charges. You may also obtain information about the Fund's sales charges and ways to reduce sales charges through the use of breakpoints and waiver arrangements by visiting the Fund's website at http://www.emcapitalmanagement.com.
CLASS A CLASS C CLASS I Sales Charge (Load) Front-end sales No front-end sales No front-end sales charge; reduced charge or contingent charge or contingent sales charges sales charge. sales charge. available. A contingent deferred sales charge of 1% applies to redemptions made within 12 months following certain purchases made without a sales charge. Distribution and Subject to annual Subject to annual No distribution and Service (12b-1) Fee distribution and distribution and shareholder shareholder shareholder servicing fees. servicing fees of up servicing fees of up to 0.50% of the to 1.00% of the Fund's total assets Fund's total assets applicable to Class applicable to Class A shares. C shares. Fund Expenses Lower annual Higher annual Lower annual expenses than Class expenses than Class expenses than Class C shares; higher A and Class I A and Class C annual expenses than shares. shares. Class I shares.
15 SHAREHOLDER INFORMATION DISTRIBUTION ARRANGEMENTS/SALES CHARGES CONTINUED CALCULATION OF SALES CHARGES CLASS A SHARES Class A shares are sold at their public offering price. This price includes the initial sales charge. Therefore, part of the money you invest will be used to pay the sales charge. The remainder is invested in Fund shares. The sales charge decreases with larger purchases. There is no sales charge on reinvested dividends and distributions. The current sales charge rates for the Class A shares of the Fund are as follows:
DEALER SALES CHARGE SALES CHARGE COMMISSION YOUR AS A % OF AS A % OF AS A % OF INVESTMENT OFFERING PRICE YOUR INVESTMENT OFFERING PRICE Less than $50,000 5.00% 5.26% 4.50% $ 50,000 but less than $100,000 4.00% 4.17% 3.65% $100,000 but less than $250,000 3.75% 3.90% 3.40% $250,000 but less than $500,000 3.00% 3.09% 2.75% $500,000 but less than $1,000,000 2.00% 2.04% 1.75% $1,000,000(1) or more None None None
(1) There is no initial sales charge on purchase of $1 million or more. However, a contingent deferred sales charge ("CDSC") of up to 1.00% of the purchase price will be charged to the shareholder if shares are redeemed in the first 12 months after purchase. This charge will be based on the lower of your cost for the shares or their NAV at the time of redemption. There will be no CDSC on reinvested distributions. For sales of $1 million or more, payments may be made to those broker-dealers having at least $1 million of assets invested in the Fund, a fee of up to 1% of the offering price of such shares up to $2.5 million, 0.5% of the offering price from $2.5 million to $5 million, and 0.25% of the offering price over $5 million. 16 SHAREHOLDER INFORMATION DISTRIBUTION ARRANGEMENTS/SALES CHARGES CONTINUED SALES CHARGE REDUCTIONS Reduced sales charges for Class A shares are available to shareholders with investments of $50,000 or more. In addition, you may qualify for reduced sales charges under the following circumstances: LETTER OF INTENT -- You inform the Fund in writing that you intend to purchase enough shares over a 13-month period to qualify for a reduced sales charge. Shares purchased under the non-binding Letter of Intent will be held in escrow until the total investment has been completed. In the event the Letter of Intent is not completed, sufficient escrowed shares will be redeemed to pay any applicable front-end sales charges. RIGHTS OF ACCUMULATION -- When the value of shares you already own in all share classes plus the amount you intend to invest reaches the amount needed to qualify for reduced sales charges, your added investment will qualify for the reduced sales charge. REINSTATEMENT PRIVILEGE If you have sold Class A shares and decide to reinvest in the Fund within a 120 day period, you will not be charged the applicable sales load on amounts up to the value of the shares you sold. You must provide a written reinstatement request and payment within 120 days of the date your instructions to sell were processed. SALES CHARGE WAIVERS The sales charge will not apply to purchases of Class A shares by: (1) BISYS or any of its affiliates; (2) Trustees or officers of the Fund; (3) Officers, directors and employees of EM Capital Management, LLC and their immediate families; (4) Employees of investment dealers and registered investment advisers authorized to sell the Fund; (5) Institutional investors (such as qualified retirement plans, wrap fee plans and other programs charging asset-based fees) that have received authorization from the Distributor; (6) Accounts that are held with certain selected financial intermediaries that have entered into service agreements that have received authorization from the Distributor. For these purposes, "immediate family" is defined to include a person's spouse, parents and children. The Adviser, at its expense, may provide compensation to dealers in connection with sales of shares of the Fund. 17 SHAREHOLDER INFORMATION DISTRIBUTION ARRANGEMENTS/SALES CHARGES CONTINUED CLASS C SHARES Class C shares are sold without any initial sales charge or contingent sales charge. CLASS I SHARES Class I Shares are sold without any initial sales charge, with a minimum initial investment of $100,000 to the following: (1) Accounts for which the Adviser or any of its affiliates act as fiduciary, agent, investment adviser or custodian. (2) Institutional investors (such as qualified retirement plans, wrap fee plans and other programs charging asset-based fees) that have received authorization from the Distributor. (3) Advisory clients of EM Capital Management, LLC with a fee-based asset management account. For these purposes, "immediate family" is defined to include a person's spouse, parents and children. The initial investment minimum may be waived for persons affiliated with the Adviser and its affiliated entities. 18 SHAREHOLDER INFORMATION DISTRIBUTION ARRANGEMENTS/SALES CHARGES CONTINUED DISTRIBUTION AND SERVICE (12b-1) FEES 12b-1 fees compensate dealers and investment representatives for services and expenses relating to the sale and distribution of the Fund's shares and/or for providing shareholder services. 12b-1 fees are paid from Fund assets on an ongoing basis, and will increase the cost of your investment. The 12b-1 fees vary by share class as follows: - Class A shares pay a 12b-1 fee of up to 0.50% of the average daily net assets of the Fund attributable to Class A shares. This will cause expenses for Class A shares to be higher and dividends to be lower than for Class I shares. - Class C shares pay a 12b-1 fee of up to 1.00% of the average daily net assets of the Fund attributable to Class C shares. This will cause expenses for Class C shares to be higher and dividends to be lower than for Class A and Class I shares. - The higher 12b-1 fee on Class C shares helps the Distributor sell Class C shares without an "up-front" sales charge. - The Distributor may use up to 0.25% of the 12b-1 fee for shareholder servicing and up to 0.75% for distribution, as applicable. Long-term shareholders of Class A shares and Class C shares may pay indirectly more than the equivalent of the maximum permitted front-end sales charge due to the recurring nature of 12b-1 distribution and service fees. Class I shares are not subject to any 12b-1 distribution or service fees. The Adviser, at its expense, may provide compensation to dealers in connection with sales of shares of the Fund. 19 SHAREHOLDER INFORMATION DISTRIBUTION ARRANGEMENTS/SALES CHARGES CONTINUED DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS -- ADDITIONAL PAYMENTS The Adviser has entered into an agreement with the Distributor whereby the Adviser has agreed that, in the event that the Fund's 12b-1 fees are not sufficient to pay for certain distribution activities described elsewhere in this Prospectus and disclosed above, the Adviser will use its own resources to pay the Distributor for the portion of distribution activities not paid for by the Fund's 12b-1 fees. Such payments by the Adviser may be made, among other things, to supplement commissions re-allowed to dealers, or more generally to promote the sale of Fund shares or to service Fund shareholders. Among other things, such payments may include, but are not limited to: (1) due diligence payments for a broker-dealer's examination of the Fund and payments for employee training and education in relation to the Fund; (2) listing fees for the placement of the Fund on a broker-dealer's list of mutual funds available for purchase by its clients; (3) marketing support fees for providing assistance in promoting the sale of Fund shares; (4) payments in connection with attendance at sales meetings for the promotion of the sale of Fund shares; and (5) payments for the sale of Fund shares and/or the maintenance of Fund share balances. These payments will not change the price an investor will pay for Fund shares. In some circumstances, the payments may create an incentive for a dealer, other organizations and their investment professionals to recommend or sell Fund shares to a client over shares of other mutual funds. For more information, please contact your investment professional. FREQUENT TRADING POLICY Frequent trading into and out of the Fund can have adverse consequences for the Fund and for long-term shareholders in the Fund. The Fund believes that frequent or excessive short-term trading activity by shareholders of the Fund may be detrimental to long-term shareholders because those activities may, among other things: (a) dilute the value of shares held by long-term shareholders; (b) cause the Fund to maintain larger cash positions than would otherwise be necessary; (c) increase brokerage commissions and related costs and expenses, and (d) incur additional tax liability. The Fund therefore discourages frequent purchases and redemptions by shareholders and it does not make any effort to accommodate this practice. To protect against such activity, the Board of Trustees has adopted policies and procedures that are intended to permit the Fund to curtail frequent or excessive short-term trading by shareholders. As described immediately below, the Fund changes a redemption fee of 2.00% of the total redemption amount on the sale of shares held for less than 90 days. At the present time the Fund does not impose limits on the frequency of purchases and redemptions. The Fund reserves the right, however, to impose certain limitations at any time with respect to trading in shares of the Fund, including suspending or terminating trading privileges in Fund shares, for any investor whom the Fund believes has a history of abusive trading or whose trading, in the judgment of the Fund, has been or may be disruptive to the Fund. 20 SHAREHOLDER INFORMATION REDEMPTION FEE The Fund charges a redemption fee of 2.00% of the total redemption amount if you sell your shares within 90 days of purchase, subject to certain exceptions and limitations as described below. The redemption fee is paid directly to the Fund and is designed to offset brokerage commissions, market impact and other costs associated with short-term trading of Fund shares. For purposes of determining whether the redemption fee applies, the shares that were held the longest will be redeemed first. This redemption fee is in addition to any contingent deferred sales charges that may be applicable at the time of sale. The redemption fee will not apply to shares representing the reinvestment of dividends and capital gains distributions. The redemption fee may not apply in certain circumstances such as redemptions of shares through systematic withdrawal plans, redemptions of shares purchased via an automatic investment plan, redemptions requested within 90 days following the death or disability of the shareholders (or, if a trust, its beneficiary), and redemptions requested pursuant to minimum required distributions from retirement plans or redemptions initiated by the Fund. DIVIDENDS, DISTRIBUTIONS AND TAXES Any income the Fund receives in the form of interest and dividends is paid out, less expenses, to its shareholders. Income dividends and capital gains for the Fund are distributed at least annually. Dividends and distributions are treated in the same manner for federal income tax purposes whether you receive them in cash or in additional shares. An exchange of shares is considered a sale, and any related gains may be subject to applicable taxes. Dividends are taxable as ordinary income. Taxation on capital gains will vary with the length of time the Fund has held the security -- not how long the shareholder has been in the Fund. Dividends are taxable in the year they are paid or credited to your account. However, dividends declared in October, November or December to shareholders of record in such a month and paid by January 31st are taxable on December 31st of the year they are declared. Currently effective tax legislation generally provides for a maximum tax rate for individual taxpayers of 15% on long-term gains and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers. The following are guidelines for how certain distributions by the Fund are generally taxed to individual taxpayers: - Distributions of earnings from qualifying dividends and qualifying long-term capital gains will be taxed at a maximum rate of 15%. - Note that distributions of earnings from dividends paid by certain "qualified foreign corporations" can also qualify for the lower tax rates on qualifying dividends. - A shareholder will also have to satisfy a greater than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate. - Distributions of earnings from non-qualifying dividends, interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer. 21 SHAREHOLDER INFORMATION You will be notified in January each year about the federal tax status of distributions made by the Fund. Depending on your residence for tax purposes, distributions also may be subject to state and local taxes, including withholding taxes. Foreign shareholders may be subject to special withholding requirements. There is a penalty on certain pre-retirement distributions from retirement accounts. Consult your tax advisor about the federal, state and local tax consequences in your particular circumstances. The Fund is required to withhold 28% of taxable dividends, capital gains distributions and redemptions paid to shareholders who have not provided the Fund with their certified taxpayer identification number in compliance with IRS rules. To avoid this, make sure you provide your correct Tax Identification Number (Social Security Number for most investors) on your account application. 22 [ICON] FUND MANAGEMENT THE INVESTMENT ADVISER The Fund's investment adviser is EM Capital Management, LLC (www.emcapitalmanagement.com), located in the United States at 61 Moraga Way, Suite 7, Orinda, California 94563. EM Capital Management, LLC also has offices in New Delhi, India, located at 15 Birbal Road, Jangpura Extension, New Delhi, 110014, India, through its domestic affiliate, EM Capital India Advisory Private, Limited. The investment adviser manages the Fund's investments and provides the Fund with operating facilities under the direction of the Board of Trustees. Mr. G. W. Bajpai, former Chairman of the Securities Exchange Board of India, serves as the Non-Executive Chairman of EM Capital Management, LLC. Mr. Bajpai also is a former Chairman of Life Insurance Corporation of India, India's largest insurance company. The Senior Officers of EM Capital Management, LLC, Robert K. Bell, Dhruba Gupta and Seth R. Freeman, also serve as Lead Portfolio Manager and Co-Portfolio Managers, respectively. Their titles and brief biographies appear in the "Portfolio Managers" section below. As compensation for its advisory and management services to the Fund, the investment adviser receives an annual fee that is computed and accrued daily and payable monthly. The investment advisory fee paid by the Fund on an annual basis based on the net assets of the Fund is as follows: 1.20% of the first $500 million; 0.90% of the next $500 million; 0.80% of the next $500 million; 0.70% of the next $500 million; 0.65% of the next $1 billion; and 0.60% of the net assets over $3 billion. The investment adviser may, from time to time, waive some or all of the investment advisory fee payable to it. Information regarding the factors considered by the Board of Trustees of the Fund in connection with their approval of the Investment Advisory Agreement with respect to the Fund is provided in the Fund's Annual Report to Shareholders. PORTFOLIO MANAGERS The following individuals serve as portfolio managers for the Fund and are primarily responsible for the day-to-day management of the Fund's portfolio: ROBERT K. BELL, CHARTERED FINANCIAL ANALYST. Mr. Bell serves as Lead Portfolio Manager for the Fund. He is a co-founder of EM Capital Management, LLC. Mr. Bell is the Chief Investment Officer of the Adviser and he has over ten years of investment management experience. Prior to becoming one of the founders of the Adviser in 2005, Mr. Bell previously served as the Director of Global Investment Implementation at the investment management firm AXA Rosenberg. Mr. Bell holds an MBA in Finance from the Haas School at the University of California, Berkeley and an MS in Mathematics from the University of Waterloo. DHRUBA GUPTA, CA. Mr. Gupta serves as Co-Portfolio Manager for the Fund. Mr. Gupta is the Chief Executive Officer of EM Capital India Advisory Private, Limited located in New Delhi, India and he is a co-founder of EM Capital Management, LLC. Mr. Gupta provides local market research and analysis and is responsible for managing the Adviser's day-to-day operations in India. Prior to becoming one of the founders of the Adviser, Mr. Gupta served as Special Advisor to the Chairman of IFCI Bank, a large Indian economic development bank. Mr. Gupta has also previously consulted on India policy, infrastructure and investment strategies to both foreign and India corporations as well as the 23 FUND MANAGEMENT Organization for Economic Co-Operation and Development (the "OECD"). Prior to returning to India, Mr. Gupta served as Deputy Treasurer of the International Monetary Fund (the "IMF") for the last seven years of his 29-year career with the IMF. Mr. Gupta is a Chartered Accountant and holds a BS in Economics for the London School of Economics and an M. Phil. in Economics from George Washington University. SETH R. FREEMAN. Mr. Freeman serves as Co-Portfolio Manager of the Fund. Mr. Freeman is the Chief Executive Officer and a co-founder of EM Capital Management, LLC and he is based in the Adviser's California office. Mr. Freeman is also the Chief Executive Officer and founder of EM Capital, Inc., an international financial and investment advisory firm specializing in emerging markets focused on India and Latin America. From 1996 to 1997, Mr. Freeman served as Senior Emerging Markets consultant to Barr Rosenberg Investment Management. Mr. Freeman holds an MBA in International Management from Thunderbird, the American Graduate School of International Management and a BA in Management from St. Mary's College of California. Mr. Freeman is a Certified Insolvency and Restructuring Advisor (CIRA). The Statement of Additional Information has more detailed information about the Adviser and the other service providers as well as additional information about the portfolio managers' compensation arrangements, other accounts managed, as applicable, and ownership of securities of the Fund. THE DISTRIBUTOR AND ADMINISTRATOR BISYS Fund Services, Limited Partnership is the Fund's distributor and BISYS Fund Services Ohio, Inc. is the Fund's administrator. Their address is 3435 Stelzer Road, Columbus, OH 43219. CAPITAL STRUCTURE. The Coventry Funds Trust was organized as a Massachusetts business trust in 1994 and overall responsibility for the management of the Fund is vested in the Board of Trustees. Shareholders are entitled to one vote for each full share held and a proportionate fractional vote for any fractional shares held and will vote in the aggregate and not by series except as otherwise expressly required by law. DISCLOSURE OF FUND PORTFOLIO HOLDINGS A complete list of the Fund's portfolio holdings is publicly available on a quarterly basis through filings made with the SEC on Forms N-CSR and N-Q. A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is provided in the Statement of Additional Information (SAI). 24 [THIS PAGE INTENTIONALLY LEFT BLANK] For more information about the Fund, the following documents are available free upon request: ANNUAL/SEMI-ANNUAL REPORTS: The Fund's annual and semi-annual reports to shareholders contain additional information on the Fund's investments. In the annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed information about the Fund, including its operations and investment policies. It is incorporated by reference and is legally considered a part of this prospectus. YOU CAN RECEIVE FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT THE FUND BY CONTACTING A BROKER THAT SELLS THE FUND. YOU MAY ALSO VISIT THE FUND'S WEBSITE AT HTTP://WWW.EMCAPITALMANAGEMENT.COM TO OBTAIN FREE COPIES OF REPORTS AND THE SAI. OR CONTACT THE FUND AT: EM CAPITAL INDIA GATEWAY FUND P.O. BOX 182626 COLUMBUS, OHIO 43218-2626 TELEPHONE:1-866-611-4967 You can review the Fund's reports and the SAI at the Public Reference Room of the Securities and Exchange Commission. You can get text-only copies: - For a duplicating fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-6009 or calling 1-202-942-8090, or by electronic request by e-mailing the SEC at the following address: publicinfo@sec.gov. - Free from the EDGAR Database on the Commission's Website at http://www.sec.gov. Investment Company Act file no. 811-8644. EM Capital India Gateway Fund AN INVESTMENT PORTFOLIO OF THE COVENTRY FUNDS TRUST STATEMENT OF ADDITIONAL INFORMATION May 11, 2007 This Statement of Additional Information is not a prospectus but should be read in conjunction with the prospectus for the EM Capital India Gateway Fund (the "Fund") dated the same date as the date hereof (the "Prospectus"). The Fund is a separate investment series of The Coventry Funds Trust (the "Trust"), an open-end management investment company. This Statement of Additional Information is incorporated in its entirety into the Prospectus. Copies of the Prospectus may be obtained by writing the EM Capital India Gateway Fund, at 3435 Stelzer Road, Columbus, Ohio 43219, or by telephoning toll free 1-866-611-4967. TABLE OF CONTENTS INVESTMENT OBJECTIVE AND POLICIES............................................3 Additional Information on Portfolio Instruments..............................3 MATTERS WITH RESPECT TO INVESTMENT IN INDIA.................................19 INVESTMENT RESTRICTIONS.....................................................21 Portfolio Turnover..........................................................23 NET ASSET VALUE............................................................ 23 Additional Purchase and Redemption Information..............................24 MANAGEMENT OF THE TRUST.....................................................25 Trustees and Officers.......................................................25 Investment Adviser..........................................................29 Portfolio Manager Information...............................................30 Code Of Ethics..............................................................31 Portfolio Transactions......................................................31 Administrator, Transfer Agent and Fund Accounting Services..................33 Distributor.................................................................34 Custodian...................................................................36 Independent Registered Public Accounting Firm...............................36 Legal Counsel...............................................................36 ADDITIONAL INFORMATION......................................................36 Description Of Shares.......................................................36 Vote of a Majority of the Outstanding Shares................................37 Additional Tax Information..................................................38 Performance Calculations....................................................44 Performance Comparisons.....................................................47 Principal Shareholders......................................................48 Proxy Voting................................................................48 Disclosure of Fund Portfolio Holdings.......................................49 MISCELLANEOUS...............................................................50 FINANCIAL STATEMENTS........................................................50 - 2 - STATEMENT OF ADDITIONAL INFORMATION THE COVENTRY FUNDS TRUST The Coventry Funds Trust (the "Trust") is an open-end management investment company which currently offers its shares in separate investment series. This Statement of Additional Information deals with one such investment series, the EM Capital India Gateway Fund (the "Fund"). Much of the information contained in this Statement of Additional Information expands upon subjects discussed in the Prospectus. Capitalized terms not defined herein are defined in the Prospectus. No investment in Shares of the Fund should be made without first reading the Prospectus. INVESTMENT OBJECTIVE AND POLICIES ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS The following policies supplement the investment objective and policies of the Fund as set forth in the Prospectus. The Board of Trustees of the Fund may change the Fund's investment objective without a shareholder vote upon a 60-day written notice. The Fund will invest in the following portfolio instruments either directly or through one or more special purpose vehicles. Foreign (Non-U.S.) Securities. The Fund invests, under normal circumstances, at least 80% of its net assets plus the amount of any borrowings for investment purposes in publicly-traded common stocks, preferred stocks and convertible stocks of Indian companies listed on Indian stock exchanges and Indian-related companies listed on global stock exchanges. Indian-related companies are those companies that derive 50% or more of their revenues or profits from operations in India. Investing in securities issued by foreign companies, such as Indian and Indian-related companies, involves inherent risks that are different from those of domestic issuers, including political or economic instability of the issuer, diplomatic developments which could affect U.S. investments in those countries, changes in foreign currency and exchange rates and the possibility of adverse changes in exchange control regulations. Costs are incurred in connection with conversions between various currencies. In addition, foreign brokerage commissions are generally higher than in the U.S., and foreign securities markets may be not as large or liquid as in the U.S. Investments in foreign countries could be affected by other factors not present in the U.S., including expropriation, confiscatory taxation, lack of uniform accounting and auditing standards and potential difficulties in enforcing contractual obligations which could extend settlement periods. The Fund may invest in companies located in developing countries, such as India, which present greater risks than investing in foreign issuers based in more developed markets in general. A number of developing countries, including India, restrict foreign investments in stocks. Repatriation of investment income, capital and the proceeds of sales by foreign investors may be more difficult, and may require governmental registration and/or approval in some developing countries. A number of currencies of developing countries have experienced significant declines against the U.S. dollar in recent years, and devaluation may occur subsequent to investments in these currencies by the Fund. Many of the developing countries securities - 3 - markets are relatively small, have low trading volumes, suffer periods of relative illiquidity, and are characterized by significant price volatility. Depositary Receipts The Fund may also invest in American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs). ADRs are receipts issued by an American bank or trust company evidencing ownership of underlying securities issued by a foreign issuer. Generally, ADRs in registered form are dollar denominated securities designed for use in the U.S. securities markets. Unsponsored ADRs may be created without the participation of the foreign issuer. Holders of these ADRs generally bear all the costs of the ADR facility, whereas foreign issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation to distribute shareholder communications received from the foreign issuer or to pass through voting rights. EDRs are receipts issued by a European financial institution evidencing an arrangement similar to that of ADRs. EDRs, in bearer form, are designed for use in the European securities markets. GDRs are depositary receipts issued on a global basis and are typically offered through global banking institutions and their branches. Participatory Notes. Participatory notes are financial instruments that are issued by major international investment firms which represent interests in securities of Indian issuers. Participatory notes allow the purchaser to receive exposure to Indian investment performance without directly acquiring the securities of Indian issuers. Participatory notes are not currently regulated by Indian securities authorities, but they may become subject to investment limitations imposed by the Government of India in order to limit their use by Indian citizens. Common Stocks. The Fund may invest in common stocks, which include the common stock of any class or series of 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. The Fund may also invest in warrants and rights related to common stocks. 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 statistical rating organizations are generally rated below other obligations of the company and many convertible securities are not - 4 - rated. The Fund does not have any rating criteria applicable to their investments in any securities, convertible or otherwise. Preferred Stock. The Fund may invest in preferred stock. Preferred stock, unlike common stock, offers a stated dividend rate payable from the issuer's earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction rate. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of the preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. The Fund may purchase preferred stock of companies which have also issued other classes of preferred stock or debt obligations that may take priority as to payment of dividends over the preferred stock held by the Fund. Warrants. The Fund may invest in warrants. The Fund may purchase warrants issued by domestic and foreign companies to purchase newly created equity securities consisting of common and preferred stock. Warrants are securities that give the holder the right, but not the obligation to purchase equity issues of the company issuing the warrants, or a related company, at a fixed price either on a date certain or during a set period. The equity security underlying a warrant is authorized at the time the warrant is issued or is issued together with the warrant. Investing in warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security, and, thus, can be a speculative investment. At the time of issue, the cost of a warrant is substantially less than the cost of the underlying security itself, and price movements in the underlying security are generally magnified in the price movements of the warrant. This leveraging effect enables the investor to gain exposure to the underlying security with a relatively low capital investment. This leveraging increases an investor's risk, however, in the event of a decline in the value of the underlying security and can result in a complete loss of the amount invested in the warrant. In addition, the price of a warrant tends to be more volatile than, and may not correlate exactly to, the price of the underlying security. If the market price of the underlying security is below the exercise price of the warrant on its expiration date, the warrant will generally expire without value. The value of a warrant may decline because of a decline in the value of the underlying security, the passage of time, changes in interest rates or in the dividend or other policies of the company whose equity underlies the warrant or a change in the perception as to the future price of the underlying security, or any combination thereof. Warrants generally pay no dividends and confer no voting or other rights other than to purchase the underlying security. Foreign Currency Transactions. The Fund may engage in foreign currency transactions, including foreign currency forward contracts, options, swaps and other strategic transactions in connection with its investments in securities of non-U.S. companies. The Fund will conduct its foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through forward contracts to purchase or sell foreign currencies. - 5 - The Fund may enter into forward foreign currency exchange contracts (forward contracts) in order to protect against possible losses on foreign investments resulting from adverse changes in the relationship between the U.S. dollar and foreign currencies. A forward contract is an obligation to purchase or sell a specific currency for an agreed price on a future date which is individually negotiated and privately traded by currency traders and their customers. A forward contract generally has a deposit requirement, and no commissions are charged at any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the price at which they are buying and selling various currencies. However, forward contracts may limit the potential gains which could result from a positive change in such currency relationships. The Fund may purchase and write put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of foreign portfolio securities and against increases in the U.S. dollar cost of foreign securities to be acquired. As with other kinds of options, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount, of the premium received, and the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring loses. The purchase of an option on foreign currency may constitute an effective hedge against fluctuation in exchange rates although, in the event of rate movements adverse to the Fund's position, the Fund may forfeit the entire amount of the premium plus related transaction costs. See generally the discussion below on "Options." The Fund may enter into interest rate swaps on either an asset-based or liability-based basis, depending on whether it is hedging its assets or its liabilities, and will usually enter into interest rate swaps on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of a Fund's obligations over its entitlement with respect to each interest rate swap will be calculated on a daily basis and an amount of cash or other liquid assets (marked to market daily) having an aggregate net asset value at least equal to the accrued excess will be maintained in a segregated account by the Fund's custodian. If the Fund enters into an interest rate swap on other than a net basis, it would maintain a segregated account in the full amount accrued on a daily basis of its obligations with respect to the swap. The Fund will not enter into any interest rate swap transactions unless the unsecured senior debt or the claims-paying ability of the other party thereto is rated in one of the three highest rating categories of at least one nationally recognized statistical rating organization ("NRSRO") at the time of entering into such transaction. The Fund's Adviser will monitor the creditworthiness of all counterparties on an ongoing basis. If there is a default by the other party to such a transaction, a Fund will have contractual remedies pursuant to the agreements related to the transaction. There is no limit on the amount of interest rate swap transactions that may be entered into by a Fund, subject to the segregation requirement described above. These transactions may in some instances involve the delivery of securities or other underlying assets by a Fund or its counterparty to collateralize obligations under the swap. Under the documentation currently used in those markets, the risk of loss with respect to interest rate swaps is limited to the net amount of the payments that a Fund is contractually obligated to make. If the other party to an interest rate swap that is not - 6 - collateralized defaults, The Fund would risk the loss of the net amount of the payments that it contractually is entitled to receive. Futures Contracts. The Fund may invest in futures contracts and options thereon (stock index futures contracts or interest rate futures or options) to hedge or manage risks associated with the Fund's securities investments. Although techniques other than sales and purchases of futures contracts could be used to reduce the Fund's exposure, the Fund may be able to hedge its exposure more effectively and perhaps at a lower cost through using futures contracts. A stock index futures contract is an agreement in which one party agrees to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the index value (which assigns relative values to the common stocks included in the index) at the close of the last trading day of the contract and the price at which the agreement is originally made. No physical delivery of the underlying stock in the index is contemplated. 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. Brokerage fees are also incurred when a futures contract is purchased or sold. Although futures contracts typically require future delivery of and payment for financial instruments, the futures contracts are usually closed out before the delivery date. Closing out an open futures contract sale or purchase is effected by entering into an offsetting futures contract purchase or sale, respectively, for the same aggregate amount of the identical type of financial instrument and the same delivery date. If the offsetting purchase price is less than the original sale price, the Fund realizes a gain; if it is more, the Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the Fund realizes a gain; if it is less, the Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however, that the Fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the margin deposits on the contract. As an example of an offsetting transaction in which the financial instrument is not delivered, the contractual obligations arising from the sale of one contract of September Treasury Bills on an exchange may be fulfilled at any time before delivery of the contract is required (e.g., on a specified date in September, the "delivery month") by the purchase of one contract of September Treasury Bills on the same exchange. In such instance the difference between the price at which the futures contract was sold and the price paid for the offsetting purchase, after allowance for transaction costs, represents the profit or loss to the Fund. 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 - 7 - possible to close a futures position. In the event of adverse price movements, the Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if the Fund had insufficient cash, it might have to sell portfolio securities to meet daily margin requirements at a time when it would be disadvantageous to do so. In addition, the Fund might be required to make delivery of the instruments underlying futures contracts it holds. The inability to close options and futures positions also could have an adverse impact on the Fund's ability to hedge or manage risks effectively. The Fund will not enter into any futures contracts and related options for purposes other than bona fide hedging transactions within the meaning of Commodity Futures Trading Commission ("CFTC") regulations if such non-hedging positions would exceed the limitations established in CFTC regulations. Currently, non-hedging transactions are subject to either of two alternative limitations. Under one alternative, the aggregate initial margin and premiums required to establish non-hedging positions in futures contracts and options may not exceed 5% of the fair market value of the Fund's net assets (after taking into account unrealized profits and unrealized losses on any such contracts). Under the other alternative, which has been established by the CFTC on a temporary basis, the aggregate net notional value of non-hedging futures contracts and related options may not exceed the liquidation value of the Fund's portfolio (after taking into account unrealized profits and unrealized losses on any such contracts). The Fund will not enter into futures contracts for speculation and will only enter into futures contracts which are traded on national futures exchanges and are standardized as to maturity date and underlying financial instrument. The principal futures exchanges in the United States are the Board of Trade of the City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and trading are regulated under the Commodity Exchange Act by the CFTC. Futures are also traded in various overseas markets. The Fund may enter into real estate related futures contracts as a hedge against changes in prevailing levels of real estate stock values in order to establish more definitely the effective return on securities held or intended to be acquired by the Fund. The Fund's hedging may include sales of futures as an offset against the effect of expected declines in real estate stock values, and purchases of futures in anticipation of purchasing underlying index stocks prior to the availability of sufficient assets to purchase such stocks or to offset potential increases in the prices of such stocks. When selling options or futures contracts, the Fund will segregate cash and liquid securities to cover any related liability. The Fund may enter into stock index futures contracts. A stock index contract such as the S&P 500 Stock Index Contract, for example, is an agreement to take or make delivery at a specified future date of an amount of cash equal to $500 multiplied by the difference between the value of the stock index at purchase and at the close of the last trading day of the contract. In order to close long positions in the stock index contracts prior to their settlement date, the Fund will enter into offsetting sales of stock index contracts. Using stock index contracts in anticipation of market transactions involves certain risks. Although the Fund may intend to purchase or sell stock index contracts only if there is an active - 8 - market for such contracts, no assurance can be given that a liquid market will exist for the contracts at any particular time. In addition, the price of stock index contracts may not correlate perfectly with the movement in the stock index due to certain market distortions. Due to the possibility of price distortions in the futures market and because of the imperfect correlation between movements in the stock index and movements in the price of stock index contracts, a correct forecast of general market trends may not result in a successful anticipatory hedging transaction. Persons who trade in futures contracts may be broadly classified as "hedgers" and "speculators." Hedgers, such as the Fund, whose business activity involves investment or other commitments in debt securities, equity securities, or other obligations, use the futures markets primarily to offset unfavorable changes in value that may occur because of fluctuations in the value of the securities and obligations held or expected to be acquired by them or fluctuations in the value of the currency in which the securities or obligations are denominated. Debtors and other obligors may also hedge the interest cost of their obligations. The speculator, like the hedger, generally expects neither to deliver nor to receive the financial instrument underlying the futures contract, but, unlike the hedger, hopes to profit from fluctuations in prevailing interest rates or securities prices. The Fund's futures transactions will be entered into for traditional hedging purposes; that is, futures contracts will be sold to protect against a decline in the price of securities that the Fund owns, or futures contracts will be purchased to protect the Fund against an increase in the price of securities it has a fixed commitment or expectation to purchase. "Margin" with respect to futures and futures contracts is the amount of funds that must be deposited by the Fund with a broker in order to initiate futures trading and to maintain the Fund's open positions in futures contracts. A margin deposit ("initial margin") is intended to assure the Fund's performance of the futures contract. The margin required for a particular futures contract is set by the exchange on which the contract is traded, and may be significantly modified from time to time by the exchange during the term of the contract. Futures contracts are customarily purchased and sold on margins that may range upward from less than 5% of the value of the contract being traded. If the price of an open futures contract changes (by increase in the case of a sale or by decrease in the case of a purchase) so that the loss on the futures contract reaches a point at which the margin on deposit does not satisfy margin requirements, the broker will require an increase in the margin deposit ("margin variation"). However, if the value of a position increases because of favorable price changes in the futures contract so that the margin deposit exceeds the required margin, the broker will pay the excess to the Fund. In computing daily net asset values, the Fund will mark to market the current value of its open futures contracts. The Fund expects to earn interest income on its margin deposits. The prices of futures contracts are volatile and are influenced, among other things, by actual and anticipated changes in interest rates, which in turn are affected by fiscal and monetary policies and national and international political and economic events. - 9 - At best, the correlation between changes in prices of futures contracts and of the securities being hedged can be only approximate. The degree of imperfection of correlation depends upon circumstances such as: variations in speculative market demand for futures and for securities or currencies, including technical influences in futures trading; and differences between the financial instruments being hedged and the instruments underlying the standard futures contracts available for trading, with respect to interest rate levels, maturities, and creditworthiness of issuers. A decision of whether, when, and how to hedge involves skill and judgment, and even a well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior or interest rate trends. Because of the low margin deposits required, futures trading involves an extremely high degree of leverage. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor. For example, if at the time of purchase, 10% of the value of the futures contract is deposited as margin, a subsequent 10% decrease in the value of the futures contract would result in a total loss of the margin deposit, before any deduction for the transaction costs, if the account were then closed out. A 15% decrease would result in a loss equal to 150% of the original margin deposit, if the contract were closed out. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount invested in the futures contract. However, the Fund would presumably have sustained comparable losses if, instead of the futures contract, it had invested in the underlying financial instrument and sold it after the decline. Furthermore, in the case of a futures contract purchase, in order to be certain that the Fund has sufficient assets to satisfy its obligations under a futures contract, the Fund segregates and commits to back the futures contract with cash or liquid securities equal in value to the current value of the underlying instrument less the margin deposit. Most United States futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. The daily limit establishes the maximum amount that the price of a futures contract may vary either up or down from the previous day's settlement price at the end of a trading session. Once the daily limit has been reached in a particular type of contract, no trades may be made on that day at a price beyond that limit. The daily limit governs only price movement during a particular trading day and therefore does not limit potential losses, because the limit may prevent the liquidation of unfavorable positions. Futures contract prices have occasionally moved to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and subjecting some futures traders to substantial losses. Successful use of futures by the Fund is subject to the Adviser's ability to predict movements correctly in the direction of the market. There is typically an imperfect correlation between movements in the price of the future and movements in the price of the securities that are the subject of the hedge. In addition, the price of futures may not correlate perfectly with movement in the cash market due to certain market distortions. Due to the possibility of price distortion in the futures market and because of the imperfect correlation between the movements in the cash market and movements in the price of futures, a correct forecast of general market - 10 - trends or interest rate movements by the Adviser may still not result in a successful hedging transaction over a short time frame. The trading of futures contracts is also subject to the risk of trading halts, suspension, exchange or clearing house equipment failures, government intervention, insolvency of a brokerage firm or clearing house or other disruption of normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess variation margin payments. Call Options. The Fund may write (sell) "covered" call options and purchase options to close out options previously written by it. Such options must be listed on a National Securities Exchange and issued by the Options Clearing Corporation. The purpose of writing covered call options is to generate additional premium income for the Fund. This premium income will serve to enhance the Fund's total return and will reduce the effect of any price decline of the security involved in the option. Covered call options will generally be written on securities which, in the opinion of the Adviser, are not expected to make any major price moves in the near future but which, over the long term, are deemed to be attractive investments for the Fund. A call option gives the holder (buyer) the "right to purchase" a security at a specified price (the exercise price) at any time until a certain date (the expiration date). So long as the obligation of the writer of a call option continues, he may be assigned an exercise notice by the broker-dealer through whom such option was sold, requiring him to deliver the underlying security against payment of the exercise price. This obligation terminates upon the expiration of the call option, or such earlier time at which the writer effects a closing purchase transaction by repurchasing an option identical to that previously sold. To secure his obligation to deliver the underlying security in the case of a call option, a writer is required to deposit in escrow the underlying security or other assets in accordance with the rules of the Options Clearing Corporation. The Fund will write only covered call options and will normally not write a covered call option if, as a result, the aggregate market value of all portfolio securities covering all call options would exceed 25% of the market value of its net assets. Fund securities on which call options may be written will be purchased solely on the basis of investment considerations consistent with the Fund's investment objective. The writing of covered call options is a conservative investment technique believed to involve relatively little risk (in contrast to the writing of naked or uncovered options, which the Fund will not do), but capable of enhancing the Fund's total return. When writing a covered call option, the Fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security above the exercise price, but retains the risk of loss should the price of the security decline. Unlike one who owns securities not subject to an option, the Fund has no control over when it may be required to sell the underlying securities, since it may be assigned an exercise notice at any time prior to the expiration of its obligation as a writer. If a call option which the Fund has written expires, the Fund will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security during the option period. If the call option is exercised, the Fund will realize a gain or loss from - 11 - the sale of the underlying security. The security covering the call will be maintained in a segregated account of the Fund's Custodian. The Trust, on behalf of the Fund, has filed with the National Futures Association, a notice claiming an exemption from the definition of the term "commodity pool operator" under the Commodity Exchange Act, as amended, and the rules of the Commodity Futures Trading Commission promulgated thereunder, with respect to the Fund's operations. Accordingly, the Fund is not subject to registration or regulation as a commodity pool operator. The premium received is the market value of an option. The premium the Fund will receive from writing a call option will reflect, among other things, the current market price of the underlying security, the relationship of the exercise price to such market price, the historical price volatility of the underlying security, and the length of the option period. Once the decision to write a call option has been made, the Adviser, in determining whether a particular call option should be written on a particular security, will consider the reasonableness of the anticipated premium and the likelihood that a liquid secondary market will exist for such option. The premium received by the Fund for writing covered call options will be recorded as a liability in the Fund's statement of assets and liabilities. This liability will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the net asset value per share of the Fund is computed (close of the New York Stock Exchange), or, in the absence of such sale, the latest asked price. The liability will be extinguished upon expiration of the option, the purchase of an identical option in a closing transaction, or delivery of the underlying security upon the exercise of the option. Closing transactions will be effected in order to realize a profit on an outstanding call option, to prevent an underlying security from being called, or to permit the sale of the underlying security. Furthermore, effecting a closing transaction will permit the Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. If the Fund desires to sell a particular security from its portfolio on which it has written a call option, it will seek to effect a closing transaction prior to, or concurrently with, the sale of the security. There is, of course, no assurance that the Fund will be able to effect such closing transactions at a favorable price. If the Fund cannot enter into such a transaction, it may be required to hold a security that it might otherwise have sold, in which case it would continue to be at market risk on the security. The Fund will pay transaction costs in connection with the writing of options to close out previously written options. Such transaction costs are normally higher than those applicable to purchases and sales of portfolio securities. Call options written by the Fund will normally have expiration dates of less than nine months from the date written. The exercise price of the options may be below, equal to, or above the current market values of the underlying securities at the time the options are written. From time to time, the Fund may purchase an underlying security for delivery in accordance with an exercise notice of a call option assigned to it, rather than delivering such security from its portfolio. In such cases, additional costs will be incurred. The Fund will realize a profit or loss from a closing purchase transaction if the cost of the transaction is less or more than the premium received from the writing of the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by the Fund. - 12 - Writing Covered Put Options. The Fund may write covered put options. A put option gives the purchaser of the option the right to sell, and the writer (seller) has the obligation to buy, the underlying security at the exercise price during the option period. So long as the obligation of the writer continues, the writer may be assigned an exercise notice by the broker-dealer through whom such option was sold, requiring the writer to make payment of the exercise price against delivery of the underlying security. The operation of put options in other respects, including their related risks and rewards, is substantially identical to that of call options. The Fund may write put options only on a covered basis, which means that the Fund would maintain in a segregated account cash and liquid securities in an amount not less than the exercise price at all times while the put option is outstanding. (The rules of the Options Clearing Corporation currently require that such assets be deposited in escrow to secure payment of the exercise price.) The Fund would generally write covered put options in circumstances where the Adviser wishes to purchase the underlying security for the Fund's portfolio at a price lower than the current market price of the security. In such event, the Fund would write a put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay. Since the Fund would also receive interest on debt securities maintained to cover the exercise price of the option, this technique could be used to enhance current return during periods of market uncertainty. The risk in such a transaction would be that the market price of the underlying security would decline below the exercise price less the premiums received. Purchasing Put Options. The Fund may purchase put options. As the holder of a put option, the Fund has the right to sell the underlying security at the exercise price at any time during the option period. The Fund may enter into closing sale transactions with respect to such options, exercise them, or permit them to expire. The Fund may purchase put options for defensive purposes in order to protect against an anticipated decline in the value of its securities or currencies. An example of such use of put options is provided below. The Fund may purchase a put option on an underlying security (a "protective put") owned as a defensive technique in order to protect against an anticipated decline in the value of the security. Such hedge protection is provided only during the life of the put option when the Fund, as the holder of the put option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price's exchange value. For example, a put option may be purchased in order to protect unrealized appreciation of a security where the Adviser deems it desirable to continue to hold the security because of tax considerations. The premium paid for the put option and any transaction costs would reduce any capital gain otherwise available for distribution when the security is eventually sold. The Fund may also purchase put options at a time when the Fund does not own the underlying security. By purchasing put options on a security it does not own, the Fund seeks to benefit from a decline in the market price of the underlying security. If the put option is not sold when it has remaining value, and if the market price of the underlying security remains equal to or greater than the exercise price during the life of the put option, the Fund will lose its entire - 13 - investment in the put option. In order for the purchase of a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs, unless the put option is sold in a closing sale transaction. The Fund will commit no more than 5% of its assets to premiums when purchasing put options. The premium paid by the Fund when purchasing a put option will be recorded as an asset in the Fund's statement of assets and liabilities. This asset will be adjusted daily to the option's current market value, which will be the latest sale price at the time at which the Fund's net asset value per share is computed (close of trading on the New York Stock Exchange), or, in the absence of such sale, the latest bid price. The asset will be extinguished upon expiration of the option, the selling (writing) of an identical option in a closing transaction, or the delivery of the underlying security upon the exercise of the option. Purchasing Call Options. The Fund may purchase call options. As the holder of a call option, the Fund has the right to purchase the underlying security at the exercise price at any time during the option period. The Fund may enter into closing sale transactions with respect to such options, exercise them, or permit them to expire. The Fund may purchase call options for the purpose of increasing its current return or avoiding tax consequences which could reduce its current return. The Fund may also purchase call options in order to acquire the underlying securities. Examples of such uses of call options are provided below. Call options may be purchased by the Fund for the purpose of acquiring the underlying securities for its portfolio. Utilized in this fashion, the purchase of call options enables the Fund involved to acquire the securities at the exercise price of the call option plus the premium paid. At times the net cost of acquiring securities in this manner may be less than the cost of acquiring the securities directly. This technique may also be useful to the Fund in purchasing a large block of securities that would be more difficult to acquire by direct market purchases. So long as it holds such a call option rather than the underlying security itself, the Fund is partially protected from any unexpected decline in the market price of the underlying security and in such event could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. The Fund will commit no more than 5% of its assets to premiums when purchasing call options. The Fund may also purchase call options on underlying securities it owns in order to protect unrealized gains on call options previously written by it. A call option would be purchased for this purpose where tax considerations make it inadvisable to realize such gains through a closing purchase transaction. Call options may also be purchased at times to avoid realizing losses that would result in a reduction of the Fund's current return. For example, where the Fund has written a call option on an underlying security having a current market value below the price at which such security was purchased by the Fund, an increase in the market price could result in the exercise of the call option written by the Fund and the realization of a loss on the underlying security with the same exercise price and expiration date as the option previously written. - 14 - Options on Futures Contracts. Options on futures contracts are similar to options on fixed income or equity securities or options on currencies, except that options on futures contracts give the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put), rather than to purchase or sell the futures contract, at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash equal to the difference on the expiration date between the exercise price of the option and the closing level of the securities upon which the futures contracts are based. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. As an alternative to purchasing call and put options on futures, the Fund may purchase call and put options on the underlying securities. Such options would be used in a manner identical to the use of options on futures contracts. To reduce or eliminate the leverage then employed by the Fund or to reduce or eliminate the hedge position then currently held by the Fund, the Fund may seek to close out an option position by selling an option covering the same securities or contract and having the same exercise price and expiration date. Restricted and Illiquid Securities. Restricted securities are subject to restrictions on resale under federal securities law. Under criteria established by the Fund's Trustees, certain restricted securities are determined to be liquid. To the extent that restricted securities are not determined to be liquid, the Fund will limit its purchase, together with other illiquid securities including non-negotiable time deposits, and repurchase agreements providing for settlement in more than seven days after notice, to no more than 15% of its net assets. Restricted securities in which the Fund may invest may include commercial paper issued in reliance on the exemption from registration afforded by Section 4(2) of the Securities Act of 1933. Section 4(2) commercial paper is restricted as to disposition under federal securities law, and is generally sold to institutional investors, such as the Fund, who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) commercial paper is normally resold to other institutional investors like the Fund through or with the assistance of the issuer or investment dealers who make a market in Section 4(2) commercial paper, thus providing liquidity. The Adviser believes that Section 4(2) commercial paper and possibly certain other restricted securities which meet the criteria for liquidity established by the Trustees of the Fund are quite liquid. The Fund intends, therefore, to treat the restricted securities which meet the criteria for liquidity established by the Trustees, including Section 4(2) commercial paper, as determined by the Adviser, as liquid and not subject to the investment limitations applicable to illiquid securities. - 15 - Bank Obligations. The Fund may invest in bank obligations such as bankers' acceptances, certificates of deposit, and demand 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 demand and time deposits will be those of domestic banks and savings and loan associations, if (a) at the time of investment the depository institution has capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of its most recently published financial statements), or (b) the principal amount of the instrument is insured in full by the Federal Deposit Insurance Corporation. Commercial Paper. Commercial paper consists of unsecured promissory notes issued by corporations. Issues of commercial paper normally have maturities of less than nine months and fixed rates of return. The Fund may purchase commercial paper consisting of issues rated at the time of purchase by one or more appropriate nationally recognized statistical rating organizations ("NRSRO") (e.g., Standard & Poor's Corporation and Moody's Investors Service, Inc.). The Fund may also invest in commercial paper that is not rated but that is determined by the Adviser to be of comparable quality to instruments that are so rated by an NRSRO that is neither controlling, controlled by, or under common control with the issuer of, or any issuer, guarantor, or provider of credit support for, the instruments. U.S. Government Obligations. The Fund may invest in obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities. 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. Variable and Floating Rate Securities. The Fund may acquire variable and floating rate securities, subject to the Fund's investment objectives, policies and restrictions. A variable rate security is one whose terms provide for the adjustment of its interest rate on set dates and which, upon such adjustment, can reasonably be expected to have a market value that approximates its par value. A floating rate security is one whose terms provide for the adjustment of its interest rate whenever a specified interest rate changes and which, at any time, can reasonably be - 16 - expected to have a market value that approximates its par value. Such securities are frequently not rated by credit rating agencies; however, unrated variable and floating rate securities purchased by the Fund will be determined by the Adviser to be of comparable quality at the time of purchase to rated instruments eligible for purchase under the Fund's investment policies. In making such determinations, the Adviser will consider the earning power, cash flow and other liquidity ratios of the issuers of such notes (such issuers include financial, merchandising, bank holding and other companies) and will continuously monitor their financial condition. Although there may be no active secondary market with respect to a particular variable or floating rate security purchased by the Fund, the Fund may resell the security at any time to a third party. The absence of an active secondary market, however, could make it difficult for the Fund to dispose of a variable or floating rate security in the event the issuer of the security defaulted on its payment obligations and the Fund could, as a result or for other reasons, suffer a loss to the extent of the default. To the extent that there exists no readily available market for such security and the Fund is not entitled to receive the principal amount of a note within seven days, such a security will be treated as an illiquid security for purposes of calculation of the Fund's limitation on investments in illiquid securities, as set forth in the Fund's investment restrictions. Variable or floating rate securities may be secured by bank letters of credit. When-Issued Securities. The Funds may purchase securities on a "when-issued" basis (i.e., for delivery beyond the normal settlement date at a stated price and yield). When the Fund agrees to purchase securities on a "when-issued" basis, the Fund's custodian will set aside cash or liquid portfolio securities equal to the amount of the commitment in a separate account. Normally, the Fund's custodian will set aside portfolio securities to satisfy the purchase commitment, and in such a case, the Fund may be required subsequently to place additional assets in the separate account in order to assure that the value of the account remains equal to the amount of the Fund's commitment. It may be expected that the Fund's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. In addition, because the Fund will set aside cash or liquid portfolio securities to satisfy its purchase commitments in the manner described above, the Fund's liquidity and the ability of the Adviser to manage it might be affected in the event its commitments to purchase "when-issued" securities ever exceeded 25% of the value of its total assets. Under normal market conditions, however, the Fund's commitment to purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of the value of its total assets. When the Fund engages in "when-issued" transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in the Fund's incurring a loss or missing the opportunity to obtain a price considered to be advantageous. The Fund will engage in "when-issued" delivery transactions only for the purpose of acquiring portfolio securities consistent with the Fund's investment objectives and policies and not for investment leverage. Repurchase Agreements. Securities held by the Fund may be subject to repurchase agreements. Under the terms of a repurchase agreement, the Fund would acquire securities from banks and registered broker-dealers which the Adviser deems creditworthy under guidelines - 17 - approved by the Trust's Board of Trustees, subject to the seller's agreement to repurchase such securities at a mutually agreed-upon date and price. The repurchase price would generally equal the price paid by the Fund plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller under a repurchase agreement will be required to maintain continually the value of collateral held pursuant to the agreement at not less than the repurchase price (including accrued interest). This requirement will be continually monitored by the Adviser. If the seller were to default on its repurchase obligation or become insolvent, the Fund would suffer a loss to the extent that the proceeds from a sale of the underlying portfolio securities were less than the repurchase price under the agreement, or to the extent that the disposition of such securities by the Fund were delayed pending court action. Additionally, there is no controlling legal precedent confirming that the Fund would be entitled, as against a claim by such seller or its receiver or trustee in bankruptcy, to retain the underlying securities, although the Board of Trustees of the Trust believes that, under the regular procedures normally in effect for custody of the Fund's securities subject to repurchase agreements and under federal laws, a court of competent jurisdiction would rule in favor of the Trust if presented with the question. Securities subject to repurchase agreements will be held by the Fund's custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by the Fund under the 1940 Act. Reverse Repurchase Agreements. The Fund may borrow funds by entering into reverse repurchase agreements in accordance with the Fund's investment restrictions. Pursuant to such agreements, the Fund would sell portfolio securities to financial institutions such as banks and broker-dealers, and agree to repurchase the securities at a mutually agreed-upon date and price. The Fund intends to enter into reverse repurchase agreements only to avoid otherwise selling securities during unfavorable market conditions to meet redemptions. At the time the Fund enters into a reverse repurchase agreement, it will place in a segregated custodial account assets such as U.S. Government securities or other liquid securities consistent with the Fund's investment restrictions having a value equal to the repurchase price (including accrued interest), and will subsequently continually monitor the account to ensure that such equivalent value is maintained at all times. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase the securities. Reverse repurchase agreements are considered to be borrowings by the Fund under the 1940 Act. Securities of Other Investment Companies. The Fund may invest in securities issued by other investment companies in accordance with applicable provisions of the 1940 Act. Other investment companies, for these purposes, are deemed to include certain types of exchange traded funds ("ETFs") and may include ETFs that trade on foreign stock exchanges, including Indian stock exchanges. The statutory limitations of the 1940 Act with respect to the investment by the Fund in the securities of other investment companies, including ETFs, absent reliance on applicable exemptive relief, provides that the Fund may invest in other investment companies so that, as determined immediately after a securities purchase is made: (a) not more than 5% of the value of its total assets will be invested in the securities of any one investment company; (b) not - 18 - 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, except as such securities may be acquired as part of a merger, consolidation or acquisition of assets and further, except as may be permitted by Section 12 of the 1940 Act or except as may be permitted by the Securities and Exchange Commission. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of that company's expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations. Lending of Portfolio Securities. In order generate additional income, the Fund may, from time to time, lend portfolio securities to broker-dealers, banks or institutional borrowers of securities pursuant to written guidelines approved by the Board of Trustees. The Fund must receive at least 100% collateral, or more, in the form of cash or government securities. The collateral must be valued daily, and should the market value of the loaded securities increase, the borrower must furnish additional collateral to the lender. During the time portfolio securities are on loan, the borrower pays the lender any dividends or interest paid on such securities. Loans are subject to termination by the lender or the borrower at any time. The Fund does not have the right to vote securities on loan, but the Fund may terminate a loan and regain the right to vote if it deems it advisable to do so. In the event that the borrower defaults on its obligation to the Fund, the Fund could experience delays in recovering the securities and could possible losses. The Fund will only enter into loan arrangements with broker-dealers, banks or other institutions and entities determined to be creditworthy under guidelines established by the Board of Trustees that permit the Fund to loan up to 33 1/3% of the value of its total assets. MATTERS WITH RESPECT TO INVESTMENT IN INDIA Foreign investment in the securities of issuers in India is usually restricted or controlled to some degree. For example, "Foreign Institutional Investors" ("FIIs") may predominately invest in exchange-traded securities (and securities to be listed, or those approved on the over-the-counter exchange of India) subject to the conditions specified in the guidelines for Direct Foreign Investment by FIIs in India, (the "Guidelines") published in a Press Note dated September 14, 1992, issued by the Government of India, Ministry of Finance, Investment Division. FIIs have to apply for registration to the Securities and Exchange Board of India ("SEBI") and to the Reserve Bank of India for permission to trade in Indian securities. The Guidelines require SEBI to take into account the track record of the FII, its professional competence, financial soundness, experience and other relevant criteria. SEBI must also be satisfied that suitable custodial arrangements are in place for the Indian securities. The Fund currently invests through an FII established in Mauritius that has received applicable registration approvals from the SEBI. FIIs are required to observe certain investment restrictions, including an ownership ceiling on the total issued share capital of any one company. In addition, the shareholdings of all registered FIIs, together with the shareholdings of non-resident Indian individuals and foreign corporate bodies substantially owned by non-resident Indians, may generally not exceed 40% of the issued share capital of most companies. Only registered FIIs and non-Indian mutual funds that comply - 19 - with certain statutory conditions may make direct portfolio investments in exchange-traded Indian securities. There can be no assurance that these investment control regimes will not change in a way that makes it more difficult or impossible for the Fund to implement its investment objective or repatriate its income, gains and initial capital from these countries. A high proportion of the shares of many Indian issuers are held by a limited number of persons or entities, which may limit the number of shares available for investment. In addition, a limited number of issuers represent a disproportionately large percentage of market capitalization and trading value. The limited liquidity of the Indian securities markets may affect the Fund's ability to acquire or dispose of securities at the price and time that it wishes to do so. There are currently 23 recognized stock exchanges in India, including the Over the Counter Exchange of India. Most stock exchanges are governed by regulatory boards. The Stock Exchange, Mumbai, (the "BSE") and the National Stock Exchange of India Limited (the "NSE") have nationwide trading terminals and, taken together, are the principal Indian stock exchanges in terms of the number of listed companies, market capitalization and trading volume. The securities market in India is substantially smaller, less liquid and significantly more volatile than the securities market in the United States. The relatively small market capitalizations of, and trading values on, the BSE and NSE may cause the Fund's investments in securities listed on these exchanges to be comparatively less liquid and subject to greater price volatility than comparable U.S. investments. Indian stock exchanges, including the BSE and the NSE, have in the past experienced substantial fluctuations in the prices of their listed securities. They have also experienced problems such as temporary exchange closures, broker defaults, settlement delays and broker strikes that, if they occur again in the future, could affect the market price and liquidity of the Indian securities in which the Fund invests. In addition, the governing bodies of the various Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Disputes have also occurred from time to time among listed companies, the stock exchanges and other regulatory bodies, and in some cases those disputes have had a negative effect on overall market sentiment. Recently, there have been delays and errors in share allotments relating to initial public offerings, which in turn affect overall market sentiment and lead to fluctuations in the market prices of the securities of those companies and others in which the Fund may invest. In addition to their smaller size, lesser liquidity and greater volatility, Indian securities markets are less developed than U.S. securities markets. Disclosure and regulatory standards are in many respects less stringent than U.S. standards. Indian issuers are subject to accounting, auditing and financial standards and requirements that differ, in some cases significantly, from those applicable to U.S. issuers. In particular, the assets and profits appearing on the financial statements of an Indian issuer may not reflect its financial position or results of operations in the way they would be reflected had such financial statements been prepared in accordance with - 20 - U.S. generally accepted accounting principles. There is substantially less publicly available information about Indian issuers than there is about U.S. issuers. Legal principles relating to corporate affairs and the validity of corporate procedures, directors' fiduciary duties and liabilities and shareholders' rights may differ from those that may apply in other jurisdictions. Shareholders' rights under Indian laws may not be as extensive as those that exist under the laws of the United States. The Fund may therefore have more difficulty asserting its rights as a shareholder of an Indian company in which it invests than it would as a shareholder of a comparable American company. The value of the Fund's assets may be adversely affected by political, economic, social and other factors, changes in Indian law or regulations and the status of India's relations with other countries. In addition, the economy of India may differ favorably or unfavorable from the U.S. economy in such respects as the rate of growth of gross domestic product, the rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments positions. The Indian government has exercised and continues to exercise significant influence over many aspects of the economy, and the number of public sector enterprises in India is substantial. Accordingly, Indian government actions in the future could have a significant effect on the Indian economy, which could affect private sector companies and the Fund, market conditions, and prices and yields of securities held by the Fund. There exists the possibility of nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war or terrorist attacks) which could affect adversely the economy of India or the value of the Fund's investments. The Indian population is comprised of diverse religious, linguistic and ethnic groups and religious and border disputes continue to pose problems for India. From time to time, India has experienced internal disputes between religious groups within the country. In addition, India has faced, and continues to face, military hostilities with neighboring countries and regional countries. These events could adversely influence the Indian economy and, as a result, negatively affect the Fund's investments. INVESTMENT RESTRICTIONS The Fund's investment objective is a non-fundamental policy and may be changed without a vote of the holders of a majority of the Fund's outstanding Shares. The following investment restrictions may be changed with respect to a the Fund only by a vote of the majority of the outstanding Shares of the Fund (as defined under "ADDITIONAL INFORMATION - Vote of a Majority of the Outstanding Shares"). The Fund may not: - 21 - 1. Purchase any securities which would cause more than 25% of the Fund's total assets at the time of purchase to be invested in securities of one or more issuers conducting their principal business activities in the same industry; provided that (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements secured by such obligations; (b) wholly owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of their parents; and (c) utilities will be divided according to their services. For example, gas, gas transmission, electric and gas, electric, and telephone will each be considered a separate industry. 2. Borrow money or issue senior securities except as and to the extent permitted by the 1940 Act or any rule, order or interpretation thereunder; 3. Make loans, except that the Fund may purchase or hold debt instruments and lend portfolio securities in accordance with its investment objective and policies, make time deposits with financial institutions, and enter into repurchase agreements; 4. Purchase securities on margin, except for use of short-term credit necessary for clearance of purchases of portfolio securities and except as may be necessary to make margin payments in connection with derivative securities transactions; 5. Underwrite the securities issued by other persons, except to the extent that the Fund may be deemed to be an underwriter under certain securities laws in the disposition of "restricted securities;" 6. Purchase or sell real estate (although investments in marketable securities of companies engaged in such activities and securities secured by real estate or interests therein are not prohibited by this restriction); and 7. Purchase or sell commodities or commodities contracts, except to the extent disclosed in the current Prospectus of the Fund. If any percentage restriction or requirement described above is satisfied at the time of investment, a later increase or decrease in such percentage resulting from a change in asset value will not constitute a violation of such restriction or requirement. However, should a change in net asset value or other external events cause the Fund's investments in illiquid securities, repurchase agreements with maturities in excess of seven days and other instruments in the Fund which are not readily marketable to exceed the limit set forth in the Fund's Prospectus for its investment in illiquid securities, the Fund will act to cause the aggregate amount of such securities to come within such limit as soon as reasonably practicable. In such an event, however, the Fund would not be required to liquidate any portfolio securities where the Fund would suffer a loss on the sale of such securities. - 22 - PORTFOLIO TURNOVER The portfolio turnover rate for the Fund is calculated by dividing the lesser of the Fund's purchases or sales of portfolio securities for the year by the monthly average value of the portfolio securities. The calculation excludes all securities whose remaining maturities at the time of acquisition were one year or less. The portfolio turnover rate may vary greatly from year to year as well as within a particular year, and may also be affected by cash requirements for redemptions of Shares. High portfolio turnover rates will generally result in higher transaction costs, including brokerage commissions, to the Fund and may result in additional tax consequences to the Fund's Shareholders. Portfolio turnover will not be a limiting factor in making investment decisions. NET ASSET VALUE As indicated in the Prospectus, the net asset value of the Fund is determined and the Shares of the Fund are priced as of the Valuation Time on each Business Day of the Fund. A "Business Day" of the Fund is a day on which the New York Stock Exchange is open for trading and any other day (other than a day on which no Shares of the Fund are tendered for redemption and no order to purchase any Shares of the Fund is received) during which there is sufficient trading in portfolio instruments that the Fund's net asset value per share might be materially affected. The New York Stock Exchange will not open in observance of the following holidays: New Year's Day, Martin Luther King, Jr.'s Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. The Fund does not expect to determine the net asset value of its shares on any day when the Exchange is not open for trading, even if there is sufficient trading in portfolio securities on such days to materially affect the net asset value per share. Portfolio securities for which market quotations are readily available are valued based upon their current available bid prices in the principal market (closing sales prices if the principal market is an exchange) in which such securities are normally traded. Unlisted securities for which market quotations are readily available will be valued at the current quoted bid prices. Other securities and assets for which quotations are not readily available, including restricted securities and securities purchased in private transactions, are valued at their fair value in the Adviser's best judgment under procedures established by, and under the supervision of, the Trust's Board of Trustees. Among the factors that will be considered, if they apply, in valuing portfolio securities held by the Fund are the existence of restrictions upon the sale of the security by the Fund, the absence of a market for the security, the extent of any discount in acquiring the security, the estimated time during which the security will not be freely marketable, the expenses of registering or otherwise qualifying the security for public sale, underwriting commissions if underwriting would be required to effect a sale, the current yields on comparable securities for debt obligations traded independently of any equity equivalent, changes in the financial condition and prospects of the issuer, and any other factors affecting fair value. In making - 23 - valuations, opinions of counsel may be relied upon as to whether or not securities are restricted securities and as to the legal requirements for public sale. The Trust 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. Certain instruments, for which pricing services used for the Fund do not provide prices, may be valued by the Trust using methodologies similar to those used by pricing services, where such methodologies are believed to reflect fair value of the subject security. The methods used by the pricing service and the Trust and the valuations so established will be reviewed by the Trust under the general supervision of the Trust's Board of Trustees. Several pricing services are available, one or more of which may be used by the Adviser from time to time. Investments in securities for which market quotations are readily available are valued based upon their current available prices in the principal market in which such securities are normally traded. Unlisted securities for which market quotations are readily available are valued at such market value. Securities and other assets for which quotations are not readily available are valued at their fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Trustees of the Trust. Short-term securities (i.e., with maturities of 60 days or less) are valued at either amortized cost or original cost plus accrued interest, which approximates current value. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION Shares of the Fund are sold on a continuous basis by BISYS, and BISYS has agreed to use appropriate efforts to solicit all purchase orders. In addition to purchasing Shares directly from BISYS Fund Services Limited Partnership ("BISYS"), Shares may be purchased through procedures established by BISYS in connection with the requirements of accounts at the Adviser or the Adviser's affiliated entities (collectively, "Entities"). Customers purchasing Shares of the Fund may include officers, directors, or employees of the Adviser or the Entities. The Trust may suspend the right of redemption or postpone the date of payment for Shares during any period when (a) trading on the New York Stock Exchange (the "NYSE") is restricted by applicable rules and regulations of the Commission, (b) the NYSE is closed for other than customary weekend and holiday closings, (c) the Commission has by order permitted such suspension, or (d) an emergency exists as a result of which (i) disposal by the Trust of securities owned by it is not reasonably practical, or (ii) it is not reasonably practical for the Trust to determine the fair value of its net assets. - 24 - MANAGEMENT OF THE Trust TRUSTEES AND OFFICERS Overall responsibility for management of the Trust rests with its Board of Trustees, who are elected by Shareholders of the Trust. The Trustees elect the officers of the Trust to supervise actively its day-to-day operations. The names of the Trustees and officers of the Trust, their addresses, ages and principal occupations during the past five years are provided in the tables below. Trustees that are deemed "interested persons," as defined in the 1940 Act, are listed as "Interested Trustees" in the table. Trustees who are not interested persons are referred to as Independent Trustees. INTERESTED TRUSTEES*
- ----------------------------------------------------------------------------------------------------------------------------------- TERM OF PRINCIPAL NUMBER OF FUNDS IN POSITION(S) OFFICE** AND OCCUPATION(S) FUND COMPLEX OTHER HELD WITH LENGTH OF DURING PAST FIVE OVERSEEN BY DIRECTORSHIPS NAME, ADDRESS AND AGE THE FUNDS TIME SERVED YEARS TRUSTEE*** HELD BY TRUSTEE - ----------------------------------------------------------------------------------------------------------------------------------- Walter B. Grimm(1) Trustee Indefinite; Co-Owner, Leigh 15 American Performance Funds 3435 Stelzer Road 4/97 to present Investments, Inc. Columbus, OH 43219 (Real Estate) - The Coventry Group 1/06 to present; Date of Birth: 6/30/1945 Employee of BISYS Fund Legacy Funds Group Services 6/92 to 9/05 Performance Funds Trust - -----------------------------------------------------------------------------------------------------------------------------------
* Mr. Grimm is considered to be an "interested person" of the Trust as defined in the 1940 Act due to his previous employment with BISYS Fund Services, the Fund's distributor and administrator. Mr. Grimm ceased to be an employee of BISYS Fund Services effective after December 31, 2005. INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------- NUMBER OF FUNDS TERM OF PRINCIPAL IN FUND POSITION(S) OFFICE** AND OCCUPATION(S) COMPLEX*** OTHER HELD WITH LENGTH OF TIME DURING PAST FIVE OVERSEEN BY DIRECTORSHIPS NAME, ADDRESS AND AGE THE FUNDS SERVED YEARS TRUSTEE HELD BY TRUSTEE - -------------------------------------------------------------------------------------------------------------------------- Diane E. Armstrong Trustee Indefinite; Principal of King 15 The Coventry Group 3435 Stelzer Road 2/06 to present Dodson Armstrong Columbus, OH 43219 Financial Advisors, Date of Birth: 7/02/1964 Inc. - 8/03 to present; Director of Financial Planning, Hamilton Capital Management - 4/00 to 8/03 - -------------------------------------------------------------------------------------------------------------------------- James H. Woodward Trustee Indefinite; Chancellor, 15 The Coventry Group 9201 University City Blvd. 4/97 to present University of Charlotte, NC 28223 North Carolina Date of Birth: 11/24/1939 at Charlotte -- 7/89 to 7/05 Michael Van Buskirk Trustee Indefinite; Chief Executive 15 The Coventry Group 3435 Stelzer Road and Chairman 4/97 to present Officer, Ohio Columbus, OH 43219 of the Board Bankers Assoc. Date of Birth: 2/22/1947 (industry trade association) -- 5/91 to present Maurice Stark Trustee Indefinite; Consultant, 15 The Coventry Group 7662 Cloister Drive 3/04 to present (part-time) Columbus, OH 43235 Battelle Date of Birth: 9/23/1935 Memorial Institute -- 1/95 to present
- 25 - ** Trustees hold their position until their resignation or removal. *** The "Fund Complex" consists of the Trust and The Coventry Group. OFFICERS WHO ARE NOT TRUSTEES
TERM OF OFFICE AND LENGTH PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND DATE OF BIRTH POSITION(S) HELD WITH TRUST OF TIME SERVED DURING PAST 5 YEARS -------------------------------- --------------------------------- --------------------------- --------------------------- R. Jeffrey Young President Indefinite; 9/05 to present Employee of BISYS Fund 3435 Stelzer Road Services (10/93 to present) Columbus, OH 43219 Date of Birth: 8/22/1964 Eric Phipps Anti-Money Laundering Officer and Indefinite; 11/06 to Employee of BISYS Fund 3435 Stelzer Road Columbus, OH 43219 Chief Compliance Officer present Services (6/06 to present); Date of Birth: 6/20/71 United States Securities and Exchange Commission (10/04 to 5/06); Director - Compliance Services, BISYS Fund Services (12/95 to 10/04) Linda A. Durkin Treasurer Indefinite; 11/06 to present Employee of BISYS Fund 3435 Stelzer Road Services (9/06 to present); Columbus, OH 43219 Employee of Investor Bank Date of Birth: 11/1/1960 and Trust (2/06 to 9/06); Employee of R R Donnelley, (6/03 to 1/06); Vice President-Director of Fund Administration, Mercantile - Safe Deposit and Trust Co. (1993-2002).
The officers of the Trust are "interested persons" (as defined in the 1940 Act) and receive no compensation directly from the Funds for performing the duties of their offices. BOARD COMMITTEES Valuation Committee The Board of Trustees has a Valuation Committee whose function is to monitor the valuation of portfolio securities and other investments and, as required by the Trust's valuation - 26 - policies, when the Board is not in session, it shall determine the fair value of portfolio holdings after consideration of all relevant factors, which determinations shall be reported to the full Board. The Valuation Committee consists of at least two Independent Trustees. The Valuation Committee did not hold any meetings in the last fiscal year. Audit Committee The Board of Trustees has an Audit Committee, comprised of the Independent Trustees, whose function is to oversee the financial reporting and internal controls of the Trust. The Audit Committee: (i) recommends to the Board of Trustees the selection of an independent public accounting firm; (ii) annually reviews the scope of the proposed audit, the audit procedures to be utilized and the proposed audit fees; (iii) reviews the annual audit with the independent auditors; and (iv) reviews the adequacy and effectiveness of internal controls and procedures. The Audit Committee held two meetings during the past fiscal year. Nominating Committee The Board of Trustees has a Nominating Committee that recommends nominations for membership on the Board. The Committee evaluates candidates' qualifications for Board membership and, with respect to nominees for positions as Independent Trustees, their independence from the Fund's investment adviser and other principal services providers. The Committee meets as necessary to identify and evaluate nominees for Trustee and to make its recommendations to the Board. The Nominating Committee is composed of all of the Independent Trustees of the Trust. The Nominating Committee does not consider nominees recommended by shareholders. During the last fiscal year, the Nominating Committee did not hold any meetings. OWNERSHIP OF SECURITIES As of the date of this Statement of Additional Information, the Trust's Trustees and officers, as a group, owned less than 1% of the Fund's outstanding Shares. For the year ended December 31, 2006, the dollar range of equity securities owned beneficially by each Trustee in the Fund and in any registered investment companies overseen by the Trustee within the same family of investment companies as the Fund is as follows: - 27 - INTERESTED TRUSTEES
- --------------------------------------------------------------------------------------------------------------------- AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES DOLLAR RANGE OF EQUITY OVERSEEN BY TRUSTEE IN FAMILY OF INVESTMENT NAME OF TRUSTEE SECURITIES IN THE FUND* COMPANIES - --------------------------------------------------------------------------------------------------------------------- Walter B. Grimm None None - ---------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------- AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT COMPANIES DOLLAR RANGE OF EQUITY OVERSEEN BY TRUSTEE IN FAMILY OF INVESTMENT NAME OF TRUSTEE SECURITIES IN THE FUND COMPANIES - --------------------------------------------------------------------------------------------------------------------- Diane E. Armstrong None None - --------------------------------------------------------------------------------------------------------------------- Maurice G. Stark None None - --------------------------------------------------------------------------------------------------------------------- Michael M. Van Buskirk $50,001-$100,000 Over $100,000 - --------------------------------------------------------------------------------------------------------------------- James H. Woodward None None - ---------------------------------------------------------------------------------------------------------------------
* The Fund had not commenced operations as of December 31, 2006 and therefore shares of the Funds were not offered during the covered period. The Officers of the Trust (other than the Chief Compliance Officer) receive no compensation directly from the Trust for performing the duties of their offices. BISYS Fund Services may receive fees pursuant to the Distribution and Shareholder Services Plan. BISYS Fund Services Ohio, Inc. ("BISYS") receives fees from the Fund for acting as administrator and transfer agent and for providing certain fund accounting services. Messrs. Young, Bresnahan and Stevens are employees of BISYS. Trustees of the Trust not affiliated with BISYS or BISYS Fund Services receive from the Trust, effective as of April 1, 2006, the following fees: a quarterly retainer fee of $2,000 per quarter; a regular meeting fee of $3,000 per meeting; a special in-person meeting fee of $1,000; a telephonic meeting fee of $500; an Audit Committee fee of $1,000 per meeting; and a $500 per meeting fee for all other committee meetings. Trustees are also reimbursed for all out-of-pocket expenses relating to attendance at such meetings. Trustees who are employed by BISYS or BISYS Fund Services do not receive compensation from the Trust. For the fiscal year ended December 31, 2006 the Trustees received the following compensation from the Trust and from certain other investment companies (if applicable) that have the same investment advisor as the Fund or an investment advisor that is an affiliated person of the Trust's investment advisor: - 28 -
- --------------------------------------------------------------------------------------------------------------------- PENSION OR TOTAL COMPENSATION RETIREMENT BENEFITS ESTIMATED ANNUAL FROM THE FUND AND AGGREGATE COMPENSATION ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX** PAID NAME OF TRUSTEE FROM THE FUND* FUNDS EXPENSES RETIREMENT TO THE TRUSTEES - --------------------------------------------------------------------------------------------------------------------- James H. Woodward $0 $0 $0 $22,000 - --------------------------------------------------------------------------------------------------------------------- Michael Van Buskirk $0 $0 $0 $20,250 - --------------------------------------------------------------------------------------------------------------------- Walter B. Grimm $0 $0 $0 $19,750 - --------------------------------------------------------------------------------------------------------------------- Maurice Stark $0 $0 $0 $20,750 - --------------------------------------------------------------------------------------------------------------------- Diane Armstrong*** $0 $0 $0 $20,750 - ---------------------------------------------------------------------------------------------------------------------
* The Fund had not commenced operations as of December 31, 2006 and therefore did not make any payments during the covered period. *** Ms. Armstrong became a Trustee of the Trust as of February, 2006. ** The Fund Complex consists of the Trust and The Coventry Group INVESTMENT ADVISER Investment advisory services are provided to the Fund by EM Capital Management, LLC (the "Adviser"), pursuant to an Investment Advisory Agreement dated as of March 1, 2007. Under the terms of the Investment Advisory Agreement, the Adviser has agreed to provide investment advisory services as described in the Prospectus of the Fund. For the services provided and expenses assumed pursuant to the Investment Advisory Agreement, the Fund pays the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.20% of the Fund's first $500 million in net assets; 0.90% of the next $500 million in net assets; 0.80% of the next $500 million in net assets; 0.70% of the next $500 million in net assets; 0.65% of the next $1 billion in net assets; and 0.60% of net assets in excess of $3 billion. The Adviser may, from time to time, voluntarily reduce all or a portion of its advisory fee with respect to the Fund. The Adviser has contractually agreed, until April 30, 2008, pursuant to the terms of an Expense Limitation Agreement, to waive fees and/or reimburse the Fund to the extent necessary to maintain the Fund's total fund operating expenses for Class A, Class C and Class I shares at 2.30%, 2.80% and 1.80%, respectively, provided that these limits do not apply to increases due to brokerage costs, interest, taxes and dividends and extraordinary expenses. The Fund has agreed to repay the Adviser for amounts that were waived or reimbursed by the Adviser pursuant to the Expense Limitation Agreement for a period of up to three years after such waiver or reimbursement was made to the extent that such payment does not cause the total fund operating expenses for a class of shares of the Fund to exceed the above limits and the repayment is made within three years after the year in which the Adviser incurred the expense. - 29 - Unless sooner terminated, the Investment Advisory Agreement will continue in effect until March 1, 2008, and year to year thereafter for successive annual periods if, as to the Fund, such continuance is approved at least annually by the Trust's Board of Trustees or by vote of a majority of the outstanding Shares of the Fund, and a majority of the Trustees who are not parties to the Investment Advisory Agreement or interested persons (as defined in the 1940 Act) of any party to the Investment Advisory Agreement by votes cast in person at a meeting called for such purpose. The Investment Advisory Agreement is terminable as to the Fund at any time on 60 days' written notice without penalty by the Trustees, by vote of a majority of the outstanding Shares of the Fund, or by the Adviser. The Investment Advisory Agreement also terminates automatically in the event of any assignment, as defined in the 1940 Act. The Investment Advisory Agreement provides that the Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of the Investment Advisory Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the Adviser in the performance of its duties, or from reckless disregard by the Adviser of its duties and obligations thereunder. PORTFOLIO MANAGER INFORMATION Robert K. Bell, Chartered Financial Analyst, serves as Lead Portfolio Manager for the Fund. Dhruba Gupta CA and Seth R. Freeman, CIRA serve as Co-Portfolio Managers. The following table lists the number and types of other accounts managed by the Portfolio Managers and assets under management in those accounts as of March 31, 2007:
- -------------------------------------------------------------------------------------------------------------------- OTHER POOLED OTHER REGISTERED ASSETS INVESTMENT ASSETS ASSETS TOTAL ASSETS PORTFOLIO INVESTMENT COMPANY MANAGED ($ VEHICLE MANAGED ($ OTHER MANAGED ($ MANAGED ($ MANAGER ACCOUNTS MILLIONS) ACCOUNTS MILLIONS) ACCOUNTS MILLIONS) MILLIONS) - -------------------------------------------------------------------------------------------------------------------- ROBERT K. BELL 0 n/a 0 n/a 0 $ $ DHRUBA GUPTA 0 n/a 0 n/a 0 $ $ SETH R. FREEMAN 0 n/a 0 n/a 0 $ $ - --------------------------------------------------------------------------------------------------------------------
Portfolio managers at the Adviser may manage accounts for multiple clients. Portfolio managers at the Adviser make investment decisions for each account based on the investment objectives and policies and other relevant investment considerations applicable to that portfolio. The management of multiple accounts may result in a portfolio manager devoting unequal time - 30 - and attention to the management of each account. Even where multiple accounts are managed by the same portfolio manager within the same investment discipline, however, the Adviser may take action with respect to one account that may differ from the timing or nature of action taken, with respect to another account. Accordingly, the performance of each account managed by a portfolio manager will vary. The compensation of the portfolio managers varies with the general success of the Adviser as a firm. Each portfolio manager's compensation consists of a fixed annual salary, plus additional remuneration based on the overall performance of the Adviser for the given time period. The portfolio manager's compensation is not linked to any specific factors, such as the Fund's performance or asset level. The Adviser has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which it believes address the potential conflicts associated with managing multiple accounts for multiple clients. The dollar range of equity securities beneficially owned by the Fund's portfolio manager in the Fund will be included in subsequent filing materials. CODE OF ETHICS The Trust, the Adviser and the Distributor have each adopted a Code of Ethics, pursuant to Rule 17j-1 under the Investment Company Act of 1940, applicable to securities trading practices of their respective personnel. Each Code permits covered personnel to trade in securities in which the Fund may invest, subject to certain restrictions and reporting requirements. PORTFOLIO TRANSACTIONS Pursuant to the Investment Advisory Agreement, the Adviser determines, subject to the general supervision of the Board of Trustees of the Trust and in accordance with the Fund's investment objective and restrictions, which securities are to be purchased and sold by the Fund, and which brokers are to be eligible to execute the Fund's portfolio transactions. Purchases and sales of portfolio securities with respect to fixed income securities usually are principal transactions in which portfolio securities are normally purchased directly from the issuer or from an underwriter or market maker for the securities. Purchases from underwriters of portfolio securities generally include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market makers may include the spread between the bid and asked price. Transactions on stock exchanges involve the payment of negotiated brokerage commissions. Transactions in the over-the-counter market are generally principal transactions with dealers. With respect to the over-the-counter market, the Trust, where possible, will deal - 31 - directly with dealers who make a market in the securities involved except in those circumstances where better price and execution are available elsewhere. Allocation of transactions, including their frequency, to various brokers and dealers is determined by the Adviser in its best judgment and in a manner deemed fair and reasonable to Shareholders. The primary consideration is prompt execution of orders in an effective manner at the most favorable price. Subject to this consideration, brokers and dealers who provide supplemental investment research to the Adviser may receive orders for transactions on behalf of the Fund. The Adviser is authorized to pay a broker-dealer who provides such brokerage and research services a commission for executing the Fund's brokerage transactions which is in excess of the amount of commission another broker would have charged for effecting that transaction if, but only if, the Adviser determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker viewed in terms of that particular transaction or in terms of all of the accounts over which it exercises investment discretion. Any such research and other statistical and factual information provided by brokers to the Fund or to the Adviser is considered to be in addition to and not in lieu of services required to be performed by the Adviser under its agreement regarding management of the Fund. The cost, value and specific application of such information are indeterminable and hence are not practicably allocable among the Funds and other clients of the Adviser who may indirectly benefit from the availability of such information. Similarly, the Fund may indirectly benefit from information made available as a result of transactions effected for such other clients. Under the Investment Advisory Agreement the Adviser is permitted to pay higher brokerage commissions for brokerage and research services in accordance with Section 28 (e) of the Securities Exchange Act of 1934. In the event the Adviser does follow such a practice, it will do so on a basis which is fair and equitable to the Trust and the Fund. While the Adviser generally seeks competitive commissions, the Trust may not necessarily pay the lowest commission available on each brokerage transaction, for reasons discussed above. Except as otherwise disclosed to the Shareholders of the Fund and as permitted by applicable laws, rules and regulations, the Trust will not, on behalf of the Fund, execute portfolio transactions through, acquire portfolio securities issued by, make savings deposits in, or enter into repurchase or reverse repurchase agreements with the Adviser, BISYS, or their affiliates, and will not give preference to the Adviser's correspondents with respect to such transactions, securities, savings deposits, repurchase agreements, and reverse repurchase agreements. Investment decisions for the Fund are made independently from those for the other funds of the Trust or any other investment company or account managed by the Adviser. Any such other fund, investment company or account may also invest in the same securities as the Trust on behalf of the Fund. When a purchase or sale of the same security is made at substantially the same time on behalf of the Fund and another fund of the Trust, investment company or account, the transaction will be averaged as to price and available investments will be allocated as to - 32 - amount in a manner which the Adviser believes to be equitable to the Fund and such other fund, investment company or account. In some instances, this investment procedure may adversely affect the price paid or received by the Fund or the size of the position obtained by the Fund. To the extent permitted by law, the Adviser may aggregate the securities to be sold or purchased for the Fund with those to be sold or purchased for other investment companies or accounts in order to obtain best execution. As provided by the Investment Advisory Agreement, in making investment recommendations for the Fund, the Adviser will not inquire or take into consideration whether an issuer of securities proposed for purchase or sale by the Trust is a customer of the Adviser, any of its parents or subsidiaries or affiliates and, in dealing with its customers, the Adviser, its parent, subsidiaries, and affiliates will not inquire or take into consideration whether securities of such customers are held by the Fund or any other fund of the Trust. ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING SERVICES BISYS Ohio serves as administrator and transfer agent for the Fund and also provides fund accounting services to the Fund pursuant to a Master Services Agreement dated as of January 1, 2007 (the "Master Services Agreement"). As administrator, BISYS Ohio assists in supervising all operations of the Fund and 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, assist the Trust or its designee in the preparation of, and file all of the Fund's federal and state tax returns and required tax filings other than those required to be made by the Fund's custodian; prepare compliance filings pursuant to state securities laws with the advice of the Trust's counsel; assist to the extent requested by the Trust with the Trust's preparation of its Annual and Semi-Annual Reports to Shareholders and its Registration Statement (on Form N-1A or any replacement therefor); compile data for, prepare and file timely Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act; keep and maintain the financial accounts and records of the Fund, including calculation of daily expense accruals; and generally assist in all aspects of the Fund's operations. BISYS Ohio also serves as transfer agent for the Fund pursuant to the Master Services Agreement. Pursuant to such Agreement, BISYS, as the transfer agent, among other things, performs the following services in connection with the Fund's shareholders of record: maintenance of shareholder records for the Fund's shareholders of record; processing shareholder purchase and redemption orders; processing transfers and exchanges of shares of the Fund on the shareholder files and records; processing dividend payments and reinvestments; and assistance in the mailing of shareholder reports and proxy solicitation materials. In addition, BISYS Ohio provides certain fund accounting services to the Fund pursuant to the Master Services Agreement. Under the Master Services Agreement, BISYS Ohio maintains the accounting books and records for the Fund, including journals containing an itemized daily record of all purchases and sales of portfolio securities, all receipts and disbursements of cash and all other debits and credits, general and auxiliary ledgers reflecting all asset, liability, reserve, capital, income and expense accounts, including interest accrued and - 33 - interest received, and other required separate ledger accounts; maintains a monthly trial balance of all ledger accounts; performs certain accounting services for the Fund, including calculation of the net asset value per share, calculation of the dividend and capital gain distributions, if any, and of yield, reconciliation of cash movements with the Fund's custodian, affirmation to the Fund's custodian of all portfolio trades and cash settlements, verification and reconciliation with the Fund's custodian of all daily trade activity; provides certain reports; obtains dealer quotations, prices from a pricing service or matrix prices on all portfolio securities in order to mark the portfolio to the market; and prepares an interim balance sheet, statement of income and expense, and statement of changes in net assets for the Fund. BISYS Ohio receives a fee from the Fund for its services provided under the Master Services Agreement and expenses assumed pursuant to the Master Services Agreement that is calculated daily and paid periodically based upon the amount of the Fund's average daily net assets and it also receives specific fees for individual services performed under the Agreement. Unless sooner terminated as provided therein, the Master Services Agreement's term expires on January 1, 2010. The Master Services Agreement thereafter shall be renewed automatically for successive one-year terms, unless written notice not to renew is given by the non-renewing party to the other party. The Master Services Agreement is terminable with respect to the Fund only upon mutual agreement of the parties to the Agreement and for cause (as defined in the Agreement) by the party alleging cause, on not less than 60 days' notice by the Trust's Board of Trustees or by the Administrator. The Agreement provides that BISYS Ohio shall not be liable for any error of judgment or mistake of law or any loss suffered by the Fund in connection with the matters to which the Master Services Agreement relates, except a loss resulting from willful misfeasance, bad faith, or negligence in the performance of its duties, or from the reckless disregard by BISYS Ohio of its obligations and duties thereunder. DISTRIBUTOR BISYS serves as agent for the Fund in the distribution of its Shares pursuant to a Distribution Agreement dated as of April 30, 2007 (the "Distribution Agreement"). Unless otherwise terminated, the Distribution Agreement will continue in effect for successive annual periods if, as to the Fund, such continuance is approved at least annually by (i) by the Trust'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 Trust who are not parties to the Distribution Agreement or interested persons (as defined in the 1940 Act) of any party to the Distribution Agreement, cast in person at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated in the event of any assignment, as defined in the 1940 Act. In its capacity as Distributor, BISYS enters into selling agreements with intermediaries that solicit orders for the sale of Shares, advertises and pays the costs of advertising, office space and the personnel involved in such activities. BISYS receives annual compensation of $20,000 - 34 - under the Distribution Agreement with the Trust. BISYS has entered into a Distribution Services Agreement with the Adviser in connection with BISYS' services as distributor of the Fund pursuant to which the Adviser undertakes to pay BISYS amounts owed to BISYS under the terms of the Distribution Agreement to the extent that the Fund is not otherwise authorized to make such payments. The Trust has adopted a Service and Distribution Plan for Class A and Class C Shares (the "Plan") pursuant to Rule 12b-1 under the 1940 Act under which the Class A Shares of the Fund are authorized to pay the Distributor for payments it makes to banks, other institutions and broker-dealers, and for expenses the Distributor and any of its affiliates or subsidiaries incur (with all of the foregoing organizations being referred to as "Service Organizations") for providing administration, distribution or shareholder service assistance to the Fund. Payments to such Service Organizations may be made pursuant to agreements entered into with BISYS Fund Services. The Plan authorizes the Fund to make payments to the Distributor in an amount not to exceed, on an annual basis, 0.50% of the average daily net assets of Class A Shares of the Fund and up to 1.00% of the average daily net assets of Class C Shares. As required by Rule 12b-1, the Plan was approved by the initial Shareholders of the Fund and by the Board of Trustees, including a majority of the Trustees who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan (the "Independent Trustees"). The Plan may be terminated as to the Fund by vote of a majority of the Independent Trustees, or by vote of a majority of the outstanding Shares of the Fund. Any change in the Plan that would materially increase the distribution cost to the Fund requires Shareholder approval. 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. For so long as the Plan is in effect, selection and nomination of those Trustees who are not interested persons of the Trust shall be committed to the discretion of such disinterested persons. All agreements with any person relating to the implementation of the Plan may be terminated at any time on 60 days' written notice without payment of any penalty, by vote of a majority of the Independent Trustees or by a vote of the majority of the outstanding Shares of the Fund. The Plan will continue in effect for successive one-year periods, provided that each such continuance is specifically approved (i) by the vote of a majority of the Independent Trustees, and (ii) by a 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 them to make an informed determination of whether the Plan should be implemented or continued. In addition the Trustees in approving the Plan must determine that there is a reasonable likelihood that the Plan will benefit the Fund and its Shareholders. The Board of Trustees of the Trust believes that the Plan is in the best interests of the Fund since it encourages Fund growth and maintenance of Fund assets. 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. - 35 - BISYS may enter into, from time to time, Rule 12b-1 Agreements with selected dealers pursuant to which such dealers will provide certain services in connection with the distribution of the Fund's Shares including, but not limited to, those discussed above. CUSTODIAN Union Bank of California, N.A., 350 California Street, San Francisco, California 94104 (the "Custodian"), has been selected to serve as the Fund's custodian. The Custodian's responsibilities include safeguarding and controlling the Fund's cash and securities, handling the receipt and delivery of securities, and collecting interest and dividends on the Fund's investments. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The independent registered public accounting firm of Ernst & Young LLP performs an annual audit of the Fund's financial statements and provides other related services. Reports of their activities are provided to the Trust's Board of Trustees. LEGAL COUNSEL Thompson Hine LLP, 10 W. Broad Street, Columbus, Ohio 43215, serves as counsel to the Trust. ADDITIONAL INFORMATION DESCRIPTION OF SHARES The Trust is a Massachusetts business trust that was organized on July 20, 1994. The Trust's Declaration of Trust is on file with the Secretary of State of the Commonwealth of Massachusetts and was filed with the Secretary of the State on that date. The Declaration of Trust, as amended and restated, authorizes the Board of Trustees to issue an unlimited number of Shares, which are units of beneficial interest, without par value. The Trust currently has multiple series of Shares which represent interests in each series of the Trust. The Trust's Declaration of Trust authorizes the Board of Trustees to divide or redivide any unissued shares of the Trust into one or more additional series or classes by setting or changing in any one or more respects their respective preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption. Shares have no subscription or preemptive rights and only such conversion or exchange rights as the Board of Trustees may grant in its discretion. When issued for payment as described in the Prospectus and this SAI, the Trust's Shares will be fully paid and non-assessable by the Trust. In the event of a liquidation or dissolution of the Trust, Shareholders of the Fund are entitled to receive the assets available for distribution belonging to the Fund, and a proportionate distribution, based upon the relative asset values of the respective series, of any general assets not belonging to any particular series which are available for distribution. - 36 - 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 Trust shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding Shares of the Fund affected by the matter. For purposes of determining whether the approval of a majority of the outstanding Shares of the Fund will be required in connection with a matter, the Fund will be deemed to be affected by a matter unless it is clear that the interests of the 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 series only if approved by a majority of the outstanding Shares of the Fund. However, Rule 18f-2 also provides that the ratification of independent public accountants, the approval of principal underwriting contracts, and the election of Trustees may be effectively acted upon by Shareholders of the Trust voting without regard to series. Under Massachusetts law, holders of units of interest in a business trust may, under certain circumstances, be held personally liable as partners for the obligations of the Trust. However, the Trust's Declaration of Trust provides that Shareholders shall not by subject to any personal liability for the obligations of the Trust. The Declaration of Trust provides for indemnification out of Trust property of any shareholder held personally liable solely by reason of his or her being or having been a Shareholder. The Declaration of Trust also provides that the Trust shall, upon request, reimburse any Shareholder for all legal and other expenses reasonably incurred in the defense of any claim made against the Shareholder for any act or obligation of the Trust, and shall satisfy any judgment thereon. Thus, the risk of a Shareholder incurring financial loss on account of Shareholder liability is limited to circumstances in which the Trust itself would be unable to meet its obligations, and thus should be considered remote. The Declaration of Trust states further that no Trustee, officer, or agent of the Trust shall be personally liable in connection with the administration or preservation of the assets of the Trust or the conduct of the Trust's business; nor shall any Trustee, officer, or agent be personally liable to any person for any action or failure to act except for his own bad faith, willful misfeasance, gross negligence, or reckless disregard of his duties. The Declaration of Trust also provides that all persons having any claim against the Trustees of the Trust shall look solely to the assets of the Trust for payment. VOTE OF A MAJORITY OF THE OUTSTANDING SHARES As used in the Prospectus and this SAI, a "vote of a majority of the outstanding Shares" of the Trust of the Fund means the affirmative vote, at an annual or special meeting of Shareholders duly called, of the lesser of (a) 67% or more of the votes of Shareholders of the Trust or the Fund present at a meeting at which the holders of more than 50% of the votes attributable to Shareholders of record of the Trust 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 Trust or the Fund. - 37 - ADDITIONAL TAX INFORMATION Set forth below is a discussion of certain U.S. federal income tax issues concerning the Funds and the purchase, ownership, and disposition of Fund shares. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to Shareholders in light of their particular circumstances. This discussion is based upon present provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, which change may be retroactive. Prospective investors should consult their own tax advisors with regard to the federal tax consequences of the purchase, ownership, or disposition of Fund shares, as well as the tax consequences arising under the laws of any state, foreign country, or other taxing jurisdiction. The Fund is treated as a separate entity for federal income tax purposes and intends each year to qualify and elect to be treated as a "regulated investment company" under Subchapter M of the Code. To qualify as a regulated investment company, the Fund must, among other things: derive 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 securities or foreign currencies, net income derived from interests in one or more qualified publicly traded partnerships; or other income derived with respect to its business of investing in such stock, securities, or currencies; diversify it holdings so that, at the end of each quarter of the taxable year, (a) at least 50% of the market value of the Fund's assets is represented by cash, cash items, U.S. government securities, 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 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. Government securities or the securities of other regulated investment companies), of two or more issuers with the Fund controls (as that term is defined in the relevant provisions of the Code) and which are determined to be engaged in the same or similar trades or businesses or related trades or businesses, or of one or more qualified publicly traded partnerships; and, distribute to its Shareholders at least 90% of its investment company taxable income for the year. In general, the Fund's investment company taxable income will be its taxable income subject to certain adjustments and excluding the excess of any net long-term capital gain for the taxable year over the net short-term capital loss, if any, for such year. A non-deductible 4% excise tax is imposed on regulated investment companies that do not distribute in each calendar year (regardless of whether they otherwise have a non-calendar taxable year) an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the one-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. If distributions during a calendar year were less than the required amount, the Fund would be subject to a non-deductible excise tax equal to 4% of the deficiency. - 38 - Although the Fund expects to qualify as a "regulated investment company" and thus to be relieved of all or substantially all of its federal income tax liability, depending upon the extent of its activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located, or in which it is otherwise deemed to be conducting business, the Fund may be subject to the tax laws of such states or localities. In addition, if for any taxable year the Fund does not qualify for the special tax treatment afforded regulated investment companies, all of its taxable income will be subject to federal tax at regular corporate rates (without any deduction for distributions to its Shareholders). In such event, dividend distributions would be taxable to Shareholders to the extent of earnings and profits, and would be eligible for the dividends received deduction for corporations. It is expected that the Fund will distribute annually to Shareholders all or substantially all of the Fund's net ordinary income and net realized capital gains and that such distributed net ordinary income and distributed net realized capital gains will be taxable income to Shareholders for federal income tax purposes, even if paid in additional Shares of the Fund and not in cash. The excess of net long-term capital gains over short-term capital losses realized and distributed by the Fund and designated as capital gain dividends, whether paid in cash or reinvested in Fund shares, will be taxable to Shareholders. The Code generally provides for a maximum tax rate for individual taxpayers of 15% on long-term capital gains and on certain qualified dividend income. The rate reductions do not apply to corporate taxpayers. The Fund may separately designate distributions of any long-term capital gains or qualified dividends earned by the Fund that would be eligible for the lower maximum rate. A shareholder would also have to satisfy a more than 60-day holding period with respect to any distributions of qualified dividends in order to obtain the benefit of the lower rate. Distributions resulting from the Fund's investments in bonds and other debt instruments will not generally qualify for the lower rates. Note that distributions of earnings from dividends paid by "qualified foreign corporations" can also qualify for the lower tax rates on qualifying dividends. Qualified foreign corporations are corporations incorporated in a U.S. possession, corporations whose stock is readily tradable on an established securities market in the U.S., and corporations eligible for the benefits of a comprehensive income tax treaty with the United States which satisfy certain other requirements. Passive foreign investment companies are not treated as "qualified foreign corporations." Foreign tax credits associated with dividends from "qualified foreign corporations" will be limited to reflect the reduced U.S. tax on those dividends. Any net capital loss realized by the Fund may be carried forward and will be available to offset future net capital gains, if any, for a period of eight years to the extent provided by the Treasury regulations. To the extent that this carryforward is used to offset future capital gains, it is probable that these gains so offset will not be distributed to shareholders. Certain corporations are entitled to a 70% dividends received deduction for distributions from certain domestic corporations. The Fund may designate the portion of any distributions which qualify for the 70% dividends received deduction. The amount so designated may not exceed the amount received by the Fund for its taxable year that qualifies for the dividends - 39 - received deduction. Foreign taxes may be imposed on the Fund by foreign countries with respect to its income from foreign securities, if any. It is expected that, because less than 50% in value of the Fund's total assets at the end of its fiscal year will be invested in stocks or securities of foreign corporations, the Fund will not be entitled under the Code to pass through to its Shareholders their pro rata share of the foreign taxes paid by the Fund. Any such taxes will be taken as a deduction by such Fund. Upon the sale or exchange of shares, a shareholder will realize a taxable gain or loss depending upon the shareholder's basis in the shares. Such a gain or loss will be treated as capital gain or loss taxable at reduced rates if the shares are capital assets in the shareholder's hands, and will be long-term capital gain or loss if the shares are held for more than one year. If your tax basis in your shares exceeds the amount of proceeds you receive from a sale, exchange or redemption of shares, you will recognize a taxable loss on the sale of shares of the Fund. Any loss recognized on shares held for six months or less will be treated as long-term capital loss to the extent of any long-term capital gain distributions that were received with respect to the shares. Additionally, any loss realized on a sale, redemption or exchange of shares of the Fund may be disallowed under "wash sale" rules to the extent the shares disposed of are replaced with other shares of the Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of the Fund. If disallowed, the loss will be reflected in an adjustment to the tax basis of the shares required. The Fund may be required by federal law to withhold and remit to the U.S. Treasury 28% of taxable dividends, if any, and capital gain distributions to any Shareholder, and the proceeds of redemption or the values of any exchanges of Shares of the Fund by the Shareholder, if such Shareholder (1) fails to furnish the Trust with a correct taxpayer identification number, (2) under-reports dividend or interest income, or (3) fails to certify to the Trust that he or she is not subject to such withholding. An individual's taxpayer identification number is his or her Social Security number. Information as to the Federal income tax status of all distributions will be mailed annually to each Shareholder. Market Discount. If the Fund purchases a debt security at a price lower than the stated redemption price of such debt security, the excess of the stated redemption price over the purchase price is "market discount". If the amount of market discount is more than a de minimis amount, a portion of such market discount must be included as ordinary income (not capital gain) by the Fund in each taxable year in which the Fund owns an interest in such debt security and receives a principal payment on it. In particular, the Fund will be required to allocate that principal payment first to the portion of the market discount on the debt security that has accrued but has not previously been includable in income. In general, the amount of market discount that must be included for each period is equal to the lesser of (i) the amount of market discount accruing during such period (plus any accrued market discount for prior periods not previously taken into account) or (ii) the amount of the principal payment with respect to such period. - 40 - Generally, market discount accrues on a daily basis for each day the debt security is held by the Fund at a constant rate over the time remaining to the debt security's maturity or, at the election of the Fund, at a constant yield to maturity which takes into account the semi-annual compounding of interest. Gain realized on the disposition of a market discount obligation must be recognized as ordinary interest income (not capital gain) to the extent of the "accrued market discount." Original Issue Discount. Certain debt securities acquired by the Fund may be treated as debt securities that were originally issued at a discount. Very generally, original issue discount is defined as the difference between the price at which a security was issued and its stated redemption price at maturity. Although no cash income on account of such discount is actually received by the Fund, original issue discount that accrues on a debt security in a given year generally is treated for federal income tax purposes as interest and, therefore, such income would be subject to the distribution requirements applicable to regulated investment companies. Some debt securities may be purchased by the Fund at a discount that exceeds the original issue discount on such debt securities, if any. This additional discount represents market discount for federal income tax purposes (see above). Options, Futures and Forward Contracts. Any regulated futures contracts and certain options (namely, non-equity options and dealer equity options) in which the Fund may invest may be "section 1256 contracts." Gains (or losses) on these contracts generally are considered to be 60% long-term and 40% short-term capital gains or losses. Also, section 1256 contracts held by the Fund at the end of each taxable year (and on certain other dates prescribed in the Code) are "marked to market" with the result that unrealized gains or losses are treated as though they were realized. Transactions in options, futures and forward contracts undertaken by the Fund may result in "straddles" for federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by the Fund, and losses realized by the Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. In addition, certain carrying charges (including interest expense) associated with positions in a straddle may be required to be capitalized rather than deducted currently. Certain elections that the Fund may make with respect to its straddle positions may also affect the amount, character and timing of the recognition of gains or losses from the affected positions. Because only a few regulations implementing the straddle rules have been promulgated, the consequences of such transactions to the Fund are not entirely clear. The straddle rules may increase the amount of short-term capital gain realized by the Fund, which is taxed as ordinary income when distributed to Shareholders. Because application of 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 must be distributed to Shareholders as ordinary income or long-term capital gain may be increased or decreased substantially as compared to a fund that did not engage in such transactions. - 41 - Constructive Sales. Certain Code provisions may affect the timing and character of gain if the Fund engages in transactions that reduce or eliminate its risk of loss with respect to appreciated financial positions. If the Fund enters into certain transactions in property while holding substantially identical property, the Fund would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the Fund's holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the Fund's holding period and the application of various loss deferral provisions of the Code. Section 988 Gains or Losses. Gains or losses attributable to fluctuations in exchange rates which occur between the time the Fund accrues income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to fluctuations in the value of the foreign currency between the acquisition and disposition of the position also are treated as ordinary gain or loss. These gains and losses, referred to under the Code as "section 988" gains or losses, increase or decrease the amount of the Fund's investment company taxable income available to be distributed to its Shareholders as ordinary income. If section 988 losses exceed other investment company taxable income during a taxable year, the Fund would not be able to make any ordinary dividend distributions, or distributions made before the losses were realized would be recharacterized as a return of capital to Shareholders, rather than as an ordinary dividend, reducing each Shareholder's basis in his or her Fund shares. Passive Foreign Investment Companies. The Fund may invest in shares of foreign corporations that may be classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign corporation is classified as a PFIC if at least one-half of its assets constitute investment-type assets, or 75% or more of its gross income is investment-type income. If the Fund receives a so-called "excess distribution" with respect to PFIC stock, the Fund itself may be subject to a tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the Fund to Shareholders. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which the Fund held the PFIC shares. The Fund will itself be subject to tax on the portion, if any, of an excess distribution that is so allocated to prior Fund taxable years and an interest factor will be added to the tax, as if the tax had been payable in such prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC shares are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of the PFIC rules, certain excess distributions might have been classified as capital gain. The Fund may be eligible to elect alternative tax treatment with respect to PFIC shares. Under an election that is available in some circumstances, the Fund would include in its gross income its share of the earnings of a PFIC on a current basis, regardless of whether distributions - 42 - were received from the PFIC in a given year. If this election is made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. In addition, another available election the Fund's PFIC shares at the end of each taxable year would be marked to market, with the result that unrealized gains would be 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. Foreign Shareholders. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from the Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from the Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, ordinary income dividends (including distributions of any net short-term capital gains) will generally be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend. However, subject to certain limitations and the receipt of further guidance from the U.S. Treasury, dividends paid to certain foreign shareholders may be exempt from U.S. tax through 2007 to the extent such dividends are attributable to qualified interest and/or net short-term capital gains, provided that the Fund elects to follow certain procedures. The Fund may choose to not follow such procedures and there can be no assurance as to the amount, if any, of dividends that would not be subject to withholding. Note that the 15% rate of tax applicable to certain dividends (discussed above) does not apply to dividends paid to foreign shareholders. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gains realized on the sale of shares of the Fund, and distributions of net long-term capital gains that are designated as capital gain dividends. If the income from the Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations. The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund, including the applicability of foreign taxes. Investment Through Mauritius. The Fund will operate, in part, through the EM Capital India Master Fund, Ltd., an entity formed in the Republic of Mauritius which is deemed to be a tax resident of Mauritius and which will be treated as a partnership for United States federal tax purposes. This is being done in order to allow the Fund to take advantage of the currently effective tax treaty that is in place between India and Mauritius. The Supreme Court of India has previously upheld the validity of this tax treaty in response to a lower court challenge contesting the treaty's applicability to certain foreign entities. Any change in the provision of this treaty or in its applicability to the Fund or the EM Capital India Master Fund, Ltd. could result in the imposition of various taxes on the Fund by India, which could reduce the return to the Fund on its investments. - 43 - PERFORMANCE CALCULATIONS Yield and Total Return Calculations Yield Calculations. Yields of the Fund will be computed by dividing the net investment income per share (as described below) earned by the Fund during a 30-day (or one month) period by the maximum offering price per share on the last day of the period and annualizing the result on a semi-annual basis by adding one to the quotient, raising the sum to the power of six, subtracting one from the result and then doubling the difference. The Fund's net investment income per share earned during the period is based on the average daily number of Shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. This calculation can be expressed as follows: a - b Yield = 2 (------- + 1) to the 6th power - 1 cd Where: a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursements). c = the average daily number of Shares outstanding during the period that were entitled to receive dividends. d = maximum offering price per Share on the last day of the period. For the purpose of determining net investment income earned during the period (variable "a" in the formula), dividend income on equity securities held by the Fund is recognized by accruing 1/360 of the stated dividend rate of the security each day that the security is in the Fund. Interest earned on any debt obligations held by the Fund is calculated by computing the yield to maturity of each obligation held by the Fund based on the market value of the obligation (including actual accrued interest) at the close of business on the last Business Day of each month, or, with respect to obligations purchased during the month, the purchase price (plus actual accrued interest) and dividing the result by 360 and multiplying the quotient by the market value of the obligation (including actual accrued interest) in order to determine the interest income on the obligation for each day of the subsequent month that the obligation is held by the Fund. For purposes of this calculation, it is assumed that each month contains 30 days. The maturity of an obligation with a call provision is the next call date on which the obligation reasonably may be expected to be called or, if none, the maturity date. With respect to debt obligations purchased at a discount or premium, the formula generally calls for amortization of the discount or premium. The amortization schedule will be adjusted monthly to reflect changes in the market values of such debt obligations. - 44 - Undeclared earned income will be subtracted from the net asset value per share (variable "d" in the formula). Undeclared earned income is the net investment income which, at the end of the base period, has not been declared as a dividend, but is reasonably expected to be and is declared as a dividend shortly thereafter. During any given 30-day period, the Adviser or Administrator may voluntarily waive all or a portion of its fees with respect to the Fund. Such waiver would cause the yield of the Fund to be higher than it would otherwise be in the absence of such a waiver. Total Return Calculations. Average annual total return is a measure of the change in value of an investment in the Fund over the period covered, which assumes any dividends or capital gains distributions are reinvested in the Fund immediately rather than paid to the investor in cash. Aggregate total return is calculated similarly to average annual total return except that the return figure is aggregated over the relevant period instead of annualized. The Fund computes its average annual total returns by determining the average annual compounded rates of return during specified periods that equate the initial amount invested to the ending redeemable value of such investment. This is done by dividing the ending redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising the quotient to a power equal to one divided by the number of years (or fractional portion thereof) covered by the computation and subtracting one from the result. This calculation can be expressed as follows: ERV Average Annual Total Return = ( --- ) 1/n - 1 P Where: ERV = ending redeemable value at the end of the period covered by the computation of a hypothetical $1,000 payment made at the beginning of the period. p = hypothetical initial payment of $1,000. n = period covered by the computation, expressed in terms of years. The Fund computes its aggregate total returns by determining the aggregate compounded rates of return during specified periods that likewise equate the initial amount invested to the ending redeemable value of such investment. The formula for calculating aggregate total return is as follows: ERV Aggregate Total Return = ( --- ) 1/n - 1 P - 45 - 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. The calculations of average annual total return and aggregate total return assume the reinvestment of all dividends and capital gain distributions on the reinvestment dates during the period. The ending redeemable value (variable "ERV" in each formula) is determined by assuming complete redemption of the hypothetical investment and the deduction of all nonrecurring charges at the end of the period covered by the computations. The Fund computes its average annual total return after taxes on distributions 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 after taxes on fund distributions but not after taxes on redemptions. This is done by dividing the ending redeemable value after taxes on fund distributions 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: ATVD Average Annual Total Return After Taxes = [------ to the 1/nth power -1] (after taxes on distributions) P Where: P = a hypothetical initial payment of $1,000. n = number of years. ATVD = ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of such periods after taxes on fund distributions but not after taxes on redemption. The Fund computes its average annual total return after taxes on distributions and redemptions 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 after taxes on fund distributions and redemptions. This is done by dividing the ending redeemable value after taxes on fund distributions and redemptions 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: - 46 - ATVDR Average Annual Total Return After Taxes = [(----) to the 1/nth power -1] (after taxes on distributions and redemptions) P Where: P = a hypothetical initial payment of $1,000. n = number of years. ATVDR = ending value of a hypothetical $1,000 payment made at the beginning of the 1, 5, or 10-year periods at the end of such periods, after taxes on fund distributions and redemption. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. PERFORMANCE COMPARISONS Investors may analyze the performance results of the Fund by comparing them 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. Comparisons may also be made to indices or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal, Morningstar, Inc., Ibbotson Associates, CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today and local periodicals. In addition to performance information, general information about these Funds that appears in a publication such as those mentioned above may be included in advertisements, sales literature and reports to shareholders. The Fund may also include in advertisements and reports to shareholders information discussing the performance of the Adviser in comparison to other investment advisors and to other banking institutions. From time to time, the Trust may include the following types of information in advertisements, supplemental sales literature and reports to Shareholders: (1) discussions of general economic or financial principles (such as the effects of inflation, the power of compounding and the benefits of dollar cost averaging); (2) discussions of general economic trends; (3) presentations of statistical data to supplement such discussions; (4) descriptions of past or anticipated portfolio holdings for one or more of the Funds within the Trust; (5) descriptions of investment strategies for one or more of such Funds; (6) descriptions or comparisons of various investment products, which may or may not include the Fund; (7) comparisons of investment products (including the Fund) with relevant market or industry indices or other appropriate benchmarks; (8) discussions of fund rankings or ratings by - 47 - recognized rating organizations; and (9) testimonials describing the experience of persons that have invested in one or more of the Funds. The Trust may also include calculations, such as hypothetical compounding examples, which describe hypothetical investment results in such communications. Such performance examples will be based on an express set of assumptions and are not indicative of the performance of any Fund. Current yields or total return will fluctuate from time to time and are not necessarily representative of future results. Accordingly, the Fund's yield or total return may not provide for comparison with bank deposits or other investments that pay a fixed return for a stated period of time. Yield and total return are functions of the Fund's quality, composition and maturity, as well as expenses allocated to the Fund. Fees imposed upon Customer accounts by the Adviser or its affiliated or correspondent banks for cash management services will reduce the Fund's effective yield and total return to Customers. PRINCIPAL SHAREHOLDERS As of the date of this Statement of Additional Information, no persons or entities owned beneficially or of record 5% or more of the Fund's outstanding shares other than the Adviser which owned 100% of the Fund's then outstanding shares. Persons or entities owning more than 25% of the Fund's voting securities may be deemed to be control persons of the Fund because they can effect control on the voting securities of other security holders. PROXY VOTING The Board of Trustees of the Trust has adopted a proxy voting policy and procedure (the "Trust Policy"), pursuant to which the Trustees have delegated proxy voting responsibility to the Adviser and adopted the Adviser's proxy voting policies and procedures (the "Policy") which are described below. The Trustees will review the Fund's proxy voting records from time to time and will annually consider approving the Policy for the upcoming year. In the event that a conflict of interest arises between the Fund's Shareholders and the Adviser or any of its affiliates or any affiliate of the Fund, the Adviser will generally refrain from voting the proxies related to the companies giving rise to such conflict until it consults with the Board of Trustees. A Committee of the Board with responsibility for proxy oversight will instruct the Adviser on the appropriate course of action. The Policy is designed to promote accountability of a company's management to its shareholders and to align the interests of management with those shareholders. The Adviser generally reviews each matter on a case-by-case basis in order to make a determination of how to vote in a manner that best serves the interests of Fund shareholders. The Adviser may abstain from voting from time to time where it determines that the costs associated with voting a proxy outweigh the benefits derived from exercising the right to vote. In addition, the Adviser will monitor situations that may result in a conflict of interest between the Fund's shareholders and the Adviser or any of its affiliates or any affiliate of the Fund by maintaining a list of significant existing and prospective corporate clients. Information on how the Fund voted proxies relating to portfolio securities during the 12 month period ended June 30th of each year will be available - 48 - (1) without charge, upon request, by calling 1-877-xxx-xxxx, and (2) on the Funds' Form N-PX on the Securities and Exchange Commission's website at http://www.sec.gov. DISCLOSURE OF FUND PORTFOLIO HOLDINGS The Board of Trustees has adopted policies and procedures for the public and nonpublic disclosure of the Fund's portfolio securities. A complete list of the Fund's portfolio holdings is made publicly available on a quarterly basis through filings made with the SEC on Forms N-CSR and N-Q. As a general matter, in order to protect the confidentiality of the Fund's portfolio holdings, no information concerning the portfolio holdings of the Fund may be disclosed to any unaffiliated third party except: (1) to service providers that require such information in the course of performing their duties (such as the Fund's custodian, fund accountants, investment adviser, administrator, independent registered public accounting firm, attorneys, officers and trustees and each of their respective affiliates and advisors) and are subject to a duty of confidentiality; (2) in marketing materials, provided that the information regarding the portfolio holdings contained therein is at least fifteen days old; or (3) pursuant to certain enumerated exceptions that serve a legitimate business purpose. These exceptions include: (1) disclosure of portfolio holdings only after such information has been publicly disclosed, and (2) to third-party vendors, such as Morningstar Investment Services, Inc. and Lipper Analytical Services that (a) agree to not distribute the portfolio holdings or results of the analysis to third parties, other departments or persons who are likely to use the information for purposes of purchasing or selling the Fund before the portfolio holdings or results of the analysis become publicly available; and (b) sign a written confidentiality agreement, or where the Board of Trustees has determined that the polices of the recipient are adequate to protect the information that is disclosed. The confidentiality agreement must provide, among other things, that the recipient of the portfolio holdings information agrees to limit access to the portfolio information to its employees (and agents) who, on a need to know basis, are (1) authorized to have access to the portfolio holdings information and (2) subject to confidentiality obligations, including duties not to trade on non-public information, no less restrictive than the confidentiality obligations contained in the confidentiality agreement. Such disclosures must be authorized by the President or Chief Compliance Officer of the Adviser and shall be reported periodically to the Board. Neither the Fund nor the Adviser may enter into any arrangement providing for the disclosure of non-public portfolio holding information for the receipt of compensation or benefit of any kind. Any exceptions to the policies and procedures may only be made by the consent of a majority of the Board of Trustees upon a determination that such disclosure serves a legitimate business purpose and is in the best interests of the Fund. Any amendments to these policies and procedures must be approved and adopted by the Board of Trustees. The Board may, on a case-by-case basis, impose additional restrictions on the dissemination of portfolio holdings information beyond those found in the policies and procedures, as necessary. - 49 - MISCELLANEOUS 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. Individual Trustees may be removed by vote of the Shareholders voting not less than a majority of the Shares then outstanding, cast in person or by proxy at any meeting called for that purpose, or by a written declaration signed by Shareholders voting not less than two-thirds of the Shares then outstanding. The Trust is registered with the Securities and Exchange Commission as a management investment company. Such registration does not involve supervision by the Securities and Exchange Commission of the management or policies of the Trust. The Prospectus and this SAI omit certain of the information contained in the Registration Statement filed with the Securities and Exchange Commission. Copies of such information may be obtained from the Securities and Exchange Commission upon payment of the prescribed fee. The Prospectus and this SAI are not an offering of the securities herein described in any state in which such offering may not lawfully be made. No salesperson, dealer, or other person is authorized to give any information or make any representation other than those contained in the Prospectus and this SAI. FINANCIAL STATEMENTS The financial statements of the Fund will be included in annual and semi-annual reports to shareholders and the annual reports will included financial statements that have been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. - 50 - PART C ----------- OTHER INFORMATION ----------------- ITEM 23. EXHIBITS (a)(1) Form of Amended and Restated Declaration of Trust dated July 20, 1994, as amended and restated February 5, 1997 and November 20, 2002 (1) (a)(2) Establishment and Designation of Series of Shares (The EM Capital India Gateway Fund) is filed herewith (b) By-Laws(2) (c) Articles V and VI of the Registrant's Amended and Restated Declaration of Trust define rights of holders of Shares. (d) Investment Advisory Agreement between Registrant and EM Capital Management, LLC is filed herewith (e)(1) Distribution Agreement between Registrant and BISYS Fund Services Limited Partnership is filed herewith (e)(2) Distribution Services Agreement is filed herewith (f) Not Applicable (g) Form of Custody Agreement between Registrant and Union Bank of California is filed herewith (h)(1) Master Services Agreement between the Registrant and BISYS Fund Services Ohio, Inc. is filed herewith (h)(2) Expense Limitation Agreement is filed herewith (h)(3) Compliance Services Agreement is filed herewith (i) Opinion and Consent of Counsel is filed herewith (j) Not Applicable (k) Not Applicable C-1 (l) Not Applicable (m) Service and Distribution Plan is filed herewith (n) Not Applicable (o) Not Applicable (p)(1) Code of Ethics of Registrant(3) (p)(2) Code of Ethics of EM Capital Management, LLC is filed herewith __________________ 1. Filed with Post-Effective Amendment No. 21 on April 28, 2003. 2. Filed with Pre-Effective Amendment No. 1 on February 5, 1997. 3. Filed with Post-Effective Amendment No. 9 filed April 28, 2000. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT Not applicable. ITEM 25. INDEMNIFICATION Reference is made to Article IV of the Registrant's Amended and Restated Declaration of Trust (Exhibit (a)(1)) which is incorporated by reference herein. 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 Fund's Declaration of Trust, its By Laws 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 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. C-2 ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER (a) EM Capital Management, LLC is the investment adviser for the Fund. The business and other connections of EM Capital Management, LLC are set forth in the Uniform Application for Investment Adviser Registration ("Form ADV") of EM Capital Management, LLC as currently filed with the SEC which is incorporated by reference herein. ITEM 27. PRINCIPAL UNDERWRITER (a) BISYS Fund Services, Limited Partnership ("BISYS" or the "Distributor") acts as principal underwriter for the following investment companies; American Independence Funds Trust American Performance Funds The Bjurman, Barry Funds Commonwealth International Series Trust The Coventry Group The Coventry Funds Trust Excelsior Funds, Inc. Excelsior Funds Trust Excelsior Tax-Exempt Funds, Inc. First Focus Funds, Inc. The Hirtle Callaghan Trust HSBC Advisor Funds Trust HSBC Investor Funds HSBC Investor Portfolios Legacy Funds Group Pacific Capital Funds STI Classic Funds STI Classic Variable Trust Allianz Variable Insurance Products Trust Allianz Variable Insurance Products Fund of Funds Vintage Mutual Funds, Inc. BISYS is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers. BISYS' main address is 100 Summer Street, 15th Floor, Boston, Massachusetts, 02110. Office of Supervisory Jurisdiction(OSJ) Branch is located at 3435 Stelzer Road, Columbus, Ohio 43219. BISYS is an indirect wholly-owned subsidiary of The BISYS Group, Inc. C-3 (b) Information about Directors and Officers of BISYS is as follows:
Name Position with Underwriter - ---------------- --------------------------------------------------------- Brian K. Bey President and Director Elliott Dobin Secretary Andrew H. Byer Chief Compliance Officer Wayne A. Rose Assistant Chief Compliance Officer James E. Pike Financial and Operations Principal
(c) Not Applicable ITEM 28. LOCATION OF ACCOUNTS AND RECORDS (a) In connection with the Fund, the accounts, books and other documents required to be maintained by the Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and rules promulgated thereunder are in the possession of EM Capital Management, LLC, 61 Moraga Way, Suite 207, Orinda, California 94563 (records relating to its function as investment adviser for the Fund); BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219 (records relating to its functions as general manager, administrator and distributor), BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219 (records relating to its functions as transfer agent) and Union Bank of California, N.A., 350 California Street, San Francisco, California 94104 (records relating to its function as custodian). ITEM 29. MANAGEMENT SERVICES Not Applicable. ITEM 30. UNDERTAKINGS None C-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all the requirements for effectiveness of this registration statement under 485(b) under the Securities Act and has duly caused this Post-Effective Amendment No. 33 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Columbus in the State of Ohio on the 10th day of May, 2007. THE COVENTRY FUNDS TRUST By: /s/ R. Jeffrey Young --------------------- R. Jeffrey Young President 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 - ----------- ------ ------ /s/Walter B. Grimm Trustee May 10, 2007 - ------------------------ Walter B. Grimm* /s/ Diane E. Armstrong Trustee May 10, 2007 - ------------------------ Diane E. Armstrong* /s/ Maurice G. Stark Trustee May 10, 2007 - ------------------------ Maurice G. Stark* /s/ Michael M. Van Buskirk Trustee May 10, 2007 - ------------------------ Michael M. Van Buskirk* /s/ James H. Woodward Trustee May 10, 2007 - ------------------------ James H. Woodward* /s/ R. Jeffrey Young President May 10, 2007 - ------------------------ (Principal Executive Officer) R. Jeffrey Young /s/ Linda Durkin Treasurer (Principal May 10, 2007 - ------------------------ Financial and Accounting Officer) Linda Durkin
/s/ Michael V. Wible -------------------------------------- Michael V. Wible, as attorney-in-fact * Pursuant to power of attorney filed with Post-Effective Amendment No. 31 on April 10, 2006. C-5 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 23(a)(2) Establishment and Designation of Series of Shares 23(d) Investment Advisory Agreement 23(e)(1) Distribution Agreement 23(e)(2) Distribution Services Agreement 23(g) Form of Custody Agreement 23(h)(1) Master Services Agreement 23(h)(2) Expense Limitation Agreement 23(h)(3) Amendment to Compliance Services Agreement 23(i) Opinion and Consent of Counsel 23(m) Service and Distribution Plan 23(p)(2) Code of Ethics of EM Capital Management, LLC
EX-23.A.2 2 l23639bexv23waw2.txt EX-23(A)(2) Exhibit 23(a)(2) THE COVENTRY FUNDS TRUST Establishment and Designation of Series and Classes of Shares of Beneficial Interest, Par Value $0.01 Per Share RESOLVED, that pursuant to Section 5.11 of the Declaration of Trust of The Coventry Funds Trust (the "Trust"), dated July 20, 1994, as amended and restated February 5, 1997 and November 20, 2002 ("Declaration"), a separate series of the shares of beneficial interest of the Trust shall hereby be established, relating to the Trust's new investment portfolio (the "Fund"); and FURTHER RESOLVED, that pursuant to Section 5.12 of the Declaration, the Fund shall have such classes of shares of beneficial interest (each, a "Class") as provided below; and FURTHER RESOLVED, that the Fund and initial Classes shall have the following designations and Shares of the Fund or Class, as applicable, shall have the following special and relative rights: 1. The Fund shall be designated "The EM Capital India Gateway Fund". 2. The Fund shall initially have three Classes, designated Class A, Class C and Class I, each, and any additional Classes, to have such special and relative rights, and be subject to such liabilities, as may be provided from time to time in the Trust's registration statement under the Securities Act of 1933 and the Investment Company Act of 1940, as amended from time to time. 3. The Fund shall be authorized to invest in cash, securities, instruments and other property as from time to time described in the Fund's then currently effective prospectus and registration statement under the Securities Act of 1933. Each share of beneficial interest ("Share") of the Fund shall be redeemable. Except for matters that are voted separately by Class, each Share of the Fund shall be entitled to one vote (or fraction thereof in respect of a fractional Share) on matters on which Shares of the Fund shall be entitled to vote. Subject to paragraph 4, each Share of the Fund shall represent a pro rata beneficial interest in the assets allocated to the Fund and shall be subject to a pro rata share of expenses allocated to the Fund; and, subject to paragraph 4, shall be entitled to receive its pro rata share of net assets of the Fund upon liquidation of the Fund, all as provided in the Declaration or in accordance with applicable law, regulation or regulatory policy 4. Shares of each Class of the Fund shall be entitled to one vote (or fraction thereof in respect of a fractional Share) on matters on which Shares of the Class shall be entitled to vote, shall represent a pro rata beneficial interest in the assets allocated to the Fund subject to such expenses as are allocated to the Class, and shall be entitled to receive a pro rata share of net assets of the Class upon liquidation of the Fund, all as provided in the Declaration or in accordance with applicable law, regulation or regulatory policy. 5. Each Share of the Fund and of each Class shall have the voting rights provided to shareholders in the Declaration and shall vote with shareholders of other series of the Trust with respect to matters affecting the Trust generally. With respect to matters concerning the Fund (but not other series of the Trust), Shares of the Fund and all Classes shall vote as a group, except that 1 a Class shall vote separately as a group on a matter to the extent required by the Declaration, applicable law, regulation or regulatory policy or when the matter affects only that Class or affects that Class in a manner that is different from other Classes. In each case of separate voting, the Trustees shall determine whether, for the matter to be effectively acted upon in accordance with the Declaration, or applicable law, rule or regulatory policy, as applicable, as to the Fund or a Class, the applicable percentage (as specified in the Declaration, or the Act and the rules thereunder) of the shares of the Fund or a Class alone must be voted in favor of the matter, or whether the required favorable vote of such applicable percentage of the shares must include shares of other Classes of the Fund and/or other series of the Trust, as well. 6. The assets and liabilities of the Trust shall be allocated to the Fund and among the Classes as set forth in Sections 5.11 and 5.12 of the Declaration; except that costs of establishing the Fund and of the registration and public offering of the Fund's Shares shall be treated in accordance with applicable law and generally accepted accounting principles. 7. The Trustees shall have the right at any time and from time to time to reallocate assets and expenses or to change the designation of the Fund and Classes hereby created, or to otherwise change the special and relative rights of the Fund and each Class, provided that such change shall not adversely affect the rights of the Shareholders of the Fund or any Class. IN WITNESS WHEREOF, the undersigned have executed this instrument this 12th day of March 2007. /s/ Diane E. Armstrong /s/ Michael M. Van Buskirk - ------------------------------------- ---------------------------------------- Diane E. Armstrong Michael M. Van Buskirk /s/ Walter B. Grimm /s/ James H. Woodward - ------------------------------------- ---------------------------------------- Walter B. Grimm James H. Woodward /s/ Maurice G. Stark - ------------------------------------- Maurice G. Stark 2 EX-23.D 3 l23639bexv23wd.txt EX-23(D) Exhibit 23(d) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 1st day of March, 2007, between The Coventry Funds Trust (the "Trust"), a Massachusetts business trust having its principal place of business in Columbus, Ohio, and EM Capital Management, LLC (the "Investment Adviser"), an investment adviser having its principal place of business in Orinda, California. WHEREAS, the Trust is registered as an open-end, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Trust desires to retain the Investment Adviser to furnish investment advisory and administrative services to certain investment portfolios of the Trust and may retain the Investment Adviser to serve in such capacity with respect to certain additional investment portfolios of the Trust, all as now or hereafter may be identified in Schedule A hereto as such Schedule may be amended from time to time (individually referred to herein as a "Fund" and collectively referred to herein as the "Funds") and the Investment Adviser represents that it is willing and possesses legal authority to so furnish such services without violation of applicable laws and regulations; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. The Trust hereby appoints the Investment Adviser to act as investment adviser to the Fund for the period and on the terms set forth in this Agreement. The Investment Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. Additional investment portfolios may from time to time be added to those covered by this Agreement by the parties executing a new Schedule A which shall become effective upon its execution and shall supersede any Schedule A having an earlier date. 2. Delivery of Documents. The Trust has furnished the Investment Adviser with copies properly certified or authenticated of each of the following: (a) the Trust's Declaration of Trust, filed with the Secretary of State of Massachusetts on January 8, 1992, and any and all amendments thereto or restatements thereof (such Declaration, as presently in effect and as it shall from time to time be amended or restated, is herein called the "Declaration of Trust"); (b) the Trust's By-Laws and any amendments thereto; (c) resolutions of the Trust's Board of Trustees authorizing the appointment of the Investment Adviser and approving this Agreement; (d) the Trust's Notification of Registration on Form N-8A under the 1940 Act as filed with the Securities and Exchange Commission (the "Commission"), and all amendments thereto; (e) the Trust's Registration Statement on Form N-1A under the Securities Act of 1933, as amended (the "1933 Act"), and under the 1940 Act as filed with the Commission and all amendments thereto; and (f) the most recent Prospectus and Statement of Additional Information of each of the Funds (such Prospectus and Statement of Additional Information, as presently in effect, and all amendments and supplements thereto, are herein collectively called the "Prospectus"). The Trust will furnish the Investment Adviser from time to time with copies of all amendments of or supplements to the foregoing. 3. Management. Subject to the supervision of the Trust's Board of Trustees, the Investment Adviser will provide a continuous investment program for the Fund, including investment research and management with respect to all securities and investments and cash equivalents in the Fund. The Investment Adviser will determine from time to time what securities and other investments will be purchased, retained or sold by the Trust with respect to the Fund. The Investment Adviser will provide the services under this Agreement in accordance with the Fund's investment objectives, policies, and restrictions as stated in the Prospectus and resolutions of the Trust's Board of Trustees. The Investment Adviser further agrees that it: (a) will use the same skill and care in providing such services as it uses in providing services to its other accounts for which it has investment responsibilities; (b) will conform with all applicable Rules and Regulations of the Commission under the 1940 Act and in addition will conduct its activities under this Agreement in accordance with any applicable regulations of any governmental authority pertaining to the investment advisory activities of the Investment Adviser; (c) will place or cause to be placed orders for the Fund either directly with the issuer or with any broker or dealer. In placing orders with brokers and dealers, the Investment Adviser will attempt to obtain prompt execution of orders in an effective manner at the most favorable price. Consistent with this obligation and to the extent permitted by the 1940 Act, when the execution and price offered by two or more brokers or dealers are comparable, the Investment Adviser may, in its discretion, purchase and sell portfolio securities to and from brokers and dealers who provide the Investment Adviser with research advice and other services. In no instance will portfolio securities be purchased from or sold to BISYS, Inc., the Investment Adviser, or any affiliated person of the Trust, BISYS Inc. or the Investment Adviser, except to the extent permitted by the 1940 Act and the Commission; (d) will maintain all books and records with respect to the securities transactions of the Fund and will furnish the Trust's Board of Trustees with such periodic and special reports as the Board may request; and 2 (e) will treat confidentially and as proprietary information of the Trust all records and other information relative to the Trust and the Fund and prior, present, or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where the Investment Adviser may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Trust. The Investment Adviser may, subject to the approval of the Trust's Board of Trustees, appoint a sub-adviser to provide the services contemplated hereunder, provided, however, that the Investment Adviser shall not be relieved of any of its obligations under this Agreement by the appointment of such sub-adviser and provided further, that the Investment Adviser shall be responsible, to the extent provided in Section 8 hereof for all acts of such sub-adviser as if such acts were its own. 4. Services Not Exclusive. The investment management services furnished by the Investment Adviser hereunder are not to be deemed exclusive, and the Investment Adviser shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby. 5. Books and Records. In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records which it maintains for the Fund are the property of the Trust and further agrees to surrender promptly to the Trust any of such records upon the Trust's request. The Investment Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act. 6. Expenses. During the term of this Agreement, the Investment Adviser will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of securities (including brokerage commissions, if any) purchased for the Fund. 7. Compensation. For the services provided and the expenses assumed pursuant to this Agreement, the Fund will pay the Investment Adviser and the Investment Adviser will accept as full compensation therefor a fee as set forth on Schedule A hereto. The obligation of the Fund to pay the above-described fee to the Investment Adviser will begin as of the date of the initial public sale of shares in the Fund. The fee attributable to the Fund shall be the obligation of that Fund and not of any other Fund. 8. Limitation of Liability. The Investment Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of this 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 Investment Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. 3 9. Duration and Termination. This Agreement will become effective with respect to each Fund listed on Schedule A as of the date first written above (or, if a particular Fund is not in existence on that date, on the date a registration statement relating to that Fund becomes effective with the Commission), provided that it shall have been approved by vote of a majority of the outstanding voting securities of such Fund, in accordance with the requirements under the 1940 Act, and, unless sooner terminated as provided herein, shall continue in effect until March 1, 2008. Thereafter, if not terminated, this Agreement shall continue in effect as to a particular Fund for successive one-year terms, provided that such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Trust's Board of Trustees who are not parties to this Agreement or interested persons of any party to this Agreement, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the vote of a majority of the Trust's Board of Trustees or by the vote of a majority of all votes attributable to the outstanding shares of such Fund. Notwithstanding the foregoing, this Agreement may be terminated as to a particular Fund at any time on sixty days' written notice, without the payment of any penalty, by the Trust (by vote of the Trust's Board of Trustees or by vote of a majority of the outstanding voting securities of such Fund) or by the Investment Adviser. This Agreement will immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities", "interested persons" and "assignment" shall have the same meanings as ascribed to such terms in the 1940 Act.) 10. Investment Adviser's Representations. The Investment Adviser hereby represents and warrants that it is willing and possesses all requisite legal authority to provide the services contemplated by this Agreement without violation of applicable law and regulations. 11. Amendment of this Agreement. 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. 12. Governing Law. This Agreement shall be governed by and its provisions shall be construed in accordance with the laws of the Commonwealth of Massachusetts. 13. Miscellaneous. The names "The Coventry Funds Trust" and "Trustees of The Coventry Funds Trust" 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 July 20, 1994, as amended and restated February 5, 1997 and November 20, 2002, 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 Funds Trust" entered into in the name or on behalf thereof 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 4 persons dealing with any series of shares of the Trust must look solely to the assets of the Trust belonging to such series 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 the day and year first above written. THE COVENTRY FUNDS TRUST By: /s/ R. Jeffrey Young ------------------------------------ Name: R. Jeffrey Young ---------------------------------- Title: President --------------------------------- EM CAPITAL MANAGEMENT, LLC By: /s/ Seth R. Freeman ------------------------------------ Name: Seth R. Freeman ---------------------------------- Title: LLC Manager --------------------------------- 5 DATED: MARCH 1, 2007 SCHEDULE A TO THE INVESTMENT ADVISORY AGREEMENT BETWEEN THE COVENTRY FUNDS TRUST EM CAPITAL MANAGEMENT, LLC
Name of Fund Compensation* - ------------ ------------ EM Capital Indian Gateway Fund Advisory fee as a percentage of the average daily net assets of the fund: 1.20% First $500 million 0.90% Next $500 million 0.80% Next $500 million 0.70% Next $500 million 0.65% Next $1 billion 0.65% Over $1 billion
THE COVENTRY FUNDS TRUST By: /s/ R. Jeffrey Young ------------------------------------ Name: R. Jeffrey Young ---------------------------------- Title: President --------------------------------- EM CAPITAL MANAGEMENT, LLC By: /s/ Seth R. Freeman ------------------------------------ Name: Seth R. Freeman ---------------------------------- Title: LLC Manager --------------------------------- 538144.1 - ---------- * All fees are computed daily and paid monthly. EX-23.E.1 4 l23639bexv23wew1.txt EX-23(E)(1) Exhibit 23(e)(1) DISTRIBUTION AGREEMENT AGREEMENT made as of April 30, 2007 between Coventry Funds Trust (the "Company"), an Ohio business trust, having an office at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS Fund Services Limited Partnership ("Distributor"), having an office at 100 Summer Street, Boston, Massachusetts 02110. WHEREAS, the Company is an open-end management investment company, organized as an Ohio business trust and registered with the Securities and Exchange Commission (the "Commission") under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, it is intended that Distributor act as the distributor of the shares of beneficial interest ("Shares") of EM Capital India Gateway Fund, a series of the Company managed by EM Capital Management, LLC, ("EM") as now in existence and listed on Schedule A to this Agreement or such other series of the Company as hereafter may from time to time be created and managed by EM so long as agreed to by BISYS in writing (all of the foregoing series individually referred to herein as a "Fund" and collectively as the "Funds"). NOW, THEREFORE, in consideration of the mutual premises and covenants herein set forth, the parties agree as follows: 1. Services as Distributor. 1.1 Distributor will act as agent of Company on behalf of each Fund for the distribution of the Shares covered by the registration statement of Company then in effect under the Securities Act of 1933, as amended (the "Securities Act") and the 1940 Act. As used in this Agreement, the term "registration statement" shall mean the registration statement of the Company and any amendments thereto, then in effect, including Parts A (the Prospectus), B (the Statement of Additional Information) and C of each registration statement, as filed on Form N-1A, or any successor thereto, with the Commission, together with any amendments thereto. The term "Prospectus" shall mean the then-current form of Prospectus and Statement of Additional Information used by the Funds, in accordance with the rules of the Commission, for delivery to shareholders and prospective shareholders after the effective dates of the above-referenced registration statements, together with any amendments and supplements thereto. The Company will notify Distributor in advance of any proposed changes to Schedule A to this Agreement. 1.2 Consistent with the understanding between the Funds and the Distributor, Distributor may solicit orders for the sale of the Shares and may undertake such advertising and promotion as it believes reasonable in connection with such solicitation. The Company understands that Distributor is now and may in the future be the distributor of the shares of many other investment companies or series, including investment companies having investment objectives similar to those of the Company. The Company further understands that shareholders and potential shareholders in the Company may 1 invest in shares of such other investment companies. The Company agrees that Distributor's obligations to other investment companies shall not be deemed in conflict with its obligations to the Company under this Section 1.2. 1.3 Consistent with the understanding between the Funds and the Distributor, and subject to the last sentence of this Section 1.3, Distributor may engage in such activities as it deems appropriate in connection with the promotion and sale of the Shares, including without limitation entering into dealer agreements and other selling agreements with broker-dealers and other intermediaries; advertising; compensation of underwriters, dealers and sales personnel; the printing and mailing of Prospectuses to prospective shareholders other than current shareholders; and the printing and mailing of sales literature. Distributor shall have no obligation to make any payments to any third parties, whether as financing of commissions, sales concessions or similar payments; finder's fees; compensation; or otherwise, unless: (i) Distributor has received a corresponding payment from the applicable Fund's Distribution Plan (as defined in Section 2 of this Agreement), the Fund's investment adviser (the "Adviser") or from another source as may be permitted by applicable law, and (ii) such corresponding payment has been approved by the Company's Board of Trustees (the "Board"). 1.4 In its capacity as distributor of the Shares, all activities of the Distributor and its partners, agents, and employees shall comply with all applicable laws, rules and regulations, including, without limitation, the 1940 Act, all applicable rules and regulations promulgated by the Commission thereunder, and all applicable rules and regulations adopted by any securities association registered under the Securities Exchange Act of 1934. 1.5 Whenever in their judgment such action is warranted by unusual market, economic or political conditions or by abnormal circumstances of any kind, the Company's officers may upon reasonable notice instruct the Distributor to decline to accept any orders for or make any sales of the Shares until such time as those officers deem it advisable to accept such orders and to make such sales. 1.6 The Company agrees to inform the Distributor from time to time of the states in which the Fund or its administrator has registered or otherwise qualified Shares for sale, and the Company agrees at its own expense to execute any and all documents and to furnish any and all information and otherwise to take all actions that may be reasonably necessary in connection with the qualification of the Shares for sale in such states as the Distributor may designate. 1.7 The Company shall furnish from time to time, for use in connection with the sale of the Shares, such supplemental information with respect to the Funds and the Shares as Distributor may reasonably request; and the Company warrants that the statements contained in any such supplemental information will fairly show or represent what they purport to show or represent. The Company shall also furnish Distributor upon request with: (a) unaudited semi-annual statements of the Funds' books and accounts prepared by the Company, and (b) from time to time such additional information regarding the Funds as the Distributor may reasonably request. 2 1.8 The Company represents and warrants to Distributor that: (a) all registration statements, and each Prospectus, filed by the Company with the Commission under the Securities Act and the 1940 Act shall be prepared in conformity with requirements of said Acts and rules and regulations of the Commission thereunder; (b) all Company-related advertisement or sales literature shall be prepared in conformity with requirements of applicable laws and regulations; (c) the registration statement, Prospectus and advertisement or sales literature shall contain all statements required to be stated therein in conformity with said Acts, laws and regulations and the rules and regulations of the Commission thereunder or other applicable regulatory authority, and all statements of fact contained in any such registration statement, Prospectus and advertisement or sales literature are true and correct in all material respects; (d) neither any registration statement nor any Prospectus nor any advertisement or sales literature includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of the Shares; (e) no portfolio securities transactions of the Funds, or commissions in connection therewith, shall be directed to any dealer by the Funds, the Adviser, or any of their respective affiliates, in connection with any fees that are not permitted by Rule 12b-1 under the 1940 Act ("Non-Rule 12b-1 Fees") payable to any dealer; (f) each Fund or the Adviser has implemented policies and procedures required by Rule 12b-1(h)(2)(ii) under the 1940 Act and has determined that the criteria used to select broker-dealers that both execute Fund portfolio transactions and promote or sell the Shares is reasonable; and (g) each Fund's Prospectus contains such disclosure with respect to fees paid and charges imposed in connection with the sale of the Shares as is necessary to comply with all laws, rules and regulations, including, without limitation, disclosure of all Non-Rule 12b-1 Fees as required by Rule 2830(l) of the NASD Conduct Rules, as well as the nature and extent of the Non-Rule 12b-1 Fees, or such Non-Rule 12b-1 fees and charges will be in compliance with the rules and regulations of the NASD, including, without limitation, Rule 2830 of the NASD Conduct Rules. The foregoing representations and warranties shall continue throughout the term of this Agreement and be deemed to be of a continuing nature, applicable to all Shares distributed hereunder. The Company may, but shall not be obligated to, propose from time to time such amendment or amendments to any registration statement and such supplement or supplements to any Prospectus as, in the light of future developments, may, in the opinion of the Company's counsel, be necessary or advisable. If the Company shall not propose any amendment or amendments and/or supplement or supplements within 15 days after receipt by the Company of a written request from Distributor to do so, Distributor may, at its option, terminate this Agreement. In such case, the Distributor will be held harmless from, and indemnified by Company for, any liability or loss resulting from the failure to implement such amendment. The Company shall not file any amendment to any registration statement or supplement to any Prospectus without giving Distributor reasonable notice thereof in advance; provided, however, that nothing contained in this Agreement shall in any way limit the Company's right to file at any time such amendments to any registration statement and/or supplements to any Prospectus, of whatever character, as the Company may deem advisable, such right being in all respects absolute and unconditional. 3 1.9 The Company authorizes the Distributor and dealers to use any Prospectus in the form furnished by the Company from time to time in connection with the sale of the Shares. 1.10 The Distributor may utilize agents in its performance of its services and, with prior notice to the Company, appoint in writing other parties qualified to perform specific administration services reasonably acceptable to the Company (individually, a "Sub-Agent") to carry out some or all of its responsibilities under this Agreement; provided, however, that a Sub-Agent shall be the agent of the Distributor and not the agent of the Company, and that the Distributor shall be fully responsible for the acts of such Sub-Agent and shall not be relieved of any of its responsibilities hereunder by the appointment of a Sub-Agent. 1.11 The Distributor shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Company in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the Distributor's part in the performance of its obligations under this Agreement, from reckless disregard by the Distributor of its obligations under this Agreement, or from the Distributor's failure to comply with laws, rules and regulations applicable to it in connection with its activities hereunder. The Company agrees to indemnify, defend and hold harmless the Distributor, its officers, partners, employees, subsidiaries, affiliates, and any person who controls the Distributor within the meaning of Section 15 of the Securities Act, (collectively, "Distributor Indemnitees"), from and against any and all claims, demands, liabilities and expenses (including the reasonable cost of investigating or defending such claims, demands or liabilities and any reasonable counsel fees incurred in connection therewith) (collectively, "Claims") which the Distributor Indemnitees may incur under the Securities Act, or under common law, or otherwise, arising out of or based upon: (a) the Distributor acting as distributor of the Funds; (b) the Distributor or any subsidiary or affiliate of the Distributor acting as a member of the National Securities Clearing Corporation (or any successor or other entity performing similar functions) ("NSCC") on behalf of the Company; (c) the Distributor or any subsidiary or affiliate of the Distributor entering into selling agreements, dealer agreements, participation agreements, NSCC Trust SERV or Networking agreements or similar agreements (collectively, "Dealer Agreements") with financial intermediaries on behalf of the Company; (d) any of the following: (i) any untrue statement, or alleged untrue statement, of a material fact contained in any registration statement or any Prospectus, (ii) any omission, or alleged omission, to state a material fact required to be stated in any registration statement or any Prospectus or necessary to make the statements therein not misleading, or (iii) any untrue statement, or alleged untrue statement, of a material fact in any Company-related advertisement or sales literature, or any omission, or alleged omission, to state a material fact required to be stated therein to make the statements therein not misleading, in either case notwithstanding the exercise of reasonable care in the preparation or review thereof by the Distributor; (e) the breach by the Company of any provision of this Agreement, including without limitation a breach by the Company of its obligations with respect to any Fund's transfer agent as set forth in Section 1.15 of this Agreement, to the extent applicable; or (f) the electronic processing of orders over the internet at the Company's request; provided, however, that the 4 Company's agreement to indemnify the Distributor Indemnitees pursuant to this Section 1.11 shall not be construed to cover any Claims (A) pursuant to subsection (d) above to the extent such untrue statement, alleged untrue statement, omission, or alleged omission, was furnished in writing, or omitted from the relevant writing furnished, as the case may be, to the Company by the Distributor for use in the registration statement or in corresponding statements made in the Prospectus, advertisement or sales literature; (B) arising out of or based upon the willful misfeasance, bad faith or gross negligence of the Distributor in the performance of its obligations under this Agreement or the Distributor's reckless disregard of its obligations under this Agreement; or (C) arising out of or based upon the Distributor's failure to comply with laws, rules and regulations applicable to it in connection with its activities hereunder. In the event of a Claim for which the Distributor Indemnitees may be entitled to indemnification hereunder, the Distributor shall fully and promptly advise the Company in writing of all pertinent facts concerning such Claim, but failure to do so in good faith shall not affect the Company's indemnification obligations under this Agreement except to the extent that the Company is materially prejudiced thereby. The Company will be entitled to assume the defense of any suit brought to enforce any such Claim if such defense shall be conducted by counsel of good standing chosen by the Company and approved by the Distributor, which approval shall not be unreasonably withheld. In the event any such suit is not based solely on an alleged untrue statement, omission, or wrongful act on the Company's part, the Distributor shall have the right to participate in the defense. In the event the Company elects to assume the defense of any such suit and retain counsel of good standing so approved by the Distributor, the Distributor Indemnitees in such suit shall bear the fees and expenses of any additional counsel retained by any of them, but in any case where the Company does not elect to assume the defense of any such suit or in case the Distributor reasonably withholds approval of counsel chosen by the Company, the Company will reimburse the Distributor Indemnitees named as defendants in such suit, for the reasonable fees and expenses of any counsel retained by them to the extent related to a Claim covered under this Section 1.11. The Company's indemnification agreement contained in this Section 1.11 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Distributor Indemnitees, and shall survive the delivery of any Shares. 1.12 The Distributor agrees to indemnify, defend and hold harmless the Company, its officers, trustees, directors, employees, and any person who controls the Company within the meaning of Section 15 of the Securities Act (collectively, "Company Indemnitees"), from and against any and all Claims which the Company Indemnitees may incur under the Securities Act or under common law or otherwise, arising out of or based upon (a) any untrue statement, or alleged untrue statement, of a material fact contained in any registration statement, Prospectus, or Company-related advertisement or sales literature, or upon any omission, or alleged omission, to state a material fact in such materials that would be necessary to make the information therein not misleading, which untrue statement, alleged untrue statement, omission, or alleged omission, was furnished in writing, or omitted from the relevant writing furnished, as the case may be, to the Company by the Distributor for use in the registration statement or in corresponding statements made in the Prospectus, or advertisement or sales literature; (b) the willful 5 misfeasance, bad faith or gross negligence of the Distributor in the performance of its obligations under this Agreement, or the Distributor's reckless disregard of its obligations under this Agreement, or (c) the Distributor's failure to comply with laws, rules and regulations applicable to it in connection with its activities hereunder (other than in respect of Fund-related advertisements or sales literature that fail to comply with applicable laws despite the Distributor's exercise of reasonable care in the preparation and review thereof); provided, however, that the Distributor's agreement to indemnify the Company Indemnitees pursuant to this Section 1.12 shall not be construed to cover any Claims (A) arising out of or based upon the willful misfeasance, bad faith or gross negligence of the Company in the performance of its obligations under this Agreement or the Company's reckless disregard of its obligations under this Agreement; or (B) arising out of or based upon the Company's failure to comply with laws, rules and regulations applicable to it in connection with its activities hereunder. In the event of a Claim for which the Company Indemnitees may be entitled to indemnification hereunder, the Company shall fully and promptly advise the Distributor in writing of all pertinent facts concerning such Claim, but failure to do so in good faith shall not affect the Distributor's indemnification obligations under this Agreement except to the extent that the Distributor is materially prejudiced thereby. The Distributor will be entitled to assume the defense of any suit brought to enforce any such Claim if such defense shall be conducted by counsel of good standing chosen by the Distributor and approved by the Company, which approval shall not be unreasonably withheld. In the event any such suit is not based solely on an alleged untrue statement, omission, or wrongful act on the Distributor's part, the Company shall have the right to participate in the defense. In the event the Distributor elects to assume the defense of any such suit and retain counsel of good standing so approved by the Company, the Company Indemnitees in such suit shall bear the fees and expenses of any additional counsel retained by any of them, but in any case where the Distributor does not elect to assume the defense of any such suit or in case the Company reasonably withholds approval of counsel chosen by the Distributor, the Distributor will reimburse the Company Indemnitees named as defendants in such suit, for the reasonable fees and expenses of any counsel retained by them to the extent related to a Claim covered under this Section 1.12. The Distributor's indemnification agreement contained in this Section 1.12 shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Company Indemnitees, and shall survive the delivery of any Shares. 1.13 No Shares shall be offered by either the Distributor or the Company under any of the provisions of this Agreement and no orders for the purchase or sale of Shares hereunder shall be accepted by the Company if and so long as the effectiveness of the registration statement then in effect or any necessary amendments thereto shall be suspended under any of the provisions of the Securities Act or if and so long as a current Prospectus as required by Section 10(b)(2) of said Securities Act is not on file with the Commission; provided, however, that: (a) the Distributor will not be obligated to cease offering shares until it has received from the Company written notice of such events, and (b) nothing contained in this Section 1.13 shall in any way restrict or have an application to or bearing upon the Company's obligation to repurchase Shares from any shareholder 6 in accordance with the provisions of the Company's Prospectus, Agreement and Declaration of Trust, or By-laws. 1.14 The Company agrees to advise the Distributor as soon as reasonably practical by a notice in writing delivered to the Distributor: (a) of any request by the Commission for amendments to the registration statement or Prospectus then in effect or for additional information; (b) in the event of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or Prospectus then in effect or the initiation by service of process on the Company of any proceeding for that purpose; (c) of the happening of any event that makes untrue any statement of a material fact made in the registration statement or Prospectus then in effect or which requires the making of a change in such registration statement or Prospectus in order to make the statements therein not misleading; and (d) of any other event which could reasonably be expected to have a material adverse impact upon the offering of Shares or the Distributor's provision of services under this Agreement. For purposes of this section, informal requests by or acts of the Staff of the Commission shall not be deemed actions of or requests by the Commission unless they would reasonably be expected to have a material negative impact upon the offering of Shares. 1.15 During any period for which a party other than Distributor or one of its affiliates acts as any Fund's transfer agent ("Transfer Agent"), the following provisions shall apply: (a) The Company shall ensure that the Transfer Agent complies with all requirements of law and all provisions of Dealer Agreements that are applicable to the Transfer Agent or the services provided by Transfer Agent, or that are within the control of the Transfer Agent, including without limitation laws and Dealer Agreement provisions with respect to: (i) providing shareholder account data to the dealer or other third parties; (ii) facilitating the transfer of Shares held directly with the Transfer Agent; (iii) indemnifying a dealer against claims to which the dealer may become subject insofar as any Claim arises out of or is based on any error or alleged error made in the calculation of any Fund's net asset value per Share, to the extent that the Transfer Agent is responsible for such error or alleged error; (iv) providing to Distributor such information required by Distributor to facilitate payment of Rule 12b-1 fees to dealers in a timely and accurate manner; (v) transmitting purchase and redemption orders for Shares through the NSCC Fund/SERV system ("Fund/SERV") or in certain circumstances through such other means; (vi) making payment for purchases and redemptions of Shares on the settlement date and as otherwise required by the dealer through Fund/SERV; (vii) notifying the dealer whenever an error is made in the calculation of any Fund's net asset value; (viii) rejecting transactions in Shares originating in states or jurisdictions in which 7 the Fund shares are not qualified for sale; and (ix) complying with applicable escheatment requirements. (b) The Company will ensure that the Transfer Agent provides to Distributor at least quarterly (or more frequently to the extent required by law applicable to the Distributor) certifications of the Transfer Agent in a form reasonably acceptable to the Distributor with respect to the Funds' compliance with anti-money laundering laws, sales caps, breakpoints, and such other certifications as Distributor shall reasonably request from time to time. 1.16 The Company will ensure that any service provider to the Company and/or the Funds other than Distributor or one of its affiliates provides to Distributor such cooperation and information as the Distributor shall reasonably request from time to time, including, without limitation, information to facilitate the Distributor's compliance with federal securities laws, as defined within Rule 38a-1(e)(1) under the 1940 Act.. 1.17 NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR SIMILAR DAMAGES, INCLUDING LOST REVENUE, LOST PROFITS OR LOST OR DAMAGED DATA, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES. 2. Fees. 2.1 (a) Attached as Schedule B to this Agreement are all plans of distribution under Rule 12b-1 under the 1940 Act approved by the Funds and in effect (collectively, the "Distribution Plan"). The Funds will deliver to Distributor promptly after any changes thereto updated copies of the Distribution Plan. For its services under this Agreement, the Distributor shall be compensated and reimbursed for its expenses as set forth on Schedules C and D to this Agreement. If the Funds have a Distribution Plan that permits and authorizes them to compensate and reimburse the Distributor and required Board approvals have been given, then the Funds shall be responsible for all such compensation and reimbursements or such portions of it as have been permitted and authorized under the Distribution Plan. It is contemplated by the Distributor that the Adviser shall compensate and reimburse the Distributor for its provision to the Funds of any distribution services for which the Funds are not authorized to compensate and reimburse the Distributor. The fees set forth on Schedules C and D are subject to change by Distributor upon 30 days advance notice. (b) It is expected as of the date of this Agreement that the services to be provided by the Distributor under this Agreement may be provided at "less than cost" (i.e., the compensation and reimbursements paid to the Distributor will be less than the cost of providing such services). The Distributor has estimated its costs based on certain assumptions about the level of service that will be provided to the Company and the Funds, and there can be no guarantee that Distributor's estimate will be accurate. The 8 Distributor will review its costs to provide services under this Agreement periodically, and the Distributor reserves the right to adjust its compensation and reimbursements, after the initial term, if the Distributor determines that such compensation and reimbursements are not approximately equal to the cost of providing such services. 2.2 In the event that the Distributor is requested or authorized by the Company or is required by governmental regulation, summons, subpoena, investigation, examination or other legal or regulatory process to produce documents or personnel with respect to services provided by the Distributor to the Company or any Fund, the Company will, so long as the Distributor is not the subject of the investigation or proceeding in which the information is sought, pay the Distributor for its professional time (at its standard billing rates) and reimburse the Distributor for its out-of-pocket expenses (including reasonable attorneys fees) incurred in responding to such requests or requirements. 3. Sale and Payment. 3.1 Shares of a Fund may be subject to a sales load and may be subject to the imposition of a distribution fee pursuant to the Distribution Plan referred to above. To the extent that Shares of a Fund are sold at an offering price which includes a sales load or subject to a contingent deferred sales load with respect to certain redemptions (either within a single class of Shares or pursuant to two or more classes of Shares), such Shares shall hereinafter be referred to collectively as "Load Shares" (and in the case of Shares that are sold with a front-end sales load, "Front-end Load Shares", or Shares that are sold subject to a contingent deferred sales load, "CDSL Shares"). Funds that issue Front-End Load Shares shall hereinafter be referred to collectively as "Front-End Load Funds." Funds that issue CDSL Shares shall hereinafter be referred to collectively as "CDSL Funds." Front-end Load Funds and CDSL Funds may individually or collectively be referred as "Load Funds." Under this Agreement, the following provisions shall apply with respect to the sale of, and payment for, Load Shares. 3.2 The Distributor shall have the right to offer Load Shares at their net asset value and to sell such Load Shares to the public against orders therefor at the applicable public offering price, as defined in Section 4 hereof. The Distributor shall also have the right to sell Load Shares to dealers against orders therefor at the public offering price less a concession determined by the Distributor, which concession shall not exceed the amount of the sales charge or underwriting discount, if any, referred to in Section 4 below. 3.3 Prior to the time of delivery of any Load Shares by a Load Fund to, or on the order of, the Distributor, the Distributor shall pay or cause to be paid to the Load Fund or to its order an amount in same-day funds equal to the applicable net asset value of such Shares. The Distributor may retain so much of any sales charge or underwriting discount as is not allowed by the Distributor as a concession to dealers. 9 3.4 With respect to CDSL Funds, the following provisions shall be applicable: (a) The Distributor shall be entitled to receive all contingent deferred sales load charges, 12b-1 payments and all distribution and service fees set forth in the Distribution Plan adopted by a CDSL Fund (collectively, the "CDSL Payments") with respect to CDSL Shares. The Distributor may assign or sell to a third party (a "CDSL Financing Entity") all or a part of the CDSL Payments on CDSL Shares that the Distributor is entitled to receive under this Agreement. The Distributor's right to the CDSL Payments on such CDSL Shares, if assigned or sold to a CDSL Financing Entity, shall continue after termination of this Agreement. (b) Unless the Distributor is legally entitled to receive such fees as the financing entity, the right to receive all CDSL Payments in respect of periods subsequent to the termination of this Agreement shall terminate upon termination of this Agreement. In the event Distributor assigns or sells all or a part of the CDSL Payments to a CDSL Financing Entity and this Agreement is subsequently terminated, Distributor shall have no obligation to assist the CDSL Financing Entity in connection with such CDSL Financing Entity's right to receive such CDSL Payments subsequent to such termination. (c) The Distributor shall not be required to offer or sell CDSL Shares of a CDSL Fund unless and until it has received a binding commitment (a "Commitment") from the Company or a CDSL Financing Entity satisfactory to the Distributor, which Commitment shall cover all initial and ongoing expenses and fees related to the offer and sale of such CDSL Shares including, but not limited to, dealer reallowances, financing commitment fees, and legal fees. If at any time during the term of this Agreement the then-current CDSL financing is terminated through no fault of the Distributor, the Distributor shall have the right to immediately cease offering or selling CDSL Shares until substitute financing becomes effective. (d) The Distributor and the Company hereby agree that the terms and conditions set forth herein regarding the offer and sale of CDSL Shares may be amended upon approval of both parties in order to comply with the terms and conditions of any agreement with a CDSL Financing Entity to finance the costs for the offer and sale of CDSL Shares so long as such terms and conditions are in compliance with the Distribution Plan. 4. Public Offering Price. The public offering price of a Load Share shall be the net asset value of such Load Share next determined, plus any applicable sales charge, all as set forth in the current Prospectus of the Load Fund. The net asset value of Load Shares shall be determined in accordance with the then-current Prospectus of the Load Fund. 10 5. Issuance of Shares. The Company reserves the right to issue, transfer or sell Load Shares at net asset values (a) in connection with the merger or consolidation of the Company or the Load Fund(s) with any other investment company or the acquisition by the Company or the Load Fund(s) of all or substantially all of the assets or of the outstanding Shares of any other investment company; (b) in connection with a pro rata distribution directly to the holders of Shares in the nature of a stock dividend or split; (c) upon the exercise of subscription rights granted to the holders of Shares on a pro rata basis; (d) in connection with the issuance of Load Shares pursuant to any exchange and reinvestment privileges described in any then-current Prospectus of the Load Fund; and (e) otherwise in accordance with any then-current Prospectus of the Load Fund. 6. Term, Duration and Termination. This Agreement shall become effective with respect to each Fund as of the date first written above (the "Effective Date") (or, if a particular Fund is not in existence on such date, on the earlier of the date an amendment to Schedule A to this Agreement relating to that Fund is executed or the Distributor begins providing services under this Agreement with respect to such Fund) and, unless sooner terminated as provided herein, shall continue for a two year period following the Effective Date. Thereafter, if not terminated, this Agreement shall continue with respect to a particular Fund automatically for successive one-year terms, provided that such continuance is specifically approved at least annually (a) by the vote of a majority of those members of the Board who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting for the purpose of voting on such approval and (b) by the vote of the Board or the vote of a majority of the outstanding voting securities of such Fund. This Agreement is terminable without penalty with 60 days' prior written notice, by the Board, by vote of a majority of the outstanding voting securities of the Company, or by the Distributor. This Agreement will also terminate automatically in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested persons" and "assignment" shall have the same meaning as ascribed to such terms in the 1940 Act.) 7. Privacy. Nonpublic personal financial information relating to consumers or customers of the Funds provided by, or at the direction of, the Company to the Distributor, or collected or retained by the Distributor to perform its obligations as distributor, shall be considered confidential information. The Distributor shall not disclose or otherwise use any nonpublic personal financial information relating to present or former shareholders of the Funds other than for the purposes for which that information was disclosed to the Distributor, including use under an exception in Rules 13, 14 or 15 of Securities and Exchange Commission Regulation S-P in the ordinary course of business to carry out those purposes. The Distributor shall have in place and maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and information 11 relating to consumers and customers of the Funds. The Company represents to the Distributor that it has adopted a Statement of its privacy policies and practices as required by Securities and Exchange Commission Regulation S-P and agrees to provide the Distributor with a copy of that statement annually. 8. Anti-Money Laundering Compliance. 8.1 Each of Distributor and the Company acknowledges that it is a financial institution subject to the USA Patriot Act of 2001 and the Bank Secrecy Act (collectively, the "AML Acts"), which require, among other things, that financial institutions adopt compliance programs to guard against money laundering. Each represents and warrants to the other that it is in compliance with and will continue to comply with the AML Acts and applicable regulations in all relevant respects. The Distributor shall also provide written notice to each person or entity with which it entered an agreement prior to the date hereof with respect to sale of the Company's Shares, such notice informing such person of anti-money laundering compliance obligations applicable to financial institutions under applicable laws and, consequently, under applicable contractual provisions requiring compliance with laws. 8.2 The Distributor shall include specific contractual provisions regarding anti-money laundering compliance obligations in agreements entered into by the Distributor with any dealer that is authorized to effect transactions in Shares of the Company. 8.3 Each of Distributor and the Company agrees that it will take such further steps, and cooperate with the other as may be reasonably necessary, to facilitate compliance with the AML Acts, including but not limited to the provision of copies of its written procedures, policies and controls related thereto ("AML Operations"). Distributor undertakes that it will grant to the Company, the Company's anti-money laundering compliance officer and regulatory agencies, reasonable access to copies of Distributor's AML Operations, books and records pertaining to the Company only. It is expressly understood and agreed that the Company and the Company's compliance officer shall have no access to any of Distributor's AML Operations, books or records pertaining to other clients of Distributor. 9. Notices. Any notice provided hereunder shall be sufficiently given when sent by registered or certified mail, or by nationally recognized overnight courier, to the party required to be served with such notice at the following address: if to the Company, to it at 3435 Stelzer Road, Columbus, Ohio 43219, with a copy to EM at 61 Moraga Way, Suite 207, Orinda, California 94653; and if to Distributor, to it at 100 Summer Street, Boston, Massachusetts 02110, Attention: Broker Dealer Chief Compliance Officer, with a copy to BISYS Distribution Services, 3435 Stelzer Road, Columbus, Ohio 43219, Attention: President, or at such other address as such party may from time to time specify in writing to the other party pursuant to this Section. 10. Confidentiality. 12 During the term of this Agreement, the Distributor and the Company may have access to confidential information relating to such matters as either party's business, trade secrets, systems, procedures, manuals, products, contracts, personnel, and clients. As used in this Agreement, "Confidential Information" means information belonging to the Distributor or the Company which is of value to such party and the disclosure of which could result in a competitive or other disadvantage to either party, including, without limitation, financial information, business practices and policies, know-how, trade secrets, market or sales information or plans, customer lists, business plans, and all provisions of this Agreement. Confidential Information includes information developed by either party in the course of engaging in the activities provided for in this Agreement, unless: (i) the information is or becomes publicly known without breach of this Agreement, (ii) the information is disclosed to the other party by a third party not under an obligation of confidentiality to the party whose Confidential Information is at issue of which the party receiving the information should reasonably be aware, or (iii) the information is independently developed by a party without reference to the other's Confidential Information. Each party will protect the other's Confidential Information with at least the same degree of care it uses with respect to its own Confidential Information, and will not use the other party's Confidential Information other than in connection with its obligations hereunder. Notwithstanding the foregoing, a party may disclose the other's Confidential Information if (i) required by law, regulation or legal process or if requested by any Agency; (ii) it is advised by counsel that it may incur liability for failure to make such disclosure; (iii) requested to by the other party; provided that in the event of (i) or (ii) the disclosing party shall give the other party reasonable prior notice of such disclosure to the extent reasonably practicably and cooperate with the other party (at such other party's expense) in any efforts to prevent such disclosure. 10. Governing Law . This Agreement shall be construed in accordance with the laws of the State of New York, without regard to New York's conflicts of laws principles, and the applicable provisions of the 1940 Act. 11. Prior Agreements. This Agreement constitutes the complete agreement of the parties as to the subject matter covered by this Agreement, and supersedes all prior negotiations, understandings and agreements bearing upon the subject matter covered by this Agreement. 12. Amendments. No amendment to this Agreement shall be valid unless made in writing and executed by both parties hereto. 13. Matters Relating to the Company as an Ohio Business Trust. It is expressly agreed that the obligations of the Company hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees 13 of the Company personally, but shall bind only the property of the Company. The execution and delivery of this Agreement have been authorized by the Board, and this Agreement has been signed and delivered by an authorized officer of the Company, acting as such, and neither such authorization by the Board nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on them personally, but shall bind only the property of the Company. * * * * * * IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first written above. COVENTRY FUNDS TRUST By: /s/ R. Jeffrey Young --------------------------------- Name: R. Jeffrey Young ------------------------------- Title: President ------------------------------ BISYS Fund Services Limited Partnership By: BISYS Fund Services, Inc., its General Partner By: /s/ Fred Naddaff --------------------------------- Name: Fred Naddaff ------------------------------- Title: President ------------------------------ 14 SCHEDULE A FUNDS EM Capital India Gateway Fund 15 SCHEDULE B DISTRIBUTION PLAN [COMPANY TO INSERT COPIES] 16 SCHEDULE C COMPENSATION OF THE DISTRIBUTOR 1. BASIC DISTRIBUTION SERVICES. For providing the distribution entity and related infrastructure and platform, including requisite registrations and qualifications, premises, personnel, compliance, ordinary Board meeting preparation, maintenance of selling agreements, clearance of advertising and sales literature with regulators, ordinary supervisory services, overhead, the Distributor shall receive an annual fee of $25,000.00, billed monthly. 2. SPECIAL DISTRIBUTION SERVICES. For special distribution services, including those set forth on Schedule D to this Agreement, such as filing appropriate documentation for advisory representatives to qualify as registered representatives of the Distributor (provided that the Adviser is solely responsible for its representatives' meeting examination requirements) and their related registrations and fees, additional personnel, registrations, marketing services, printing and fulfillment, website services, proprietary distribution expertise for particular circumstances, and any other services in addition to the basic distribution services covered by Paragraph 1 above, the Distributor shall be reimbursed promptly upon invoicing its fees and expenses for such services, including: (a) all costs to support additional personnel; (b) regulatory fees including NASD CRD costs associated with marketing materials; and (c) printing, postage and fulfillment costs, and (d) amounts payable under additional agreements to which Distributor is a party. 3. SPECIAL CONDUIT SITUATIONS. If the Distribution Plan, or any other Fund plans of distribution under Rule 12b-1 that contemplate up front and/or recurring commission and/or service payments to broker dealers, retirement plan administrators or others by the Distributor with respect to back-end loads, level loads, or otherwise, unless expressly agreed otherwise in writing between the parties, all such payments shall be made to the Distributor, which shall act as a conduit for making such payments to such broker-dealers, retirement plan administrators or others. 17 4. OTHER PAYMENTS BY THE DISTRIBUTOR. If the Distributor is required to make any payments to third parties in respect of distribution, which payments are contemplated by the parties to this Agreement or otherwise arise in the ordinary course of business, the Distributor shall be promptly reimbursed for such payments upon invoicing them. 5. FEE ADJUSTMENTS. The fixed fees and other fees expressed as stated dollar amounts in this Schedule C and in this Agreement are subject to annual increases, commencing on the one-year anniversary date of the date of this Agreement, in an amount equal to the percentage increase in consumer prices for services as measured by the United States Consumer Price Index entitled "All Services Less Rent of Shelter," or a similar index should such index no longer be published, since such one-year anniversary or since the date of the last fee increase, as applicable. 6. FEES AND EXPENSES. Except as expressly set forth in this Agreement, out-of-pocket fees and expenses incurred by Distributor in the performance of its services under this Agreement are not included in the fees set forth in this Agreement. Such out-of-pocket fees and expenses may include, without limitation: - reasonable travel and entertainment costs; - fees of auditors and accountants; - expenses incurred by the Distributor in qualifying, registering and maintaining the registration of the Distributor and each individual comprising Wholesaling Personnel as a registered representative of the Distributor under applicable federal and state laws and rules of the NASD, e.g., CRD fees and state fees; - sponsorships, promotions, sales incentives; - any and all compensation to be paid to a third party as paying agent for distribution activities (platform fees, finders fees, sub-TA fees, 12b-1 pass thru, commissions, etc.); - costs and expenses incurred for telephone service, photocopying and office supplies; - advertising costs; - costs for printing, paper stock and costs of other materials, electronic transmission, courier, talent utilized in sales materials (e.g. models), design output, photostats, photography, and illustrations; - packaging, shipping, postage, and photocopies; - taxes that are paid or payable by the Distributor or its affiliates in connection with its services hereunder, other than taxes customarily and actually imposed upon the income that the Distributor receives hereunder; and - amounts paid to the NASD based on Distributor's revenue and/or the number of Distributor's registered representatives. 18 SCHEDULE D SPECIAL DISTRIBUTION SERVICES AND FEES
SERVICES FEES - -------- ---- 1. WHOLESALING PERSONNEL SERVICES WHOLESALING PERSONNEL SERVICES FEES Wholesaling Personnel may be external For each individual constituting the wholesalers and/or internal Wholesaling Personnel employed by the wholesalers. Distributor pursuant to this Agreement, the Distributor shall receive annually Services include soliciting support an amount equal to the sum of: of the Funds with selling broker dealers; participating in promotional (i) all compensation paid annually by meetings, presentations, conferences the Distributor to the employee; plus and other and forums; identifying high potential personnel of the (ii) a management oversight fee equal Adviser and selling broker dealers; to: and assisting with mail solicitations and literature fulfillment. (a) if one to four Wholesaling Personnel are employed, 30% of the salary compensation and 5% of the bonus or commission compensation, or (b) if five or more Wholesaling Personnel are employed, 25% of the salary compensation and 5% of the bonus or commission compensation; plus (iii) 18% of the total compensation (covering costs of the Distributor's employee benefits that are provided by the Distributor). In addition, the Distributor shall be reimbursed for all related costs to support, educate and train and maintain compliance oversight of Wholesaling Personnel and other personnel such as sales management, marketing and performance reporting personnel (including time and expenses, continuing education, seminars, rent, supplies, phone, computers, firm element, license, registration) Upon any termination of Wholesaling Personnel at the request of the Funds or upon termination of this Agreement by the Funds for any reason other than cause, the Distributor will be reimbursed its severance costs with respect to such terminated Wholesaling Personnel.
19 2. REGISTRATION OF PERSONNEL: REGISTRATION OF PERSONNEL FEES: Services include filing appropriate $5,000 per registration per year, plus documentation for advisory out-of-pocket expenses. representatives to qualify as registered representatives of the $5,000 per Office of Supervisory Distributor (provided that the Jurisdiction per year Adviser is solely responsible for its representatives' meeting examination requirements) and their related registrations and fees. 3. MARKETING AND RELATED SERVICES MARKETING AND RELATED SERVICES FEES Marketing Execution: services include Marketing Execution: Quote available identification and development of upon request. appropriate marketing and communications programs, projects and Performance Reporting other initiatives; collaboration on initiating, researching, developing, Monthly Reports and delivering appropriate sales and marketing materials; and management Monthly Updating and Typesetting -- of marketing and advertising $850 - $1,000 per sheet per month projects. (for an All-in-One style report) Performance Reporting: services Initial Design and Setup (1-time include creation of templates for charge) -- $500 per sheet monthly fact sheets and quarterly fact sheets; populating templates Quarterly Reports with performance data obtained from third parties; and coordinating steps Quarterly Updating and Typesetting needed for final printing and -- $300 - $350 per Fund sheet per distribution. Share Class per quarter Creative Communication and Editorial Initial Design and Setup per Fund Services: services include preparing sheet (1-time charge) -- $500 per drafts of textual commentary and Fund sheet management discussion and analysis for annual; and semi-annual reports, Annual & Semi-Annual Reports including portfolio manager interviews; providing creative design Coordination: and direction; and coordinating production, including typesetting - $3,000 Initial Fee (includes (initial composition and changes to Chairman's Letter and 1st composition), charts and ancillary Fund) items. - $500 for each additional Fund Production Timing: NOTE: The above charges do not - - No timing guarantees can be made include the typesetting, printing, for completion of monthly and shipping, fulfillment, Edgar filing quarterly fact sheets where any or quick-turnaround charges that of the information needed to may be incurred from the financial produce the reports is generated printer. The above fees are for by service providers other than coordinating the project only. the Distributor. However, a basic estimate of turnaround time may be given based upon when the unit receives all necessary data in good order. Under normal conditions, the Performance Reporting unit expects to make proofs ready for review (either printed or electronic PDF format) by the 4th business day after the final piece of data is received. If compliance review is necessary (e.g., when Morningstar ratings data is used) an additional 2 days may be required for review.
20 Creative Communication and Editorial Services - - Printing turnaround (once the Quote available upon request. factsheets are signed-off by the client) is usually approximately 4-5 calendar days with most jobs shipping by the 5th day. - - If requested, final electronic PDF files may be generated and e-mailed on the day the job is signed-off on by the client. These PDFs may be distributed and printed as necessary until the final printed pieces arrive. 4. FRC SERVICES FRC SERVICES FEES FRC's program components include: Mutual Fund Views on the News and Monitor Publications: $7,650.00 - - Mutual Fund Views on the News and Monitor Publications Market Analytics Publications: Quote available upon request. - - Market Analytics Publications Advanced Research Publications: - - Advanced Research Publications - White Papers - FRC Vision - - Subject Matter Expert Direct (typical cost is approximately Access $2,500) The Company acknowledges that certain - Research Studies (costs vary, FRC publications may be provided only however typically range between to parties that have entered into a $6,000 and $12,500) written agreement or addendum that sets forth the terms of use of such Subject Matter Expert Direct Access: publications and the associated fee. Quote available upon request The Company will notify the Distributor whether the Company or Other FRC Fees: the Adviser or both will enter into such an agreement or addendum. The - All subsequent content and support Company acknowledges that if only one hours may be purchased at a 20% of the Company or the Adviser enters discount from standard pricing. into such agreement or addendum, the other party will be prohibited from receiving or using such publications.
21 EX-23.E.2 5 l23639bexv23wew2.txt EX-23(E)(2) Exhibit 23(e)(2) DISTRIBUTION SERVICES AGREEMENT AGREEMENT made as of April 30, 2007 by and between EM Capital Management, LLC (the "Adviser"), and BISYS Fund Services Limited Partnership (the "Distributor"). WHEREAS, the Adviser (including for purposes hereof its separate asset management divisions and subsidiaries) serves as investment adviser for the EM Capital India Gateway Fund, a series of Coventry Funds Trust (the "Company"), an Ohio business trust registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended (the "Act"), and may serve as investment adviser to other series of the Company as listed on Schedule A to the Distribution Agreement (as hereinafter defined), as such schedule may be amended from time to time, upon written agreement of the Company and the Distributor (all of the foregoing series individually referred to herein as a "Fund" and collectively as the "Funds"); and WHEREAS, pursuant to a distribution agreement between the Distributor and the Company currently in effect (the "Distribution Agreement"), the Distributor acts as the principal underwriter and distributor of shares of the Funds, which shares (the "Shares") are registered under the Securities Act of 1933, as amended; and WHEREAS, in consideration of Distributor's agreement to provide certain sales and marketing services as described in the Distribution Agreement, the Adviser has agreed to compensate and reimburse the Distributor to the extent that the Funds are not authorized to so compensate and reimburse the Distributor. NOW THEREFORE, in consideration of the covenants hereinafter contained, the Adviser and the Distributor agree as follows: 1. Services. Distributor will provide the Funds and the Adviser with some or all of the marketing and sales support services set forth in the Distribution Agreement, as the parties agree from time to time. 2. Compensation and Expenses. (a) The Distributor shall be entitled to receive the compensation and reimbursement of the expenses set forth in the Distribution Agreement, based on the services selected by Funds and/or the Adviser from time to time. (b) In accordance with the Distribution Agreement, Adviser hereby agrees that, if the Funds are not authorized to compensate and reimburse the Distributor in full in accordance with the Distribution Agreement, the Adviser shall compensate and reimburse the Distributor to the extent that the Funds are not so authorized. 3. Term and Termination. (a) This Agreement will become effective upon the date first set forth above, will continue in effect throughout the term of the Distribution Agreement, and will terminate automatically upon any termination of the Distribution Agreement; provided, however, that, notwithstanding such termination of the Distribution Agreement, the Adviser will continue to pay to Distributor all fees to which Distributor is entitled pursuant to the Distribution Agreement for services performed through such termination date and any other fees payable upon such termination. (b) This Agreement will terminate immediately and automatically in the event the Distributor is expelled as a member of the NASD, and the Adviser may terminate this Agreement immediately upon written notice in the event the Distributor's NASD membership is suspended. (c) In addition, either party may immediately terminate this Agreement if the provision of services having substantially the character, form and scope as those set forth hereunder becomes illegal or contrary to any applicable law, or if the service and payment model remaining substantially as reflected herein creates a substantial risk that such a violation could occur would be incurred. (d) In addition, either party may immediately terminate this Agreement if it has "Cause" to do so, which, for these purposes is defined as being applicable if (i) the other party materially breaches this Agreement and the breach is not remedied within 30 days after the party wishing to terminate gives the breaching party written notice of the breach; (ii) a final judicial, regulatory or administrative ruling or order is made in which the party to be terminated has been found guilty of criminal or unethical behavior in the conduct of its business; or (iii) the other party makes an assignment for the benefit of its creditors, files a voluntary petition under any bankruptcy or insolvency law, becomes the subject of an involuntary petition under any bankruptcy or insolvency law that is not dismissed within 60 days, or a trustee or receiver is appointed under any bankruptcy or insolvency law for the other party or its property. 4. Rights and Obligations of the Adviser and the Distributor. The Adviser shall be responsible for the accuracy, completeness and propriety of information concerning its organization and sales channels that the Adviser furnishes to the Distributor in connection with the performance of the Distribution Agreement. 5. Representations and Warranties. (a) The Adviser represents and warrants the following: (i) that it is presently registered under the Investment Advisers Act of 1940, as amended, as a registered investment adviser in good standing and covenants that it shall remain so registered and in good standing for the duration of this Agreement, and shall immediately notify the Distributor should the foregoing no longer be true during the term of this Agreement; -2- (ii) that it is in material compliance with all laws, rules and regulations applicable to it; and (iii) this Agreement has been duly authorized by the Adviser and, when executed and delivered, will constitute a legal, valid and binding obligation of the Adviser, enforceable against it in accordance with its terms subject to bankruptcy, insolvency, reorganizations, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties; (iii) the contractual advisory fees that the Adviser charges the Company do not contain any component for the purpose of paying for fund distribution; and (iv) this Agreement has been disclosed to the Board of Trustees or Directors, as applicable, of the Company (the "Board"), and the Adviser has provided all such information to the Board as may be appropriate (or as has been requested by the Board) in connection with the Board's review or approval of the arrangements contemplated hereunder, including amounts expended by the Adviser hereunder. (b) The Distributor represents and warrants the following: (i) it is presently a duly registered broker-dealer with the NASD in good standing and covenants that it shall remain so registered and in good standing for the duration of this Agreement, and shall immediately notify the Adviser should the foregoing no longer be true during the term of this Agreement; (ii) the Distributor also represents and warrants that it is in material compliance with all laws, rules and regulations applicable to it, including but not limited to the rules and regulations promulgated by the NASD; and (iii) this Agreement has been duly authorized by the Distributor and, when executed and delivered, will constitute a legal, valid and binding obligation of the Distributor, enforceable against the Distributor in accordance with its terms subject to bankruptcy, insolvency, reorganizations, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties. 6. Confidentiality. During the term of this Agreement, the Distributor and the Adviser may have access to confidential information relating to such matters as either party's business, trade secrets, systems, procedures, manuals, products, contracts, personnel, and clients. As used in this Agreement, "Confidential Information" means information belonging to the Distributor or the Adviser which is of value to such party and the disclosure of which could result in a competitive or other disadvantage to either party, including, without limitation, financial information, business practices and policies, know-how, trade secrets, market or sales information or plans, customer lists, business plans, and all provisions of this Agreement. Confidential Information includes information developed by either party in the course of engaging in the activities provided for in this Agreement, unless: (i) the information is or becomes publicly known without -3- breach of this Agreement, (ii) the information is disclosed to the other party by a third party not under an obligation of confidentiality to the party whose Confidential Information is at issue of which the party receiving the information should reasonably be aware, or (iii) the information is independently developed by a party without reference to the other's Confidential Information. Each party will protect the other's Confidential Information with at least the same degree of care it uses with respect to its own Confidential Information, and will not use the other party's Confidential Information other than in connection with its duties and obligations hereunder. Notwithstanding the foregoing, a party may disclose the other's Confidential Information if (i) required by law, regulation or legal process or if requested by any Agency; (ii) it is advised by counsel that it may incur liability for failure to make such disclosure; (iii) requested to by the other party; provided that in the event of (i) or (ii) the disclosing party shall give the other party reasonable prior notice of such disclosure to the extent reasonably practicable and reasonably cooperate with the other party (at such other party's expense) in any efforts to prevent such disclosure. 7. Limitation of Liability; Indemnification. (a) The Distributor retains the general rights and responsibilities associated with its employment of wholesalers and other personnel with day to day job responsibilities that are substantially dedicated to the activities (including wholesaling activities) to be performed on behalf of the Adviser and the Company (collectively, the "Distributor-employed Distribution Services Personnel"). With respect to any individuals who are not employed by the Distributor, but who are registered by the Distributor on Form U-4 in order for such individuals ("non-Distributor-employed Distribution Services Personnel", and together with the Distributor-employed Distribution Services Personnel (whether or not internal or external), collectively, the "Distribution Services Personnel") to perform activities (including wholesaling activities) on behalf of the Adviser and the Company, the Distributor shall have the following rights exercisable at any time within its sole discretion: (i) to terminate the registration by filing Form U-5 or such other necessary and appropriate documents; (ii) to take disciplinary action, including, without limitation, making reports to regulatory bodies and authorities; (iii) to seek damages for actions taken or omissions of the non-Distributor-employed Distribution Services Personnel; (iv) to receive information (including, without limitation, reports and certifications) from the Adviser's Code Compliance Officer and/or Chief Compliance Officer regarding the non-Distributor-employed Distribution Services Personnel's compliance with the Adviser's Code of Ethics; and (v) to receive periodic certification from the non-Distributor-employed Distribution Services Personnel regarding his or her compliance with the manuals and policies of the Distributor. In addition, the Adviser shall provide the Distributor with, and the Distributor shall have the right to receive, copies of any reports, complaints, documents or inquiries relating to the performance of the non-Distributor-employed Distribution Services Personnel, and any information that would affect the non-Distributor-employed Distribution Services Personnel's status of, or information on, his or her Form U-4 registration. For avoidance of confusion, it is expressly agreed and understood that all Distribution Services Personnel, whether or not Distributor-employed Distribution Services Personnel or non-Distributor-employed Distribution Services Personnel, are considered "Wholesaling Personnel" for purposes of the Distribution Agreement, and the Distributor shall be entitled to be compensated and reimbursed with respect to such Distribution Services Personnel, in accordance with the Distribution Agreement. -4- (b) Subject to Section 7(a), the Distributor shall not be liable to the Adviser or the Company for any action taken or omitted by it in the absence of bad faith, willful misfeasance, gross negligence or reckless disregard by it (or its agents or employees other than the Distribution Services Personnel) of its obligations and duties under this Agreement or the Distribution Agreement. As long as the Distributor acts in good faith and complies with laws and regulations applicable to it in connection with its services hereunder and/or under the Distribution Agreement, the Adviser shall indemnify and hold harmless the Distributor and its employees, agents, directors and officers from and against, any and all claims, demands, actions and suits, and from and against any and all judgments, liabilities, losses, damages, costs, charges and reasonable counsel fees incurred in connection therewith (collectively, "Losses") arising out of or related to the arrangement contemplated under this Agreement and/or the Distribution Agreement, including but not limited to all activities, actions and omissions of the Distribution Services Personnel as registered representatives of the Distributor, except to the extent that Losses result from (i) the Distributor's general responsibilities as employer of Distribution Services Personnel, or (ii) the bad faith, willful misfeasance, gross negligence or reckless disregard by the Distributor of its express obligations and duties hereunder and/or the Distribution Agreement. (c) NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR SIMILAR DAMAGES, INCLUDING LOST REVENUE, LOST PROFITS OR LOST OR DAMAGED DATA, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES. 8. Notices. Any notice provided hereunder shall be sufficiently given when sent by registered or certified mail to the party required to be served with such notice at the following address: if to the Adviser, to it at 61 Moraga Way, Suite 207, Orinda, California 94653, and if to Distributor, to it at 100 Summer Street, Boston, Massachusetts 02110, Attn: Broker Dealer Chief Compliance Officer, with a copy to BISYS Distribution Services, 3435 Stelzer Road, Columbus, Ohio 43219, Attn: President, or at such other address as such party may from time to time specify in writing to the other party pursuant to this Section. 9. Assignment. This Agreement and the rights and duties hereunder shall not be assignable with respect to a Fund by either of the parties hereto except by the specific written consent of the other party. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns. 10. Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of New York, without regard to New York's conflicts of laws principles. -5- 11. Miscellaneous. (a) Paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (b) This Agreement constitutes the complete agreement of the parties hereto as to the subject matter covered by this Agreement, and supersedes all prior negotiations, understandings and agreements bearing upon the subject matter covered by this Agreement. (c) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain such part, term or provision. (d) This Agreement may be executed in counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same agreement. (e) No amendment to this Agreement shall be valid unless made in writing and executed by both parties hereto. (f) The Adviser acknowledges that certain FRC publications referred to in the Distribution Agreement may be provided only to parties that have entered into a written agreement or addendum that sets forth the terms of use of such publications and the associated fee. The Distribution Agreement provides that the Company will notify the Distributor whether the Company or the Adviser or both will enter into such an agreement or addendum. The Adviser acknowledges that if only one of the Company or the Adviser enters into such agreement or addendum, the other party will be prohibited from receiving or using such publications. * * * * -6- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written. EM CAPITAL MANAGEMENT, LLC By: /s/ Seth R. Freeman ------------------------------------ Name: Seth R. Freeman ---------------------------------- Title: Manager of EM Capital Management, LLC ------------------------------------- BISYS Fund Services Limited Partnership By: BISYS Fund Services, Inc., its General Partner By: /s/ Fred Naddaff ------------------------------------ Name: Fred Naddaff Title: President -7- EX-23.G 6 l23639bexv23wg.txt EX-23(G) Exhibit 23(g) CUSTODIAN AGREEMENT (FOREIGN AND DOMESTIC SECURITIES) This Custodian Agreement is made by and between THE COVENTRY FUNDS TRUST ON BEHALF OF EM CAPITAL INDIA GATEWAY FUND ("Principal") and UNION BANK OF CALIFORNIA, N.A. ("Custodian"). Principal desires that Custodian hold and administer on behalf of Principal certain Securities (as herein defined). Custodian is willing to do so on the terms and conditions set forth in this Agreement. Accordingly, Principal and Custodian agree as follows: 1. DEFINITIONS. Certain terms used in this Agreement are defined as follows: 1.1 "Account" means, collectively, each account maintained by Custodian pursuant to Paragraph 3 of this Agreement. 1.2 "Act" means the Investment Company Act of 1940, and the rules and regulations thereunder, all as amended from time to time by the U.S. Securities and Exchange Commission ("SEC"). 1.3 "Board" means the Board of Trustees or the Board of Directors of Principal. 1.4 "Eligible Foreign Custodian" ("Sub-Custodian", or collectively "Sub-Custodians") means an entity that is incorporated or organized under the laws of a country other than the United States and that is a Qualified Foreign Bank, as defined in Section 270.17f-5(a)(5) of the Rule, or a majority-owned direct or indirect subsidiary of a U.S. Bank or bank-holding company. 1.5 "Eligible Securities Depository", ("Depository", or collectively "Depositories") means a system for the central handling of securities as defined in Section 270.17f-7(b)(1) of the Act. 1.6 "Emerging Market" means each market so identified on Appendix A attached hereto. 1.7 "Foreign Market" means each market so identified on Appendix A attached hereto. 1.8 "Investment Manager" means an investment advisor or manager identified by Principal in a written notice to Custodian as having the authority to direct Custodian regarding the management, acquisition, or disposition of Securities. 1.9 "Monitoring System" means the policies and procedures established by Custodian to fulfill its duties to monitor the custody risks associated with maintaining UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 1 of 15 securities with a Sub-Custodian or Depository on a continuing basis, pursuant to this Agreement. 1.10 "Rule" means collectively Section 270.17(f)-5 and Section 270.17(f)-7 of the Act, as amended from time to time. 1.11 "Securities" means domestic or foreign securities or both within the meaning of Section 2(a)(36) of the Act and regulations issued by the SEC under Section 270.17(f) of the Act, as amended, which are held by Custodian in the Account, and shall include cash of any currency or other property of Principal and all income and proceeds of sale of such securities or other property of Principal. 2. REPRESENTATIONS 2.1 Principal represents that with respect to any Account established by Principal to hold Securities, Principal is authorized to enter into this Agreement and to retain Custodian on the terms and conditions and for the purposes described herein. 2.2 Custodian represents that it (i) is organized under the laws of the United States and has its principal place of business in the United States; (ii) is a bank within the meaning of Section 202(a)(2) of the Investment Advisers Act of 1940 and Section 2(a)(5) of the Act, as amended; and (iii) has equity capital in excess of $1 million. 3. ESTABLISHMENT OF ACCOUNTS. Principal hereby establishes with Custodian, and may in the future establish, one or more Accounts in Principal's name. The Account shall consist of Securities delivered to and receipted for by Custodian or by any Sub-Custodian. Custodian, in its sole discretion, may reasonably refuse to accept any property now or hereafter delivered to it for inclusion in the Account. Principal shall be notified promptly of such refusal and any such property shall be immediately returned to Principal. 4. CUSTODY. Subject to the terms of this Agreement, Custodian shall be responsible for the safekeeping and custody of the Securities. Custodian may (i) retain possession of all or any portion of the Securities, including possession in a foreign branch or other office of Custodian; or (ii) retain, in accordance with Paragraph 5 of this Agreement, one or more Sub-Custodians to hold all or any portion of the Securities. Custodian and any Sub-Custodian may, in accordance with Paragraph 5 of this Agreement, deposit definitive or book-entry Securities with one or more Depositories. 4.1 If Custodian retains possession of Securities, Custodian shall ensure the Securities are at all times properly identified as being held for the appropriate Account. Custodian shall segregate physically the Securities from other securities or property held by Custodian. Custodian shall not be required to segregate physically the Securities from other securities or property held by Custodian for third parties as Custodian, but Custodian shall maintain adequate records showing the true ownership of the Securities. UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 2 of 15 4.2 If Custodian deposits Securities with a Sub-Custodian, Custodian shall maintain adequate records showing the identity and location of the Sub-Custodian, the Securities held by the Sub-Custodian, and each Account to which such Securities belong. 4.3 If Custodian or any Sub-Custodian deposits Securities with a Depository, Custodian shall maintain, or shall cause the Sub-Custodian to maintain, adequate records showing the identity and location of the Depository, the Securities held by the Depository, and each Account to which such Securities belong. 4.4 If Principal directs Custodian to deliver certificates or other physical evidence of ownership of Securities to any broker or other party, other than a Sub-Custodian or Depository employed by Custodian for purposes of maintaining the Account, Custodian's sole responsibility shall be to exercise care and diligence in effecting the delivery as instructed by Principal. Upon completion of the delivery, Custodian shall be discharged completely of any further liability or responsibility with respect to the safekeeping and custody of Securities so delivered. 4.5 Custodian shall ensure that (i) the Securities will not be subject to any right, charge, security interest, lien, or claim of any kind in favor of Custodian or any Sub-Custodian except for Custodian's expenses relating to the Securities' safe custody or administration or, in the case of cash deposits, liens or rights in favor of the creditors of the Sub-Custodian arising under bankruptcy, insolvency, or similar laws, and (ii) the beneficial ownership of the Securities will be freely transferable without the payment of money or value other than for safe custody or administration. 4.6 Principal or its designee, shall have reasonable access upon reasonable notice during regular business hours to the books and records, or shall be given confirmation of the contents of the books and records, maintained by Custodian or any Sub-Custodian holding Securities hereunder to verify the accuracy of such books and records. Custodian shall notify Principal promptly of any applicable law or regulation in any country where Securities are held that would restrict such access or confirmation. 4.7 Upon receipt of proper instructions, Custodian shall establish and maintain a segregated account or accounts for and on behalf of Principal, into which account or accounts may be transferred cash and/or Securities, including Securities maintained with a Depository (i) in accordance with the provisions of any agreement among the Principal, the Custodian and a broker-dealer registered under the 1934 Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of the Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund; (ii) for purposes of segregating cash or Securities in connection with securities options purchased or written by Principal or in connection UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 3 of 15 with financial futures contracts (or options thereon) purchased or sold by Principal (ii) which constitute collateral for loans of Securities made by Principal; (iv) for purposes of compliance by Principal with requirements under the 1940 Act for the maintenance of segregated accounts by registered investment companies in connection with reverse repurchase agreements and when-issued, delayed delivery, short sales and firm commitment transactions; and (v) for other proper corporate purposes, but only upon receipt of, in addition to proper instructions, a certified copy of a resolution of the Board of Trustees of Principal, certified by an Officer of Principal, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. Each segregated account established under this Article VI shall be established and maintained for Principal only. All proper instructions relating to a segregated account shall specify Principal. 5. SUB-CUSTODIANS AND DEPOSITORIES; SELECTION AND MONITORING. With Principal's advance approval, as provided in Subparagraph 5.5 of this Agreement, Custodian may from time to time select one or more Sub-Custodians and, subject to the provisions of Subparagraph 5.7, one or more Depositories, to hold Securities hereunder. 5.1 Custodian, acting as Principal's foreign custody manager as described in the Rule, shall establish a relationship with each Sub-Custodian governed by a written contract providing for the reasonable care of Securities based on the standards specified in section Section 270.17(f)-5(c)(1) of the Rule, and including the provisions set forth in sections Section 270.17(f)-5(c)(2)(i)(A) through (F) of the Rule, or provisions which Custodian determines provide the same or greater protection of Principal's Securities. 5.2 In making its selection of each Sub-Custodian, Custodian shall consider whether the Securities will be subject to reasonable care, based on the standards applicable to custodians in the relevant market, including (i) the Sub-Custodian's practices, procedures, and internal controls, including, but not limited to, the physical protections available for certificated securities (if applicable), the method of keeping custodial records, and the security and data protection practices; (ii) the Sub-Custodian's financial strength, general reputation and standing in the country in which it is located, its ability to provide efficiently the custodial services required, and the relative cost of such services; and, (iii) whether the Sub-Custodian has branch offices in the United States, or consents to service of process in the United States, in order to facilitate jurisdiction over and enforcement of judgments against it. Custodian will not select a Sub-Custodian unless it has determined that securities held by the Sub-Custodian will be subject to such reasonable care. 5.3 In making its selection of each Sub-Custodian and each Depository, Custodian shall exercise reasonable care, prudence, and diligence in evaluating the custody risks associated with maintaining Securities with each Depository under Custodian's custody arrangements with each Sub-Custodian or Depository. UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 4 of 15 5.4 Custodian shall give written notice to Principal of its intention to deposit Securities with a Sub-Custodian or, directly or through a Sub-Custodian, with a Depository. The notice shall identify the proposed Sub-Custodian or Depository and shall include reasonably available information relied on by Custodian in making the selection which shall include a report of the custody risks of maintaining assets with the Depository. 5.5 Within 30 days of its receipt of a notice from Custodian pursuant to Subparagraph 5.4 of this Agreement regarding Custodian's proposed selection of one or more Sub-Custodians or Depositories, Principal shall give written notice to Custodian of Principal's approval or disapproval of the proposed selection. If Principal has not responded within 30 days of receipt of Custodian's request for approval of a Sub-Custodian or Depository, Principal will be deemed to have approved the proposed selection. Principal hereby approves Custodian's selection and use of those Sub-Custodians and Depositories which are identified in Appendix A of this Agreement. 5.6 Custodian shall monitor under its Monitoring System the appropriateness of the continued custody or maintaining of Principal's Securities with each Sub-Custodian or Depository and the performance of the Sub-Custodian under its contract with Custodian. Custodian shall promptly notify Principal or Investment Manager of any material changes in the risks of continued custody or maintenance of Securities with a Sub-Custodian or Depository. 5.6.1 Custodian shall evaluate and determine at least annually the continued eligibility of each Sub-Custodian and Depository approved by Principal to act as such hereunder. In discharging this responsibility, Custodian shall (i) monitor on a continuing basis the day to day services and reports provided by each Sub-Custodian or Depository; (ii) at least annually, obtain and review the annual financial report published by each Sub-Custodian, and to the extent such reports are publicly available, each Depository, and other reports on each Sub-Custodian or Depository which Custodian may obtain from a reputable independent analyst; and, (iii) periodically as deemed appropriate, physically inspect the operations of each Sub-Custodian or Depository. 5.6.2 Custodian shall provide to the Board annually and at such other times as the Board may reasonably request based on the circumstances of the Principal's foreign custody arrangements, written reports notifying the Board of the placement of Securities of the Principal with a particular foreign Sub-Custodian within a Foreign Market or an Emerging Market and of any material change in the arrangements (including any material changes in any contracts governing such arrangements or any material changes in the established practices or procedures of Depositories) with respect to Securities of the Principal held by any Sub-Custodian. 5.6.3 If at any time Custodian determines that (i) any Sub-Custodian or Depository no longer satisfies the applicable requirements described in Subparagraph 1.4 (in the case of a Sub-Custodian) or Subparagraph 1.5 (in the case of a Depository) of this Agreement; or, (ii) any Sub-Custodian or Depository is otherwise no longer UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 5 of 15 capable or qualified to perform the functions contemplated herein; or, (iii) any change in a contract with a Sub-Custodian or any change in established Depository or market practices or procedures shall cause a custody arrangement to no longer meet the requirements of the Rule, Custodian shall promptly give written notice thereof to Principal. The notice shall, in addition, either indicate Custodian's intention to transfer Securities held by the removed Sub-Custodian or Depository to another Sub-Custodian or Depository previously approved by Principal, or include a notice pursuant to Subparagraph 5.4 of this Agreement of Custodian's intention to deposit Securities with a new Sub-Custodian or Depository, in either instance such transfer of Securities to be effected as soon as reasonably practical. 5.7 Notwithstanding the foregoing sub-sections of this Paragraph 5, Custodian shall have no responsibility for the selection or monitoring of any Depository or Depository's agent ("Compulsory Depository") (i) the use of which is mandated by law or regulation; (ii) because securities cannot be withdrawn from a depository; or (iii) because maintaining securities outside the securities depository is not consistent with prevailing market practices in the relevant market, provided however, that Custodian shall notify Principal if Principal has directed a trade in a market containing a Compulsory Depository, so Principal and Advisor shall have an opportunity to determine the appropriateness of investing in such market. 5.8 Principal and Custodian agree that, for purposes of this Paragraph, Custodian's determination of appropriateness shall only include custody risk, and shall not include any evaluation of "country risk" or systemic risk associated with the investment or holding of assets in a particular country or market, including, but not limited to (i) the use of Compulsory Depositories, (ii) the country's or market's financial infrastructure, (iii) the country's or market's prevailing custody and settlement practices, (iv) risk of nationalization, expropriation or other governmental actions, (v) regulation of the banking or securities industries, (vi) currency controls, restrictions, devaluation or fluctuation, and (vii) country or market conditions which may affect the orderly execution of securities transactions or affect the value of the transactions. Principal and Custodian further agree that the evaluation of any such country and systemic risks shall be solely the responsibility of Principal and the Adviser. 6. REGISTRATION. Subject to any specific instructions from Principal, Custodian shall hold or cause to be held all Securities in the name of (i) Principal, or (ii) Custodian, or any Sub-Custodian or Depository approved by Principal pursuant to Paragraph 5 of this Agreement, or in the name of a nominee of any of them, as Custodian shall determine to be appropriate under the circumstances. 7. TRANSACTIONS. Principal or any Investment Manager from time to time may instruct Custodian (which in turn shall be responsible for giving appropriate instructions to any Sub-Custodian or Depository) regarding the purchase or sale of Securities in accordance with this Paragraph 7: UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 6 of 15 7.1 Custodian shall effect and account for each Securities and currency sale on the date such transaction actually settles; provided, however, that Principal may in its sole discretion direct Custodian, in such manner as shall be acceptable to Custodian, to account for Securities and currency purchases and sales on contractual settlement date, regardless of whether settlement of such transactions actually occurs on contractual settlement date. Principal may, from time to time, direct Custodian to change the accounting method employed by Custodian in a written notice delivered to Custodian at least thirty (30) days prior to the date a change in accounting method shall become effective. 7.2 Custodian shall effect purchases by charging the Account with the amount necessary to make the purchase and effecting payment to the seller or broker for the securities or other property purchased. Custodian shall have no liability of any kind to any person, including Principal, except in the case of negligent or intentional tortuous acts, or willful misconduct, if the Custodian effects payment on behalf of Principal, and the seller or broker fails to deliver the securities or other property purchased. Custodian shall exercise such ordinary care and diligence as would be employed by a reasonably prudent custodian and due diligence in examining and verifying the certificates or other indicia of ownership of the property purchased before accepting them. 7.3 Custodian shall effect sales by delivering certificates or other indicia of ownership of the Property, and, as instructed, shall receive cash for such sales. Custodian shall have no liability of any kind to any person, including Principal, if Custodian exercises due diligence and delivers such certificates or indicia of ownership and the purchaser or broker fails to effect payment. 7.4 If a purchase or sale is effected through a Depository, Custodian shall exercise such ordinary care and diligence as would be employed by a reasonably prudent custodian and due diligence in verifying proper consummation of the transaction by the Depository. 7.5 Principal or, where applicable, Investment Manager, is responsible for ensuring that Custodian receives timely instructions and/or funds to enable Custodian to effect settlement of any purchase or sale of Securities or Currency Transactions. If Custodian does not receive such timely instructions or funds, Custodian shall have no liability of any kind to any person, including Principal, for failing to effect settlement. However, Custodian shall use reasonable efforts to effect settlement as soon as possible after receipt of appropriate instructions. Principal shall be liable for interest compensation and/or principal amounts to Custodian and/or its counterparty for failure to deliver instructions or funds in a timely manner to effect settlements of foreign exchange funds movement. 7.6 At the direction of Principal or the Investment Manager, as the case may be, Custodian shall convert currency in the Account to other currencies through customary channels including, without limitation, Custodian or any of its affiliates, as shall be necessary to effect any transaction directed by Principal or the Investment UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 7 of 15 Manager. Principal or the Investment Manager, as the case may be, acknowledges that (i) the foreign currency exchange department is a part of Custodian or one of its affiliates or subsidiaries; (ii) the Account is not obligated to effect foreign currency exchange with Custodian; (iii) Custodian will receive benefits for such foreign currency transactions which are in addition to the compensation which Custodian receives for administering the Account; and (iv) Custodian will make available the relevant data so that Principal or the Investment Manager, as the case may be, can determine that the foreign currency exchange transactions are as favorable to the Account as terms generally available in arm's length transactions between unrelated parties. Foreign currency exchange transactions will be performed in accordance with the Union Bank of California Foreign Exchange Agreement in the form of Appendix "C" hereto and incorporated herein by reference and Principal hereby agrees and acknowledges all of the terms and conditions thereof. If the Principal or Investment Manager elects to give standing instructions to Custodian to execute foreign currency exchange transactions on their behalf, or in the event a foreign currency exchange transaction is initiated in the absence of the specific Foreign Exchange Agreement, such transaction will be performed at the Bank's prevailing rate, in accordance with the usual commercial terms of the custodian. 7.7 Custodian shall have no responsibility to manage or recommend investments of the Account or to initiate any purchase, sale, or other investment transaction in the absence of instructions from Principal or, where applicable, an Investment Manager. 8. MARKET TRANSACTIONS; SETTLEMENT DATES. Custodian has identified certain Foreign Markets and certain Emerging Markets in Appendix A of this Agreement, which Custodian may amend in writing to Principal from time to time. 8.1 Principal agrees that all settlements of Securities transactions shall be transacted in accordance with the local laws, customs, market practices and procedures to which Sub-Custodians and Depositories are subject in each Foreign and Emerging Market. 8.2 Notwithstanding the foregoing Paragraph 7., Principal understands and agrees that settlement of Securities transactions is available only on an actual settlement date basis in certain Emerging Markets, which are identified in Appendix A, and as may be amended by Custodian in writing to Principal from time to time. 8.2.1 For Emerging Markets with actual settlement dates, cash of any currency deposited or delivered to the Account shall be available for use by Principal or Investment Manager only on the actual business day on which funds of good value are available to Sub-Custodian in the Account. 8.2.2 For Emerging Markets with actual settlement dates, Securities deposited or delivered to the Account shall be available for use by Principal or Investment Manager only on the actual business day on which such Securities are held UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 8 of 15 in the nominee name or are otherwise subject to the control of, and in a form for good delivery by, the Sub-Custodian. 9. CAPITAL CHANGES; INCOME. 9.1 Custodian may, without further instructions from Principal or any Investment Manager, exchange temporary certificates and may surrender and exchange Securities for other securities in connection with any reorganization, recapitalization, or similar transaction in which the owner of the Securities is not given an option. Custodian has no responsibility to effect any such exchange unless it has received actual notice of the event permitting or requiring such exchange at its office designated in Paragraph 15 of this Agreement or at the office of its designated agents. 9.2 Custodian, or its designated agents, are authorized, as Principal's agent, to surrender against payment maturing obligations and obligations called for redemption, and to collect and receive payments of interest and principal, dividends, warrants, and other things of value in connection with Securities. Except as otherwise provided in Subparagraph 16.4 of this Agreement, Custodian or its designated agents shall not be obligated to enforce collection of any item by legal process or other means. 9.3 Custodian or its designated agents are authorized to sign for Principal all declarations, affidavits, certificates, or other documents that may be required to collect or receive payments or distributions with respect to Securities. Custodian or its designated agents are authorized to disclose, without further consent of Principal, Principal's identity to issuers of Securities, or the agents of such issuers, who may request such disclosure. 10. NOTICES REGARDING ACCOUNT SECURITIES. Custodian shall notify Principal or, where applicable, the Investment Manager, of any reorganization, recapitalization, or similar transaction not covered by Paragraph 9, and any subscription rights, proxies, and other shareholder information pertaining to the Securities actual notice of which is received by Custodian at its office designated in Paragraph 15 of this Agreement or at the offices of its designated agents, and forward any related material to Principal. Custodian's sole responsibility in this regard shall be to give such notices to Principal or the Investment Manager, as the case may be, within a reasonable time after Custodian receives them, and Custodian shall not otherwise be responsible for the timeliness of such notices. Custodian has no responsibility to respond or otherwise act with respect to any such notice unless and until Custodian has received appropriate instructions from Principal or the Investment Manager. 11. TAXES. Custodian shall pay or cause to be paid from the Account all taxes and levies in the nature of taxes imposed on the Account or the Securities thereof by any country. Custodian will use its best efforts to give the Investment Manager advance written notice of the imposition of such taxes. However, Custodian shall use reasonable efforts to obtain refunds of taxes withheld on Securities or the income thereof that are available under applicable tax laws, treaties, and regulations. UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 9 of 15 12. CASH. Principal may from time to time, direct Custodian to hold Account cash in The HighMark(SM) Group of mutual funds or in any investment company for which Custodian or its affiliates or subsidiaries, acts as investment advisor or custodian, or provides other services. Principal shall designate the particular HighMark fund or such other above-mentioned fund that Principal deems appropriate for the Account. Principal or an Investment Manager, where applicable, acknowledges that Custodian will receive fees for such services which will be in addition to those fees charged by Custodian as agent for the Account. 13. REPORTS AND RECORDS. 13.1 Custodian shall give written reports to Principal showing (i) each transaction involving Securities effected by or reported to Custodian; (ii) the identity and location of Securities held by Custodian as of the date of the report; (iii) any transfer of location of Securities not otherwise reported; and (iv) such other information as shall be agreed upon by Principal and Custodian. Unless otherwise agreed upon by Principal and Custodian, Custodian shall provide the reports described in this Paragraph 13 on a monthly basis. 13.2 Custodian shall maintain complete and accurate records with respect to Securities, cash or other property held for Principal, including (i) journals or other records of original entry containing an itemized daily record in detail of all receipts and deliveries of Securities and all receipts and disbursements of cash; (ii) ledgers (or other records) reflecting (A) Securities in transfer, (B) Securities in physical possession, (C) monies and Securities borrowed and monies and Securities loaned (together with a record of the collateral therefore and substitutions of such collateral), (D) dividends and interest received, and (E) dividends receivable and interest receivable; and (iii) canceled checks and bank records related thereto. Custodian shall keep such other books and records of Principal as the officers of Principal shall reasonably request, or as may be required by the Act, including, but not limited to, Section 31 of the Act and Rule 31a-2 promulgated thereunder. 13.3 All such books and records maintained by Custodian shall (i) be maintained in a form acceptable to Principal and in compliance with the rules and regulations applicable to Custodian, (ii) and at all times during the regular business hours of Custodian be made available upon request for inspection by duly authorized officers, employees or agents of Principal, and (iii) be preserved for the periods prescribed in rules and regulations applicable to Custodian. 14. INSTRUCTIONS FROM PRINCIPAL. 14.1 Principal shall certify or cause to be certified to Custodian in writing the names and specimen signatures of all persons authorized to give instructions, notices, or other communications on behalf of Principal or any Investment Manager. Such certification shall remain effective until Custodian receives notice to the contrary. UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 10 of 15 14.2 Principal or authorized Investment Manager, as the case may be, may give instruction, notice, or other communication called for by this Agreement to Custodian in writing, or by telecopy, telex, telegram, or other form of electronic communication acceptable to Custodian. Unless otherwise expressly provided, all Instructions shall continue in full force and effect until canceled or superseded. Principal or Investment Manager may give and Custodian may accept oral instructions on an exception basis; provided, however, that Principal or Investment Manager shall promptly confirm any oral communications in writing or by telecopy or other means permitted hereunder. Principal will hold Custodian harmless for the failure of Principal or Investment Manager to send confirmation in writing, the failure of such confirmation to conform to the telephone instructions received or Custodian's failure to produce such confirmation at any subsequent time. Custodian may electronically record any instruction given by telephone, and any other telephone discussions with respect to the Custody Account. 14.3 All such communications shall be deemed effective upon receipt by Custodian at its address specified in Paragraph 15 of this Agreement, as amended from time to time. Custodian without liability may rely upon and act in accordance with any instruction that Custodian using ordinary care believes has been given by Principal or an Investment Manager. 14.4 Custodian may at any time request instructions from Principal and may await such instructions without incurring liability. Custodian has no obligation to act in the absence of such requested instructions, but may, however, without liability take such action as it deems appropriate to carry out the purposes of this Agreement. 15. ADDRESSES. Until further notice from either party, all communications called for under this Agreement shall be addressed as follows: If to Principal: Name: _____________________________________ Street Address: ___________________________ City, State, Zip: _________________________ Attn: _____________________________________ Telephone: ________________________________ Facsimile: ________________________________ UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 11 of 15 If to Investment Manager: Name: _____________________________________ Street Address: ___________________________ City, State, Zip: _________________________ Attn: _____________________________________ Telephone: ________________________________ Facsimile: ________________________________ If to Custodian: UNION BANK OF CALIFORNIA, NATIONAL ASSOCIATION Union Bank of California Global Custody Attn: Ms. Moon Shil Lee, Vice President 350 California Street, 6th Floor San Francisco, California 94104 Telephone: (415) 705-7211 Facsimile: (415) 705-7340 16. CUSTODIAN'S RESPONSIBILITIES AND LIABILITIES: 16.1 Custodian's duties and responsibilities shall be limited to those expressly set forth in this Agreement, or as otherwise agreed by Custodian in writing. In carrying out its responsibilities, Custodian shall exercise no less than the same degree of care and diligence it usually exercises with respect to similar property of its own. 16.2 Custodian (i) shall not be required to maintain any special insurance for the benefit of Principal, and (ii) shall not be liable or responsible for any loss, damage, expense, failure to perform or delay caused by accidents, strikes, fire, flood, war, riot, electrical or mechanical or communication line or facility failures, acts of third parties (including without limitation any messenger, telephone or delivery service), acts of God, war, government action, civil commotion, fire, earthquake, or other casualty or disaster or any other cause or causes which are beyond Custodian's reasonable control. However, Custodian shall use reasonable efforts to replace Securities lost or damaged due to such causes with securities of the same class and issue with all rights and privileges pertaining thereto. Custodian shall be liable to Principal for any loss which shall occur as the result of the failure of a Sub-Custodian to exercise reasonable care with respect to the safekeeping of assets to the same extent that Custodian would be liable to Principal if Custodian were holding such securities and cash in its own premises. In all cases, Custodian's liability for any act or failure to act under this Agreement shall be limited to the resulting direct loss, if any, of Principal. Under no circumstances shall Custodian be liable for any consequential or indirect damage that is UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 12 of 15 not reasonably foreseeable, or any punitive or special damage, which Principal may incur or suffer in connection with this Agreement. 16.3 The parties intend that Custodian shall not be considered a fiduciary of the Account. Accordingly, Custodian shall have no power to make decisions regarding any policy, interpretation, practice, or procedure with respect to the Account, but shall perform the ministerial and administrative functions described in this Agreement as provided herein and within the framework of policies, interpretations, rules, practices, and procedures made by Principal or an Investment Manager, where applicable, as the same shall be reflected in instructions to Custodian from Principal or any Investment Manager. 16.4 Custodian shall not be required to appear in or defend any legal proceedings with respect to the Account or the Securities unless Custodian has been indemnified to its reasonable satisfaction against loss and expense (including reasonable attorneys' fees). 16.5 With respect to legal proceedings referred to in Subparagraph 16.4 of this agreement, Custodian may consult with counsel acceptable to it after written notification to Principal concerning its duties and responsibilities under this Agreement, and shall not be liable for any action taken or not taken in good faith on the advice of such counsel. 16.6 Custodian agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of Principal, all records and other information relative to Principal and prior, present, or potential shareholders of Principal (and clients of said shareholders), and not to use such records and information for any purpose other than the performance of its responsibilities and duties hereunder, except (i) after prior notification to and approval in writing by Principal, which approval shall not be unreasonably withheld and may not be withheld where Custodian may be exposed to civil or criminal contempt proceedings for failure to comply, (ii) when requested to divulge such information by duly constituted authorities, or (iii) when so requested by Principal. Records and other information which have become known to the public through no wrongful act of Custodian or any of its employees, agents or representatives, and information that was already in the possession of Custodian prior to receipt thereof from Principal or its agent, shall not be subject to this paragraph. Further, Custodian will adhere to the privacy policies adopted by Principal pursuant to Title V of the Gramm-Leach-Bliley Act, as may be modified from time to time. In this regard, Custodian shall have in place and maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of, records and information relating to Principal and its shareholders. UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 13 of 15 17. INDEMNITIES. 17.1 Principal hereby agrees to indemnify Custodian against all liability, claims, demands, damages, losses, and costs, including reasonable attorneys' fees and expenses of legal proceedings, resulting from Custodian's compliance with instructions from Principal or any Investment Manager and the terms of this Agreement, except where Custodian has acted with negligence or willful misconduct. 17.2 Custodian hereby agrees to indemnify Principal against all liability, claims, demands, damages, losses, and costs, including reasonable attorneys' fees and expenses of legal proceedings, resulting from Custodian's negligence or willful misconduct. 17.3 Each party's right to indemnity under paragraph 17 of this Agreement shall survive the termination of this Agreement. 18. COMPENSATION; EXPENSES. Principal shall reimburse Custodian for all reasonable out-of-pocket expenses and processing costs incurred by Custodian in the administration of the Account including, without limitation, reasonable counsel fees incurred by Custodian pursuant to Subparagraph 16.5 of this Agreement. Principal also shall pay Custodian reasonable compensation for its services hereunder as specified in Appendix B. Custodian shall be entitled to withdraw such expenses or compensation from the Account if Principal fails to pay the same to Custodian within 45 days after Custodian has sent an appropriate billing to Principal; provided, however, that Custodian will give Principal ten (10) days prior written notice before withdrawing such funds. 19. AMENDMENT; TERMINATION. This Agreement may be amended at any time by a written instrument signed by the parties. Either party may terminate this Agreement and the Account upon 90 days' written notice to the other unless the parties agree on a different time period. Upon such termination, Custodian shall deliver or cause to be delivered the Securities, less any amounts due and owing to Custodian under this Agreement, to a successor custodian designated by Principal or, if a successor custodian has not accepted an appointment by the effective date of termination of the Account, to Principal. Upon completion of such delivery Custodian shall be discharged of any further liability or responsibility with respect to the Securities so delivered. 20. SUCCESSORS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors in interest. Without consent of the parties, this agreement cannot be assigned to any third party. 21. GOVERNING LAW. The validity, construction, and administration of this Agreement shall be governed by the applicable laws of the United States from time to time in force and effect and, to the extent not preempted by such laws of the United States, by the laws of the State of California from time to time in force and effect. Any action or proceeding to enforce, interpret or adjudicate the rights and responsibilities of the UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 14 of 15 parties hereunder shall be commenced in the State or Federal courts located in the State of California. 22. EFFECTIVE DATE. This Agreement shall be effective as of the date appearing below, and shall supersede any prior or existing agreements between the parties pertaining to the subject matter hereof. Date: ------------------------------- By: "Principal" --------------------------------- Authorized Signature --------------------------------- Name & Title --------------------------------- Authorized Signature --------------------------------- Name & Title By: Union Bank of California, National Association, "Bank" --------------------------------- Authorized Signature --------------------------------- Name & Title --------------------------------- Authorized Signature --------------------------------- Name & Title UNION BANK OF CALIFORNIA INSTITUTIONAL CUSTODY SERVICES Page 15 of 15 EX-23.H.1 7 l23639bexv23whw1.txt EX-23(H)(1) EXHIBIT 23(h)(1) MASTER SERVICES AGREEMENT This Master Services Agreement ("Agreement") is made as of April 30, 2007 (the "Effective Date"), between BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio corporation having a place of business at 3435 Stelzer Road, Columbus, Ohio 43219 and Coventry Funds Trust (the "Company") an Ohio business trust, having a place of business at 3435 Stelzer Road, Columbus, Ohio 43219. WHEREAS, the Company desires that BISYS perform administration, fund accounting and transfer agency services for the EM Capital investment portfolios of the Company managed by EM Management, LLC ("EMC") as now in existence and listed on Schedule A to this Agreement, or as hereafter may from time to time be created and managed by EMC so long as agreed to by BISYS in writing (individually referred to herein as a "Fund" and collectively, the "Funds"); WHEREAS, BISYS is willing to perform such services on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in exchange for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Company and BISYS hereby agree as follows: 1. Retention of BISYS. The Company hereby retains BISYS to act as administrator, fund accountant and transfer agent of the Company and the Funds, and to furnish the Company and the Funds with administrative, fund accounting and transfer agency services as set forth in Sections 2(a) through (c) below. In addition, the Company hereby appoints BISYS Fund Services, Inc. ("BFI"), an affiliate of BISYS, as the non-bank trustee/custodian to the IRA Accounts of the Company (as defined in Section 2(d) below). The Company hereby retains BISYS to provide the non-bank trustee/custodian services as set forth in Section 2(d) below. BISYS will perform the services upon the terms set forth in this Agreement and the Schedules to this Agreement. BISYS shall, for all purposes herein, be deemed to be an independent contractor and, except as otherwise expressly provided or authorized, shall have no authority to act for or represent the Company or Funds in any way, and shall not be deemed an agent of the Company or any Funds. 2. Services. (a) Administration Services. BISYS shall perform the administrative services set forth in Schedule B to this Agreement and, on behalf of the Company, shall investigate, and conduct relations with, custodians, depositories, underwriters, brokers and dealers, 1 corporate fiduciaries, insurers, banks and persons in any other capacity deemed to be necessary or desirable for the Company's operations. BISYS shall provide the Board of Trustees of the Company (the "Board") with such reports regarding the Fund's investment performance as it may reasonably request, but shall have no responsibility for supervising the performance by any investment adviser or sub-adviser of its responsibilities. BISYS shall perform such other administration services, and furnish such reports, for the Company and each of the Funds that are mutually agreed upon by the parties from time to time, for which the Company will pay BISYS the amounts agreed upon between them. (b) Fund Accounting Services. BISYS shall perform for the Company the fund accounting services set forth in Schedule C to this Agreement. BISYS shall also perform such special accounting services, and furnish such reports, for the Company and the Funds to the extent agreed upon by the parties from time to time, for which the Company will pay BISYS the amounts agreed upon between them. (c) Transfer Agency Services. BISYS shall perform for the Company the transfer agency services set forth in Schedule D to this Agreement. BISYS also agrees to perform for the Company such special transfer agency services, and furnish such reports, for the Company and the Funds to the extent agreed upon by the parties from time to time, for which the Company will pay BISYS the amounts agreed upon between them. (d) Trustee/Custodian Services. (i) BFI has obtained a non-bank Trustee/Custodian Notice of Approval letter from the Treasury Department, Internal Revenue Service, dated December 31, 2003. BFI, together with BISYS, has the knowledge and capabilities to act as a passive non-bank trustee/custodian of Traditional IRA, Roth IRA, and SIMPLE IRA accounts offered by the Company (collectively, "IRA Accounts"). BISYS has the knowledge and capabilities to perform the services undertaken by BISYS under Schedule D-1. (ii) BISYS agrees that BFI shall act as a non-bank trustee/custodian for the IRA Accounts and BISYS shall perform the services undertaken by BISYS under Schedule D-1, but only as long as (x) BISYS continues to act as transfer agent to the Funds and retains all legal qualifications to act as such and (y) BFI retains all legal qualifications to act as non-bank trustee/custodian. In this 2 capacity, BFI will act only as a passive non-bank trustee (within the meaning of Section 1.408-2(e)(6)(i)(A) of the IRS regulations), and neither BFI nor BISYS will have any discretion to direct investments within any of the IRA Accounts. (iii) BISYS and BFI shall have the right to review and comment upon the plan agreements and other documentation relating to or affecting its services hereunder, and shall have no liability for any modifications made thereto without its express written consent. BISYS and BFI may rely upon the most recent versions of the plan agreement and such other documentation provided to it, and shall render its services hereunder in a manner consistent with the terms of such plan agreement and such other documentation. (iv) In relation to the IRA Accounts, BISYS will perform the functions described in Schedule D-1 to this Agreement. BISYS shall provide the Company with all necessary office space, equipment, personnel and facilities (including facilities for shareholders' and Board meetings) for handling the affairs of the Company and Funds and such other services as BISYS shall, from time to time, reasonably determine to be necessary to perform its obligations under this Agreement. In addition, at the request of the Board, BISYS shall make reports to the Board concerning the performance of its obligations hereunder. BISYS shall perform such other services for the Company or the Funds that are mutually agreed upon by the parties from time to time, for which the Company will pay BISYS the amounts agreed upon between them, from time to time. Except as explicitly set forth herein, BISYS shall only perform additional services as are set forth in an amendment to this Agreement, in consideration of such fees as the parties agree. BISYS may use one or more third parties to perform some or all of its obligations under this Agreement. BISYS shall be fully responsible for the acts of such third parties and shall not be relieved of any of its responsibilities under this Agreement by virtue of the use of such third parties. 3. Allocation of Charges and Expenses. BISYS shall furnish at its own expense the executive, supervisory and clerical personnel necessary to perform its obligations under this Agreement. BISYS shall pay all compensation, if any, of officers and trustees of the Company who are affiliated persons of BISYS or any affiliated entity of BISYS; provided, however, that unless otherwise specifically provided, BISYS shall not be obligated to pay the compensation of any employee or agent of the Company (who is not a BISYS employee) retained by the Board to perform services on behalf of the Company. 3 The Company assumes and shall pay or cause to be paid all other expenses of the Company not otherwise allocated herein, including, without limitation, organization costs, taxes, expenses for Company legal and auditing services, the expenses of preparing (including typesetting), printing and mailing reports, prospectuses, statements of additional information, proxy solicitation material and notices to existing Shareholders (as defined below), all expenses incurred in connection with issuing and redeeming shares of beneficial interest in the Funds ("Shares"), the cost of custodial services, the cost of initial and ongoing registration of the Shares under Federal and state securities laws, fees and out-of-pocket expenses of trustees who are not affiliated persons of BISYS or any affiliate of BISYS (fees for other "interested trustees" may be paid by parties other than the Company), insurance, interest, brokerage costs, litigation and other extraordinary or nonrecurring expenses, and all fees and charges of investment advisers. 4. Fees and Expenses. (a) The Company shall pay BISYS for the services to be provided by BISYS under this Agreement in accordance with, and in the manner set forth in, Schedule E to this Agreement. Fees for any additional services to be provided by BISYS pursuant to an amendment to any of Schedules B, C or D shall be subject to mutual agreement at the time such amendment is proposed. (b) In addition to paying BISYS the fees set forth in Schedule E, the Company agrees to reimburse BISYS for all of its actual out-of-pocket expenses reasonably incurred in providing services hereunder, including without limitation: (i) All direct telephone, telephone transmission and telecopy or other electronic transmission expenses incurred in communication with the Company or the Company's investment adviser or custodian, broker-dealers, shareholders or others as required for BISYS to perform the services to be provided hereunder; (ii) The cost of microfilm or microfiche of records or other electronic storage of Company records and other materials; (iii) All freight and other delivery and bonding charges incurred in delivering materials to and from the Company, its investment advisers and custodian; (iv) All printing, production (including graphics support, copying, and binding) and distribution expenses incurred in relation to Board meeting materials; (v) Check and payment processing fees; 4 (vi) Fulfillment; (vii) IRA custody and other related fees; (viii) NSCC and related costs; (ix) Sales taxes; (x) Costs of tax forms; (xi) Costs of shareholder correspondence; (xii) Costs of tax data services; (xiii) Costs of rating agency services' (xiv) All out of pocket costs incurred in connection with BISYS' provision (if applicable, under Section 23 of this Agreement) of Company officers and in connection with administration services, including, without limitation, travel and lodging expenses incurred by officers and employees of BISYS in connection with attendance at Board meetings and any other meetings for which such attendance is requested or agreed upon by the parties; and (xv) Any expenses incurred at the written direction of an officer of the Company; provided however, that such officer is not an officer or employee of BISYS or its affiliates. (c) In addition, BISYS shall be entitled to receive the following miscellaneous fees and charges: (i) Ad hoc reporting fees billed, when mutually agreed upon, according to applicable rate schedules; (ii) Fees for pricing information used in connection with pricing the securities and other investments of each Fund, provided that the Fund shall not be charged an amount greater than the amount the Fund would be charged if it obtained the information directly from the relevant vendor or vendors, including costs incurred by BISYS to Fair Value Information Vendors (as defined in Schedule C) with respect to the provision of fair value pricing information to BISYS for use in valuing the portfolio holdings of a specific Fund or Funds that the Company designates as being subject to fair value determinations and for which services are to be provided by BISYS hereunder (such costs 5 shall be incurred at the discounted group rate made available to BISYS clients, if applicable); (iii) To the extent applicable hereunder, a fee for managing and overseeing the report, print and mail functions performed by BISYS using third-party vendors, not to exceed $.04 per page for Board meeting materials, tax forms and statements of average cost, and $.03 per page for daily confirmations, periodic statements, new account letters and maintenance letters; fees for programming in connection with creating or changing the forms of statements, billed at a mutually agreed upon rate; and costs for postage, couriers, stock computer paper, computer disks, statements, labels, envelopes, checks, reports, letters, tax forms, proxies, notices or other forms of printed material (including the costs of preparing and printing all printed materials) which shall be required for the performance of the services to be provided hereunder; (iv) Fees and expenses associated with providing the "AML Services," as defined in Section 23 of this Agreement, and as set forth in further detail on Schedule E; (v) System development fees, billed at a mutually agreed upon rate as approved by the Company, and all systems-related expenses, as agreed upon in advance, associated with the provision of special reports and services; (vi) Fees for development of any custom interfaces, billed at a mutually agreed upon rate; (vii) Interactive Voice Response System fees, charged according to BISYS' standard rate schedule, and applicable to the level of service (e.g., basic, transaction, premium) selected; (viii) Blue sky check processing and payment fees; and (ix) In the event that BISYS is requested or authorized by the Company or is required by governmental regulation, summons, subpoena, investigation, examination or other legal or regulatory process to produce documents or personnel with respect to services provided by BISYS to the Company or any Fund, the Company will, so long as BISYS is not the subject of the investigation or proceeding in which the information is sought, pay BISYS for its professional time (at its standard billing rates) and reimburse BISYS for its out-of-pocket expenses (including 6 reasonable attorneys fees) incurred in responding to such requests or requirements. All rights of compensation under this Agreement for services performed and for expense reimbursement and for payment of miscellaneous fees and charges shall survive the termination of this Agreement. 5. Effective Date. This Agreement shall become effective as of the launch of the Fund, which is anticipated to be on or about May 1, 2007 (the "Effective Date"). 6. Term; Liquidated Damages. (a) This Agreement shall continue in effect for an initial term of three years from the Effective Date (the "Initial Term"). Thereafter, unless otherwise terminated pursuant to this Agreement, this Agreement shall be renewed automatically for successive one year periods ("Rollover Periods"). This Agreement may be terminated only (i) by provision of a written notice of non-renewal provided at least 90 days prior to the end of the Initial Term or any Rollover Period (which notice of non-renewal will cause this Agreement to terminate as of the end of the Initial Term or such Rollover Period, as applicable), (ii) by mutual agreement of the parties, or (iii) for "cause," as defined below, upon the provision of 60 days advance written notice by the party alleging cause. (b) For purposes of this Section 6, "cause" shall mean (a) a material breach of this Agreement that has not been remedied within 30 days following written notice of such breach from the non-breaching party; (b) a final, unappealable judicial, regulatory or administrative ruling or order in which the party to be terminated has been found guilty of criminal or unethical behavior in the conduct of its business; or (c) financial difficulties on the part of the party to be terminated which are evidenced by the authorization or commencement of, or involvement by way of pleading, answer, consent or acquiescence in, a voluntary or involuntary case under Title 11 of the United States Code, as from time to time is in effect, or any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors. (c) Notwithstanding the foregoing termination provisions, following any such termination, in the event that BISYS in fact continues to perform any one or more of the services contemplated by this Agreement (or any Schedule or exhibit to this Agreement) with the consent of the Company, the provisions of this Agreement, including without limitation the provisions dealing with compensation and indemnification, shall continue in full force and effect. Fees and out-of-pocket expenses incurred by BISYS but unpaid by the Company upon such termination shall be immediately due and payable upon and notwithstanding such termination. The Company shall pay to BISYS, in addition to the fees and expenses provided in Sections 3 and 4 of this Agreement, the amount of all of BISYS' reasonable cash disbursements in connection with BISYS' activities in effecting such termination, including without limitation, the delivery to the Company, its 7 investment adviser and/or other parties of the Company's property, records, instruments and documents, such amount to be paid on or before the date of such termination. (d) If, for any reason other than (i) non-renewal, (ii) mutual agreement of the parties or (iii) "cause", the Company terminates this Agreement, or the Company terminates BISYS' services, or BISYS is replaced as service provider to the Company or some or all of the Funds, then the Company shall make a one-time cash payment to BISYS, in consideration of the fee structure and services to be provided under this Agreement, equal to the balance that would be due BISYS for its services under this Agreement during the lesser of (x) the balance of the Initial Term or any applicable Rollover Period, as the case may be, or (y)12 months, assuming for purposes of the calculation of the one-time payment that the fees that would be earned by BISYS for each month would be based upon the average fees payable to BISYS monthly during the 12 months before the date of the event that triggers such payment. (e) In the event that the Company or any Fund is, in part or in whole, liquidated, dissolved, merged into a third party, acquired by a third party, or involved in any other transaction that materially reduces the assets and/or accounts serviced by BISYS pursuant to this Agreement, the liquidated damages provision set forth above shall be applicable. (f) If one of the events described above is partial (e.g., a termination of BISYS as provider of some but not all of the services set forth in this Agreement, or a liquidation of some but not all of the Funds), the liquidated damages amount payable by the Company shall be appropriately adjusted on a pro rata basis. (g) Any liquidated damages amount payable to BISYS shall be paid by the Company on or before the date of the event that triggers the payment obligation. (h) The parties further acknowledge and agree that, upon the occurrence of any of the events described above: (i) a determination of actual damages incurred by BISYS would be extremely difficult, and (ii) the liquidated damages payment described above is intended to adequately compensate BISYS for damages incurred and is not intended to constitute any form of penalty. 7. Standard of Care; Force Majeure; Limitation of Liability. (a) BISYS shall use reasonable professional diligence in the performance of services under this Agreement, but shall not be liable to the Company for any action taken or omitted by BISYS in the absence of bad faith, willful misfeasance, negligence or reckless disregard by it of its obligations and duties. The duties of BISYS shall be confined to those expressly set forth in this Agreement, and no implied duties are assumed by or may be asserted against BISYS under this Agreement. (b) Notwithstanding any other provision of this Agreement, BISYS assumes no responsibility hereunder, and shall not be liable for, any damage, loss of data, delay or any other loss whatsoever caused by events beyond BISYS' control. Events beyond BISYS' control include, without limitation, force majeure events, such as natural 8 disasters, actions or decrees of governmental bodies, and communication lines failures that are not the fault of either party. In the event of force majeure, computer or other equipment failures or other events beyond its control, BISYS shall follow applicable procedures in its disaster recovery and business continuity plan and use all commercially reasonable efforts to minimize any service interruption. (c) BISYS shall provide the Company, at such times as the Company may reasonably request, copies of reports rendered by independent auditors on the internal controls and procedures of BISYS relating to the services provided by BISYS under this Agreement. (d) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL BISYS, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING LOST REVENUE, LOST PROFITS, AND LOST OR DAMAGED DATA, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES, REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 8. Legal Advice. BISYS may notify the Company if BISYS reasonably determines that it is in need of the advice of counsel to the Company with regard to BISYS' responsibilities and duties pursuant to this Agreement. BISYS may rely upon the advice of counsel to the Company; however, this Agreement shall not obligate counsel to the Company to render such advice. After so notifying the Company, if BISYS does not obtain the advice of counsel to the Company within a reasonable period of time, BISYS shall be entitled to seek, receive and act upon advice of legal counsel of its reasonable choosing at the reasonable expense of the Company unless relating to a matter involving BISYS' willful misfeasance, bad faith, negligence or reckless disregard of BISYS' responsibilities and duties hereunder. BISYS shall in no event be liable to the Company or any Fund or any shareholder or beneficial owner of the Company for any action reasonably taken pursuant to legal advice rendered in accordance with this paragraph. 9. Instructions / Certain Procedures, etc. (a) BISYS shall be protected in acting upon any document that it reasonably believes to be genuine and to have been signed or presented by the proper person or persons. BISYS will not be held to have notice of any change of authority of any officers, employees or agents of the Company until receipt of actual notice thereof from the Company. (b) Subject to Section 23(b) of this Agreement, whenever BISYS is requested or authorized to take action hereunder pursuant to instructions from a shareholder, or a properly authorized agent of a shareholder ("shareholder's agent"), concerning an 9 account in a Fund, BISYS shall be entitled to rely upon any certificate, letter or other instrument or communication (including electronic mail), reasonably believed by BISYS to be genuine and to have been properly made, signed or authorized by an officer or other authorized agent of the Company or by the shareholder or shareholder's agent, as the case may be, and shall be entitled to receive as conclusive proof of any fact or matter required to be ascertained by it hereunder a certificate signed by an officer of the Company or any other person authorized by the Board or by the shareholder or shareholder's agent, as the case may be. (c) As to the services to be provided hereunder, BISYS may rely conclusively upon the terms of the relevant then-current Prospectus and Statement of Additional Information of the Company, to the extent that such services are described therein unless BISYS receives written instructions to the contrary in a timely manner from the Company. (d) The parties may amend any procedures adopted, approved or set forth herein by written agreement as may be appropriate or practical under the circumstances, and BISYS may reasonably assume that any special procedure which has been approved by an executive officer of the Company (other than an officer or employee of BISYS or its affiliates) does not conflict with or violate any requirements of the Company's Charter, By-Laws or then-current Prospectus. (e) The Company acknowledges receipt of a copy of BISYS' policy related to the acceptance of trades for prior day processing (the "BISYS As-of Trading Policy"). BISYS may amend the BISYS As-of Trading Policy from time to time in its sole discretion, but will provide prompt notice to the Company of such amendment. BISYS may apply the BISYS As-of Trading Policy whenever applicable, unless BISYS agrees in writing to process trades according to such other as-of trading policy as may be adopted by the Company and furnished to BISYS by the Company. (f) The Company acknowledges and agrees that deviations from BISYS' written transfer agent compliance procedures may involve a substantial risk of loss. In the event an authorized representative of the Company (other than an officer or employee of BISYS or its affiliates) requests that an exception be made from any written compliance or transfer agency procedures adopted by BISYS, or any requirements of the AML Program (as defined in Section 16 of this Agreement), BISYS may in its sole discretion determine whether to permit such exception. In the event BISYS determines to permit such exception, the same shall become effective when set forth in a written instrument executed by an authorized representative of the Company (other than an officer or employee of BISYS or its affiliates) and delivered to BISYS (an "Exception"); provided that an Exception concerning the requirements of the Company's AML Program shall also be authorized by the Company's AML Compliance Officer (as defined in Section 16 of this Agreement). An Exception shall be deemed to remain effective until the relevant instrument expires according to its terms (or if no expiration date is stated, until BISYS receives written notice from the Company that such instrument has been terminated and the Exception is no longer in effect). Notwithstanding any provision in this Agreement that expressly or by implication 10 provides to the contrary, as long as BISYS acts in good faith, BISYS shall have no liability for any loss, liability, expenses or damages to the Company resulting from the Exception, and the Company shall indemnify BISYS and hold BISYS harmless from any loss, liability, expenses (including reasonable attorneys fees) and damages resulting to BISYS therefrom. (g) The Company instructs and authorizes BISYS to provide information pertaining to the Funds' investments to Fair Value Information Vendors (as defined in Schedule C) in connection with the fair value determinations made under the Company's Valuation Procedures (as defined in Schedule C) and other legitimate purposes related to the services to be provided hereunder. The Company acknowledges that while BISYS' services related to fair value pricing are intended to assist the Company and its Board in its obligations to price and monitor pricing of Fund investments, BISYS does not assume responsibility for the accuracy or appropriateness of pricing information or methodologies, including any fair value pricing information or adjustment factors. 10. Indemnification. (a) The Company shall indemnify and hold harmless BISYS, BFI, and their affiliates, subsidiaries and parents, and their employees, agents, directors, officers and nominees from and against any claims, demands, actions, suits, judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses including reasonable investigation expenses (collectively, "Losses") resulting directly and proximately from BFI's appointment as non-bank trustee/custodian, BISYS' performance of services under this Agreement or based, if applicable, upon BISYS' or BFI's reasonable reliance on information, records, instructions or requests pertaining to services hereunder, that are given or made to BISYS or BFI by the Company, the investment adviser, or other authorized agents of the Company with which BISYS must interface in providing services; provided that this indemnification shall not apply to actions or omissions of BISYS or BFI involving bad faith, willful misfeasance, negligence or reckless disregard by BISYS or BFI of its obligations and duties under this Agreement. (b) BISYS shall indemnify, defend, and hold the Company and its affiliates, subsidiaries and parents, and its trustees, officers, agents and nominees harmless from and against Losses resulting directly and proximately from BISYS' willful misfeasance, bad faith or negligence in the performance of, or the reckless disregard of, its duties or obligations hereunder; provided that this indemnification shall not apply to actions or omissions of the Company involving bad faith, willful misfeasance, negligence or reckless disregard by the Company of its obligations and duties. (c) In order that the indemnification provisions contained herein shall apply, if in any case a party may be asked to indemnify or hold the other party harmless, the other party shall fully and promptly advise the indemnifying party in writing of all pertinent facts concerning the situation in question. The party seeking indemnification will use all reasonable care to identify and notify the indemnifying party in writing promptly concerning any situation which presents or appears likely to present the probability of such a claim for indemnification against the indemnifying party, but failure 11 to do so in good faith shall not affect the rights hereunder except to the extent the indemnifying party is materially prejudiced thereby. As to any matter eligible for indemnification, an indemnified party shall act reasonably and in accordance with good faith business judgment and shall not effect any settlement or confess judgment without the consent of the indemnifying party, which consent shall not be withheld or delayed unreasonably. (d) The indemnifying party shall be entitled to participate in at its own expense or, if it so elects, to assume the defense of any claim or suit subject to this indemnity provision. If the indemnifying party elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by it and reasonably satisfactory to the indemnified party. In the event that the indemnifying party elects to assume the defense of any suit and retain counsel, the indemnified party shall bear the fees and expenses of any additional counsel retained by it. An indemnifying party shall not effect any settlement without the consent of the indemnified party (which shall not be withheld or delayed unreasonably by the indemnified party) unless such settlement imposes no liability, responsibility or other obligation upon the indemnified party and relieves it of all fault. If the indemnifying party does not elect to assume the defense of suit, it will reimburse the indemnified party for the reasonable fees and expenses of counsel retained by the indemnified party and reasonably satisfactory to the indemnifying party. The indemnity and defense provisions set forth herein shall survive the termination of this Agreement. (e) The provisions of this Section 10 are subject to the provisions of Section 9 and Section 23(c) of this Agreement. 11. Record Retention and Confidentiality. BISYS shall keep and maintain on behalf of the Company all books and records which are customary or which are required to be kept in connection with BISYS' services pursuant to applicable statutes, rules and regulations, including without limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as amended (the "1940 Act"). BISYS further agrees that all such books and records shall be the property of the Company and to make such books and records available for inspection by the Company at reasonable times or by the Securities and Exchange Commission (the "Commission") promptly. BISYS shall otherwise keep confidential all books and records relating to the Fund and its shareholders, except when (i) disclosure is required by law, (ii) BISYS is advised by counsel that it may incur liability for failure to make a disclosure, (iii) BISYS is requested to divulge such information by duly-constituted authorities or court process, (iv) BISYS is requested to make a disclosure by a shareholder or shareholder's agent with respect to information concerning an account as to which such shareholder has either a legal or beneficial interest and a legal right to such information at such time consistent with the Company's Charter, Prospectus and applicable law, or (v) as requested or authorized by the Company (including pursuant to its policies and procedures). BISYS shall provide the Company with reasonable advance notice of disclosure pursuant to 12 items (i) - (iii) of the previous sentence, to the extent reasonably practicable. The provisions of this Section 11 are subject to the provisions of Section 23(b) of this Agreement (Anti-Money Laundering Provisions). 12. Reports. BISYS shall furnish to the Company and to its properly-authorized auditors, investment advisers, examiners, distributors, broker-dealers, underwriters, salesmen, insurance companies and others designated by the Company in writing, such reports at such times as are prescribed pursuant to this Agreement (or schedules to this Agreement), or as subsequently agreed upon by the parties pursuant to an amendment to this Agreement (or schedules to this Agreement). The Company agrees to examine each such report or copy provided to it promptly and will report or cause to be reported to BISYS any errors or discrepancies therein. 13. Rights of Ownership. All computer programs, systems and procedures employed or developed by BISYS, or on behalf of BISYS by system providers or vendors used by BISYS, to perform services required to be provided by BISYS under this Agreement are the property of BISYS. All records and other data maintained hereunder, excepting such computer programs, systems and procedures, are the exclusive property of the Company. All such records and other data which is the property of the Company shall be furnished to the Company in appropriate form as soon as practicable after termination of this Agreement for any reason. 14. Return of Records. BISYS shall promptly upon the Company's demand, turn over to the Company and cease to retain BISYS' files, records and documents created and maintained by BISYS pursuant to this Agreement which are no longer needed by BISYS in the performance of its services or for its legal protection. If not so turned over to the Company, such documents and records shall be retained by BISYS, at the expense of the Company, for six (6) years from the date of creation. At the end of such six-year period, such records and documents shall be turned over to the Company unless the Company authorizes in writing the destruction of such records and documents. 15. Bank Accounts. BISYS is hereby granted such power and authority as may be necessary to establish one or more bank accounts for the Company with such bank or banks as are acceptable to the Company, as may be necessary or appropriate from time to time in connection with the transfer agency services to be performed hereunder. The Company shall be deemed to be the customer of such bank or banks for purposes of such accounts. To the extent that the performance of such services hereunder shall require BISYS to disburse amounts from such accounts in payment of dividends, redemption proceeds or for other purposes hereunder, the Company shall provide such bank or banks with all instructions and authorizations necessary for BISYS to effect such disbursements. 13 16. Representations and Warranties of the Company. The Company represents and warrants to BISYS that: (a) It is a corporation duly incorporated and validly existing under the laws of the jurisdiction of its formation, and has full capacity and authority to enter into this Agreement and to carry out its obligations hereunder; (b) It has all necessary authorizations, licenses and permits to carry out its business as currently conducted; (c) It is in compliance in all material respects with all laws and regulations applicable to its business and operations; (d) This Agreement has been duly authorized by the Company and, when executed and delivered by the Company, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the right and remedies of creditors and secured parties; (e) By virtue of the Charter, shares of each Fund which are redeemed by the Company may be resold by the Company; (f) (i) The Company has adopted a written anti-money laundering program, which has been provided to BISYS pursuant to Section 19 of this Agreement (the "AML Program"), and has appointed an officer of the Company as the Company's anti-money laundering compliance officer ("AML Compliance Officer"), (ii) the AML Program and the designation of the AML Officer have been approved by the Board, (iii) the delegation of certain services thereunder to BISYS, as provided in Section 23 of this Agreement, has been approved by the Board, and (iv) the Company will submit any material amendments to the AML Program to BISYS for BISYS' review and consent prior to adoption, in accordance with Section 21 of this Agreement; and (g) The Company has entered into a confidentiality agreement, in accordance with U.S. Department of the Treasury, Financial Crimes Enforcement Network ("FinCEN") release FIN-2006-G013, dated October 4, 2006, with Funds' investment adviser, and the Company hereby authorizes BISYS, acting in its capacity as transfer agent, to provide the investment adviser with information related to shareholder Suspicious Activity Reports, upon request. 17. Representations and Warranties of BISYS. 14 BISYS represents and warrants to the Company that: (a) It is a corporation duly incorporated and validly existing under the laws of the state of Ohio, and has full capacity and authority to enter into this Agreement and to carry out its obligations hereunder; (b) It has all necessary authorizations, licenses and permits to carry out its business as currently conducted; (c) It is, and shall continue to be, in compliance in all material respects with all provisions of law applicable to it in connection with its services hereunder, including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (d) The various procedures and systems which it has implemented with regard to safekeeping from loss or damage attributable to fire, theft or any other cause of the blank checks, records, and other data of the Company and BISYS' equipment, facilities, and other property used in the performance of its obligations hereunder are reasonable and adequate and that it will make such changes therein from time to time as are reasonably required for the secure performance of its obligations hereunder; and (e) This Agreement has been duly authorized by BISYS and, when executed and delivered by BISYS, will constitute a legal, valid and binding obligation of BISYS, enforceable against BISYS in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the right and remedies of creditors and secured parties. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) CONCERNING THE SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO THE SERVICES PROVIDED UNDER THIS AGREEMENT BY BISYS ARE COMPLETELY DISCLAIMED. 18. Insurance. BISYS shall maintain a fidelity bond covering larceny and embezzlement and an insurance policy with respect to directors and officers errors and omissions coverage, in amounts that are appropriate in light of its duties and responsibilities hereunder. Upon the request of the Company, BISYS shall provide evidence that coverage is in place. BISYS shall notify the Company should its insurance coverage with respect to professional liability or errors and omissions coverage be reduced or canceled. Such 15 notification shall include the date of cancellation or reduction and the reasons therefore. BISYS shall notify the Company promptly of any material claims against it with respect to services performed under this Agreement, whether or not they may be covered by insurance, and shall notify the Company promptly should the total outstanding claims made by BISYS under its insurance coverage materially impair, or threaten to materially impair, the adequacy of its coverage. 19. Information to be Furnished by the Company and Funds. The Company agrees to furnish to BISYS the following, upon BISYS' request, each as amended and current as of the Effective Date: (a) A copy of the Charter and any amendments thereto; (b) A copy of the Company's By-laws and any amendments thereto; (c) A copy of the resolutions of the Board regarding (i) approval of this Agreement and authorization of a specified officer of the Company to execute and deliver this Agreement and authorization for specified officers of the Company to instruct BISYS hereunder; and (ii) authorization of BISYS to act as administrator, fund accountant and transfer agent for the Company; (d) A certified list of all officers of the Company, with the Company's AML Compliance Officer included among the officers therein, and any other persons (who may be associated with the Company or the Funds' investment advisor), together with specimen signatures of those officers and other persons who (except as otherwise provided herein to the contrary) shall be authorized to instruct BISYS in all matters; (e) Copies of each of the following documents employed by the Company: (i) Prospectuses and Statement of Additional Information; (ii) Distribution Agreement; and (iii) All other forms commonly used by the Company or its distributor with regard to their relationships and transactions with shareholders of the Funds. (f) A certificate as to shares of the Company authorized, issued, and outstanding as of the Effective Date and as to receipt of full consideration by the Company for all shares outstanding; (g) A copy of the Company's written AML Program, including any related policies and procedures; 16 (h) A copy of the disclosure controls and procedures of the Funds ("Fund DCPs") as contemplated in Item 22 of Schedule B; and (i) The Company's Valuation Procedures as defined in Schedule C. 20. Information Furnished by BISYS. BISYS agrees to furnish to the Company, upon its request, evidence of the following: (a) Approval of this Agreement by BISYS, and authorization of a specified officer of BISYS to execute and deliver this Agreement; (b) Authorization of BISYS to act as Transfer Agent, Fund Accountant and Administrator for the Company; (c) The current BISYS As-of Trading Policy; and (d) The current version of BISYS written polices and procedures with respect to its provision on AML Services (as defined in Section 23 below). Upon request, BISYS shall furnish a copy of the relevant provisions of its internal policies on service of employees as executive officers of funds ("BISYS Policies"), and any material amendments thereto, to the Company. 21. Amendments to Documents. The Company will provide BISYS with advance notice of any material amendments to the items set forth in Section 19 of this Agreement. BISYS will not be responsible for changing or conforming its services to any such amendments until BISYS has reviewed and accepted responsibility for the relevant changes in services. BISYS will consider such changes in good faith. In the event that any such amendment, or change in laws applicable to the Company would require BISYS to make specific changes to its service model, BISYS will use reasonable good faith efforts to inform the Company of the changes that would be necessary, and set out the estimated costs and estimated implementation timetable for any additional services. The parties shall then in good faith agree to mutually agreeable terms applicable to such additional service. BISYS shall furnish the Company with written copies of any amendments to, or changes in, any of the items referred to in this Section 21. 22. Reliance on Amendments. BISYS may rely on any amendments to or changes in any of the documents and other items to be provided by the Company pursuant to Sections 19 and 21 of this Agreement and the indemnification provisions of Section 10 hereof are applicable to BISYS' reasonable reliance upon such amendments and/or changes. Although BISYS is 17 authorized to rely on the above-mentioned amendments to and changes in the documents and other items to be provided pursuant to Sections 19 and 21 of this Agreement, in the event the same relate to services provided by BISYS hereunder, BISYS shall have no liability for failure to comply with or take any action in conformity with such amendments or changes except as provided in Section 21 of this Agreement or as otherwise agreed upon in writing. 23. Compliance with Laws. (a) Prospectus and Public Offering. Except for information which is the obligation of BISYS as set forth in Section 11 of this Agreement, and except as provided in the services listed in the schedules to this Agreement which call for information to be provided by BISYS for inclusion in the Prospectus, the Company assumes full responsibility for the preparation, contents, and distribution of each Prospectus of the Company in compliance with all applicable requirements of the Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act, and any other laws, rules and regulations of governmental authorities having jurisdiction. Subject to its obligations herein with respect to "blue sky" filings, BISYS shall have no obligation to take cognizance hereunder of laws relating to the sale of the Funds' shares. The Company represents and warrants that all shares of the Funds that are offered to the public are covered by an effective registration statement under the 1933 Act and the 1940 Act. (b) Anti-Money Laundering Provisions. The Company acknowledges that it is a financial institution subject to the law entitled Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism ("USA PATRIOT") Act of 2001 and the Bank Secrecy Act (collectively, the "AML Acts") and shall comply with the AML Acts and applicable regulations adopted thereunder (collectively, the "Applicable AML Laws") in all relevant respects, subject to the delegation of certain responsibilities to BISYS, as provided in the next paragraph below. The Company hereby delegates to BISYS the performance, on behalf of the Company, of the anti-money laundering services set forth under Item 6 of Schedule D (the "AML Services") with respect to the shareholder accounts maintained by BISYS pursuant to this Agreement, and BISYS agrees to the foregoing delegation and agrees to perform such services in accordance with the Company's AML Program for the fee set forth on Schedule E to this Agreement. In connection therewith, BISYS agrees to maintain policies and procedures, and related internal controls, that are consistent with the Company's AML Program and the requirement that the Company employ procedures reasonably designed to achieve compliance with the Applicable AML Laws. BISYS' obligations under this delegation shall be subject to Sections 19 and 21 of this Agreement, which require that the AML Program and any material amendments thereto be submitted to BISYS for its review and consent prior to adoption. The Company agrees and acknowledges that, notwithstanding the delegation provided for in the foregoing paragraph, the Company maintains full responsibility for ensuring that its AML Program is, and shall continue to be, reasonably designed to ensure compliance with the Applicable AML Laws, in light of the particular business of the 18 Company, taking into account factors such as its size, location, activities and risks or vulnerabilities to money laundering. In connection with the foregoing delegation, the Company also acknowledges that the performance of the AML Services involves the exercise of discretion which in certain circumstances may result in consequences to the Company and its shareholders (such as in the case of the reporting of suspicious activities and the freezing of shareholder accounts). In this regard, (i) under circumstances in which the AML Program authorizes the taking of certain actions, BISYS is granted the discretion to take any such action as may be authorized under the AML Program, and consultation with Company shall not be required in connection therewith unless specifically required under the AML Program, and (ii) the Company instructs BISYS that it may avail the Company of any safe harbor from civil liability that may be available under Applicable AML Laws for making a disclosure or filing a report thereunder. As concerns Networked Level III accounts and omnibus accounts, the AML Services performed by BISYS are subject to a more limited scope, as discussed in the Release concerning the final rule of the Department of the Treasury, 31 CFR 103 and of the Commission, 17 CFR 270, entitled Customer Identification Programs for Mutual Funds issued on May 9, 2003 and subsequent guidance issued jointly by such agencies entitled Question and Answer Regarding the Mutual Fund Customer Identification Program Rule (31 CFR 103.131) issued on August 11, 2003. (c) Provision of Certifying Officers. Subject to the provisions of this Section 23(c) and Section 23(d) of this Agreement, BISYS shall make BISYS employees available to the Company to serve, upon designation as such by the Board, as the Chief Financial Officer of the Company or under such other title to perform similar functions (each, a "Certifying Officer"). BISYS' obligation in this regard shall be met by providing an appropriately qualified employee of BISYS (or its affiliates) who, in the exercise of his or her duties to the Company, shall act in good faith and in a manner reasonably believed to be in the best interests of the Company. BISYS shall select, and may replace, the specific employee that it makes available to serve in the designated capacities as a Certifying Officer, in BISYS' reasonable discretion, taking into account each such person's responsibilities concerning, and familiarity with, the Company's operations (but the designation of any such person as a Certifying Officer shall be subject to the approval of the Company). The obligation of BISYS to provide an employee to serve in such capacity is also subject to, and conditioned upon, the provisions of Item 15 of Schedule B to this Agreement. Capitalized terms used but not defined in this Section 23(c) have the respective meanings ascribed to them in Item 15 of Schedule B. The Fund DCPs shall contain (or the Company and BISYS shall otherwise establish) mutually agreeable procedures governing the certification process, and the parties shall comply with such procedures in all material respects. Among other things, the procedures shall provide as follows: 19 The Company shall establish and maintain a Fund DCP Committee comprised of persons including (at a minimum) the Company's Principal Executive Officer, Chief Financial Officer ("CFO") and Chief Legal Officer (if any), at least one BISYS representative other than the CFO or Chief Compliance Officer, (if such officers are provided by BISYS), at least one representative of the investment adviser, and such other individuals as may be necessary or appropriate for the Fund DCP Committee to ensure the cooperation of, and to oversee, each of the Company's agents that records, processes, summarizes, or reports information contained in Company Reports (or other information from which such information is derived), including BISYS and the Other Service Providers to the Company, such as the investment adviser and custodian. In connection therewith, the Fund DCP Committee shall assist the Certifying Officers by requiring that sub-certifications acceptable to the Certifying Officers be provided by the Other Service Providers. The Fund DCP Committee shall meet prior to the filing date of each Report to review the accuracy and completeness of the relevant Report and record its considerations and conclusions in a written memorandum sufficient to support conclusions pertaining to Fund DCPs as required by the instructions to Form N-CSR and Form N-Q. In conducting its review and evaluations, the Fund DCP Committee shall: (i) establish a schedule to ensure that all required disclosures in Form N-CSR and Form N-Q, including the financial statements, for the Company are identified and prepared in a timeframe sufficient to allow review; (ii) review SAS 70 Reports pertaining to BISYS and Other Service Providers, if applicable, or in the absence of any such reports, consider the adequacy of the sub-certifications supplied by the service provider. In cases where the SAS 70 Report is dated more than 90 days prior to the issuance of a Report, the DCP Committee shall request a written representation from the service provider regarding the continued application and effectiveness of internal controls described in the report, or descriptions of any changes in internal control structure, as of the date of the representation; (iii) consider whether there are any significant deficiencies or material weaknesses in the design or operation of the Fund DCPs and internal control over financial reporting that could adversely affect the Company's ability to record, process, summarize, and report financial information, and in the event that any such weaknesses or deficiencies are identified, disclose them to the Company's Certifying Officers, the Company's audit committee and its auditors; (iv) consider whether, to the knowledge of each member of the Fund DCP Committee, there has been or may have been any fraud, whether or not material, and in the event that any such occurrence is identified, ensure that this has been disclosed to the Certifying Officers, so that Certifying Officers may inform the Company's audit committee and its auditors; and 20 (v) determine whether there was any change in internal control over financial reporting that occurred during the Company's second fiscal quarter of the period covered by the Report (for Reports on Form N-CSR) or during the most recent fiscal quarter (for Reports on Form N-Q) that has materially affected or is reasonably likely to materially affect, the Company's internal control over financial reporting. A Certifying Officer shall have the full discretion to decline to certify a particular Report that fails to meet the standards set forth in the Certification, and to report matters involving fraud or other failures to meet the standards of applicable law to the audit committee of the Board. (d) Additional Provisions Concerning Executive Officers. It is mutually agreed and acknowledged by the parties that Certifying Officers provided by BISYS under the provisions of this Section 23 will constitute executive officers of the Company ("Executive Officers"). The provisions of Section 23(c) of this Agreement are subject to the internal policies of BISYS concerning the activities of its employees and their service as officers of funds (the "BISYS Policies"), a copy of which shall be provided to the Company upon request. The Company's governing documents (including its Agreement and Charter and By-Laws) and/or resolutions of the Board shall contain mandatory indemnification provisions that are applicable to each Executive Officer, that are designed and intended to have the effect of fully indemnifying him or her and holding him or her harmless with respect to any claims, liabilities and costs arising out of or relating to his or her service in good faith in a manner reasonably believed to be in the best interests of the Company, except to the extent he or she would otherwise be liable to the Company by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The Company shall provide coverage to each Executive Officer under its directors and officers liability policy that is appropriate to the Executive Officer's role and title, and consistent with coverage applicable to other officers holding positions of executive management. In appropriate circumstances, each Executive Officer shall have the discretion to resign from his or her position, in the event that he or she reasonably determines that there has been or is likely to be (a) a violation of Sarbanes-Oxley, Applicable AML Laws or other Federal securities laws applicable to the Company (the "Applicable Securities Laws") by the Company, or (b) a material deviation by the Company from the terms of this Agreement governing the services of such Executive Officer, which (in either case) is not primarily caused by the failure of such Executive Officer or BISYS to meet obligations under applicable laws and this Agreement. In addition, each Executive Officer shall have reasonable discretion to resign from his or her position in the event that he or she determines that he or she has not received sufficient information or cooperation 21 from the Company or to make an informed determination regarding any of the matters listed above. Each Executive Officer may, and the Company shall, promptly notify BISYS of any issue, matter or event that would be reasonably likely to result in any claim by the Company, the Company's shareholders or any third party which involves an allegation that any Executive Officer failed to exercise his or her obligations to the Company in a manner consistent with applicable laws (including but not limited to any claim that a Report failed to meet the standards of Sarbanes-Oxley and other applicable laws). Notwithstanding any provision of this Agreement that expressly or by implication provides to the contrary, (a) it is expressly agreed and acknowledged that BISYS cannot ensure that the Company complies with Applicable AML Laws, the Applicable Securities Laws or Sarbanes-Oxley, and (b) whenever an employee or agent of BISYS serves as an Executive Officer of the Company, as long as such Executive Officer acts in good faith and in a manner reasonably believed to be in the best interests of the Company (and would not otherwise be liable to the Company by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office), the Company shall indemnify the Executive Officer and BISYS and hold the Executive Officer and BISYS harmless from any loss, liability, expenses (including reasonable attorneys fees) and damages incurred by them arising out of or resulting to the service of such Employee/Executive Officer as an Executive Officer of the Company. 24. Notices. Any notice provided hereunder shall be sufficiently given when sent by registered or certified mail to the party required to be served with such notice at the following address, or at such other address as such party may from time to time specify in writing to the other party pursuant to this Section 24: If to the Company: Coventry Funds Trust 3435 Stelzer Road Columbus, OH 43219 Attn: President with a copy to: EM Management, LLC 61 Moraga Way Suite 207 Orinda, CA 94653 22 If to BISYS: BISYS Fund Services Ohio, Inc. 3435 Stelzer Road Columbus, OH 43219 Attn: President with a copy to: The BISYS Group, Inc. 105 Eisenhower Parkway Roseland, NJ 07068 Attn: General Counsel 25. Assignment. This Agreement and the rights and duties hereunder shall not be assignable by either of the parties without the prior written consent of the other party; provided, however, that either party may assign this Agreement to an affiliate of such party without the need for such consent. This Section 25 shall not limit or in any way affect BISYS' right to use a third party to perform obligations pursuant to Section 2 of this Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the parties and their respective successors and permitted assigns. 26. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to New York's conflicts of laws principles, and the applicable provisions of the 1940 Act. To the extent that the laws of the State of New York conflict with the applicable provisions of the 1940 Act, the applicable provisions of 1940 Act shall control. 27. Activities of BISYS. The services of BISYS rendered to the Company hereunder are not to be deemed to be exclusive. BISYS is free to render such services to others and to have other businesses and interests. It is understood that trustees, officers, employees and Shareholders of the Company and/or Fund are or may be or become interested in BISYS, as officers, employees or otherwise and that partners, officers and employees of BISYS and its counsel are or may be or become similarly interested in the Company and/or Fund, and that BISYS may be or become interested in the Company and/or Fund as a shareholder or otherwise. 28. Privacy. Nonpublic personal financial information relating to consumers or customers of the Company provided by, or at the direction of the Company to BISYS, or collected or 23 retained by BISYS in the course of performing its duties as transfer agent, shall be considered confidential information. BISYS shall not give, sell or in any way transfer such confidential information to any person or entity, other than affiliates of BISYS involved in servicing the Company except at the direction of the Company or as required or permitted by law (including Applicable AML Laws). BISYS represents, warrants and agrees that it has in place and will maintain physical, electronic and procedural safeguards reasonably designed to protect the security, confidentiality and integrity of, and to prevent unauthorized access to or use of records and information relating to consumers or customers of the Company. The Company represents to BISYS that it has adopted a Statement of its privacy policies and practices as required by the Commission's Regulation S-P and agrees to provide BISYS with a copy of that statement annually. 29. Miscellaneous. (a) Paragraph headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement. (b) This Agreement constitutes the complete agreement of the parties as to the subject matter covered by this Agreement, and supersedes all prior negotiations, understandings and agreements bearing upon the subject matter covered herein. (c) This Agreement may be executed in counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same agreement. (d) No amendment to this Agreement shall be valid unless made in writing and executed by both parties. (e) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain such part, term or provision. 24 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed all as of the date first above written. COVENTRY FUNDS TRUST By: /s/ R. Jeffrey Young ------------------------------------ Name: R. Jeffrey Young ---------------------------------- Title: President --------------------------------- BISYS FUND SERVICES OHIO, INC. By: /s/ Fred Naddaff ------------------------------------ Name: Fred Naddaff ---------------------------------- Title: President --------------------------------- 25 SCHEDULE A TO THE MASTER SERVICES AGREEMENT BETWEEN BISYS FUND SERVICES OHIO, INC. AND COVENTRY FUNDS TRUST FUNDS EM Capital India Gateway Fund 26 SCHEDULE B TO THE MASTER SERVICES AGREEMENT BETWEEN BISYS FUND SERVICES OHIO, INC. AND COVENTRY FUNDS TRUST ADMINISTRATION SERVICES 1. Calculate contractual Fund expenses and make and control all disbursements for the Funds, subject to review and approval of an officer of the Company or other authorized person (designated on the list of authorized persons approved by the Board), including administration of trustee and vendor fees and compensation on behalf of the Company, and as appropriate; 2. Coordinate and prepare, with the assistance and approval of the Funds' investment adviser, counsel and officers, drafts of communications to shareholders of record of the Funds ("Shareholders"), including the annual report to Shareholders; prepare drafts of the certified semi-annual report for each Fund; prepare and file the final certified versions thereof on Form N-CSR; prepare and file the Fund's Form N-SAR; and file all required notices pursuant to Rule 24f-2; 3. Manage the process of printing and initial delivery of prospectuses and prospectus supplements, including reviewing printer's proof of prospectus before print, and manage the prospectus mailing process; 4. Coordinate with the Company's transfer agent with respect to the payment of dividends and other distributions to Shareholders; 5. Calculate performance data of the Funds for dissemination to up to fifteen (15) information services covering the investment company industry; 6. Assist with the layout and printing of prospectuses and assist with and coordinate layout and printing of the Funds' semi-annual and annual reports to Shareholders; 7. Assist with the design, development, and operation of the Funds, including new portfolios or classes, investment objectives, policies and structure, and provide regulatory consultation related to agreed upon aspects of the establishment, maintenance, and liquidation or dissolution of Funds; 8. Make available appropriate individuals to serve as officers of the Company (to serve only in ministerial or administrative capacities relevant to BISYS' services hereunder, except as otherwise provided in this Agreement), upon designation as such by the Board; 27 9. Obtain and maintain fidelity bonds and directors and officers/errors and omissions insurance policies for the Company in accordance with Rules 17g-1 and 17d-1 under this 1940 Act at the expense (except as otherwise provided in this Agreement) of the Company and Funds and file the fidelity bonds and any notices with the SEC as required under the 1940 Act, to the extent such bonds and policies are approved by the Board; 10. Monitor and advise the Company and its Funds on their regulated investment company status under the Internal Revenue Code of 1986, as amended. In connection with the foregoing, prepare and send quarterly reminder letters related to such status, and prepare quarterly compliance checklist for use by investment adviser(s) if requested; 11. Assist the Company in developing portfolio compliance procedures for each Fund, and provide daily and periodic compliance monitoring services incorporating certain of those procedures, which will include, among other matters, compliance with investment restrictions imposed by the 1940 Act, each Fund's investment objective, defined investment policies, and restrictions, tax diversification, and distribution and income requirements, provided such are determinable based upon the Fund's accounting records. In connection with the foregoing, review quarterly compliance reports that are prepared by the investment adviser(s), if any, and notify appropriate Fund officers and advisor of mark-to-market issues pursuant to Board-approved procedures. BISYS will also provide the Board with quarterly results of compliance reviews; 12. Provide assistance and guidance to the Company with respect to matters governed by or related to regulatory requirements and developments including: monitoring regulatory and legislative developments which may affect the Company, and assisting in strategic planning in response thereto; assisting the Company and providing on-site personnel in responding to and providing documents for routine regulatory examinations or investigations; and coordinating with and taking instructions from counsel to the Company in response to such routine or non-routine regulatory matters. The assistance to be provided with respect to SEC inspections includes (i) rendering advice regarding proposed responses (ii) compiling data and other information in response to SEC requests for information and (iii) communicating with Fund management and portfolio managers to provide status updates. In addition, BISYS will provide appropriate assistance with respect to audits conducted by the Funds' independent auditors including compiling data and other information as necessary; 13. Manage the preparation for Board meetings by (i) coordinating Board book preparation, production and distribution, (ii) preparing the relevant sections of the Board materials required to be prepared by BISYS as transfer agent, fund accountant and distributor so long as BISYS serves in 28 such capacities, and (iii) performing such other Board meeting functions as shall be agreed by the parties in writing; 14. Furnish advice and recommendations with respect to other aspects of the business and affairs of the Funds as the Company shall request and the parties shall agree in writing; and 15. Assist the Company in connection with its obligations under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and Rules 30a-2 and Rule 30a-3 under the 1940 Act (collectively, with such other related regulatory provisions applicable to the Company, "Sarbanes-Oxley"), BISYS will internally establish and maintain controls and procedures ("BISYS internal controls") designed to ensure that information recorded, processed, summarized, or reported by BISYS and its affiliates on behalf of the Company and included in financial information certified by Company officers ("Certifying Officers") on Form N-CSR and Form N-Q ("Reports") is (a) recorded, processed, summarized, and reported by BISYS within the time periods specified in the SEC's rules and forms and corresponding disclosure controls and procedures of the Funds ("Fund DCPs"), and (b) accumulated and communicated to the relevant Certifying Officers consistent with the Fund DCPs. 16. If requested by Certifying Officers with respect to a fiscal period during which BISYS serves or served as financial administrator, BISYS will provide a sub-certification consistent with the requirements of Sarbanes-Oxley pertaining to BISYS' services, solely for the purpose of providing a basis of support (as to information which has been prepared, processed and reported by BISYS, and as to BISYS internal controls) for the Certifying Officers to render the certifications required by Sarbanes-Oxley (or, if applicable with respect to a Report, inform the Certifying Officers of the reasons why the statements in such a certification would not be accurate). In rendering such sub-certifications concerning Company Reports, BISYS may (a) limit its representations to information prepared, processed and reported by BISYS; (b) rely upon and assume the accuracy of the information provided by officers and other authorized agents of the Company, including all Other Service Providers to the Company, and compliance by such officers and agents with the Fund DCPs, including but not limited to, the Company's investment adviser(s) and custodian to the Funds; and (c) assume that the Company has selected the appropriate accounting policies for the Fund(s). 17. The Company shall assist and cooperate with BISYS (and shall use its best efforts to cause its officers, investment advisers and other service providers to assist and cooperate with BISYS) to facilitate the delivery of information requested by BISYS in connection with the preparation of the Company's Form N-CSR and Form N-Q, including Company financial statements, so that BISYS may submit a draft Report to the Company's 29 Disclosure Controls and Procedures Committee ("Fund DCP Committee") prior to the date the relevant Report is to be filed. The Certifying Officers and the Chief Legal Officer (if any) of the Company shall be deemed to constitute the Fund DCP Committee in cases in which no other Fund DCP Committee has been designated or is operative. In connection with its review and evaluations, the Fund DCP Committee shall establish a schedule to ensure that all required disclosures in Form N-CSR and in the financial statements for each Fund are identified and prepared in a timeframe sufficient to allow review by the Fund DCP Committee before the date the relevant report is to be filed. At the request of the Company or its Certifying Officers, BISYS shall provide reasonable administrative assistance to the Company in connection with obtaining service provider sub-certifications, SAS-70 reports on internal controls, and any applicable representations to bring such certifications current to the end of the reporting period, and in preparing summaries of issues raised in such documents. 18. The Company shall, in its own capacity, take all reasonably necessary and appropriate measures to comply with its obligations under Sarbanes-Oxley. Without limitation of the foregoing, except for those obligations which are expressly delegated to or assumed by BISYS in this Agreement, the Company shall maintain responsibility for, and shall support and facilitate the role of each Certifying Officer and the Fund DCP Committee in, designing and maintaining the Fund DCPs in accordance with applicable laws, including (a) ensuring that the Fund DCP Committee and/or Certifying Officers obtain and review sub-certifications and reports on internal controls from the Company's investment adviser(s) and other service providers to the Funds, if any, sufficiently in advance of the date upon which the relevant financial statements must be finalized by BISYS (in order to print, distribute and/or file the same hereunder), (b) evaluating of the effectiveness of the design and operation of the Fund DCP, under the supervision, and with the participation of, the Certifying Officers, within the requisite timeframe prior to the filing of each Report, and (c) ensuring that its Certifying Officers render the requisite certifications or take such other actions as may be permitted or required under applicable laws. 19. File holdings reports on Form N-Q as required at the end of the first and third fiscal quarters of each year. 20. Prepare quarterly brokerage allocation compliance checklist and supporting documentation for use by investment adviser(s), as requested. 21. Oversee/coordinate Trustee compensation. 22. Monitor wash sales. 30 SCHEDULE C TO THE MASTER SERVICES AGREEMENT BETWEEN BISYS FUND SERVICES OHIO, INC. AND COVENTRY FUNDS TRUST FUND ACCOUNTING SERVICES (a) BISYS will keep and maintain the following books and records of each Fund pursuant to Rule 31a-1 (the "Rule") under the 1940 Act: 1. Journals containing an itemized daily record in detail of all purchases and sales of securities, all receipts and disbursements of cash and all other debits and credits, as required by subsection (b)(1) of the Rule; 2. General and auxiliary ledgers reflecting all asset, liability, reserve, capital, income and expense accounts, including interest accrued and interest received, as required by subsection (b)(2)(i) of the Rule; 3. Separate ledger accounts required by subsection (b)(2)(ii) and (iii) of the Rule; and 4. A monthly trial balance of all ledger accounts (except shareholder accounts) as required by subsection (b)(8) of the Rule. (b) In addition to the maintenance of the books and records specified above, BISYS shall perform the following accounting services for each Fund: 1. Allocate income and expense and calculate the net asset value per share ("NAV") of each class of shares offered by each Fund in accordance with the relevant provisions of the applicable Prospectus of each Fund and applicable regulations under the 1940 Act; 2. Apply securities pricing information as required or authorized under the terms of the valuation policies and procedures of the Company ("Valuation Procedures"), including (A) pricing information from independent pricing services, with respect to securities for which market quotations are readily available, (B) if applicable to a particular Fund or Funds, fair value pricing information or adjustment factors from independent fair value pricing services or other vendors approved by the Company (collectively, "Fair Value Information Vendors") with respect to securities for which market quotations are not readily available, for which a significant event has occurred following the close of the 31 relevant market but prior to the Fund's pricing time, or which are otherwise required to be made subject to a fair value determination under the Valuation Procedures, and (C) prices obtained from each Fund's investment adviser or other designee, as approved by the Board; 3. Coordinate the preparation of reports that are prepared or provided by Fair Value Information Vendors which help the Company to monitor and evaluate its use of fair value pricing information under its Valuation Procedures; 4. Verify and reconcile with the Funds' custodian all daily trade activity; 5. Compute, as appropriate, each Fund's net income and capital gains, dividend payables, dividend factors, 7-day yields, 7-day effective yields, 30-day yields, and weighted average portfolio maturity; (and other yields or standard or non-standard performance information as mutually agreed); 6. Review daily the net asset value calculation and dividend factor (if any) for each Fund prior to release to shareholders, check and confirm the net asset values and dividend factors for reasonableness and deviations, and distribute net asset values and yields to NASDAQ; and as agreed, in certain cases, to newspapers; 7. If applicable, report to the Company the periodic market pricing of securities in any money market funds, with the comparison to the amortized cost basis; 8. Determine and report unrealized appreciation and depreciation on securities held in variable net asset value funds; 9. Amortize premiums and accrete discounts on fixed income securities purchased at a price other than face value, if requested by the Company; 10. Update fund accounting system to reflect rate changes, as received from a Fund's investment adviser, on variable interest rate instruments; 11. Post Fund transactions to appropriate categories; 12. Accrue expenses of each Fund according to instructions received from the Company's Administrator, and submit changes to accruals and expense items to authorized officers of the Company (who are not BISYS employees) for review and approval; 32 13. Determine the outstanding receivables and payables for all (1) security trades, (2) Fund share transactions and (3) income and expense accounts; 14. Provide accounting reports in connection with and coordinate with independent auditors concerning the Company's regular annual audit, and other audits and examinations by regulatory agencies; and 15. Provide such periodic reports as the parties shall agree upon, as set forth in a separate schedule. 16. Provide a representative (in a non-voting capacity) for the Company's Pricing Committee, if any; and 17. Assist the Company in identifying instances where market prices are not readily available, or are unreliable, within parameters set forth in the Company's Valuation Procedures. (c) BISYS shall also perform the following additional accounting services for each Fund: 1. Provide monthly a hard copy of the unaudited financial statements described below, upon request of the Company. The unaudited financial statements will include the following items: A. Unaudited Statement of Assets and Liabilities, B. Unaudited Statement of Operations, C. Unaudited Statement of Changes in Net Assets, and D. Unaudited Condensed Financial Information 2. Provide accounting information for the following: (in compliance with Reg. S-X as applicable): A. federal and state income tax returns and federal excise tax returns; B. the Company's semi-annual reports with the SEC on Form N-SAR and Form N-CSR; C. the Company's schedules of investments for filing with the SEC on Form N-Q; D. the Company's annual and semi-annual shareholder reports and quarterly Board meetings; E. registration statements on Form N-1A and other filings relating to the registration of shares; 33 F. BISYS' monitoring of each Fund's status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended; G. annual audit by the Company's auditors; and H. examinations performed by the SEC. 3. Calculate turnover and expense ratio. 4. Prepare schedule of Capital Gains and Losses. 5. Provide daily cash report. 6. Maintain and report security positions and transactions in accounting system. 7. Prepare Broker Commission Report. 8. Monitor expense limitations. 9. Maintain list of failed trades. 10. Provide unrealized gain/loss report. 34 SCHEDULE D TO THE MASTER SERVICES AGREEMENT BETWEEN BISYS FUND SERVICES OHIO, INC. AND COVENTRY FUNDS TRUST TRANSFER AGENCY SERVICES 1. Shareholder Transactions (a) Process shareholder purchase and redemption orders. (b) Set up account information, including address, dividend option, taxpayer identification numbers and wire instructions. (c) Issue confirmations in compliance with Rule 10b-10 under the Securities Exchange Act of 1934, as amended. (d) Issue periodic statements for shareholders. (e) Process transfers and exchanges. (f) Process dividend payments, including the purchase of new shares, through dividend reimbursement. 2. Shareholder Information Services (a) Make information available to shareholder servicing unit and other remote access units regarding trade date, share price, current holdings, yields, and dividend information. (b) Produce detailed history of transactions through duplicate or special order statements upon request. (c) Provide mailing labels for distribution of financial reports, prospectuses, proxy statements or marketing material to current shareholders, upon request. 35 3. Compliance Reporting (a) Provide reports to the Securities and Exchange Commission, the National Association of Securities Dealers, Inc. and the states in which the Fund is registered. (b) Prepare and distribute appropriate Internal Revenue Service forms for corresponding Fund and shareholder income and capital gains. (c) Issue tax withholding reports to the Internal Revenue Service. 4. Dealer/Load Processing (if applicable) (a) Where appropriate information is available, provide reports for tracking rights of accumulation and purchases made under a Letter of Intent. (b) Calculate fees due under 12b-1 plans for distribution and marketing expenses. (c) Provide for payment of commission on direct shareholder purchases in a load fund. (d) Calculate redemption fees, as appropriate. 5. Shareholder Account Maintenance (a) Maintain all shareholder records for each account in the Company. (b) Issue customer statements on scheduled cycle, providing duplicate second and third party copies if required. (c) Record shareholder account information changes. (d) Maintain account documentation files for each shareholder. 36 6. Anti-Money Laundering Services (a) Where appropriate and information is available, verify shareholder identity upon opening new accounts. (b) Monitor, identify and report shareholder transactions and identify and report suspicious activities that are required to be so identified and reported, and provide other required reports to the Securities and Exchange Commission, the U.S. Treasury Department, the Internal Revenue Service or each agency's designated agent, in each case consistent with the Company's AML Program. (c) Place holds on transactions in shareholder accounts or freeze assets in shareholder accounts, as provided in the Company's AML Program. (d) Create documentation to provide a basis for law enforcement authorities to trace illicit funds. (e) Maintain all records or other documentation related to shareholder accounts and transactions therein that are required to be prepared and maintained pursuant to the Company's AML Program, and make the same available for inspection by (i) the Company's AML Compliance Officer, (ii) any auditor of the Company's AML Program or related procedures, policies or controls that has been designated by the Company in writing, or (iii) regulatory or law enforcement authorities, and otherwise make said records or other documents available at the direction of the Company's AML Compliance Officer. 7. Blue Sky Services Prepare such reports, applications and documents (including reports regarding the sale and redemption of shares in the Funds as may be required in order to comply with Federal and state securities laws) as may be necessary or desirable to register the shares in the Funds ("Shares") with state securities authorities, monitor the sale of Shares for compliance with state securities laws, and file with the appropriate state securities authorities the registration statements and reports for the Funds and the Shares and all amendments thereto, as may be necessary or convenient to register and keep effective the registration of the Funds and the Shares with state securities authorities to enable the Funds to make a continuous offering of their Shares. State securities ("Blue Sky") exemption services are made available at an additional standard fee which is earned by BISYS based on exemptions obtained by the Funds, including an annual minimum. 37 TRANSFER AGENCY REPRESENTATION Following each quarterly period, BISYS will provide a representation to the following effect pertaining to the AML Services rendered by BISYS hereunder during such quarterly period: 1. Performance of good order review for all new and reregistered accounts; 2. Performance of acceptance review for all monetary instruments received; 3. Administration of signature guarantee policy in accordance with prospectus requirements; 4. If applicable, administration of escrow hold policy in accordance with prospectus requirements; 5. Verification of customer address changes; 6. Verification of customer identification for all new accounts and all name changes on existing accounts; 7. Monitoring of all purchase transactions made with cash equivalents totaling in excess of $10,000. The number of Form 8300 reports filed during the period will be reported; 8. Monitoring of all accounts for suspicious activity. The number of Form SAR reports filed during the period will be reported; 9. Review of shareholder names against lists of suspected terrorist and terrorist organizations supplied by various governmental organizations, such as the Office of Foreign Asset Control. The number of accounts frozen and otherwise reported to authorities during the period will be reported; 10. Creation of the documentation necessary to provide a basis for law enforcement authorities to trace illicit funds; and 11. Maintenance all records and other documentation related to shareholder accounts and transactions required to be prepared and maintained pursuant to the Company's AML program for all BISYS transfer agent services. The following will be provided in such representation if the Company falls under the related USA PATRIOT Act of 2001 provisions: 12. Performance of the required due diligence to help prevent the opening of any accounts for foreign shell banks during the period either directly or through correspondent accounts. 38 13. Performance of the required due diligence on any new correspondent accounts opened during the period. 39 SCHEDULE D-1 TO THE MASTER SERVICES AGREEMENT BETWEEN BISYS FUND SERVICES OHIO, INC. AND COVENTRY FUNDS TRUST ADDITIONAL SERVICES RELATED TO IRA ACCOUNTS BISYS shall act as the IRA custodian for the Funds' IRA Accounts, and will perform the additional recordkeeping and administrative functions listed below with respect to those accounts. Account Processing 1. Opening new Traditional IRA, Roth IRA, and SIMPLE IRAs 2. Processing purchases and redemptions of shares for the holders of IRA Accounts (the "Account Holders") 3. Processing dividends and capital gain distributions 4. Notification of distribution requirements related to age 70 1/2 5. Maintaining beneficiary information on system 6. Calculating distributions, withdrawals, required withholding and other payment to Account Holders Account Maintenance 1. Maintaining Account Holder records 2. Changing addresses for Account Holders 3. Preparing periodic reports on accounts, number of shares, etc. 4. Preparation and filing of federal tax forms (1099-R, 5498) 5. Replying to shareholder correspondence and inquiries 6. Responding to all telephone inquiries about IRA Accounts 40 SCHEDULE E TO THE MASTER SERVICES AGREEMENT BETWEEN BISYS FUND SERVICES OHIO, INC. AND COVENTRY FUNDS TRUST FEES The Company shall pay BISYS on the first business day of each month, or as otherwise set forth below, fees for administration, fund accounting and transfer agency services, determined at the annual rates set forth below. Fund Administrative Services Fees: Asset-Based Annual Fee 0.1% of the first $250 million in aggregate net assets of all Funds, plus 0.08% of the aggregate net assets of all Funds in excess of $250 million through and including $500 million, plus 0.06% of the aggregate net assets of all Funds in excess of $500 million. This asset-based fee is subject to an annual minimum fee equal to the number of Funds multiplied by $42,500. Transfer Agency Services A per CUSIP fee of $17,000.00 per CUSIP per year (except for institutional classes); plus The following per-account fees, applied per year to each shareholder account (open or closed) on BISYS' transfer agency system: Per Open Non-Networked Account $20.00 Per Open Networked Level III Accounts $15.00 Per Closed Accounts $ 2.00
For these purposes, the following categories constitute an open account on the BISYS system in any one month: open account with balance, open account with zero balance, or open account with negative balance and closed account with activity. Closed accounts with no activity in the month are considered a closed account for billing purposes. 41 Fund Accounting Services Fees: Annual Asset Based Fee: 0.03% of the first $250 million in aggregate net assets of all Funds, plus 0.02% of the aggregate net assets of all funds in excess of $250 million through and including $500 million, plus 0.015% of the aggregate net assets in excess of $500 million. This asset based fee is subject to an annual minimum equal to the number of Funds multiplied by $37,500. Annual Minimum Fee: The Administrative, Fund Accounting and Transfer Agency Fees set forth above are subject to an annual complex minimum of $200,000. Fees paid to BISYS for AML Services, IRA Custodian Services, Compliance Services or other services and/or reimbursement of out-of-pocket expenses shall not count towards satisfying the complex minimum requirement. AML Fees Annual Fees Program servicing: $4,500 for the first 50,000 accounts, plus $2,500 for accounts in excess of 50,000 (to be billed in equal monthly installments) Early Warning annual fee: $575.00 Early Warning per record cost: $ 0.22 Early Warning searches for all accounts except Networked Level III accounts are conducted and fees applied every three weeks. Equifax - per request cost: $ 5.00
Fair Value Support Services As compensation for Fair Value Support Services (the services set forth in subsections (b)2 and (b)3 (as they relate to fair value determinations) of Schedule C to this Agreement). BISYS shall receive the following annual servicing fee for each Fund that the Company designates as being subject to fair value determinations and for which Fair Value Support Services are to be provided by BISYS hereunder, as follows: One-time Development Fee, due upon the execution of this Agreement: $10,000 42 Annual Fee for Fair Value Support Services to be provided by BISYS: For each Fund with less than 200 securities: $5,000 For each Funds with at least 200 securities: $7,500 (The Annual Fee is to be billed in equal monthly installments)
The foregoing BISYS fee(s) do not include out of pocket costs. BISYS will also be reimbursed by the Company for the actual costs charged by Fair Value Information Vendors with respect to the provision of fair value pricing information to BISYS for use in valuing the portfolio holdings of a specific Fund or Funds. Form N-Q Filing Fee Per Fund per filing: $3,000 Trustee/Custodian Services. In addition, as provided in Section 4(a) of this Agreement, BISYS shall be entitled to $10 per social security number, for each plan or account type, per year (the "Custodial Fee"), to be paid within the month prior to December 31 of each such year (or, if an IRA Account is closed prior to the closing of such IRA Account), for the services provided to the IRA Account or IRA Accounts (or, if an IRA Account is closed, prior to the closing of such IRA Account). BISYS will collect the Custodial Fee from each IRA Account. ANNUAL FEE ADJUSTMENT Commencing on the one-year anniversary of the Effective Date, BISYS may annually increase the fixed fees and other fees expressed as stated dollar amounts in this Agreement by up to an amount equal to the greater of: (a) the most recent annual percentage increase in consumer prices for services as measured by the United States Consumer Price Index entitled "All Services Less Rent of Shelter" or a similar index should such index no longer be published, and (b) 10%. OUT OF POCKET EXPENSES AND MISCELLANEOUS CHARGES The out of pocket expenses and miscellaneous services fees and charges provided for under this Agreement are not included in the above fees and shall also be payable to BISYS in accordance with the provisions of this Agreement. 43 EX-23.H.2 8 l23639bexv23whw2.txt EX-23(H)(2) Exhibit 23(h)(2) EXPENSE LIMITATION AGREEMENT THIS AGREEMENT, dated as of March 1, 2007, is made and entered into by and between The Coventry Funds Trust, a Massachusetts business trust (the "Trust"), on behalf of the investment series set forth on Schedule A attached hereto (the "Fund"), and EM Capital Management, LLC (the "Adviser"). WHEREAS, the Adviser has been appointed the investment adviser of the Fund pursuant to an Investment Advisory Agreement between the Trust, on behalf of the Fund, and the Adviser (the "Advisory Agreement"); and WHEREAS, the Trust and the Adviser desire to enter into the arrangements described herein relating to certain expenses of the Fund; NOW, THEREFORE, the Trust and the Adviser hereby agree as follows: 1. The Adviser agrees, subject to Section 2 hereof, to reduce the fees payable to it under the Advisory Agreement (but not below zero) and/or reimburse other expenses of the Fund, during the period ending April 30, 2008, to the extent necessary to limit the total operating expenses of each class of shares of the Fund, exclusive of brokerage costs, interest, taxes and dividend and extraordinary expenses, to the amount of the "Maximum Operating Expense Limit" applicable to each such class of shares as set forth across from the name of each respective class of the Fund on the attached Schedule A. 2. The Fund agrees to pay to the Adviser the amount of fees (including any amounts foregone through limitation or reimbursed pursuant to Section 1 hereof) that, but for Section 1 hereof, would have been payable by the Fund to the Adviser pursuant to the Advisory Agreement or which have been reimbursed in accordance with Section 1 (the "Deferred Fees"), subject to the limitations provided in this Section. Such repayment shall be made monthly, but only if the operating expenses of the Fund (exclusive of brokerage costs, interest, taxes and dividend and extraordinary expenses), without regard to such repayment, are at an annual rate (as a percentage of the average daily net assets of the Fund) equal to or less than the "Maximum Operating Expense Limit" for each respective class of shares of the Fund, as set forth on Schedule A. Furthermore, the amount of Deferred Fees paid by the Fund in any month shall be limited so that the sum of (a) the amount of such payment and (b) the other operating expenses of the Fund (exclusive of brokerage costs, interest, taxes and dividend and extraordinary expenses) do not exceed the above-referenced "Maximum Operating Expense Limit" for each respective class of shares of the Fund. Deferred Fees with respect to any fiscal year of the Fund shall not be payable by the Fund to the extent that the amounts payable by the Fund pursuant to the preceding paragraph during the period ending three years after the end of such fiscal year are not sufficient to pay such Deferred Fees. In no event will the Fund be obligated to pay any fees waived or deferred by the Adviser with respect to any other series of the Trust. 3. A copy of the Agreement and Declaration of Trust establishing the Trust is on file with the Secretary of The Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed by the Trust on behalf of the Fund by an officer of the Trust as an officer and not individually and that the obligations of or arising out of this Agreement are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property belonging to the Fund. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. THE COVENTRY FUNDS TRUST EM CAPITAL MANAGEMENT, LLC By: /s/ R. Jeffrey Young By: /s/ Seth R. Freeman --------------------------------- ------------------------------------ Name: R. Jeffrey Young Name: Seth R. Freeman ------------------------------- ---------------------------------- Title: President Title: Manager of LLC ------------------------------ --------------------------------- SCHEDULE A OPERATING EXPENSE LIMITS
Fund Name and Class of Shares Maximum Operating Expense Limit* - ----------------------------- -------------------------------- EM Capital India Gateway Fund Class A 2.30% Class C 2.80% Class I 1.80%
* Expressed as a percentage of the Fund's average daily net assets. EX-23.H.3 9 l23639bexv23whw3.txt EX-23(H)(3) EXHIBIT 23 (H) (3) AMENDMENT TO COMPLIANCE SERVICES AGREEMENT AMENDMENT ("Amendment") dated as of May 17, 2007, between The Coventry Group (the "Trust"), a Massachusetts business trust having its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS Fund Services Ohio, Inc. ("BISYS"), an Ohio corporation having its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219, to that certain Compliance Services Agreement dated September 27, 2004, (as amended, the "Agreement"), under which BISYS performs compliance services for the Trust. WHEREAS, the parties hereto wish to add a Fund to the Agreement and set forth such Fund's portion of the fees payable under the Agreement. NOW THEREFORE, in consideration of the foregoing and the mutual premises and covenants herein set forth, the parties agree as follows: 1. The EM Capital India Gateway Fund (the "Fund"), a series of the Trust, will be covered by the Agreement. 2. In consideration of BISYS providing services under the Agreement with respect to the Fund, the Trust will pay BISYS $20,000 annually, plus applicable expenses as provided in the Agreement. 3. This Amendment may be executed in one or more counterparts, each of which will be deemed an original, but all of which together shall constitute one and the same instrument. 4. Except as expressly set forth herein, all other provisions of the Agreement shall remain unchanged and in full force and effect. 5. Capitalized terms not otherwise defined in this Amendment have the same meaning as set forth in the Agreement. * * * * * IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. THE COVENTRY GROUP By: /s/ R. Jeffrey Young --------------------------------- Name: R. Jeffrey Young ------------------------------- Title: President ------------------------------ BISYS FUND SERVICES OHIO, INC. By: /s/ Fred Naddaff --------------------------------- Name: Fred Naddaff Title: President 2 EX-23.I 10 l23639bexv23wi.txt EX-23(I) EXHIBIT 23(i) Thomas Hine LLP 10 West Broad Street, Suite 700 Columbus, OH 43215 May 10, 2007 The Coventry Funds Trust 3435 Stelzer Road Columbus, OH 43219 Re: Opinion and Consent Ladies and Gentlemen: This letter is in response to your request for our opinion in connection with the filing of Post-Effective Amendment No. 33 to the Registration Statement, File Nos. 33-81800 and 811-8644 (the "Registration Statement"), of The Coventry Funds Trust (the "Trust"). We have examined a copy of the Trust's Declaration of Trust, the Trust's By-laws, the Trust's record of the various actions by the Trustees thereof, and all such agreements, certificates of public officials, certificates of officers and representatives of the Trust and others, and such other documents, papers, statutes and authorities as we deem necessary to form the basis of the opinion hereinafter expressed. We have assumed the genuineness of the signatures and the conformity to original documents of the copies of such documents supplied to us as copies thereof. Based upon the foregoing, we are of the opinion that, after Post-Effective Amendment No. 33 is effective for purposes of applicable federal and state securities laws, the shares of EM Capital India Gateway Fund (the "Fund"), a series of the Trust, if issued in accordance with the then current Prospectus and Statement of Additional Information of the Fund, will be legally issued, fully paid and non-assessable. We hereby give you our permission to file this opinion with the Securities and Exchange Commission as an exhibit to Post-Effective Amendment No. 33 to the Registration Statement. This opinion may not be filed with any subsequent amendment, or incorporated by reference into a subsequent amendment, without our prior written consent. This opinion is prepared for the Trust and its shareholders, and may not be relied upon by any other person or organization without our prior written approval. Very truly yours, /s/ Thompson Hine LLP Thompson Hine LLP MVW/JMS EX-23.M 11 l23639bexv23wm.txt EX-23(M) EXHIBIT 23(m) EM CAPITAL INDIA GATEWAY FUND (THE "FUND") A SERIES OF THE COVENTRY FUNDS TRUST (THE "TRUST") SERVICE AND DISTRIBUTION PLAN FOR CLASS A AND CLASS C SHARES Introduction: It has been determined that the Fund, which is a series of The Coventry Funds Trust, will pay for certain costs and expenses incurred in connection with the distribution of certain classes of its shares and servicing of shareholders of certain classes, and adopts this Service and Distribution Plan for Class A and Class C Shares (the "Plan") as set forth herein pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act"). The Board of Trustees, in considering whether the Fund should implement the Plan, has requested and evaluated such information as it deemed necessary to make an informed determination as to whether the Plan should be implemented and has considered such pertinent factors as it deemed necessary to form the basis for a decision to use assets of the Fund for such purposes. In voting to approve the implementation of the Plan, the Trustees have concluded, in the exercise of their reasonable business judgment and in light of their respective fiduciary duties, that there is a reasonable likelihood that the Plan will benefit the Fund and the shareholders of each of its classes of shares. The Plan: The material aspects of the financing by the Fund of distribution expenses to be incurred in connection with securities of which it is the issuer are as follows: 1. The Fund will compensate the distributor for services provided and expenses incurred in connection with the distribution and marketing of shares of Class A and Class C of the Fund and servicing of shareholders of each such class. Distribution and servicing costs and expenses may include: (1) printing and advertising expenses; (2) payments to employees or agents of the distributor who engage in or support distribution of the Fund's shares, including salary, commissions, travel and related expenses; (3) the costs of preparing, printing and distributing prospectuses and reports to prospective investors; (4) expenses of organizing and conducting sales seminars; (5) expenses related to selling and servicing efforts, including processing new account applications, transmitting customer transaction information to the Fund's transfer agent and answering questions of shareholders; (6) payments of fees to one or more broker-dealers (which may include the distributor itself), financial institutions or other industry professionals, such as investment advisers, accountants and estate planning firms (severally, a "Service Organization"), based on the average daily value of the Fund's shares owned by shareholders for whom the Service Organization is the dealer of record or holder of record, or owned by shareholders with whom the Service Organization has a servicing relationship; (7) costs and expenses incurred in implementing and operating the Plan; and (8) such other similar services as the Board of Trustees determines to be reasonably calculated to result in the sale of the Fund's shares. Subject to the limitations of applicable law and regulation, including rules of the National Association of Securities Dealers ("NASD"), the distributor will be compensated monthly for such costs, expenses or payments at an annual rate of up to but not more than 0.50% of the average daily net assets of Class A shares of the Fund and 1.00% of the average daily net assets of Class C shares of the Fund, provided however, that up to 0.25% of each such amount may be used as a "service fee" as defined in applicable rules of the NASD. 2. The distributor may periodically pay to one or more Service Organizations (which may include the distributor itself) a fee in respect of the Fund's shares owned by shareholders for whom the Service Organizations are the dealers of record or holders of record, or owned by shareholders with whom the Service Organizations have servicing relationships. Such fees will be computed daily and paid quarterly by the distributor at an annual rate not exceeding 0.25% of the average net asset value of shares of each class of the Fund owned by shareholders for whom the Service Organizations are the dealers of record or holders of record, or owned by shareholders with whom the Service Organizations have servicing relationships. Subject to the limits herein and the requirements of applicable law and regulations, including rules of the NASD, the distributor may designate as "service fees," as that term is defined by applicable rules and regulatory interpretations applicable to payments under a plan such as the Plan, some or all of any payments made to Service Organizations (including the distributor itself) for services that may be covered by "service fees," as so defined. The payment to a Service Organization is subject to compliance by the Service Organization with the terms of a Service Agreement or Dealer Agreement between the Service Organization and the distributor (the "Agreement"). If a shareholder of a Fund ceases to be a client of a Service Organization that has entered into an Agreement with the distributor, but continues to hold shares of the Fund, the distributor will be entitled to receive a similar payment in respect of the servicing provided to such investors. For the purposes of determining the fees payable under the Plan, the average daily net asset value of the Fund's shares shall be computed in the manner specified in the Declaration of Trust of The Coventry Group and current prospectus for the computation of the value of the Fund's net asset value per share. 3. The Plan will become effective immediately upon approval by a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons" (as defined in the Act) of the Funds and have no direct or indirect financial interest in the operation of the Plan or in any agreements entered into in connection with the Plan (the "Plan Trustees"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of the Plan, or upon such later date as the Trustees determine. 4. The Plan shall continue with respect to each applicable class of shares of the Fund for a period of one year from its effective date, unless earlier terminated in accordance with its terms, and thereafter shall continue automatically with respect to each applicable class of shares of the Fund for successive annual periods, provided such continuance is approved by a majority of the Board of Trustees, including a majority of the Plan Trustees pursuant to a vote cast in person at a meeting called for the purpose of voting on the continuance of the Plan. 5. The Plan may be amended at any time by the Board of Trustees provided that (a) any amendment to increase materially the costs which a class may bear for distribution pursuant to the Plan shall be effective only upon approval by a vote of a majority of the outstanding voting securities of that class and (b) any material amendments of the terms of the Plan shall become effective only upon approval as provided in paragraph 3 hereof. 6. The Plan is terminable without penalty at any time by (a) vote of a majority of the Plan Trustees, or (b) vote of a majority of the outstanding voting securities of the Fund. 7. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to the Plan or any agreement entered into in connection with the Plan shall provide to the Board of Trustees, and the Board of Trustees shall review, at least quarterly, a written report of the amounts expended pursuant to the Plan and the purposes for which such expenditures were made. 8. While the Plan is in effect, the selection and nomination of Trustees who are not "interested persons" (as defined in the Act) of the Funds shall be committed to the discretion of the Trustees who are not "interested persons". * * * The Fund shall preserve copies of the Plan, any agreement in connection with the Plan, and any report made pursuant to paragraph 7 hereof, for a period of not less than six years from the date of the Plan or such agreement or report, the first two years in an easily accessible place. Date: January 16, 2007 EX-23.P.2 12 l23639bexv23wpw2.txt EX-23(P)(2) Exhibit 23(p)(2) APPENDIX A COMPANY CODE OF ETHICS A. INTRODUCTION The provisions contained in this Appendix A shall constitute the Company's Code of Ethics (this "Code"), which sets forth the Company's principles regarding ethics and establishes standards of conduct to guide the Company and its personnel and affiliated persons in connection with its investment advisory business. B. PERSONS COVERED BY THIS CODE This Code applies to all of the Company's "Supervised Persons", which means any member, partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of the Company, or other person who provides investment advice on behalf of the Company and is subject to the supervision and control of the Company. This Code also applies to any "affiliated person" of the Company within the meaning of Rule 17j-1 under the Investment Company Act of 1940 (the "Investment Company Act"). All such Supervised Persons and affiliated persons shall be referred to collectively in this Code as "Covered Persons". C. GUIDING PRINCIPLES AND STANDARDS OF CONDUCT The Company and all Covered Persons owe an overarching fiduciary duty to act in the best interests of the Company's clients, as well as a duty of honesty, good faith and fair dealing. In furtherance of these duties, the Company and all Covered Persons must at all times: 1. act in the best interests of clients and place their interests first; 2. avoid or disclose any actual or potential conflicts of interest, and avoid any abuse of a position of trust and responsibility particularly for personal benefit or for the benefit of other third parties; 3. act within the spirit and the letter of all federal, state, local and foreign laws, rules and regulations applicable to the Company's business, including, without limitation, applicable securities, banking, commodities, foreign investment and currency laws. Without prejudice to the generality of the foregoing statement, the Company and all Supervised Persons shall comply with all applicable United States federal securities laws, including the various applicable provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934 and all applicable rules and regulations adopted by the Securities and Exchange Commission (SEC); EM Capital Management LLC Code of Ethics 4. act within the spirit and letter of the provisions of this Code; 5. maintain information concerning the identity of securities holdings and financial circumstances of clients confidential; 6. maintain independence in the investment decision-making process; 7. avoid the misuse of material non-public information; 8. strive to act in a professional and ethical manner; and 9. with respect to each of the Company's clients that is a fund or other pooled vehicle (each, a "Fund"), including an investment company registered under the Investment Company Act and any private investment fund, refrain from engaging in any of the following conduct in connection with any security held or to be acquired by a Fund, which conduct is strictly prohibited under this Code: (a) employing any device, scheme or artifice to defraud the Fund; (b) making any untrue statement of a material fact to the Fund or omitting to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances under which they are made, not misleading; (c) engaging in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or (d) engaging in any manipulative practice with respect to the Fund. D. EXAMPLES OF PROHIBITED CONDUCT Following are examples of conduct that would be prohibited by this Code: 1. Directing or recommending purchases or sales of securities that are not in accordance with the client's investment objectives and guidelines. 2. Attempting to influence any client to purchase, sell or retain any securities for the purpose of seeking any form of personal gain. 3. Warranting the value or price of any security or guaranteeing its future performance. 4. Promising or representing that an issuer of securities will meet its obligations or fulfill its investment or business objectives in the future. 5. Agreeing to protect a client against loss by repurchasing a security at some future time. EM Capital Management LLC Code of Ethics A-2 6. Owning or taking title to any funds or assets of a client. 7. Maintaining a joint brokerage or bank account with any client; sharing with any client any performance fee, carried interest or other benefit, profit or loss resulting from securities transactions; or entering into any business transaction with a client without the prior written approval of the Compliance Department. 8. Borrowing money or securities from any client, regardless of the relationship between the client and the Company or any Supervised Person. 9. Failing to abide by the Company's Insider Trading Policies and Personal Securities Trading Rules set forth in this Code. 10. Entering orders in any account for which there is no client. 11. Manipulating or attempting in any way to manipulate the market for any securities, such as by entering matched buy and sell orders that create a false appearance of market activity. This also includes entering actual orders for the purpose of artificially inflating market valuations. 12. Engaging in any "front-running" or "scalping" of accounts, by purchasing or selling securities in a personal account, in violation of the Insider Trading Policies and Personal Securities Trading procedures, when there is reason to know that Company or client accounts will be purchasing or selling the same securities. This also includes trading for a personal account and then directing trades in the same securities - or influencing others to trade in the same securities - for clients. 13. Engaging in any other activity that is intended to mislead or deceive, or that would have the effect of misleading or deceiving others. 14. Conspiring with others to engage in any prohibited activity, or doing or attempting to do indirectly something that would be prohibited if done directly. If any Supervised Persons becomes aware of such prohibited conduct, or any other conduct that may violate this Code or any applicable law or regulation, he or she must report the incident immediately to the Company's Chief Compliance Officer. E. POLICIES AGAINST THE MISUSE OF MATERIAL NON-PUBLIC INFORMATION ("INSIDER TRADING POLICIES") The misuse of material non-public information (insider trading) by Company personnel is strictly prohibited. Any Supervised Person who does engage in insider EM Capital Management LLC Code of Ethics A-3 trading will be terminated. That person may also be subject under U.S. or applicable foreign law to civil damages, a permanent bar from the industry and criminal fines and imprisonment. In addition, Company officers and other managers may be subject to penalties if persons under their supervision engage in insider trading. 1. DEFINITION OF "INSIDER TRADING" "Insider Trading" involves making or participating in any purchase or sale of a publicly traded security while in possession of material non-public ("inside") information regarding that security or its issuer, in violation of a fiduciary duty. The inside information may relate, for example, to: o any publicly traded company in which the Company may consider making or recommending investments for its clients; or o a Company client, where the client is a publicly traded company (including, without limitation, any mutual fund advised by the Company). 2. EXAMPLES OF INSIDER TRADING All of the following are examples of potential Insider Trading: o making a trade for a personal account when you have inside information about the company whose security is being traded; o recommending a trade to a client (or any other party) or directing a trade in a discretionary client account when you have inside information about the company; o providing inside information to anyone else, who then buys or sells a public security of the company; or o trading by any third person based upon the inside information if that person knows that the information is supposed to be kept confidential. Under U.S. law, it generally does not matter if you can rightly claim that you did not use the inside information in deciding to make a trade. In most cases the mere possession of inside information at the time of a trade will constitute a legal violation. 3. DEFINITION OF "MATERIAL" INFORMATION Information is considered "material" for Insider Trading purposes if it is information that a reasonable investor would consider important in deciding whether to purchase or sell a security. The information may or may not change an actual investment EM Capital Management LLC Code of Ethics A-4 decision. It is material information if it is something that would have actual significance in the deliberations of the reasonable investor. Material information may include information about: o a company's earnings estimates; o the gain or loss of a significant customer or client; o dividend changes or the declaration of a stock split; o the borrowing of significant funds; o a new offering of securities; o a major labor dispute; o a new joint venture; o an agreement or proposal for an acquisition or merger; o a significant sale of assets or the disposition of a subsidiary; o major litigation; o liquidity problems; o management changes; or o any other significant company developments. Information about the Company's investment decisions may also be material inside information. Trading ahead of transactions for the Company's clients may constitute insider trading as well as "front-running". 4. DEFINITION OF "NON-PUBLIC" INFORMATION Information is considered non-public for insider trading purposes until it has been fully disclosed and disseminated to the public. Information in a major publication, on a major wire service or contained in an SEC filing would be considered public. Under current SEC guidance, however, information contained on a company web site is not necessarily public at the moment it appears. Depending upon the nature of the publication, it may be necessary to allow two or three business days for information to be considered fully disseminated to the public. EM Capital Management LLC Code of Ethics A-5 5. PROCEDURES FOR HANDLING INSIDE INFORMATION Fiduciary duties are owed to the Company and the Company's clients prohibit all Company personnel from engaging in any insider trading and require personnel to follow the policies and procedures set forth in this section for handling any inside information. To avoid any chance of a personal violation, and to assist the Company in preventing Insider Trading, you must do the following: o If you obtain material non-public information about a public company, immediately notify the Chief Compliance Officer. That officer will work with you to establish any required "Firewalls" or other procedures to address the situation. You always must follow the policies and procedures set forth below regarding Firewalls, the Securities Watch Lists and the Restricted Securities Lists. o If you are in possession of material non-public information about a company, do not make or participate in any purchase or sale of a publicly traded security of that company --whether the transaction is for a personal account or for a client. o Keep any material non-public information about a public company strictly confidential. Your discussions and activities both inside and outside of the Company must not reveal the existence or substance of any material non-public information. If you routinely receive material non-public information for legitimate purposes, you must notify the Chief Compliance Officer and work with that officer to assure that all paper and computer files containing the information are properly secured. o Follow the requirements of the Personal Securities Trading procedures set forth below. Please contact the Chief Compliance Officer if you have any questions or concerns. F. COMPANY POLICIES REGARDING FIREWALLS, SECURITIES WATCH LISTS AND SECURITIES RESTRICTED LISTS As discussed above, trading in the public securities of a company while in possession of material non-public information about that company is strictly prohibited by U.S. and applicable foreign law and by Company policies. To assist in the prevention and detection of any such Insider Trading, the Company has adopted the following policies and procedures relating to Firewall requirements, Securities Watch List requirements and Securities Restricted List requirements. EM Capital Management LLC Code of Ethics A-6 1. DEFINITIONS Firewall - A Firewall is a set of procedures designed to assure that any material non-public information received by any Supervised Person regarding a public company is maintained as strictly confidential. When a Firewall is put in place, the following rules apply: o Any Supervised Person who is actually in possession of material non-public information about a company may not trade or be involved in any trade of any public securities of that company, whether the trade is for a personal account or for an account of a client. o The information may not be disclosed to any other person or party, even within the Company, except as provided for in this Code or as expressly allowed by the Chief Compliance Officer. o Appropriate safeguards must be put in place to limit and control access to physical files, computer files and other means of access to the information. Watch List - A Watch List is a set of procedures by which the Chief Compliance Officer monitors trading in specific securities for the purpose of detecting any improper activity. The purpose of a Watch List is to allow this monitoring without alerting the remainder of Company personnel and without having to impose a general trading restriction. Watch List procedures may be used, for example, where the Company or an affiliate is in the early stages of a material transaction with a public company. They also may be applied where there has been an inadvertent disclosure to a limited group of Company personnel. In such a case, those in actual possession of the information would also be subject to the Firewall restrictions described above. The Chief Compliance Officer administers the Watch List procedures and investigates any indications of improper activity. Restricted List - A Restricted List is a set of procedures by which the Chief Compliance Officer actually restricts trading in certain securities in order to prevent improper activity. Restricted List procedures may be used, for example, where the Company or an affiliate is involved in a material transaction with a public company that has been publicly announced but has not yet closed. They also may be applied in certain situations of inadvertent disclosure where the Chief Compliance Officer determines that the Firewall and Watch List procedures are not sufficient to prevent possible abuses. The Chief Compliance Officer administers the Restricted List procedures and investigates any indications of violations. Unless otherwise expressly indicated, the restrictions imposed by the Restricted List procedures apply both to Supervised Persons' personal trading and to trading on behalf of client portfolios. EM Capital Management LLC Code of Ethics A-7 2. PROCEDURES To assist in the operation of the Company's Firewall, Watch List and Restricted List procedures, you must do the following: o Report to the Chief Compliance Officer any situation in which you have received or believe you may have received any material non-public information regarding a public company. The Chief Compliance Officer will work with you to determine the appropriate action to be taken in the situation. This will include the implementation of appropriate Firewall restrictions. The Chief Compliance Officer will also determine whether it is necessary to place the company on the Watch List or Restricted List. o As indicated in the Firewall procedures above, do not trade or become involved in any trade of any public securities of a company when you are in possession of material non-public information about the company. This includes trades for your personal accounts as well as any client accounts. o Do not disclose the information to any other person, including any Company personnel, except as expressly provided for in this Code or as expressly allowed by the Chief Compliance Officer. o If you are a manager that supervises other Supervised Persons, be aware of situations in which your employees may receive material non-public information regarding any companies. Ensure that they understand the need to report such situations. You also are responsible for reporting any such situations to the Chief Compliance Officer. As noted above, the Chief Compliance Officer will administer the Watch List and Restricted List. The Watch List will be maintained as strictly confidential. Only the Chief Compliance Officer and certain designated Company officers and legal advisers will have access to the names of companies that are on the Watch List or information about Watch List monitoring procedures. The Restricted List, however, is available to all Company personnel and will be distributed by secure email or posted on the Company's intranet. The Chief Compliance Officer will update the Watch List and Restricted List as appropriate to keep them current. All Supervised Persons are responsible for advising the Chief Compliance Officer of any information to assist in updating the lists, including when transactions have been completed, when previously non-public information has been fully disclosed and when any restrictions otherwise no longer apply. G. PERSONAL SECURITIES TRADING PROCEDURES Personal trading in securities by Covered Persons is permitted, subject to the limitations, restrictions and other requirements set forth in this Code. EM Capital Management LLC Code of Ethics A-8 1. REPORTING REQUIREMENTS All Covered Persons must submit the following reports to the Chief Compliance Officer in the time frames indicated: o Holdings reports - initial. Within 10 days after becoming a Covered Person, a report of all holdings in covered/reportable securities (which shall include all securities other than U.S. government obligations, certain cash instruments, shares issued by open-end registered investment companies, and any other excepted securities designated by the Chief Compliance Officer from time to time), which report shall include: (i) the title and exchange ticker symbol or CUSIP number, type of security, number of shares and principal amount (if applicable) of each reportable security in which the Covered Person has any direct or indirect beneficial ownership; (ii) the name of any broker, dealer or bank with which the Covered Person maintains an account in which any securities are held for the Covered Person's direct or indirect benefit; and (iii) the date the report is submitted. All information provided in the initial report must be current as of a date no more than 45 days before the person became a Covered Person. o Holdings reports - annual. Following the initial holding report, each Covered Person shall thereafter submit holdings reports on an annual basis. All information provided in the report must be current as of a date no more than 45 days before the report is submitted. o Quarterly transaction reports. No later than 30 days after the end of each calendar quarter, a report covering all transactions in covered/reportable securities during the quarter. The transaction reports must include information about each transaction involving a reportable security in which the Covered Person had, or as a result of the transaction acquired, any direct or indirect beneficial ownership. The reports must include: (i) the date of the transaction, the title and exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), the number of shares and the principal amount (if applicable) of each reportable security involved; (ii) the nature of the transaction (e.g., purchase, sale); EM Capital Management LLC Code of Ethics A-9 (iii) the price of the security at which the transaction was effected; (iv) the name of the broker, dealer, or bank with or through which the transaction was effected; (v) the date the report is submitted. o Quarterly brokerage account reports. No later than 30 days after the end of each calendar quarter, a report disclosing the following information about any account opened during the quarter containing securities held for the direct or indirect benefit of a Covered Person: (i) the name of the broker, dealer or bank with whom the Covered Person established the account; (ii) the date the account was established; and (iii) the date the report is submitted. All holdings and transaction reports shall be made on forms prescribed by the Chief Compliance Officer from time to time, which form shall require the Covered Person to certify as to the completeness and accuracy of the information provided. All transactions and holdings reports shall be maintained in confidence, except to the extent necessary to implement and enforce the provisions of this Code or applicable law, or to comply with requests for information from government agencies. 2. MONITORING OF PERSONAL SECURITIES TRADING The Company is required to designate a person to periodically review the personal securities transactions and holdings reports of Covered Persons. The Chief Compliance Officer shall be responsible for reviewing and monitoring personal securities transactions and trading patterns of Covered Persons (in such capacity, the "Reviewer"). The managing director of the Company and the Company's designated counsel, acting jointly, shall be responsible for reviewing and monitoring the personal securities transactions of the Reviewer and for taking on the responsibilities of the Reviewer in the Reviewer's absence. The Chief Compliance Officer shall develop specific monitoring and reviewing procedures, which, for reasons of security, shall be made available only to key members of senior management. In accordance with Securities and Exchange Commission guidance, review of personal securities holding and transaction reports should include: o an assessment of whether the Covered Person followed any required internal procedures, such as pre-clearance; o comparison of personal trading to any restricted lists; EM Capital Management LLC Code of Ethics A-10 o an assessment of whether the Covered Person is trading for his or her own account in the same securities he or she is trading for clients, and if so, whether the clients are receiving terms as favorable as the access person takes for him or herself; o periodically analyzing the Covered Person's trading for patterns that may indicate abuse, including market timing; and o an investigation of any substantial disparities between the percentage of trades that are profitable when the Covered Person trades for his or her own account and the percentage that are profitable when he or she places trades for clients. 3. PRE-CLEARANCE REQUIREMENTS FOR CERTAIN TRANSACTIONS Pre-clearance from the Chief Compliance Officer is required before any Covered Person participates in an initial public offering (IPO) or in an offering of privately-placed securities, subject to any blanket exceptions approved by the Chief Compliance Officer from time to time. H. COMPLIANCE AND ENFORCEMENT The provisions and procedures set forth in this section are intended, together with other provisions and procedures contained in this Code, to provide reasonable assurance that violations of this Code will be prevented. 1. DELIVERY OF CODE AND AMENDMENTS TO COVERED PERSONS; CERTIFICATE OF COMPLIANCE o Initial certification. The Company shall provide each Covered Person with a copy of this Code at the time such person first acquires such status. Each such Covered Person shall certify in writing that they have: (a) received a copy of this Code; (b) read and understood all provisions of this Code; and (c) agreed to comply with the terms of this Code. o Acknowledgement of amendments. The Company shall provide Covered Persons with any amendments to this Code (whether or not considered to be major amendments). Covered Persons are required to submit a written acknowledgement that they have received, read, and understood the amendments to this Code, and that they agree to comply with the terms of this Code, as amended. The Company shall endeavor to group technical amendments together with major amendments in order to minimize disruptions. The Chief Compliance Officer shall highlight and summarize important changes to this Code in the relevant transmittal or cover letter. EM Capital Management LLC Code of Ethics A-11 o Annual certification. In addition to acknowledgement of amendments, Covered Persons shall be required to annually certify that they have read, understood, and complied with this Code in a form prescribed by the Chief Compliance Officer from time to time. Any Covered Person who is unable to make the representations required in such form may be subject to immediate disciplinary actions. 2. REPORTING VIOLATIONS OF THIS CODE All Covered Persons are required to report violations or suspected violations of this Code promptly to the Chief Compliance Officer (or such other person designated in this section). o Confidential treatment. Reports of violations or suspected violations will be treated confidentially to the extent permitted by law and investigated promptly and appropriately. In appropriate cases it may be appropriate for the report to be submitted anonymously. o Alternate designee. Covered Persons may report violations to either the managing director of the Company or the Company's chief legal officer in the event that the Chief Compliance Officer is or may be involved in the violation or is unreachable. o Advice of legal counsel. The Chief Compliance Officer (or alternate designee, if applicable) may direct Covered Persons to seek advice from the Company's legal counsel with respect to any violations or suspected violations of this Code, or other actions or transactions that may raise legal concerns. It shall be emphasized, however, that any such legal counsel represents the Company and not the Covered Person, and that such Covered Person may wish to seek their own independent counsel. o Retaliation. Retaliation against any person (whether or not a Covered Person) who reports a violation or suspected violation of this Code is strictly prohibited and constitutes in and of itself a further violation of this Code. 3. SANCTIONS FOR VIOLATIONS OF THIS CODE Any violation of this Code may result in any disciplinary action that the Chief Compliance Officer and senior management deem appropriate, including but not limited to a warning, fines, disgorgement, suspension, demotion, or termination of employment or other affiliation. In addition to sanctions, violations may result in referral to civil, regulatory or criminal authorities where appropriate, as well as private legal actions being taken by the Company against the Covered Person. EM Capital Management LLC Code of Ethics A-12 I. ADMINISTRATION OF THIS CODE 1. APPROVAL OF THIS CODE BY THE BOARD OF DIRECTORS OF REGISTERED INVESTMENT COMPANIES The Company is required to have this Code approved by the board of directors of any registered investment company ("Registered Fund") advised or sub-advised by the Company. Any material amendments to this Code must also be approved by a Registered Fund's board within 6 months following adoption of such amendments. 2. ANNUAL REVIEW OF CODE The Chief Compliance Officer shall review at least annually the adequacy of this Code and the effectiveness of its implementation. This review shall be undertaken as part of the annual review of the Company's compliance policies generally pursuant to Rule 206(4)-7 under the Investment Advisers Act of 1940 and, where applicable, Rule 38a-1 under the Investment Company Act. 3. ANNUAL REPORT TO BOARD OF DIRECTORS OF REGISTERED INVESTMENT COMPANIES The Company shall provide an annual written report to the board of directors of each Registered Fund that it advises or sub-advises. Such report shall include, at a minimum, the items required by Rule 17j-1 under the Investment Company Act. The report shall describe any issues arising under this Code since the last report, including information about material violations of this Code and sanctions imposed in response to such violations. The report must include discussion of whether any waivers that might be considered important by the board were granted during the period, as well as certify that the Company has adopted procedures reasonably necessary to prevent Covered Persons from violating this Code. 4. ANNUAL REPORT TO THE COMPANY'S SENIOR MANAGEMENT The Chief Compliance Officer shall report to senior management regarding his or her annual review of this Code and to bring material violations to the attention of senior management. 5. COORDINATION WITH FORM ADV DISCLOSURE The Company is required to include on Schedule F of Form ADV, Part II a description of the Company's code of ethics and to state that the firm will provide a copy of the code to any client or prospective client upon request. The Company shall take care to review and update the Company's Part II disclosure in connection with any amendments to this Code. 6. TRAINING AND EDUCATION EM Capital Management LLC Code of Ethics A-13 The Chief Compliance Officer and senior management of the Company shall periodically review the need for training and educating Covered Persons regarding the implementation, operation and administration of this Code. J. RECORDKEEPING This Code forms a part of the records of the Company, and as such the Code and any ancillary and related documents are subject to the Company's overall recordkeeping requirements. Further to such requirements, the Company shall maintain the following records in a readily accessible place: o a copy of each version of this Code that has been in effect at any time during the past 5 years; o a record of any violation of this Code and any action taken as a result of such violation for 5 years from the end of the fiscal year in which the violation occurred; o a record of all written acknowledgements of receipt of this Code and amendments for each person who is currently, or within the past five years was, a Covered Person. These records must be kept for 5 years after the individual ceases to be a Covered Person; o holdings and transactions reports made pursuant to this Code, including any brokerage confirmation and account statements made in lieu of these reports; o a list of the names of persons who are currently, or within the past 5 years were, Covered Persons; o a record of any decision and supporting reasons for approving the acquisition of securities by Covered Persons in IPOs and limited offerings for at least 5 years after the end of the fiscal year in which approval was granted; o records of any decisions that grant Covered Persons a waiver from or exception to this Code; o a record of persons responsible for reviewing Covered Persons' reports currently and during the last 5 years; and o a copy of any reports provided to the board of directors of any Registered Fund advised or sub-advised by the Company regarding this Code. EM Capital Management LLC Code of Ethics A-14 -----END PRIVACY-ENHANCED MESSAGE-----