-----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, BOVhbSPnLD7ORjNfehKusWVcmOhdOEAEFjxs8y8J1Nwi3YaLLjQgfFpsmw6iC6gj rLcRCFsd8tvdIKI8rJEHvA== 0000950152-08-005401.txt : 20080715 0000950152-08-005401.hdr.sgml : 20080715 20080715124113 ACCESSION NUMBER: 0000950152-08-005401 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20080715 DATE AS OF CHANGE: 20080715 EFFECTIVENESS DATE: 20080715 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: 08952367 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: 1940 Act SEC FILE NUMBER: 811-08644 FILM NUMBER: 08952368 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 l32429ae485bpos.htm THE COVENTRY FUNDS TRUST 485BPOS The Coventry Funds Trust 485BPOS
As filed with the Securities and Exchange Commission on July 15, 2008
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                            þ
      Pre-Effective Amendment No.   __               o
      Post-Effective Amendment No. 34               þ
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940     þ
     Amendment No. 36                                        þ
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
 
C. David Bunstine
Citi Fund Services Ohio, Inc.
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)
þ     immediately upon filing pursuant to paragraph (b)
o    on o pursuant to paragraph (b)
o     60 days after filing pursuant to paragraph (a)(i)
o     on o pursuant to paragraph (a)(i)
o     75 days after filing pursuant to paragraph (a)(ii)
If appropriate, check the following box:
o     this post-effective amendment designates a new effective date for post-effective amendment No. ___ filed on [date].
 
 


 

         
PROSPECTUS
  INVESTOR SHARES — CLASS A — (EMINX) AND CLASS C;    
DATED JULY 15, 2008
  INSTITUTIONAL SHARES — CLASS I — (EMIIX)    
EM CAPITAL
INDIA GATEWAY FUND
THE FUND SEEKS LONG-TERM CAPITAL GROWTH AND INCOME BY INVESTING PRIMARILY IN A DIVERSIFIED
PORTFOLIO OF SECURITIES ISSUED BY INDIAN AND INDIA-RELATED COMPANIES.
GATEWAY OF INDIA, MUMBAI, INDIA
(C) Hannah Freeman
EM CAPITAL
MANAGEMENT, LLC
Investment Adviser
1-800-933-1850
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
Carefully review this important section for a summary of the Fund’s investments, risks and fees.
The section contains details on the Fund’s investment strategies and risks
Consult this section to obtain details on how shares are valued, how to purchase, sell and exchange shares, related charges and payments of dividends.
Review this section for details on the people and organizations who oversee The Fund and its investments.
     
RISK/RETURN SUMMARY AND FUND EXPENSES
 
   
2
  EM Capital India Gateway Fund
 
   
INVESTMENT OBJECTIVE AND STRATEGIES
 
   
5
  EM Capital India Gateway Fund
7
  Investment Risks
7
  Risks of Investing in Foreign Securities Generally
7
  Risks of Investing Primarily in India
8
  Other Risks of Foreign Investment
 
   
SHAREHOLDER INFORMATION
 
   
8
  Pricing of Fund Shares
9
  Purchasing and Adding to Your Shares
14
  Distribution Arrangements/Sales Charges
18
  Dividends, Distributions and Taxes
 
   
FUND MANAGEMENT
 
   
19
  The Investment Adviser
19
  Portfolio Managers
20
  The Distributor and Administrator
 
   
FINANCIAL HIGHLIGHTS
 
   
21
  Financial Highlights

 


 

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 India-related companies.
 
   
PRINCIPAL
INVESTMENT
   
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, as well as in India-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. The investment adviser believes that by investing a significant portion of the Fund’s assets in Indian small- and mid-cap companies the Fund will benefit by investing early in lesser-known, high-growth companies that may provide higher long-term returns to the Fund. 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 makes 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”). Investing through EM Capital Gateway (Mauritius), Ltd. allows the Fund to take advantage of a India-Mauritius tax treaty, thereby achieving increased tax-efficiency for U.S. investors.
 
   
PRINCIPAL
   
INVESTMENT RISKS:
  Because the value of the Fund’s investments will fluctuate with market 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 India-related firms, the Fund is subject to the political and economic risks associated with investment in India.
 
   
WHO MAY WANT
   
TO INVEST?
  Consider investing in the Fund if you are:
 
  - investing for a long-term goal such as retirement (five-year or longer investment horizon)
 
  - 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

2


 

     
FUND PERFORMANCE:
  The Fund commenced operations on July 23, 2007, and, as a result, has less than a full calendar year of performance. Therefore, no performance information is shown.

3


 

FEES AND EXPENSES
This table describes the
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)
    1.74 %     1.74 %     1.74 %
 
Total Fund Operating Expenses(6)
    3.44 %     3.94 %     2.94 %
 
Fee Waiver and/or Expense Reimbursement(6)
    1.14 %     1.14 %     1.14 %
 
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 “Redemption Fee” 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)   Because the Fund has been in operation for less than six months, Other Expenses are based on estimated amounts for the current fiscal year. The estimated amounts are based on an estimate by the Fund’s investment adviser of average net assets of $8,800,000 for the current fiscal year.
 
(6)   The Adviser has contractually agreed until April 30, 2009 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


 

EXPENSE EXAMPLE
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.
                   
    1   3  
    YEAR   YEARS  
Class A
  $ 721     $ 1,403  
 
Class C
  $ 283     $ 1,097  
 
Class I
  $ 183     $ 802  
Expenses for periods beyond 1 Year assume that the current expense limitation agreement expires and is not renewed. However, if the expense limitation agreement is renewed, the expense of investing in the Fund would be substantially lower.
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 India-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, as well as in India-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 (the “Adviser”) selects securities using its proprietary Quantitative + Qualitative™ investment methodology. This methodology 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 Adviser’s quantitative methodology allows it to efficiently and pro-actively find Indian companies that are attractively priced, providing the Fund with an early investment entry-point for achieving long-

5


 

term growth and income in the Indian market. The Adviser’s proprietary quantitative valuation models systematically analyze both fundamental and investor sentiment indicators for over 3,000 individual Indian companies to identify a small subset of promising investment candidates. The promising candidates are selected from a range of industries, and consist of some larger, well-established firms and some smaller, less well-known firms, that the Adviser forecasts to have higher earnings growth and liquidity than their peers. The Adviser believes that firms deemed attractive by the Adviser’s models are likely to demonstrate stronger price growth based on solid fundamentals that will attract attention from both sell-side analysts and other investors.
The Adviser then subjects attractive candidates to an in-country qualitative assessment and due diligence process prior to recommendation for inclusion in the Fund. The due diligence process considers information such as the quality of management, analysis of key drivers of the Indian economy and sectoral growth trends, and other unique aspects of the target company that the Adviser believes may be overlooked in its valuation. The Adviser also looks at the relationship of any prospective sale or purchase in terms of the overall contribution to both risk and return of the Fund, based on both quantitative and qualitative factors. Based upon all of these factors the decision to invest is made by the Adviser’s Investment Committee.
The Adviser believes that deep local-market knowledge is important for long-term success in emerging markets, particularly in a large and complex country such as India. In-country qualitative research is performed by the Adviser’s New Delhi-based Portfolio Manager and research analysts. The Adviser also believes its location in India’s capital provides greater insights into national policy and regulatory changes that impact investing in India. In addition, the Adviser may consult with its panel of senior advisors comprising leading corporate senior executives, academics and policy-makers.
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 makes 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.
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
 
    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 private investment in public entity investments (PIPES)
 
    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

6


 

    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 (i.e., Indian) and international economic conditions and general market conditions.
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, limited access to capital and may lack management experience. 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 investing involves risks not typically associated with U.S. investments. These risks include, among others, adverse fluctuations in currency exchange rates, and unstable or adverse political, social and economic developments affecting a foreign country. In addition, foreign investing may involve less publicly available or accurate company information, more volatile or less liquid securities markets. differences in the way securities markets operate, and less secure foreign banks or securities depositories than those in the U.S. Investments in foreign countries could be affected by factors not present in the U.S., such as restrictions on receiving the investment proceeds from a foreign country, foreign tax laws, and potential difficulties in enforcing contractual obligations. Foreign accounting may be less transparent than U.S. accounting practices and foreign regulation may be inadequate or irregular.
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 India-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

7


 

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.
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.
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. The Fund’s assets generally are valued at their market value using market quotations. The Fund may use pricing services to determine market value. If market prices are not available or, in the Adviser’s opinion, market prices do not reflect fair value, or if an event occurs after the close of trading on the domestic or foreign exchange or market on which the security is principally traded (but prior to the time the NAV is calculated) that materially affects fair value, the Adviser will value the Fund’s assets at their fair value according to policies approved by the Fund’s Board of Trustees. For example, if trading in a portfolio security is halted and does not

8


 

resume before the Fund calculates its NAV, the Adviser may need to price the security using the Fund’s fair value pricing guidelines. Without a fair value price, short term traders could take advantage of the arbitrage opportunity and dilute the NAV of long term investors. Securities trading on overseas markets present time zone arbitrage opportunities when events effecting portfolio security values occur after the close of the overseas market, bur prior to the close of the U.S. market. Fair valuation of the Fund’s portfolio securities can serve to reduce arbitrage opportunities available to short-term traders, but there is no assurance that fair value pricing policies will prevent dilution of the Fund’s NAV by short-term traders. Fair valuation involves subjective judgments and it is possible that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security. The Fund will invest in other investment companies. The Fund’s NAV is calculated based, in part, upon the market prices of the investment companies in its portfolio, and the prospectuses of those companies explain the circumstances under which they will use fair value pricing and the effects of using fair value pricing.
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.
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.

9


 

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.
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:

10


 

    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.
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
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.

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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.

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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.
CLOSING OF SMALL ACCOUNTS

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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 charge; reduced sales charges available. A contingent deferred sales charge of 1% applies to redemptions made within 12 months following certain purchases made without a sales charge.   No front-end sales charge or contingent sales charge.   No front-end sales charge or contingent sales charge.
 
           
Distribution and Service (12b-1) Fee
  Subject to annual distribution and shareholder servicing fees of up to 0.50% of the fund’s total assets applicable to Class A shares.   Subject to annual distribution and shareholder servicing fees of up to 1.00% of the fund’s total assets applicable to Class C shares.   No distribution and shareholder servicing fees.
 
           
Fund Expenses
  Lower annual expenses than Class C shares; higher annual expenses than Class I shares.   Higher annual expenses than Class A and Class I shares.   Lower annual expenses than Class A and Class C shares.
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:

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                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.
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) The Fund’s distributor or any of its affiliates;
(2) Trustees or officers of the Fund;
(3) Officers, directors and employees of the Adviser and their immediate families;
(4) Employees of investment dealers and registered investment advisers authorized to sell the Fund;

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(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.
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 the Adviser 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.
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.

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The Adviser, at its expense, may provide compensation to dealers in connection with sales of shares of the Fund.
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.
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.
The Fund reserves the right to modify or eliminate the redemption fee or waivers at any time and will give 60 days prior written notice of any material changes, unless otherwise provided by law. The redemption fee policy may be modified or amended in the future.

17


 

In addition to the circumstances noted above, the Fund reserves the right to grant additional exceptions based on such factors as system limitations, operational limitations, contractual limitations and further guidance from the SEC or other regulators.
If your shares are held through an investment representative in an omnibus or other group account, the Fund relies on the investment representative to assess the redemption fee on underlying shareholder accounts. The application of redemption fees and exemptions may vary and certain intermediaries may not apply the exceptions listed above. If you invest through a financial intermediary, please contact your intermediary for more information regarding when redemption fees will be applied to the redemption of your shares.
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.
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.

18


 

FUND MANAGEMENT
THE INVESTMENT ADVISER
The Fund’s investment adviser is EM Capital Management, LLC (www.emcapitalmanagement.com), located in the United States at 920 Country Club Drive, Suite 1-E, Moraga, California 94556. 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 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, Dhruba Gupta and Seth R. Freeman, serve as Co-Portfolio Managers. 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 for the fiscal period ended December 31, 2007.
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:
DHRUBA GUPTA, CA. Mr. Gupta has served as Co-Portfolio Manager for the Fund since July 2007. 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 from April, 2002 to April, 2004. Mr. Gupta has also previously consulted on India policy, infrastructure and investment strategies to both foreign and India corporations as well as the 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. Mr. Gupta is a resident of New Delhi and Virginia.
SETH R. FREEMAN. Mr. Freeman has served as Co-Portfolio Manager of the Fund since July 2007. 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, a position he has held since 2003. 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).

19


 

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
Foreside Distribution Services, L.P. is the Fund’s distributor located at 100 Summer Street, Boston, MA 02110. Citi Fund Services Ohio, Inc. is the Fund’s administrator located at 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).

20


 

FINANCIAL HIGHLIGHTS
The financial highlights table sets forth the per share operating performance data for a share of capital stock outstanding, total return, ratios to average net assets and other supplemental data for the period indicated.
The financial highlights table is intended to help you understand the Fund’s financial performance for the past five years (or if shorter, the period of the Fund’s operation). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by Ernst & Young, LLP, whose report, along with the Fund’s financial statements, are included in the annual report, which is available upon request.
                 
    Class A Shares   Class I Shares
    Period ended   Period ended
    December 31, 2007 (c)   December 31, 2007 (c)
 
Net Asset Value, Beginning of Period
  $ 10.00     $ 10.00  
 
Investment Activities:
               
 
Net Investment Income
    0.05       0.10  
Net Realized and Unrealized Gains on Investments
    3.14       3.12  
Total From Investment Activities
    3.19       3.22  
 
Net Asset Value, End of Period
  $ 13.19     $ 13.22  
 
Total Return (a) (b)
    31.90 %     32.20 %
 
Ratio/Supplementary Data:
               
 
Net Assets, End of Period (000’s)
  $ 296     $ 3  
 
Ratio of Expenses to Average Net Assets (e)
    2.23 %     1.77 %
Ratio of Net Investment Income to Average Net Assets (e)
    1.48 %     2.01 %
Ratio of Expenses to Average Net Assets (e) (d)
    374.21 %     374.23 %
Portfolio Turnover (b)
    9.82 %     9.82 %
 
(a)   Total return calculations do not include any sales or redemption charges.
 
(b)   Not annualized.
 
(c)   Inception date July 23, 2007.
 
(d)   During the period, certain fees were contractually reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratio would have been as indicated.
 
(e)   Annualized for periods less than one year.

21


 

EM Capital India Gateway Fund
Notice of Privacy Policy & Practices
          EM Capital India Gateway Fund recognizes and respects the privacy expectations of our customers1. We provide this notice to you so that you will know what kinds of information we collect about our customers and the circumstances in which that information may be disclosed to third parties who are not affiliated with the EM Capital India Gateway Fund.
Collection of Customer Information
          We collect nonpublic personal information about customers from the following sources:
    Account Applications and other forms, which may include a customer’s name, address, social security number, and information about a customer’s investment goals and risk tolerance.
 
    Account History, including information about the transactions and balances in a customer’s accounts; and
 
    Correspondence, written, telephonic or electronic between a customer and the EM Capital India Gateway Fund or service providers to the EM Capital India Gateway Fund.
Disclosure of Customer Information
          We may disclose all of the information described above to certain third parties who are not affiliated with the EM Capital India Gateway Fund under one or more of these circumstances:
    As Authorized — if you request or authorize the disclosure of the information.
 
    As Permitted by Law — for example, sharing information with companies who maintain or service customer accounts for the EM Capital India Gateway Fund is permitted and is essential for us to provide shareholders with necessary or useful services with respect to their accounts.
 
    Under Joint Agreements — we may also share information with companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements.
Security of Customer Information
          We require service providers of the EM Capital India Gateway Fund:
    to maintain policies and procedures designed to assure only appropriate access to, and the use of information about customers of the EM Capital India Gateway Fund.
 
    to maintain physical, electronic and procedural safety standards that comply with federal standards to guard non public personal information of customers of the EM Capital India Gateway Fund.
          We will adhere to the policies and practices described in this notice regardless of whether you are a current or former shareholder of the EM Capital India Gateway Fund.
THIS IS NOT PART OF THE PROSPECTUS
 
1   For purposes of this notice, the terms “customer” or “customers” includes both shareholders of the EM Capital India Gateway Fund and individuals who provide nonpublic personal information to the EM Capital India Gateway Fund, but do not invest in the EM Capital India Gateway Fund.

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Class A:
  Ticker EMINX   CUSIP  268678109
Class C:
  Ticker N/A   CUSIP  268678208
Class I:
  Ticker EMIIX   CUSIP  268678307
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.

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EM Capital
India Gateway Fund
AN INVESTMENT PORTFOLIO OF
THE COVENTRY FUNDS TRUST
STATEMENT OF ADDITIONAL INFORMATION
July 15, 2008
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 incorporates the Fund’s financial statements and related notes and auditor’s reports from the Fund’s annual report for the fiscal year ended December 31, 2007, and 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.

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TABLE OF CONTENTS
         
INVESTMENT OBJECTIVE AND POLICIES
    3  
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
    3  
MATTERS WITH RESPECT TO INVESTMENT IN INDIA
    21  
INVESTMENT RESTRICTIONS
    23  
PORTFOLIO TURNOVER
    24  
NET ASSET VALUE
    24  
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
    26  
MANAGEMENT OF THE TRUST
    26  
TRUSTEES AND OFFICERS
    26  
INVESTMENT ADVISER
    30  
PORTFOLIO MANAGER INFORMATION
    31  
CODE OF ETHICS
    32  
PORTFOLIO TRANSACTIONS
    32  
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING SERVICES
    34  
DISTRIBUTOR
    34  
CUSTODIAN
    37  
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    38  
LEGAL COUNSEL
    38  
ADDITIONAL INFORMATION
    38  
DESCRIPTION OF SHARES
    38  
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES
    39  
ADDITIONAL TAX INFORMATION
    40  
PERFORMANCE CALCULATIONS
    46  
PERFORMANCE COMPARISONS
    50  
PRINCIPAL SHAREHOLDERS
    51  
PROXY VOTING
    52  
DISCLOSURE OF FUND PORTFOLIO HOLDINGS
    52  
MISCELLANEOUS
    53  
FINANCIAL STATEMENTS
    54  

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STATEMENT OF ADDITIONAL INFORMATION
EM CAPITAL INDIA GATEWAY FUND
AN INVESTMENT PORTFOLIO OF 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 (“Shares” or a “Share”) 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 India-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. Investing in securities issued by foreign companies, such as Indian and India-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.

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     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 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 currently regulated, in some respects, by Indian securities authorities, but they may become subject to additional investment limitations imposed by the Government of India in order to limit their use by Indian citizens and non-Indian entities.
     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

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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 rated. The Fund does not have any rating criteria applicable to its 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 on percentage basis. 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

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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.
     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

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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, the 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 the 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 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 initial deposit requirement 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.

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     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 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).

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     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 $250 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 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,

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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. 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

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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 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

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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 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.

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     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.

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     Writing Covered Put Options. The Fund may write covered put options (as defined below). 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. 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

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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 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

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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.
     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 or maturity 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

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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.
     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 Fund will be those guaranteed by domestic and foreign banks having, at the time of investment, capital, surplus, and undivided profits in excess of $100,000,000 (as of the date of their most recently published financial statements).
     Certificates of deposit are negotiable certificates issued against funds deposited in a commercial bank or a savings and loan association for a definite period of time and earning a specified return. Certificates of deposit and 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

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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 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 or 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.

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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 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

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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 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.

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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 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 19 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

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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 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,

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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:
     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;

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     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.
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

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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 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.

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     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 Foreside Distribution Services, L.P. (the “Distributor” or “Foreside”), and Foreside has agreed to use appropriate efforts to solicit all purchase orders. In addition to purchasing Shares directly from the Distributor, Shares may be purchased through procedures established by the Distributor 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.
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.”

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INDEPENDENT TRUSTEES
                         
                NUMBER OF    
                PORTFOLIOS    
        TERM OF   PRINCIPAL   IN FUND    
    POSITION(S)   OFFICE* AND   OCCUPATION(S)   COMPLEX**   OTHER
NAME, ADDRESS   HELD WITH   LENGTH OF TIME   DURING PAST FIVE   OVERSEEN BY   DIRECTORSHIPS
AND AGE   THE FUND   SERVED   YEARS   TRUSTEE   HELD BY TRUSTEE
Walter B. Grimm
3435 Stelzer Road
Columbus, OH 43219
Date of Birth:
6/30/1945
  Trustee   Indefinite;
4/97 to present
  Co-Owner, Leigh Investments, Inc. (Real Estate) — January, 2006 to present; Employee of BISYS Fund Services Ohio, Inc. — June, 1992 to September, 2005     11     The Coventry Group Performance Funds Trust
 
                       
Diane E. Armstrong
3435 Stelzer Road
Columbus, OH 43219
Date of Birth:
7/02/1964
  Trustee   Indefinite;
2/06 to present
  Principal of King Dodson Armstrong Financial Advisors, Inc. — August, 2003 to present; Director of Financial Planning, Hamilton Capital Management —April, 2000 to August, 2003     11     The Coventry Group
 
                       
James H. Woodward
9201 University
City Blvd.
Charlotte, NC 28223
Date of birth:
11/24/1939
  Trustee   Indefinite;
4/97 to present
  Chancellor Emeritus, University of North Carolina at Charlotte —August, 2005 to present; Chancellor, University of North Carolina at Charlotte — July, 1989 to July, 2005     11     The Coventry Group
 
                       
Michael Van Buskirk
3435 Stelzer Road
Columbus, OH
43219
Date of Birth:
2/22/1947
  Trustee and Chairman of the Board   Indefinite;
4/97 to present
  Chief Executive Officer, Ohio Bankers Assoc. (Industry Trade Association) — May, 1991 to present     11     The Coventry Group
 
                       
Maurice Stark
7662 Cloister Drive
Columbus, OH 43235
Date of Birth:
9/23/1935
  Trustee   Indefinite;
3/04 to present
  Consultant, (part-time) Battelle Memorial Institute — January, 1995 to present     11     The Coventry Group
 
*   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    
NAME, ADDRESS AND   POSITION(S) HELD WITH   LENGTH OF TIME   PRINCIPAL OCCUPATION(S)
DATE OF BIRTH   TRUST   SERVED   DURING PAST FIVE YEARS
C. David Bunstine
3435 Stelzer Road
Columbus, OH 43219
Date of Birth: 7/30/1965
  President   Indefinite;
June, 2007 to present
  Employee of Citi Fund Services Ohio, Inc. (formerly BISYS Fund Services Ohio, Inc) (October, 1993 to present)
 
           
Eric Phipps**
3435 Stelzer Road
Columbus, OH 43219
Date of Birth 6/20/1971
  Anti-Money
Laundering Officer
and Chief Compliance
Officer
  Indefinite;
November, 2006 to present
  Employee of Citi Fund Services Ohio, Inc. (formerly BISYS Fund Services Ohio, Inc.) (June, 2006 to present); United States Securities and Exchange Commission (October, 2004 to May, 2006); Director — Compliance Services, BISYS Fund Services Ohio, Inc. (December, 1995 to October, 2004)

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        TERM OF OFFICE* AND    
NAME, ADDRESS AND   POSITION(S) HELD WITH   LENGTH OF TIME   PRINCIPAL OCCUPATION(S)
DATE OF BIRTH   TRUST   SERVED   DURING PAST FIVE YEARS
Robert W. Silva
3435 Stelzer Road
Columbus, OH 43219
Date of Birth: 8/15/1966
  Treasurer   Indefinite;
February, 2008 to present
  Senior Vice President, Citi Fund Services Ohio, Inc. (September, 2007 to present); Assistant Vice President, Citizens Advisers, Inc., (May, 2002 to August, 2007)
 
           
Curtis Barnes
100 Summer Street
Boston, MA 02110
Date of Birth: 9/24/1953
  Secretary   Indefinite;
May, 2007 to present
  Vice President-Legal Services, Citi Fund Services Ohio, Inc. (formerly BISYS Fund Services Ohio, Inc.) (May, 1995 to present)
 
*   Officers hold their positions until their resignation or removal.
 
**   Mr. Phipps serves as Chief Compliance Officer. His compensation is reviewed and approved by the Board of Trustees and paid by Citi Fund Services Ohio, Inc. pursuant to a Compliance Services Agreement between Citi Fund Services Ohio, Inc. and the Trust. The fee paid pursuant to the Compliance Services Agreement by the Fund is not indicative of the total compensation received by Mr. Phipps.
     The officers of the Trust are “interested persons” (as defined in the 1940 Act) and receive no compensation directly from the Fund 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 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 registered 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 registered public accounting firm; 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

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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 July 1, 2008, 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, 2007, 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:
INTERESTED TRUSTEES
None
INDEPENDENT TRUSTEES
         
        AGGREGATE DOLLAR RANGE
        OF EQUITY SECURITIES
        IN ALL REGISTERED
        INVESTMENT COMPANIES
    DOLLAR RANGE OF EQUITY   OVERSEEN BY TRUSTEE IN
    SECURITIES IN THE   FAMILY OF INVESTMENT
NAME OF TRUSTEE   FUND*   COMPANIES
Walter B. Grimm
  None   $1—$10,000
Diane E. Armstrong
  None   None
Maurice G. Stark
  None   $10,001—$50,000
Michael M. Van Buskirk
  None   $50,001—$100,000
James H. Woodward
  None   None
     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. Foreside may receive fees pursuant to the Distribution and Shareholder Services Plan. Citi Fund Services Ohio, Inc. (“Citi”) receives fees from the Fund for acting as administrator and transfer agent and for providing certain fund accounting services. Messrs. Bunstine, Phipps, Barnes and Silva are employees of Citi.
     Trustees of the Trust not affiliated with Citi 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 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.
     For the fiscal year ended December 31, 2007 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:

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            PENSION OR           TOTAL COMPENSATION
    AGGREGATE   RETIREMENT BENEFITS   ESTIMATED ANNUAL   FROM THE FUND AND
    COMPENSATION FROM   ACCRUED AS PART OF   BENEFITS UPON   FUND COMPLEX* PAID
NAME OF TRUSTEE   THE FUND*   FUNDS EXPENSES   RETIREMENT   TO THE TRUSTEES
James H. Woodward
  $ 1     $ 0     $ 0     $ 23,250  
Michael Van Buskirk
  $ 1     $ 0     $ 0     $ 25,500  
Walter B. Grimm
  $ 1     $ 0     $ 0     $ 23,500  
Maurice Stark
  $ 1     $ 0     $ 0     $ 25,500  
Diane E. Armstrong
  $ 1     $ 0     $ 0     $ 25,500  
 
*   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, 2009, 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 Adviser incurred the expense.
     Pursuant to the Investment Advisory Agreement and the Expense Limitation Agreement the Adviser earned the following amounts during the fiscal year ended December 31, 2007:
                         
    Gross Investment   Investment Advisory    
Fiscal   Advisory Fees   Fees Waived or   Net Investment
Year   Earned   Reimbursed   Advisory Fees Paid
2007
  $ 999     $ 999     $ 0  
     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

30


 

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
     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 December 31, 2007:
                                                         
    OTHER           OTHER                            
    REGISTERED           POOLED                           TOTAL
    INVESTMENT   ASSETS   INVESTMENT   ASSETS           ASSETS   ASSETS
PORTFOLIO   COMPANY   MANAGED   VEHICLE   MANAGED   OTHER   MANAGED   MANAGED
MANAGER   ACCOUNTS   ($ MILLIONS)   ACCOUNTS1   ($ MILLIONS)   ACCOUNTS   ($ MILLIONS)   ($ MILLIONS)
DHRUBA GUPTA
    0     $ 0       4     $ 0       6     $ 1.5     $ 1.5  
SETH R. FREEMAN
    0     $ 0       4     $ 0       7     $ 3.0     $ 3.0  
 
1   Three Feeder Funds in an Offshore Master/Feeder arrangement pay advisory fees based on the performance of the fund
     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 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

31


 

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 managers in the Fund as of December 31, 2007, was as follows:
     
PORTFOLIO MANAGER   DOLLAR RANGE
DHRUBA GUPTA
  None
SETH R. FREEMAN
  $100,001 to $500,000
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 Fund, where possible, will deal directly with dealers who make a market in the securities involved except in those circumstances where better price and execution are available elsewhere.
     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

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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 Fund 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 (“Soft-Dollars”). In the event the Adviser does follow such a practice, it will do so on a basis which is fair and equitable to the Fund.
     While the Adviser generally seeks competitive commissions, the Fund may not necessarily pay the lowest commission available on each brokerage transaction, for reasons discussed above.
     During the fiscal year ended December 31, 2007, the Fund paid no brokerage commissions because its sole investment is in shares of the EM Capital India Master Fund, Ltd., which the Fund buys without an commission or brokerage charges.
     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, Foreside, 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

33


 

to price and available investments will be allocated as to amount in a manner which the Adviser believes to be equitable to the Fund and such other 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
     Citi serves as administrator(“Administrator”), transfer agent (“Transfer Agent”) and accountant (“Accountant”) for the Fund pursuant to a Master Services Agreement dated as of April 30, 2007 and amended as of December 10, 2007 (the “Master Services Agreement”). As Administrator, Citi 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 all 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. Prior to its acquisition by a subsidiary of Citigroup Inc. on August 1, 2007, Citi was known as BISYS Fund Services Ohio, Inc.
     Citi also serves as transfer agent for the Fund pursuant to the Master Services Agreement. Pursuant to the Master Services Agreement, Citi, 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.

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     In addition, Citi provides certain fund accounting services to the Fund pursuant to the Master Services Agreement. Under the Master Services Agreement, Citi maintains the accounting books and records for the Fund, including journals containing an itemized daily record of all purchases and sales of portfolio securities, all receipts and disbursements of cash and all other debits and credits, general and auxiliary ledgers reflecting all asset, liability, reserve, capital, income and expense accounts, including interest accrued and interest received, and other required separate ledger accounts; maintains a monthly trial balance of all ledger accounts; performs certain accounting services for the Fund, including calculation of the net asset value per share, calculation of the dividend and capital gain distributions, if any, and of yield, reconciliation of cash movements with the 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.
     Citi 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.
     Pursuant to the Master Services Agreement, Citi, as the Fund’s Administrator, Transfer Agent and Accountant earned the following amounts during the fiscal year ended December 31, 2007:
                         
Fiscal            
Year   Administrative Fees   Transfer Agent Fees   Fund Accountant Fees
2007
  $ 18,863     $ 57,499     $ 19,771  
     Unless sooner terminated as provided therein, the Master Services Agreement’s term expires on July 27, 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 Citi.
     The Agreement provides that Citi 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 Citi of its obligations and duties thereunder.

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DISTRIBUTOR
     The Distributor, located at 100 Summer Street, Boston, MA 02110, serves as the principal underwriter for the Fund’s shares pursuant to a Distribution Agreement dated as of August 1, 2007. From May 11, 2007 to July 31, 2007, BISYS Fund Services, Limited Partnership (“Prior Distributor”), located at 3435 Stelzer Road, Columbus, Ohio 43219, served as the principal underwriter of the Fund’s shares pursuant to a prior agreement dated as of April 30, 2007. Unless otherwise terminated, the Distribution Agreement will continue in effect for successive annual periods if, as to the Trust, such continuance is approved at least annually (i) by the Trust’s Board of Trustees or by the vote of a majority of the outstanding shares of the Trust, 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. The Distributor is obligated to sell the Shares of the Fund on a best efforts basis only against purchase orders for the shares. Shares of the Fund are offered to the public on a continuous basis.
     The Distributor 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. The Distributor receives annual compensation of $25,000 plus certain out of pocket expenses under the Distribution Agreement with the Fund.
     For the fiscal year ended December 31, 2007, the Distributor and the Prior Distributor received no underwriting commissions.
     The Fund 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 and Class C 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 relating to Class A and Class C Shares. Payments to such Service Organizations may be made pursuant to agreements entered into with the Distributor. The Plan authorizes the Fund to make payments to the Distributor in an amount not to exceed, on an annual basis, 0.50% of the 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

36


 

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.
     The Distributor 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.
     For the fiscal year ending December 31, 2007, the Fund incurred $410 in 12b-1 fees of which $298 was paid out and $112 is an account payable liability. The following table summarizes the amounts actually paid out by the Fund relating to the following types of activities:
                 
Activity   Amount   Allocation
Advertising/Marketing
  $ 0       0 %
Printing and Mailing Prospectus to potential investors
  $ 0       0 %
Compensation to Underwriter
  $ 151       51 %
Compensation to Broker-Dealers
  $ 147       49 %
Compensation to Sales Personnel
  $ 0       0 %
Interest, carrying, or other financing charges
  $ 0       0 %
Other
  $ 0       0 %
CUSTODIAN

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     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. The Custodian earned $4,991 in custody fees during the fiscal year ended December 31, 2007.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Briggs, Bunting & Dougherty, LLP, Two Penn Center Plaza, Suite 820, Philadelphia, PA 19102-1732, the independent accountants for the Fund, will perform 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 Statement of Additional Information (the “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

38


 

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.
     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 registered public accounting firm, 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

39


 

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.
ADDITIONAL TAX INFORMATION
     Set forth below is a discussion of certain U.S. federal income tax issues concerning the Fund 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 its 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 which 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

40


 

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.
     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. Under current law, net long-term capital gains and certain qualified dividend income of individual taxpayers is subject to a 15% maximum U.S. federal income tax rate. 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.

41


 

     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.
     Subject to certain limitations, 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 may 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 received deduction. Investment income received by the Fund from sources within foreign countries may be subject to foreign income taxes (including income taxes withheld at source). If more than 50% of the value of the Fund’s total assets at the close of its taxable year consists of stocks or securities of foreign corporations, the Fund may elect, for U.S. federal income tax purposes, to pass through to its Shareholders the benefit of taking either a foreign tax credit or a deduction for foreign taxes to the extent of each shareholder’s proportionate share of foreign income taxes paid by the Fund. If the Fund makes this election, Shareholders will be required to include in gross income their proportionate share of such foreign income taxes paid by the Fund, and, subject to certain limitations, Shareholders may claim, for U.S. federal income tax purposes, either a credit or deduction for such taxes.
     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 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. Net long-term capital gains of individual taxpayers are taxable at reduced U.S. federal income tax rates. 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

42


 

(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. 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.

43


 

     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.
     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

44


 

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 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, under 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. Prior law provided that dividends paid by a fund to certain foreign shareholders were exempt from U.S. withholding tax to the extent such dividends were attributable to qualified interest or net short-term capital gains, provided that the fund elected to follow certain procedures. However, this exemption expired on December 31, 2007 and is no longer effective. Legislation has been proposed that may reinstate and extend this exemption from withholding tax for one year, but it is unclear whether such proposed legislation will

45


 

be enacted. Note that the 15% rate of tax applicable to certain dividends (discussed above) does not apply to dividends paid to foreign shareholders subject to U.S. withholding tax. 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 disregarded entity 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.
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:
             
 
  Yield = 2 (   a - b
 
cd
  + 1) to the 6th power - 1

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  Where:   a=dividends and interest earned during the period.
 
       
 
      b=expenses accrued for the period (net of reimbursements).
 
       
 
      c=the average daily number of Shares outstanding during the period that were entitled to receive dividends.
 
       
 
      d=maximum offering price per Share on the last day of the period.
     For the purpose of determining net investment income earned during the period (variable “a” in the formula), dividend income on equity securities held by the Fund is recognized by accruing 1/360 of the stated dividend rate of the security each day that the security is in the Fund. Interest earned on any debt obligations held by the Fund is calculated by computing the yield to maturity of each obligation held by the Fund based on the market value of the obligation (including actual accrued interest) at the close of business on the last Business Day of each month, or, with respect to obligations purchased during the month, the purchase price (plus actual accrued interest) and dividing the result by 360 and multiplying the quotient by the market value of the obligation (including actual accrued interest) in order to determine the interest income on the obligation for each day of the subsequent month that the obligation is held by the Fund. For purposes of this calculation, it is assumed that each month contains 30 days. The maturity of an obligation with a call provision is the next call date on which the obligation reasonably may be expected to be called or, if none, the maturity date. With respect to debt obligations purchased at a discount or premium, the formula generally calls for amortization of the discount or premium. The amortization schedule will be adjusted monthly to reflect changes in the market values of such debt obligations.
     Undeclared earned income will be subtracted from the net asset value per share (variable “d” in the formula). Undeclared earned income is the net investment income which, at the end of the base period, has not been declared as a dividend, but is reasonably expected to be and is declared as a dividend shortly thereafter.
     During any given 30-day period, the Adviser 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.

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     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:
             
 
  Average Annual Total Return = (   ERV
 
P
  ) 1/n - 1
         
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:
             
 
  Aggregate Total Return = (   ERV
 
P
  ) 1/n - 1
         
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

48


 

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:
             
 
  Average Annual Total Return After Taxes = [ ATVD
 
P
  to the 1/nth power -1]
(after taxes on distributions)
     
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:
             
 
  Average Annual Total Return After Taxes= [( ATVDR
 
P
) to the 1/nth power -1]
     (after taxes on distributions and redemptions)
     
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

49


 

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 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.

50


 

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
     A principal shareholder is any person who owns (either of record or beneficially) 5% or more of the outstanding shares of a Fund. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities of a Fund or acknowledges the existence of such control. As a controlling shareholder, each of these persons could control the outcome of any proposal submitted to the shareholders for approval, including changes to the Fund’s fundamental policies or the terms of the management agreement with the Adviser. The following tables set forth information concerning such persons that, to the knowledge of the Trust’s Board of Trustees, owned, of record or beneficially, at least five percent of a Fund’s Shares as of July 1,2008:
Class A Shares
             
    Percent of    
Name and Address   Ownership   Nature of Ownership
Seth R. Freeman and M. Maureen Freeman
21 Broadmoor Street
Moraga, CA 94556
    42.29 %   Beneficial
Robert V. Trask and Mary L. Trask
3212 Falcon Point
Springfield, IL 62711
    19.52 %   Beneficial
TD Ameritrade Clearing, Inc.
1005 North Ameritrade Place
Bellevue, NE 68005
    12.46 %   Record
Francis W. Jump, Jr. and Joan Marie Jump
2007 Jump Family Trust
3615 Powell Drive
Lafayette, CA 94549
    6.61 %   Beneficial
E*Trade Clearing LLC
34 Exchange Place
Jersey City, NJ 07311
    7.55 %   Record
Class I Shares
             
    Percent of    
Name and Address   Ownership   Nature of Ownership
Seth R. Freeman and M. Maureen Freeman
21 Broadmoor Street
Moraga, CA 94556
    100.00 %   Beneficial

51


 

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 is available (1) without charge, upon request, by calling 1-866-611-4967, 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)

52


 

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.
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.

53


 

     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
     Financial statements for the Trust with respect to the Fund, since commencement of its operations through December 31, 2007, including notes thereto and the report thereon of Ernst & Young LLP (the Fund’s independent registered public accounting firm) are incorporated by reference from the Trust’s 2007 Annual Report filed on Form N-CSR. A copy of the report delivered with this SAI should be retained for future reference.

54


 

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)(4)
(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 (4)
(e)(1) Distribution Agreement between Registrant and Foreside Distributions Services, L.P. is filed herewith
(f) Not Applicable
(g) Form of Custody Agreement between Registrant and Union Bank of California (4)
(h)(1) Amendment to Master Services Agreement between the Registrant and Citi Fund Services Ohio, Inc. (formerly BISYS Fund Services Ohio, Inc.) is filed herewith
(h)(2) Master Services Agreement between the Registrant and BISYS Fund Services Ohio, Inc. (4)
(h)(3) Expense Limitation Agreement dated March 1, 2007 (4)
(h)(4) Expense Limitation Agreement dated March 1, 2008 is filed herewith.
(h)(5) Compliance Services Agreement Amendment is filed herewith
(i)(1) Consent of Counsel is filed herewith
(i)(2) Consent of Independent Registered Public Accounting Firm is filed herewith
(j) Not Applicable

 


 

(k) Not Applicable
(l) Not Applicable
(m) Service and Distribution Plan (4)
(n) Not Applicable
(o) Not Applicable
(p)(1) Code of Ethics of Registrant(3)
(p)(2) Code of Ethics of EM Capital Management, LLC (4)
(p)(3) Code of Ethics of Foreside Distribution Services, L.P. 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.
 
4.   Filed with Post-Effective Amendment No. 33 filed May 10, 2007.
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.

 


 

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) Foreside Distribution Services, L.P. (“Foreside” or the “Distributor”) acts as principal underwriter for the following investment companies;
American Independence Funds Trust
The Bjurman, Barry Funds
Capital One Funds
Commonwealth International Series Trust
The Coventry Group
Coventry Funds Trust
First Focus Funds, Inc.
HSBC Advisor Funds Trust
HSBC Investor Funds
Lou Holland Trust
Pacific Capital Funds (including CATS and Hawaiian Trust)
PNC Funds
RMR Series Trust
STI Classic Funds
STI Classic Variable Trust
The 3800 Fund
The Blue Fund Group
Vintage Mutual Funds, Inc.
Foreside is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority. Foeside’s main address is 100 Summer St. 15TH FLOOR, Boston, Massachusetts 02110.
(b) Information about Directors and Officers of Foreside is as follows:

 


 

         
Name   Address   Position
Mark S. Redman
  3435 Stelzer Rd., Columbus, OH 43219   President and Director
Elliott Dobin
  100 Summer St., Boston, MA 02110   Secretary
Wayne A. Rose
  3435 Stelzer Rd., Columbus, OH 43219   Co-Chief Compliance Officer
Linda C. Carley
  100 Summer St, Boston, MA 02110   Chief Compliance Officer
James E. (Ed) Pike
  3435 Stelzer Rd., Columbus, OH 43219   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, 920 Country Club Drive, Suite 1-E, Moraga, California 94556 (records relating to its function as investment adviser for the Fund); Citi Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219 (records relating to its functions as general manager, administrator, transfer agent and accountant), Foreside Distribution Services, L.P. 3435 Stelzer Road, Columbus, OH 43219 (records relating to its functions as distributor) 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

 


 

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. 34 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 14th day of July, 2008.
         
THE COVENTRY FUNDS TRUST
 
   
By:   /s/ C. David Bunstine      
  C. David Bunstine     
  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
 
Walter B. Grimm*
  Trustee    July 14, 2008
 
       
/s/ Diane E. Armstrong
 
Diane E. Armstrong*
  Trustee    July 14, 2008
 
       
/s/ Maurice G. Stark
 
Maurice G. Stark*
  Trustee    July 14, 2008
 
       
/s/ Michael M. Van Buskirk
 
Michael M. Van Buskirk*
  Trustee    July 14, 2008
 
       
/s/ James H. Woodward
 
James H. Woodward*
  Trustee    July 14, 2008
 
       
/s/ C. David Bunstine
 
C. David Bunstine
  President
(Principal Executive Officer)
  July 14, 2008

 


 

         
Signature   Title   Date
 
       
/s/ Robert W. Silva
 
Robert W. Silva
  Treasurer
(Principal Financial and Accounting Officer)
  July 14, 2008
 
       
/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.

 


 

EXHIBIT INDEX
     
Exhibit No.   Description
23(e)(1)
  Distribution Agreement
 
   
23(h)(1)
  Amendment to Master Services Agreement
 
   
23(h)(4)
  Expense Limitation Agreement
 
   
23(h)(5)
  Compliance Services Agreement
 
   
23(i)(1)
  Consent of Counsel
 
   
23(i)(2)
  Consent of Independent Registered Public Accounting Firm
 
   
23(p)(3)
  Foreside Code of Ethics

 

EX-99.E1 2 l32429aexv99we1.htm EX-99.E1 EX-99.E1
Exhibit 23(e)(1)
DISTRIBUTION AGREEMENT
     AGREEMENT made as of August 1, 2007 between The Coventry Funds Trust (the “Company”), having an office at 3435 Stelzer Road, Columbus, OH 43219, and Foreside Distribution Services, LP (“Distributor”), having an office at 100 Summer Street, Boston, Massachusetts 02110.
     WHEREAS, the Company is an open-end management investment company, organized as a 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 the Distributor 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 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.
     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 FINRA 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 FINRA, including, without limitation, Rule 2830 of the FINRA 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.
     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 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 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 in accordance with the provisions of the Company’s Prospectus, Amended and Restated Declaration of Trus, 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 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 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.
     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.
     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.
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 through February 29, 2008. 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 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 [funds to insert name and address]; and if to Distributor, to it at 100 Summer Street, Boston, Massachusetts 02110, Attention: Broker Dealer Chief Compliance Officer, 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.
     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 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.
         
THE COVENTRY FUNDS TRUST
 
   
By:   /s/ David Bunstine      
  Name:   David Bunstine     
  Title:   President     

 


 

         
FORESIDE DISTRIBUTION SERVICES, LP
 
   
By:   Brian K Bey      
  Name:   Brian K. Bey     
  Title:   President     

 


 

         
SCHEDULE A
FUNDS
EM Capital India Gateway Fund

 


 

SCHEDULE B
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-l 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 0.75% 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
 
 
     
     
     

 


 

         
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 representative’s meeting examination requirements) and their related registrations and fees, additional personnel, registrations, 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 expenses for such services, including: (a) all costs to support additional personnel; (b) regulatory fees including FINRA 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.

 


 

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;
 
  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 FINRA, 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 FINRA based on Distributor’s revenue and/or the number of Distributor’s registered representatives.

 


 

SCHEDULE D
SPECIAL DISTRIBUTION SERVICES AND FEES
             
Services   Fees
 
           
1. Wholesaling Personnel Services   Wholesaling Personnel Services Fees
 
           
Wholesaling Personnel may be external wholesalers and/or internal wholesalers.   For each individual constituting the Wholesaling Personnel employed by the Distributor pursuant to this Agreement, the Distributor shall receive annually an amount equal to the sum of:
 
           
Services include soliciting support of the Funds with selling broker dealers; participating in promotional meetings, presentations, conferences and other forums; identifying high potential personnel of the Adviser and selling broker dealers; and assisting with mail solicitations and literature fulfillment.   (i) all compensation paid annually by the Distributor to the employee attributable to services rendered to the Trust; plus

(ii) a management oversight fee equal to:

      (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) to the extent related directly to services rendered to the Trust.
 
           
    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.

 


 

             
Services   Fees
 
           
2. Registration of Personnel:   Registration of Personnel Fees:
 
           
Services include 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.   $5,000 per registration per year, plus out-of-pocket expenses.

$5,000 per Office of Supervisory Jurisdiction per year.

 

EX-99.H1 3 l32429aexv99wh1.htm EX-99.H1 EX-99.H1
23(h)(1)
AMENDMENT TO
MASTER SERVICES AGREEMENT
     AMENDMENT made as of the 10th day of Decemberr, 2007, between COVENTRY FUNDS TRUST, an Ohio business trust (the “Company”) and CITI FUND SERVICES OHIO, INC., an Ohio corporation, formerly known as BISYS Fund Services Ohio, Inc. (“Citi”), to that certain Master Services Agreement, dated April 30, 2007, between the Company and Citi (as in effect on the date hereof, the “Agreement”). All capitalized terms used but not defined herein shall have the meanings given to them in the Agreement.
WHEREAS, pursuant to the Agreement, Citi performs certain administration, fund accounting and transfer agency services for the EM Capital investment portfolios of the Company managed by EM Capital Management, LLC (individually referred to herein as a “Fund” and collectively as the “Funds”);
WHEREAS, Citi and the Company wish to enter into this Amendment to the Agreement in order to amend the annual fee adjustment provisions of the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter contained and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Citi hereby agree as follows:
1. Amendments.
Schedule E of the Agreement is amended by deleting the paragraph under the heading “Annual Fee Adjustment” in its entirety and replacing it with the following:
“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 lesser 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%.”
2. Representations and Warranties.

 


 

     (a) The Company represents (i) that it has full power and authority to enter into and perform this Amendment, (ii) that this Amendment, and all information relating thereto has been presented to and reviewed by the Board of Trustees of the Company (the “Board”), and (iii) that the Board has approved this Amendment.
     (b) Citi represents that it has full power and authority to enter into and perform this Amendment.
     3. Miscellaneous.
     (a) This Amendment supplements and amends the Agreement. The provisions set forth in this Amendment supersede all prior negotiations, understandings and agreements bearing upon the subject matter covered herein, including any conflicting provisions of the Agreement or any provisions of the Agreement that directly cover or indirectly bear upon matters covered under this Amendment.
     (b) Each reference to the Agreement in the Agreement (as it existed prior to this Amendment) and in every other agreement, contract or instrument to which the parties are bound, shall hereafter be construed as a reference to the Agreement as amended by this Amendment. Except as provided in this Amendment, the provisions of the Agreement remain in full force and effect. No amendment or modification to this Amendment shall be valid unless made in writing and executed by both parties hereto.
     (c) Paragraph headings in this Amendment are included for convenience only and are not to be used to construe or interpret this Amendment.
     (d) This Amendment 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.
* * * * *

 


 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed all as of the day and year first above written.
         
  COVENTRY FUNDS TRUST
 
 
  By:   /s/ David Bunstine    
    Name:   David Bunstine   
    Title:   President   
 
  CITI FUND SERVICES OHIO, INC.
 
 
  By:   /s/ Fred Naddaff Jr.    
    Name:   Fred Naddaff Jr.   
    Title:   President   

 

EX-99.H4 4 l32429aexv99wh4.htm EX-99.H4 EX-99.H4
Exhibit 23(h)(4)
EXPENSE LIMITATION AGREEMENT
     THIS AGREEMENT, dated as of March 1, 2008, 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, 2009, 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/ David Bustine       By:   /s/ Seth R. Freeman    
                     
 
  Name:   David Bunstine           Name:   Seth R. Freeman    
 
  Title:   President           Title:   Chief Executive Officer & LLC Manager    

 


 

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-99.H5 5 l32429aexv99wh5.htm EX-99.H5 EX-99.H5
Exhibit 23(h)(5)
SECOND AMENDMENT
TO
COMPLIANCE SERVICES AGREEMENT
     AMENDMENT (“Amendment”) dated as of May 17,2007, between The Coventry Funds Trust (formerly known as Variable Insurance Funds) (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 October 1,2004, (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 promises 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 shall be effective as of May 1,2007.
 
  4.   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.
 
  5.   Except as expressly set forth herein, all other provisions of the Agreement shall remain unchanged and in full force and effect.
 
  6.   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.
         
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     
 

2

EX-99.I1 6 l32429aexv99wi1.htm EX-99.I1 EX-99.I1
23(i)(1)
Thompson Hine
10 W. Broad Street, Suite 700
Columbus, Ohio 43215
July 11, 2008
The Coventry Funds Trust
3435 Stelzer Road
Columbus, OH 43219
Re: The Coventry Funds Trust, File Nos. 33-81800 and 811-8644
Gentleman:
A legal opinion (the “Legal Opinion”) that we prepared was filed with Post-Effective Amendment No. 33 to the Registration Statement (the “Registration Statement”) of The Coventry Funds Trust (the “Trust”). We hereby give you our consent to incorporate by reference the Legal Opinion into Post-Effective Amendment No. 34 to the Registration Statement (the “Amendment”), and consent to all references to us in the Amendment.
Very truly yours,
/s/ Thompson Hine
THOMPSON HINE LLP

 

EX-99.I2 7 l32429aexv99wi2.htm EX-99.I2 EX-99.I2
23(i)(2) Consent of Independent Registered Public Accounting Firm
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the references to our firm under the captions “Financial Highlights” in the Prospectus and “Financial Statements” in the Statement of Additional Information and to the incorporation by reference of our report dated June 30, 2008 on the financial statements and financial highlights included in the Annual Report to Shareholders for the fiscal year ended December 31, 2007 of EM Capital India Gateway Fund of The Coventry Funds Trust, in Post-Effective Amendment Number 34 to the Registration Statement (Form N-1A, No. 33-81800).
/s/ Ernst & Young LLP
Columbus, Ohio
July 11, 2008

 

EX-99.P3 8 l32429aexv99wp3.htm EX-99.P3 EX-99.P3
23(p)(3)
FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
August 1, 2007
INTRODUCTION
     This Code of Ethics (the “Code”) has been adopted by each of the broker-dealers listed in Exhibit A (each, a “Company” and collectively, the “Companies”). This Code pertains to the Companies’ distribution services to registered management investment companies or series thereof, as well as those funds for which certain employees of the Companies (or an affiliate thereof) serve as an officer or director of a registered investment company ( “Fund Officer”), (each a “Fund” and as set forth on Appendix B1). This Code:
  1.   establishes standards of professional conduct;
 
  2.   establishes standards and procedures for the detection and prevention of activities by which persons having knowledge of the investments and investment intentions of a Fund may abuse their fiduciary duties to the Fund; and
 
  3.   addresses other types of conflict of interest situations.
Definitions of underlined terms are included in Appendix C.
     Each Company, through its Principal Executive Officer or President, may impose internal sanctions should Access Persons of any Company (as identified on Appendix D) violate these policies or procedures. A registered broker-dealer and its personnel may be subject to various regulatory sanctions, including censure, suspension, fines, expulsion or revocation of registration for violations of securities rules, industry regulations and the firm’s internal policies and procedures. In addition, negative publicity associated with regulatory investigations and private lawsuits can negatively impact and severely damage business reputation.
     Furthermore, failure to comply with this Code is a very serious matter and may result in internal disciplinary action being taken. Such action can include, among other things, warnings,
 
1   Each Company is adopting this Code pursuant to Rule 17j-1 with respect to certain funds that it distributes. Adopting and approving a Rule 17j-1 code of ethics with respect to a Fund, as well as the Code’s administration, by a principal underwriter is not required unless:
    the principal underwriter is an affiliated person of the Fund or of the Fund’s adviser, or
 
    an officer, director, or general partner of the principal underwriter serves as an officer, director or general partner of the Fund or of the Fund’s investment adviser.
A Fund Officer is permitted to report as an Access Person under this Code with respect to the Funds listed on Appendix B.

 


 

monetary fines, disgorgement of profits, suspension or termination. In addition to sanctions, violations may result in referral to civil or criminal authorities where appropriate.
     Should Access Persons require additional information about this Code or have ethics-related questions, please contact the Review Officer, as defined under Section 8 below, directly.
1. STANDARDS OF PROFESSIONAL CONDUCT
     Each Company forbids any Access Person from engaging in any conduct that is contrary to this Code. In addition, due to their positions, each Company also forbids any Access Person from engaging in any conduct that is contrary to each Company’s Insider Trading Policy. Furthermore, certain persons subject to the Code are also subject to other restrictions or requirements that affect their ability to open securities accounts, effect securities transactions, report securities transactions, maintain information and documents in a confidential manner and other matters relating to the proper discharge of their obligations to the Company or to a Fund.
     Each Company has always held itself and its employees to the highest ethical standards. Although this Code is only one manifestation of those standards, compliance with its provisions is essential. Each Company adheres to the following standards of professional conduct, as well as those specific policies and procedures discussed throughout this Code:
     (a) Fiduciary Duties. Each Company and its Access Persons are fiduciaries and shall
    act solely for the benefit of the Funds; and
 
    place each Fund’s interests above their own
     (b) Compliance with Laws. Access Persons shall maintain knowledge of and comply with all applicable federal and state securities laws, rules and regulations, and shall not knowingly participate or assist in any violation of such laws, rules or regulations.
     It is unlawful for Access Persons to use any information concerning a security held or to be acquired by a Fund, or their ability to influence any investment decisions, for personal gain or in a manner detrimental to the interests of a Fund.
     Access Persons shall not, directly or indirectly in connection with the purchase or sale of a security held or to be acquired by a Fund:
  (i)   employ any device, scheme or artifice to defraud a Fund or engage in any manipulative practice with respect to a Fund;
 
  (ii)   make to a Fund any untrue statement of a material fact or omit to state to a Fund a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
 
  (iii)   engage in any act, practice, or course of business that operates or would operate as a fraud or deceit upon a Fund; or

 


 

  (iv)   engage in any manipulative practice with respect to securities, including price manipulation.
     (c) Corporate Culture. Access Persons, through their words and actions, shall act with integrity, encourage honest and ethical conduct, and adhere to a high standard of business ethics.
     (d) Professional Misconduct. Access Persons shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness, or professional competence. Access Persons shall not knowingly misrepresent, or cause others to misrepresent, facts about a Company to a Fund, a Fund’s shareholders, regulators or any member of the public. Disclosure in reports and documents should be fair and accurate.
     (e) Disclosure of Conflicts. As a fiduciary, each Company has an affirmative duty of care, loyalty, honesty and good faith to act in the best interests of a Fund. Compliance with this duty can be achieved by trying to avoid conflicts of interest and by fully disclosing all material facts concerning any conflict that does arise with respect to any Fund. Access Persons must try to avoid situations that have even the appearance of conflict or impropriety.
     Access Persons shall support an environment that fosters the ethical resolution of, and appropriate disclosure of, conflicts of interest.
     This Code prohibits inappropriate favoritism of one Fund over another that would constitute a breach of fiduciary duty. Access Persons shall comply with any prohibitions on activities imposed by a Company if a conflict of interest exists.
     (f) Undue Influence. Access Persons shall not cause or attempt to cause any Fund to purchase, sell or hold any security in a manner calculated to create any personal benefit to them.
     (g) Confidentiality and Protection of Material Nonpublic Information. Information concerning the identity of portfolio holdings and financial circumstances of a Fund is confidential. Access Persons are responsible for safeguarding nonpublic information about portfolio recommendations and fund holdings. Except as required in the normal course of carrying out their business responsibilities and as permitted by the Funds’ policies and procedures, Access Persons shall not reveal information relating to the investment intentions or activities of any Fund, or securities that are being considered for purchase or sale on behalf of any Fund.
     Each Company shall be bound by a Fund’s policies and procedures with regard to disclosure of an investment company’s identity, affairs and portfolio holdings. The obligation to safeguard such Fund information would not preclude Access Persons from providing necessary information to, for example, persons providing services to a Company or a Fund’s account such as brokers, accountants, custodians and fund transfer agents, or in other circumstances when the

 


 

Fund consents, as long as such disclosure conforms to the Fund’s portfolio holdings disclosure policies and procedures.
     In any case, Access Persons shall not:
    trade based upon confidential, proprietary information where Fund trades are likely to be pending or imminent; or
 
    use knowledge of portfolio transactions of a Fund for personal benefit or the personal benefit of others
     (h) Personal Securities Transactions. All personal securities transactions shall be conducted in such a manner as to be consistent with this Code and to avoid any actual or potential conflict of interest or any abuse of any Access Person’s position of trust and responsibility.
     (i) Gifts. Access Persons shall not accept or provide anything in excess of $100.00 (per individual per year) or any other preferential treatment, in each case as a gift, to or from any broker-dealer or other entity with which a Company or a Fund does business;
     (j) Service on Boards. Access Persons shall not serve on the boards of directors of publicly traded companies, absent prior authorization based upon a determination by the Review Officer (or if the Review Officer, by the Principal Executive Officer or President of the Company) that the board service would be consistent with the interests of the Company, a Fund and its shareholders.
     (k) Prohibition Against Market Timing. Access Persons shall not engage in market timing of shares of Reportable Funds (a list of which are provided in Appendix E). For purposes of this section, a person’s trades shall be considered ‘market timing’ if made in violation of any stated policy in the Fund’s prospectus.
11.
12.     2. WHO IS COVERED BY THIS CODE
     All Access Persons, in each case only with respect to those Funds as listed on Appendix B, shall abide by this Code. Access Persons are required to comply with specific reporting requirements as set forth in Sections 3 and 4 of this Code.
     12.1     3. PROHIBITED TRANSACTIONS

 


 

     (a) Blackout Period. Access Persons shall not purchase or sell a Reportable Security in an account in their name, or in the name of others in which they hold a beneficial ownership interest, if they had actual knowledge at the time of the transaction that, during the 24 hour period immediately preceding or following the transaction, the security was purchased or sold or was considered for purchase or sale by a Fund.
     (b) Requirement for Pre-clearance. Access Persons must obtain prior written approval from the designated Review Officer before:
  (i)   directly or indirectly acquiring beneficial ownership in securities in an initial public offering for which no public market in the same or similar securities of the issue has previously existed; and
 
  (ii)   directly or indirectly acquiring beneficial ownership in securities in a private placement.
     In determining whether to pre-clear the transaction, the Review Officer designated under Section 8 shall consider, among other factors, whether such opportunity is being offered to the Access Person by virtue of their position with the Fund.
     (c) Fund Officer Prohibition. No Fund Officer shall directly or indirectly seek to obtain information (other than that necessary to accomplish the functions of the office) from any Fund portfolio manager regarding (i) the status of any pending securities transaction for a Fund or (ii) the merits of any securities transaction contemplated by the Fund Officer.
4. REPORTING REQUIREMENTS OF ACCESS PERSONS
     (a) Reporting. Access Persons must report the information described in this Section with respect to transactions in any Reportable Security in which they have, or by reason of such transaction acquire, any direct or indirect beneficial ownership. They must submit the appropriate reports to the designated Review Officer or his or her designee, unless they are otherwise required by a Fund, pursuant to a Code of Ethics adopted by the Fund, to report to the Fund or another entity.
     (b) Exceptions from Reporting Requirement of Section 4. Access Persons need not submit:
  (i)   any report with respect to securities held in accounts over which the Access Person had no direct or indirect influence or control;
 
  (ii)   a quarterly transaction report with respect to transactions effected pursuant to an automatic investment plan. However, any transaction that overrides the pre-set schedule or allocations of the automatic investment plan must be included in a quarterly transaction report;

 


 

  (iii)   a quarterly transaction report if the report would duplicate information contained in broker trade confirmations or account statements that the Company holds in its records so long as the Company receives the confirmations or statements no later than 30 days after the end of the applicable calendar quarter.
     (c) Initial Holding Reports. No later than ten (10) days after a person becomes an Access Person , the person must report the following information:
  (i)   the title, type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Reportable Security (whether or not publicly traded) in which the person has any direct or indirect beneficial ownership as of the date they became an Access Person;
 
  (ii)   the name of any broker, dealer or bank with whom the person maintains an account in which any securities were held for the Access Person’s direct or indirect benefit as of the date they became an Access Person; and
     (iii) the date that the report is submitted by the Access Person.
The information must be current as of a date no more than 45 days prior to the date the person becomes an Access Person.
     (d) Quarterly Transaction Reports. No later than thirty (30) days after the end of a calendar quarter, each Access Person must submit a quarterly transaction report which report must cover, at a minimum, all transactions during the quarter in a Reportable Security (whether or not publicly traded) in which the Access Person had any direct or indirect beneficial ownership, and provide the following information:
  (i)   the date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Reportable Security involved;
 
  (ii)   the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
 
  (iii)   the price of the Reportable Security at which the transaction was effected;
 
  (iv)   the name of the broker, dealer or bank with or through which the transaction was effected; and
 
  (v)   the date that the report is submitted.
     (e) New Account Opening; Quarterly New Account Report. Each Access Person shall provide written notice to the Review Officer prior to opening any new account with any entity through which a Reportable Securities (whether or not publicly traded) transaction may be effected for which the Access Person has direct or indirect beneficial ownership.
     In addition, no later than thirty (30) days after the end of a calendar quarter, each Access Person must submit a quarterly new account report with respect to any account established by

 


 

such a person in which any Reportable Securities (whether or not publicly traded) were held during the quarter for the direct or indirect benefit of the Access Person. The Quarterly New Account Report shall cover, at a minimum, all accounts at a broker-dealer, bank or other institution opened during the quarter and provide the following information:
  (1)   the name of the broker, dealer or bank with whom the Access Person has established the account;
 
  (2)   the date the account was established; and
 
  (3)   the date that the report is submitted by the Access Person.
     (f) Annual Holdings Reports. Annually, each Access Person must report the following information (which information must be current as of a date no more than forty-five (45) days before the report is submitted):
  (i)   the title, type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Reportable Security (whether or not publicly traded) in which the Access Person had any direct or indirect beneficial ownership;
 
  (ii)   the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities are held for the Access Person’s direct or indirect benefit; and
 
  (iii)   the date that the report is submitted by the Access Person.
     (g) Alternative Reporting. The submission to the Review Officer of duplicate broker trade confirmations and statements on all securities transactions required to be reported under this Section shall satisfy the reporting requirements of Section 4. The annual holdings report may be satisfied by confirming annually, in writing, the accuracy of the information delivered by, or on behalf of, the Access Person to the Review Officer and recording the date of the confirmation.
     (h) Report Qualification. Any report may contain a statement that the report shall not be construed as an admission by the person making the report that he or she has any direct or indirect beneficial ownership in the Reportable Securities to which the report relates.
  (i)   Providing Access to Account Information. Covered Persons will promptly:
 
  (i)   provide full access to a Fund, its agents and attorneys to any and all records and documents which a Fund considers relevant to any securities transactions or other matters subject to the Code;
 
  (ii)   cooperate with a Fund, or its agents and attorneys, in investigating any securities transactions or other matter subject to the Code;
 
  (iii)   provide a Fund, its agents and attorneys with an explanation (in writing if requested) of the facts and circumstances surrounding any securities transaction or other matter subject to the Code; and

 


 

  (iv)   promptly notify the Review Officer or such other individual as a Fund may direct, in writing, from time to time, of any incident of noncompliance with the Code by anyone subject to this Code.
     (j) Confidentiality of Reports. Transaction and holding reports will be maintained in confidence, expect to the extent necessary to implement and enforce the provisions of this Code or to comply with requests for information from government agencies.
13.     5. ACKNOWLEDGEMENT AND CERTIFICATION OF COMPLIANCE
     Each Access Person is required to acknowledge in writing, initially and annually (in the form of Attachment A), that the person has received, read and understands the Code (and in the case of any amendments thereto, shall similarly acknowledge such amendment) and recognizes that they are subject to the Code. Further, each such person is required to certify annually that they have:
    read, understood and complied with all the requirements of the Code;
 
    disclosed or reported all personal securities transactions pursuant to the requirements of the Code; and
 
    not engaged in any prohibited conduct.
If a person is unable to make the above representations, they shall report any violations of this Code to the Review Officer.
14.     6. REPORTING VIOLATIONS
     Access Persons shall report any violations of this Code promptly to the Review Officer, unless the violations implicate the Review Officer, in which case the individual shall report to the Principal Executive Officer or President of the Company, as appropriate. Such reports will be confidential, to the extent permitted by law, and investigated promptly and appropriately. Retaliation against an individual who reports a violation is prohibited and constitutes a further violation of this Code.
     Reported violations of the Code will be investigated and appropriate actions will be taken. Types of reporting that are required include, but are not limited to:
    Noncompliance with applicable laws, rules and regulations
 
    Fraud or illegal acts involving any aspect of the firm’s business
 
    Material misstatements in regulatory filings, internal books and records, Fund records or reports
 
    Activity that is harmful to a Fund, including Fund shareholders
 
    Deviations from required controls and procedures that safeguard a Fund or a Company

 


 

     Access Persons should seek advice from the Review Officer with respect to any action or transaction that may violate this Code and refrain from any action or transaction that might lead to the appearance of a violation. Access Persons should report apparent or suspected violations in addition to actual or known violations of this Code.
7. TRAINING
     Training with respect to the Code will occur periodically and all Access Persons are required to attend any training sessions or read any applicable materials. Training may include, among other things (1) periodic orientation or training sessions with new and existing personnel to remind them of their obligations under the Code and/or (2) certifications that Access Persons have read and understood the Code, and require re-certification that the person has re-read, understands and has complied with the Code.
8. REVIEW OFFICER
     (a) Duties of Review Officer. The Chief Compliance Officer of the Company has been appointed by the President of the Company as the Review Officer to:
  (i)   review all securities transaction and holdings reports and shall maintain the names of persons responsible for reviewing these reports;
 
  (ii)   identify all persons subject to this Code and promptly inform each person of the requirements of this Code and provide them with a copy of the Code and any amendments;
 
  (iii)   compare, on a quarterly basis, all Reportable Securities transactions with each Fund’s completed portfolio transactions to determine whether a Code violation may have occurred;
 
  (iv)   maintain signed acknowledgments and certifications by each person who is then subject to this Code, in the form of Attachment A;
 
  (v)   identify persons who are Access Persons of each Company and inform those persons of their requirements to obtain prior written approval from the Review Officer prior to directly or indirectly acquiring beneficial ownership of a security in any private placement or initial public offering.
 
  (vi)   ensure that Access Persons receive adequate training on the principles and procedures of this Code.
 
  (vii)   review, at least annually, the adequacy of this Code and the effectiveness of its implementation
 
  (viii)   submit a written report to a Fund’s Board and the Company’s senior management as described in Section 8(e) and (f), respectively.

 


 

     The President or Principal Executive Officer shall review the Review Officer’s personal transactions; the Review Officer shall review the Compliance Manager’s personal transactions. The President or Principal Executive Officer shall assume the responsibilities of the Review Officer in his or her absence. The Review Officer may delegate responsibilities to the Compliance Manager.
     (b) Potential Trade Conflict. When there appears to be a Reportable Securities transaction that conflicts with the Code, the Review Officer shall request a written explanation of from the Access Person with regard to the transaction. If, after post-trade review, it is determined that there has been a violation of the Code, a report will be made by the Review Officer with a recommendation of appropriate action to the President or Principal Executive Officer of the Company and a Fund’s Board of Trustees (or Directors).
     (c) Required Records. The Review Officer shall maintain and cause to be maintained:
  (i)   a copy of any code of ethics adopted by each Company that is in effect, or at any time within the past five (5) years was in effect, in an easily accessible place;
 
  (ii)   a record of any violation of any code of ethics, and of any action taken as a result of such violation, in an easily accessible place for at least five (5) years after the end of the fiscal year in which the last entry was made on any such report, the first two (2) years in an easily accessible place;
 
  (i)   a copy of each holding and transaction report (including duplicate confirmations and statements) made by anyone subject to this Code as required by Section 4 for at least five (5) years after the end of the fiscal year in which the report is made, the first two (2) years in an easily accessible place;
 
  (ii)   a record of all written acknowledgements and certifications by each Access Person who is currently, or within the past five (5) years was, an Access Person (records must be kept for 5 years after individual ceases to be a Access Person under the Code);
 
  (iv)   a list of all persons who are currently, or within the past five years were , required to make reports or who were responsible for reviewing these reports pursuant to any code of ethics adopted by each Company, in an easily accessible place;
 
  (v)   a copy of each written report and certification required pursuant to Section 8(e) of this Code for at least five (5) years after the end of the fiscal year in which it is made, the first two (2) years in an easily accessible place;
 
  (vi)   a record of any decision, and the reasons supporting the decision, approving the acquisition of securities by Access Persons under Section 3(b) of this Code, for at least five (5) years after the end of the fiscal year in which the approval is granted; and
 
  (vii)   a record of any decision, and the reasons supporting the decision, granting an Access Person a waiver from, or exception to, the Code for at least five (5) years after the end of the fiscal year in which the waiver is granted.
     (d) Post-Trade Review Process. Following receipt of trade confirms and statements, transactions will be screened by the Review Officer (or her designee) for the following:

 


 

  (i)   same day trades: transactions by Access Persons occurring on the same day as the purchase or sale of the same security by a Fund for which they are an Access Person.
 
  (ii)   fraudulent conduct: transaction by Access Persons which, within the most recent 15 days, is or has been held by a Fund or is being or has been considered by a Fund for purchase by a Fund.
 
  (iii)   market timing of Reportable Funds: transactions by Access Persons that appear to be market timing of Reportable Funds
 
  (iv)   other activities: transactions which may give the appearance that an Access Person has executed transactions not in accordance with this Code or otherwise reflect patterns of abuse.
     (e) Submission to Fund Board.
  (i)   The Review Officer shall, at a minimum, annually prepare a written report to the Board of Trustees (or Directors) of a Fund listed in Appendix B that
  A.   describes any issues under this Code or its procedures since the last report to the Trustees, including, but not limited to, information about material violations of the code or procedures and sanctions imposed in response to the material violations; and
 
  B.   certifies that each Company has adopted procedures reasonably necessary to prevent Covered Persons from violating this Code.
  (ii)   The Review Officer shall ensure that this Code and any material amendments are approved by the Board of Trustees (or Directors) for those funds listed in Appendix B.
     (f) Report to the President or Principal Executive Officer. The Review Officer shall report to the President or Principal Executive Officer of regarding his or her annual review of the Code and shall bring material violations to the attention of senior management.

 


 

FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
APPENDIX A
The following broker/dealers are subject to the Foreside Distributors, LLC Code of Ethics*:
Foreside Distribution Services, L.P.
BNY Hamilton Distributor, Inc.
Funds Distributor, Inc.
Performance Funds Distributor, Inc.
 
*   The companies listed on this Appendix A may be amended from time to time, as required.

 


 

FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
APPENDIX B
FUNDS COVERED BY THE CODE
 
American Independence Funds
Bjurman, Barry Funds
BNY Hamilton Funds
BNY/Ivy Multi-Strategy Hedge Fund LLC
Capital One Funds
Commonwealth International Series Trust
Coventry Group (consisting of the First Source Monogram, Pathmaster, UST Boston, and Signal)
Coventry Funds Trust (formerly Variable Insurance Funds)
Excelsior Funds
First Focus Funds
GMO Trust
HSBC Investor Funds
HSBC Advisers Funds
Merrimac Series
Ivy Long/Short Hedge Fund LLC
Legacy Funds
Mercantile Funds, Inc.
Munder Series Trust
Munder Series Trust II
Pacific Capital (including CATS and Hawaiian Trust)
Paypal (x.com)
Performance Funds
STI Classic Funds
STI Classic Variable Insurance Funds
The Blue Fund Group
Vintage Mutual Funds

 


 

FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
APPENDIX C
DEFINITIONS
(a) Access Person:
  (i)(1)    of a Company means each director or officer of the Companies who in the ordinary course of business makes, participates in or obtains information regarding the purchase or sale of Reportable Securities for a Fund or whose functions or duties as part of the ordinary course of business relate to the making of any recommendation to a Fund regarding the purchase or sale of Reportable Securities.
 
  (ii)(2)     of a Fund, whereby an employee or agent of a Company serves as an officer of a Fund (“Fund Officer”). Such Fund Officer is an Access Person of a Fund and is permitted to report under this Code unless otherwise required by a Fund’s Code of Ethics.
 
  (iii)   of a Company includes anyone else specifically designated by the Review Officer.
(b) Beneficial Owner shall have the meaning as that set forth in Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, except that the determination of direct or indirect beneficial ownership shall apply to all Reportable Securities that a Covered Person owns or acquires. A beneficial owner of a security is any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest (the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities) in a security. A Covered Person is presumed to be a beneficial owner of securities that are held by his or her immediate family members sharing the Covered Person’s household.
(c) Indirect pecuniary interest in a security includes securities held by a person’s immediate family sharing the same household. Immediate family means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships).
(d) Control means the power to exercise a controlling influence over the management or policies of an entity, unless this power is solely the result of an official position with the company. Ownership of 25% or more of a company’s outstanding voting securities is presumed to give the holder thereof control over the company. This presumption may be rebutted by the Review Officer based upon the facts and circumstances of a given situation.

 


 

(e) Purchase or sale includes, among other things, the writing of an option to purchase or sell a Reportable Security.
(f) Reportable Fund (see Appendix E) means any fund that triggers the Company’s compliance with a Rule 17j-1 Code of Ethics or any fund for which an employee or agent of the Company serves as a Fund Officer.
(g) Reportable Security means any security such as a stock, bond, future, investment contract or any other instrument that is considered a ‘security’ under Section 2(a)(36) of the Investment Company Act of 1940, as amended, except:
  (i)   direct obligations of the Government of the United States;
 
  (ii)   bankers’ acceptances and bank certificates of deposits;
 
  (iii)   commercial paper and debt instruments with a maturity at issuance of less than 366 days and that are rated in one of the two highest rating categories by a nationally recognized statistical rating organization;
 
  (iv)   repurchase agreements covering any of the foregoing;
 
  (v)   shares issued by money market mutual funds;
 
  (vi)   shares of SEC registered open-end investment companies (other than a Reportable Fund); and
 
  (vii)   shares of unit investment trusts that are invested exclusively in one or more open-end funds, none of which are Reportable Funds.
Included in the definition of Reportable Security are:
    Options on securities, on indexes, and on currencies;
 
    All kinds of limited partnerships;
 
    Foreign unit trusts, UCITs, SICAVs and foreign mutual funds; and
 
    Private investment funds, hedge funds and investment clubs
(h) Security held or to be acquired by the Fund means
  (i)   any Reportable Security which, within the most recent 15 days (x) is or has been held by the applicable Fund or (y) is being or has been considered by the applicable Fund or its investment adviser for purchase by the applicable Fund; and
  (i)   and any option to purchase or sell, and any security convertible into or exchangeable for, a Reportable Security.

 


 

FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
APPENDIX D
List of Access Persons
             
Rule 17j-1 Access       Code of Ethics Access    
Persons   As of Date   Person to Listed Fund   Reportable Fund
Andrew Byer
  August 1, 2007   Commonwealth
International
Series Trust
  Commonwealth
International Series
Trust
Linda Carley   August 1, 2007   Capital One Funds   Capital One Funds
Wayne Rose   August 1, 2007   BNY Hamilton Funds   BNY Hamilton Funds, Inc.

 


 

FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
APPENDIX E
REPORTABLE FUNDS
 
American Independence Funds
Bjurman, Barry Funds
BNY Hamilton Funds
BNY/Ivy Multi-Strategy Hedge Fund LLC
Capital One Funds
Commonwealth International Series Trust
Coventry Group (consisting of the First Source Monogram, Pathmaster, UST Boston, and Signal)
Coventry Funds Trust (formerly Variable Insurance Funds)
Excelsior Funds
First Focus Funds
GMO Trust
HSBC Investor Funds
HSBC Advisers Funds
Merrimac Series
Ivy Long/Short Hedge Fund LLC
Legacy Funds
Mercantile Funds, Inc.
Munder Series Trust
Munder Series Trust II
Pacific Capital (including CATS and Hawaiian Trust)
Paypal (x.com)
Performance Funds
STI Classic Funds
STI Classic Variable Insurance Funds
The Blue Fund Group
Vintage Mutual Funds

 


 

FORESIDE DISTRIBUTORS, LLC
CODE OF ETHICS
ATTACHMENT A
ACKNOWLEDGMENT
I understand that I am subject to the Code of Ethics (the “Code”) adopted by each Company. I have read and I understand the current Code of Ethics, and will comply with it in all respects. In addition, I certify that I have complied with the requirements of the Code in that I have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of the Code.
         
     
 
Signature
 
 
Date
   
 
       
 
Printed Name
       
This form must be completed and returned to the Compliance Department:
Foreside Distributors, LLC
ATTN: Review Officer
100 Summer Street
Boston, MA 02110
Received By:                                                             
Date:                                         

 

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