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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</Table>
THE COVENTRY GROUP
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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KENSINGTON INVESTMENT GROUP, INC.
4 ORINDA WAY, SUITE 220D
ORINDA, CALIFORNIA 94563
January 15, 2003
Dear Shareholder:
As the President of Kensington Investment Group, Inc. ("Kensington"),
the investment adviser to Kensington Strategic Realty Fund, Kensington Select
Income Fund and Kensington Real Estate Securities Fund (the "Funds"), I AM
WRITING TO YOU REGARDING THE ATTACHED PROXY THAT SEEKS YOUR APPROVAL FOR A
PROPOSED TAX-FREE REORGANIZATION TRANSACTION INVOLVING THE FUNDS
("REORGANIZATION").
While we encourage you to read the full proxy, please note the
following:
o THE REORGANIZATION WILL NOT RESULT IN ANY CHANGE IN THE NAME,
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGY,
INVESTMENT ADVISER, PORTFOLIO MANAGERS OR INDEPENDENT
ACCOUNTANTS OF ANY OF THE FUNDS.
o WE THINK THIS REORGANIZATION OFFERS THE FUNDS THE OPPORTUNITY
TO OBTAIN GREATER OPERATING EFFICIENCIES, WHICH SHOULD BENEFIT
ALL SHAREHOLDERS.
o KENSINGTON INVESTMENT GROUP WILL BEAR ALL EXPENSES ASSOCIATED
WITH THE REORGANIZATION, INCLUDING EXPENSES ASSOCIATED WITH
THE SOLICITATION OF PROXIES.
o THE BOARD OF TRUSTEES OF THE COVENTRY GROUP HAS UNANIMOUSLY
RECOMMENDED THE REORGANIZATION TO SHAREHOLDERS.
The Funds are currently each a series of The Coventry Group, an
investment company organized as a Massachusetts business trust. In addition to
Kensington's real estate mutual funds, The Coventry Group also includes several
other non-Kensington managed mutual funds. After the completion of the
Reorganization, Kensington's real estate mutual Funds would become the initial
three series of The Kensington Funds, a new Delaware statutory trust comprised
only of Kensington's real estate mutual Funds (the "New Trust").
PLEASE TAKE A FEW MINUTES TO REVIEW THIS PROXY STATEMENT AND SIGN AND
RETURN THE PROXY CARD TODAY.
WE ASK THAT YOU VOTE PROMPTLY IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF
FURTHER SOLICITATION.
On behalf of my colleagues at Kensington, I would like to take this
opportunity to review for you the primary factors that influenced our decision
to recommend the Reorganization to the Board of Trustees of The Coventry Group.
In the three year period from September 1999, when the Strategic Realty Fund
first commenced investment operations, through September 2002, by which time the
Select Income Fund had also
commenced operations, the two Funds had grown, in the aggregate, to over $500
million in net assets. We concluded, therefore, that it would be in the best
interests of the Funds and their shareholders to reorganize the Funds as part of
an investment company that is focused solely on Kensington managed investment
funds, and the New Trust is intended to be just such an entity. Three members of
Kensington's senior management team are proposed to become Trustees of the New
Trust and will thus take on an active role in the affairs of the New Trust. Each
of these three Kensington Trustee candidates have extensive experience and
backgrounds rooted in real estate securities portfolio investment management.
It is proposed that they be joined on the Board of the New Trust by four
independent Trustees who possess complementary business expertise in order to
round out the overall effectiveness of the Board.
We believe that the approval of the Reorganization will result in
greater opportunities for operational efficiencies as a result of the focus on
Kensington managed investments by the New Trust, and, based in large part upon
our recommendation, the Board of Trustees of The Coventry Group has unanimously
recommended the Reorganization to shareholders as a result of their careful
consideration of our recommendation and the interests of the shareholders of the
Funds.
Accordingly, because your current Board of Trustees has unanimously
recommended that shareholders of each Fund vote "FOR" the proposal, we are
hopeful that you will indeed vote in favor of this important matter by returning
your proxy card in the enclosed postage-paid envelope. Should you have any
questions, regarding the proxy, please feel free to call Georgeson Shareholder
Communications, Inc., at (866) 609-2981 and they will be happy to answer any
questions you may have.
Should you prefer to vote your shares in person, a shareholder meeting
is scheduled to be held at 10 a.m. Eastern Time on March 14, 2003, at the office
of the Funds, 3435 Stelzer Road, Columbus, Ohio 43219.
PLEASE RESPOND -- WE ASK THAT YOU VOTE PROMPTLY IN ORDER TO AVOID THE ADDITIONAL
EXPENSE OF FURTHER SOLICITATION.
Sincerely,
John Kramer
President
Kensington Investment Group, Inc.
KENSINGTON STRATEGIC REALTY FUND
KENSINGTON SELECT INCOME FUND
KENSINGTON REAL ESTATE SECURITIES FUND
EACH A SERIES OF
THE COVENTRY GROUP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1 (877) 945-3863
------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 14, 2003
------------
To the Shareholders:
The Coventry Group, a Massachusetts business trust (the "Trust"), will
hold a special meeting of the shareholders ("Meeting") of Kensington Strategic
Realty Fund, Kensington Select Income Fund, and Kensington Real Estate
Securities Fund (collectively, the "Funds," and each individually, a "Fund") at
the office of the Trust, 3435 Stelzer Road, Columbus, Ohio 43219 on March 14,
2003 at 10:00 a.m., Eastern Time, for the following purposes:
o To approve a proposed Agreement and Plan of Reorganization, in
the form set forth in Exhibit A to the attached Proxy
Statement, pursuant to which the Funds would be reorganized as
separate series of The Kensington Funds, a new Delaware
statutory trust ("New Trust").
o To consider and act upon any other business as may properly
come before the Meeting and any adjournments thereof.
You are entitled to vote at the Meeting and any adjournment(s) if you
owned shares of any of the Funds at the close of business on December 31, 2002.
Whether or not you plan to attend the Meeting in person, please vote your
shares. In addition to voting by mail you may also vote by either telephone or
via the Internet, as follows:
TO VOTE BY TELEPHONE: TO VOTE BY INTERNET:
=========================================================== ====================================================
1) Read the Proxy Statement and have your Proxy card at 1) Read the Proxy Statement and have your Proxy
hand. card at hand.
2) Call the 1-800 number that appears on your Proxy card. 2) Go to the website, www.proxyvote.com
3) Enter the control number set forth on the 3) Enter the control number set forth on
Proxy card and follow the simple instructions. the Proxy card and follow the simple
instructions.
- -------------------------------------------------------------------------------------------------------------------
We encourage you to vote by telephone or via the Internet using the
control number that appears on your enclosed proxy card. Use of telephone or
Internet voting will reduce the time and costs associated with this proxy
solicitation. Whichever method you choose, please read the enclosed proxy
statement carefully before you vote.
PLEASE RESPOND -- WE ASK THAT YOU VOTE PROMPTLY IN
ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER
SOLICITATION.
YOUR VOTE IS IMPORTANT.
By Order of the Board of Trustees
of The Coventry Group,
George L. Stevens
Secretary
KENSINGTON STRATEGIC REALTY FUND
KENSINGTON SELECT INCOME FUND
KENSINGTON REAL ESTATE SECURITIES FUND
EACH A SERIES OF
THE COVENTRY GROUP
------------
PROXY STATEMENT
------------
MEETING OF SHAREHOLDERS
This proxy statement is being furnished in connection with the
solicitation by the Board of Trustees of The Coventry Group (the "Trust") of
proxies to be used at a special meeting of the shareholders ("Meeting") of the
Kensington Strategic Realty Fund, Kensington Select Income Fund, and Kensington
Real Estate Securities Fund (each a "Fund" and collectively, the "Funds") to be
held at 10 a.m. Eastern Time on March 14, 2003 at the office of the Funds,
located at 3435 Stelzer Road, Columbus, OH 43219, and at any adjournment of the
Meeting, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders ("Notice"). The primary purpose of the Meeting is for
shareholders of the Funds, as set forth in the attached Notice, to consider and
approve the following proposal:
TO APPROVE A PROPOSED AGREEMENT AND PLAN OF REORGANIZATION, IN
THE FORM SET FORTH IN EXHIBIT A TO THE PROXY STATEMENT,
PURSUANT TO WHICH THE FUNDS WOULD BE REORGANIZED AS SEPARATE
SERIES OF THE KENSINGTON FUNDS, A NEW DELAWARE STATUTORY TRUST
("NEW TRUST").
Shareholders of record of the Funds at the close of business on
December 31, 2002 (the "Record Date") will be entitled to vote at the Meeting or
at any postponements or adjournments thereof. The date of the first mailing of
this Proxy Statement and form of proxy will be on or about January 15, 2003.
Only shareholders of record of the Funds at the close of business on
the Record Date will be entitled to notice of and to vote at the Meeting. Shares
represented by proxies, unless previously revoked, will be voted at the Meeting
in accordance with the instructions of the shareholders. If no instructions are
given, the proxies will be voted in favor of the proposals. To revoke a proxy,
the shareholder giving such proxy must either submit to the Trust a subsequently
dated proxy, deliver to the Trust a written notice of revocation or otherwise
give notice of revocation in open meeting, in all cases prior to the exercise of
the authority granted in the proxy.
The presence in person or by proxy of the holders of record of a
majority of the outstanding shares of each of the Funds shall constitute a
quorum at the Meeting, permitting action to be taken with respect to that Fund.
In the event that sufficient votes are not received by the date of the Meeting,
a person named as proxy may propose one or more adjournments of the Meeting for
a reasonable period or periods to permit further solicitation of proxies. The
persons named as proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor of the proposal and will vote against
any such adjournment those proxies required to be voted against the proposal.
If a shareholder wishes to participate in the Meeting, but does not
wish to authorize the execution of a proxy by telephone or through the Internet,
the shareholder may still submit the proxy form included with this Proxy
Statement or attend the Meeting in person.
The most recent annual report of the Funds (except of the Kensington
Real Estate Fund, which commenced operating on December 20, 2002), including
financial statements, for the year ended March 31, 2002, and the most recent
semi-annual report for the semi-annual period ended September 30, 2002, have
been mailed previously to shareholders. If you have not received these reports
or would like to receive additional copies free of charge, please contact the
Funds at the address set forth on the first page of this proxy statement or by
calling 1 (877) 945-3863, and they will be sent within three business days by
first class mail.
SUMMARY OF PROPOSAL
While you should read the full text of the Proxy Statement, here is a
brief summary of the proposal and how it will affect each Fund and its
shareholders.
WHAT ARE SHAREHOLDERS BEING ASKED TO APPROVE?
Shareholders of the Funds are asked to consider a proposed Agreement
and Plan of Reorganization, which includes: (a) the transfer of all assets of
each Fund to a corresponding series of the same name (the "New Funds") of The
Kensington Funds, a newly formed Delaware statutory trust (the "New Trust"), and
the assumption by each New Fund of the liabilities of the respective Fund, in
exchange for shares of the corresponding New Fund, and (b) the distribution to
shareholders of each Fund the shares of the corresponding New Fund (the
"Reorganization"). A form of the Agreement and Plan of Reorganization is
attached as Exhibit A (the "Reorganization Plan").
Because the Reorganization Plan calls for the Funds, as sole
shareholders of the New Trust prior to Shares of the New Funds being distributed
to the Funds' shareholders, to vote on certain issues regarding the organization
of the New Trust, shareholders of the Funds, in approving the proposed
Reorganization, will essentially be approving the Funds to vote in the
affirmative on the following issues: (i) the election of trustees for the New
Trust, (ii) approval of advisory agreements and service and distribution plans
for the New Funds that are essentially the same as the current advisory
agreements and service and distribution plans for the Funds, and (iii)
ratification of the independent auditors for the New Trust's upcoming fiscal
year. Shareholders of the Funds are not being asked to separately vote on these
issues. More information on each of these items is discussed below.
WHY HAS THE REORGANIZATION BEEN PROPOSED?
We think this Reorganization offers the Funds the opportunity to obtain
greater operating efficiencies, which should benefit all shareholders of the
Funds.
WHAT EFFECT WILL THE REORGANIZATION HAVE ON THE FUNDS AND THEIR SHAREHOLDERS?
Immediately after the Reorganization each shareholder will own the same
number of shares of the New Fund as the number of Fund shares owned by the
shareholder on the closing of the Reorganization. As a result of the
Reorganization, shareholders of the Funds, series of a Massachusetts business
trust, will become shareholders of the New Funds, series of a Delaware statutory
trust.
2
THE REORGANIZATION WILL NOT RESULT IN ANY CHANGE IN THE NAME,
INVESTMENT OBJECTIVE OR PRINCIPAL INVESTMENT STRATEGY, INVESTMENT ADVISER,
PORTFOLIO MANAGERS, OR INDEPENDENT ACCOUNTANTS OF ANY OF THE FUNDS. EACH NEW
FUND WILL OFFER THE SAME SHAREHOLDER SERVICES AS ITS CORRESPONDING FUND. SEE
"CERTAIN COMPARATIVE INFORMATION ABOUT THE TRUST AND THE NEW TRUST" ON PAGE __
FOR ADDITIONAL INFORMATION.
WHAT WILL BE THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION?
As a condition to each Fund's obligation to consummate the
Reorganization, the Trust and New Trust will receive an opinion from legal
counsel to the Funds to the effect that, on the basis of the existing provisions
of the Internal Revenue Code of 1986, as amended, (the "Code"), current
administrative rules and court decisions, the transactions contemplated by the
Reorganization Plan constitute a tax-free reorganization for federal income tax
purposes.
WHO IS BEARING THE EXPENSES RELATED TO THE REORGANIZATION?
Kensington Investment Group will bear all expenses associated with the
Reorganization, including expenses associated with the solicitation of proxies.
PROPOSAL:
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
At a meeting of the Trustees of the Trust held on November 19, 2002,
the Trustees approved the Reorganization Plan substantially in the form attached
to this Proxy Statement as Exhibit A. Kensington Investment Group requested that
the Reorganization Plan be submitted to shareholders of the Funds. For the
reasons set forth below under "Reasons for the Reorganization," the Trustees of
the Trust, including the Trustees who are not "interested persons" as that term
is defined in the federal securities laws ("Independent Trustees"), have
unanimously determined that the Reorganization is in the best interests of the
shareholders of each of the Funds and that the interests of those shareholders
will not be diluted as a result of the Reorganization.
We now submit to shareholders of each Fund a proposal to approve the
Reorganization Plan. If shareholders approve the proposal, the Trustees and
officers of the Trust will execute and implement the Reorganization Plan. If
approved, we expect the Reorganization to take effect on or about April 1, 2003,
although that date may be adjusted in accordance with the Reorganization Plan.
SUMMARY OF THE REORGANIZATION PLAN AND AGREEMENT
We summarize below the important terms of the Reorganization Plan. This
summary is qualified in its entirety by reference to the Reorganization Plan
itself, which is set forth in Exhibit A to this Proxy Statement. All information
regarding the New Trust, its operations and the various agreements between the
New Trust and its several service providers have been supplied by Kensington
Investment Group, and neither the current Trust nor any of its Trustees or
officers has independently verified the accuracy of such information.
GENERAL PLAN OF REORGANIZATION. The Reorganization Plan consists of
several steps that will occur on the Closing Date following shareholder
approval. First, each Fund of the Trust will transfer all of its assets to a
corresponding New Fund of the New Trust in exchange solely for all of the shares
of the corresponding New Fund having an aggregate net asset value equal to the
net asset value of the
3
Fund. Each New Fund will also assume all of the liabilities of the corresponding
Fund. The Funds, as sole shareholders of the New Funds, will make certain
elections, approvals and ratifications as set forth below. Immediately
thereafter, each Fund will liquidate and distribute shares of the corresponding
New Fund to its shareholders in exchange for their shares of that Fund. This
will be accomplished by opening an account on the books of the corresponding New
Fund in the name of each shareholder of record of the Fund and by crediting to
each account the shares due in the Reorganization. Every shareholder will own
the same number of shares of the corresponding New Fund as the number of shares
held by the shareholder in each Fund immediately before the Reorganization. For
example, if you held 100 shares of the Kensington Strategic Realty Fund
immediately prior to the close of the New York Stock Exchange on the Closing
Date, those shares would be canceled and you would receive 100 shares of the
corresponding New Fund of the same name and representing the same net asset
value. All of these transactions would occur as of the Closing Date. The net
asset value of your investment immediately after the Reorganization will be the
same as it was immediately prior to the Reorganization.
ELECTIONS, APPROVALS AND RATIFICATIONS. The Investment Company Act of
1940, as amended ("1940 Act"), generally requires that shareholders of a mutual
fund elect the fund's trustees, approve the fund's investment advisory
agreements, approve the distribution plan administered pursuant to Rule 12b-1
under the 1940 Act and ratify the trustees' selection of the independent
accountant for the fund. These requirements apply to new mutual funds, including
the New Funds. If shareholders approve the proposed Reorganization, they will
also be:
o authorizing the approval of new Investment Advisory Agreements
with Kensington Investment Group;
o approving the Service and Distribution Plans administered
pursuant to Rule 12b-1 under the 1940 Act;
o authorizing election of Trustees of the New Trust; and
o ratifying the selection of Ernst & Young, LLP as the
independent accountants for the New Funds.
Technically, these elections, approvals and ratifications will be
accomplished by a vote of the Funds, as sole shareholders of the New Funds prior
to the effective date of the Reorganization. In general, there will be no
substantive changes in those areas noted above from the Funds to the New Funds
except that the Trustees will not be the same for the New Funds.
Information regarding each of these matters is included in this Proxy
Statement, including information about the individuals proposed to serve as
Trustees of the New Funds, which may be found in the section entitled,
"Information About the Proposed Trustees."
CLOSING DATE. It is currently anticipated that the closing of the
Reorganization will occur on or about April 1, 2003.
OTHER PROVISIONS. The Reorganization is subject to a number of
conditions set forth in the Reorganization Plan. Certain of these conditions may
be waived by the Board of Trustees. The significant conditions that may not be
waived include: (a) the receipt by the Trust and the New Trust of an opinion of
counsel as to certain federal income tax aspects of the Reorganization and (b)
the approval
4
of the Reorganization Plan by the shareholders of each of the Funds. The
Reorganization Plan may be terminated and the Reorganization abandoned at any
time, before or after approval by the shareholders of the Funds prior to the
Closing Date, by the Board of Trustees. In addition, the Reorganization Plan may
be amended by the Board of Trustees. However, the Reorganization Plan may not be
amended subsequent to the shareholder meeting in a manner that would change the
method for determining the number of shares to be issued to shareholders of the
existing Funds without shareholder approval.
REASONS FOR THE PROPOSED REORGANIZATION
The Board of Trustees of the Trust, including the Independent Trustees,
unanimously approved the Reorganization Plan at a meeting held on November 19,
2002. In approving the Reorganization, the Trustees of the Trust determined that
the proposed Reorganization would be in the best interests of each Fund, and
that the interests of each Fund's shareholders would not be diluted as a result
of effecting the Reorganization. We summarize below the key factors considered
by the Trustees:
o Kensington Investment Group informed the Trustees that it
believes that by establishing the New Trust, the New Funds
should be able to realize greater operating efficiencies.
o The Trustees considered that the investment objective,
policies and restrictions of each Fund are identical to those
of the corresponding New Fund, and the Fund would be managed
by the same personnel and in accordance with the same
investment strategies and techniques utilized in the
management of each Fund immediately prior to the
Reorganization.
o In recent years, many mutual funds have reorganized as
Delaware statutory trusts. Kensington Investment Group has
informed the Trustees that it believes that the proposed
Delaware statutory trust form provides the most flexible and
cost efficient method of providing different investment
vehicles to present and prospective shareholders.
CERTAIN COMPARATIVE INFORMATION ABOUT THE TRUST AND THE NEW TRUST
CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS. BISYS Fund Services,
Inc., as the Trust's and New Trust's transfer agent, will establish accounts for
all current Fund shareholders containing the appropriate number of New Fund
shares to be received by that shareholder in accordance with the terms and
provisions of the Reorganization Plan. These accounts will be identical in all
material respects to the accounts currently maintained by each Fund on behalf of
its shareholders.
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES. The New Funds will
offer the same shareholder services as the Funds, including the Automatic
Withdrawal Program, Automatic Investment Plan, telephone exchanges, telephone
redemptions and exchanges between Funds.
Shares of the New Funds may be redeemed at a redemption price equal to
the net asset value of the shares as next determined following the receipt of a
redemption order and any other required documentation in proper form, less any
applicable redemption fee. Payment of redemption proceeds for redeemed New Fund
shares will generally be made within seven days after receipt of a redemption
request in proper form and documentation.
DIVIDENDS AND DISTRIBUTIONS. Each New Fund will have the same dividend
and distribution policy as the corresponding Fund. After the closing of the
Reorganization, Fund shareholders who
5
currently have dividends reinvested will continue to have dividends reinvested
in the New Fund. Shareholders who currently have capital gains reinvested will
continue to have capital gains reinvested in the New Fund.
FISCAL YEAR. Each of the Funds currently operates on a fiscal year
ending March 31. Following the Reorganization, the New Funds will operate on a
fiscal year ending December 31.
DECLARATION OF TRUST AND BY-LAWS OF THE TRUST AND THE NEW TRUST
The following is a summary of certain differences between and among the
Declaration of Trust and By-laws of the Trust and the Declaration of Trust and
By-laws of the New Trust. It is not a complete list of the differences.
Shareholders should refer to the provisions of these documents and state law
directly for a more thorough comparison. Copies of the Declaration of Trust and
By-laws of the Trust and of the Declaration of Trust and By-laws of the New
Trust are available to shareholders without charge upon written request.
GENERAL. The Trust was organized as a Massachusetts business trust on
January 8, 1992. As a Massachusetts business trust, the Trust's operations are
currently governed by its Declaration of Trust ("Massachusetts Trust
Instrument"), By-Laws and applicable Federal and Massachusetts law. The New
Trust was organized as a Delaware statutory trust on January 10, 2003. As a
Delaware statutory trust, the New Trust's operations will be governed by a
Declaration of Trust (the "Delaware Trust Instrument"), By-Laws and applicable
Federal and Delaware law.
Under the Delaware Trust Instrument and By-Laws, the Trustees of the
New Trust will have more flexibility than Trustees of the Trust and, subject to
applicable requirements of the 1940 Act and Delaware law, broader authority to
act. The increased flexibility may allow the Trustees to react more quickly to
changes in competitive and regulatory conditions and, as a consequence, may
allow the Trust to operate in a more efficient and economical manner. The
Trustees' existing fiduciary obligations to act with due care and in the
interest of shareholders will not be affected by the Reorganization.
TERM OF TRUSTEES. The term of office of a Trustee of both the Trust and
the New Trust is unlimited in duration unless the Trustees themselves adopt a
limited term. A person serving as Trustee will continue as Trustee under the
Massachusetts Trust Instrument until the person resigns, dies, is declared
incompetent or is removed from office. Under the Delaware Trust Instrument a
Trustee will continue to serve for an indefinite period of time or until his
successor is elected and qualified, the Trust terminates or the person dies,
resigns, or is removed. The Delaware Trust Instrument also provides that a
Trustee may be removed at any meeting of shareholders by a vote of two-thirds
of the outstanding shares of the New Trust or by the unanimous vote of the
Trustees. The Massachusetts Trust Instrument also provides that any Trustee may
be removed by the affirmative vote of the holders of two-thirds of the
outstanding shares. However, a Trustee may be removed by two-thirds of the
remaining Trustees only for cause.
LIABILITY OF TRUSTEES AND OFFICERS. A Trustee of both the Trust and the
New Trust will be personally liable only for his or her own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee. Under the Massachusetts Trust Instrument,
Trustees and officers of the Trust are indemnified by the Trust for the expenses
of litigation against them unless it is determined that his or her conduct
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. Under the Delaware Trust
6
Instrument, Trustees are indemnified by the New Trust for expenses of
litigation against them unless it is determined that his or her conduct
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. Further, such indemnification extends to any
person who is or was an employee or other agent of the New Trust or who is or
was serving at the request of the New Trust as a trustee, director, officer,
employee or agent of another organization in which the New Trust has any
interest as a shareholder, creditor or otherwise.
SHAREHOLDER LIABILITY. Delaware law provides that shareholders are not
liable for the obligations of a Delaware statutory trust. Under Massachusetts
law, there is no equivalent statutory limitation of shareholder liability.
However, the Delaware Trust Instrument and the Massachusetts Trust Instrument
contain disclaimers of shareholder liability for acts or obligations of the
respective trust, and provide for indemnification for any shareholder who is
exposed to liability by reason of a claim or demand relating to such person
being or having been a shareholder.
SHAREHOLDER VOTING. The voting rights of shareholders of the Trust are
based on the number of shares the shareholder owns. Each holder of a share of a
Fund is entitled to one vote for each whole share and a proportionate fractional
vote for each fractional share.
SHAREHOLDER MEETINGS. The New Trust and the Trust are not required to
hold annual shareholder meetings. Under both trust instruments, shareholders
owning at least 10% of the outstanding shares of a Fund may call a special
meeting for any purpose.
REORGANIZATION/COMBINATION TRANSACTIONS. Under the Delaware Trust
Instrument, the Trustees may generally authorize mergers, consolidations, share
exchanges and reorganizations of a New Fund or the New Trust with another trust,
series or other business organization without shareholder approval, although
such approval may be separately required under the federal securities laws and
rules thereunder. Under the Massachusetts Trust Instrument, a majority of the
outstanding shares of a Fund must approve a merger of the Fund with another
business organization, or the sale or exchange of all or substantially all of
the property of the Fund.
AMENDMENT OF CHARTER DOCUMENT. Under the Delaware Trust Instrument, the
Trustees may generally restate, amend or otherwise supplement the Delaware Trust
Instrument without the approval of shareholders, subject to limited exceptions
(such as amendments affecting shareholders' voting rights). The Massachusetts
Trust Instrument may generally only be amended by the affirmative vote of the
majority of shareholders. The Trustees may amend the Massachusetts Trust
Instrument without shareholder approval to conform the Massachusetts Trust
Instrument to the requirements of applicable federal laws or regulations, the
requirements of the regulated investment company provisions of the Internal
Revenue Code, to change the name of the Trust and to make any other changes
which do not materially adversely affect the rights of shareholders.
DERIVATIVE AND CLASS ACTIONS. Under the Massachusetts Trust Instrument,
shareholders have the power to vote to the same extent as the shareholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a class
action on behalf of the Trust or its shareholders. The Delaware Trust Instrument
does not provide shareholders a similar right.
7
THE INVESTMENT ADVISORY AGREEMENTS
The Reorganization Plan authorizes each Fund, while it is the sole
shareholder of the corresponding New Fund, to approve new advisory agreements
with Kensington Investment Group ("Adviser") for each New Fund (each a "New
Advisory Agreement") that are substantially identical to the current advisory
agreements between the Trust, on behalf of each Fund, and the Adviser (each a
"Current Advisory Agreement"), as further detailed below.
Unless sooner terminated, each Fund's Current Advisory Agreement, and
each proposed New Advisory Agreement, continues in effect for an initial period
of two years and from year to year thereafter if such continuance is approved at
least annually by the Board of Trustees or by vote of a majority of the
outstanding shares of the Fund, or the New Fund, as applicable, and a majority
of the Trustees who are not parties to the Agreement or interested persons (as
defined in the 1940 Act) of any party to the Agreement by votes cast in person
at a meeting called for such purpose. Each Current Advisory Agreement and each
New Advisory Agreement is terminable at any time on 60 days' written notice
without penalty by the Trustees, by vote of a majority of the outstanding Shares
of the Fund, or the New Fund, as applicable, or by the Adviser. Each Agreement
also terminates automatically in the event of any assignment, as defined in the
1940 Act.
Both the Current Advisory Agreements and the New Advisory Agreements
provide that the Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by a Fund in connection with the
performance of the Agreement, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith, or gross negligence on the part
of the Adviser in the performance of its duties, or from reckless disregard by
the Adviser of its duties and obligations thereunder.
The Adviser currently acts as investment adviser to the Funds pursuant
to Current Advisory Agreements dated September 15, 1999 for the Kensington
Strategic Realty Fund ("Strategic Realty Fund"), March 30, 2001 for the
Kensington Select Income Fund ("Select Income Fund"), and December 20, 2002 for
the Kensington Real Estate Securities Fund ("Real Estate Securities Fund").
Under the Current Advisory Agreements, the Funds pay the Adviser fees
for its services performed pursuant to these agreements. The fees, which are
computed daily and paid monthly, are at the following annual rates for each
Fund, calculated as a percentage of the particular Fund's average daily net
assets: Strategic Realty Fund, 1.50% (subject to performance adjustments);
Select Income Fund, 1.00%; and Real Estate Securities Fund, 0.85%. The rate of
advisory fees to be paid to the Adviser under the New Advisory Agreements with
respect to the New Funds will be the same as under the Current Advisory
Agreements for each corresponding Fund.
The Adviser may periodically waive all or a portion of its advisory fee
to increase the net income of a Fund available for distribution as dividends or
to limit a Fund's total operating expenses. Should the Reorganization be
approved, the Adviser would continue to be subject to its current agreements to
waive fees and/or reimburse its fees with respect to each of the Funds. With
respect to the Strategic Realty Fund, the Adviser has contractually agreed,
until October 31, 2003, to waive fees and/or reimburse that Fund to the extent
necessary to maintain the Fund's Total Fund Operating Expenses for Class A, B,
and C shares at 2.25%, 3.00% and 3.00%, respectively. The Adviser has also
contractually agreed, until March 30, 2004, to waive fees and/or reimburse the
Select Income Fund to the extent necessary to maintain that Fund's Total Fund
Operating Expenses for Class A, B, and C shares at 1.60%, 2.35% and 2.35%,
respectively. The Adviser has also contractually agreed, until
8
December 31, 2005, to waive fees and/or reimburse the Real Estate Securities
Fund to the extent necessary to maintain that Fund's Total Fund Operating
Expenses for Class A, B, and C shares at 1.45%, 2.20% and 2.20%, respectively.
In each case, these limits do not apply to increases due to brokerage costs,
interest, taxes and dividends and extraordinary expenses (and, in the case of
the Strategic Realty Fund, performance fee adjustments). In addition, each Fund
has agreed to pay or repay fees that were waived or reimbursed for a period up
to three years after such waiver or reimbursement was made to the extent such
payments or repayments would not cause the expenses of a Class to exceed the
above limits.
Investment advisory fees earned by the Adviser for services to the
Strategic Realty Fund for the fiscal year ended March 31, 2002 totaled
$4,258,363; the Adviser waived advisory fees in the amount of $74,662 in
accordance with applicable fee waiver adjustments. Investment advisory fees
earned by the Adviser for services to the Select Income Fund for the period from
April 3, 2001 (commencement of operations) through the fiscal year ended March
31, 2002 totaled $404,571, and the Adviser waived advisory fees in the amount of
$207,905. As of March 31, 2002, the Real Estate Securities Fund had not yet
commenced operations.
THE SERVICE AND DISTRIBUTION PLANS
The Reorganization Plan also authorizes each Fund, while it is the sole
shareholder of the corresponding New Fund, to approve new service and
distribution plans for each New Fund (each a "New Plan") that are substantially
identical to the service and distribution plans adopted by the Trust for each
Fund (each a "Current Plan"), as further detailed below.
The Current Plans for the Strategic Realty Fund, Select Income Fund,
and Real Estate Securities Fund were initially approved by the Board of the
Trust at meetings held on August 31, 1999, February 22, 2001, and November 19,
2002, respectively. The Trust has adopted a Current Plan for each class of
shares of the Funds pursuant to Rule 12b-1 under the 1940 Act under which each
Fund is authorized to compensate BISYS Fund Services Limited Partnership, the
Funds' distributor ("Distributor"), for payments it makes to banks, other
institutions and broker-dealers, and for expenses the Distributor and any of its
affiliates or subsidiaries incur (with all of the foregoing organizations being
referred to as "Participating Organizations") for providing administration,
distribution or shareholder service assistance. Payments to such Participating
Organizations may be made pursuant to agreements entered into with the
Distributor. The Current Plans authorize each Fund to make payments to the
Distributor in amounts not to exceed, on an annual basis, 0.25% of the average
daily net assets of Class A Shares of the Fund and 1.00% of Class B and Class C
Shares. Each Class is authorized to pay a Shareholder Service Fee of up to 0.25%
of its average daily net assets.
As required by Rule 12b-1, each Current Plan was initially approved by
the Board of Trustees, including a majority of the Independent Trustees who have
no direct or indirect financial interest in the operation of the Current Plan. A
Current Plan may be terminated with respect to a Class by vote of a majority of
the Independent Trustees or by vote of a majority of the outstanding Shares of
the Class. The Trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. A Current Plan may be amended
by vote of the Trustees, including a majority of the Independent Trustees, cast
in person at a meeting called for that purpose. However, any change in a Current
Plan that would materially increase the distribution cost to a Class requires
approval by a majority of the Shareholders of that Class. For so long as a
Current Plan is in effect, selection and nomination of the Independent Trustees
shall be committed to the discretion of such Independent Trustees. All
agreements with any person relating to the implementation of the Plan may be
terminated
9
at any time on 60 days' written notice without payment of any penalty, by vote
of a majority of the Independent Trustees or, with respect to a Class, by vote
of a majority of the outstanding Shares of that Class. A Current Plan will
continue in effect with respect to a Class for successive one-year periods,
provided that each such continuance is specifically approved (i) by the vote of
a majority of the Independent Trustees, and (ii) by the vote of a majority of
the entire Board of Trustees cast in person at a meeting called for that
purpose. The Board of Trustees has a duty to request and evaluate such
information as may be reasonably necessary for it to make an informed
determination of whether a Current Plan should be implemented or continued. In
addition, for each Class, the Trustees, in approving a Current Plan, must
determine that there is a reasonable likelihood that the Current Plan will
benefit the Class and its Shareholders.
For the fiscal year ended March 31, 2002, the Distributor earned
$313,788, $174,439 and $324,364 pursuant to the Current Plan for Strategic
Realty Fund's Class A, Class B, and Class C Shares, respectively. For the period
April 3, 2001 (commencement of operations of the Select Income Fund) through the
fiscal year ended March 31, 2002, the Distributor earned $66,055, $44,416 and
$95,933 pursuant to the Current Plan for Select Income Fund's Class A, Class B,
and Class C Shares, respectively. As of March 31, 2002, the Real Estate
Securities Fund had not yet commenced operations.
INFORMATION REGARDING THE PROPOSED TRUSTEES
In relation to the Reorganization, Kensington Investment Group has
proposed new Trustees to oversee the operations of the New Trust. Federal
securities laws require that at least a majority of the Trustees of the Trust
and, following the Reorganization, the New Trust, be elected by shareholders.
Rather than call another shareholder meeting to vote on Trustees after the
Reorganization, the Reorganization Plan authorizes each Fund, while it is the
sole shareholder of the corresponding New Fund, to elect the Trustees of the New
Trust.
Information on the individuals proposed to serve as the Trustees of the
New Trust ("Nominees") and officers of the New Trust, to the extent determined
to date, their business affiliations for the past five years and other relevant
information is set forth below.
PROPOSED POSITION PRINCIPAL OCCUPATION NUMBER OF PORTFOLIOS IN OTHER
WITH THE NEW TRUST DURING THE FUND COMPLEX** TO BE DIRECTORSHIPS
NAME, AGE, AND ADDRESS AND TERM OF OFFICE* PAST FIVE YEARS OVERSEEN BY NOMINEE HELD BY NOMINEE
======================== =================== ========================= ========================== ===================
INDEPENDENT TRUSTEE NOMINEES
ROBERT M. BROWN Trustee Partner, VxCapital 3 Portfolios None
Age: 44 Partners (Aircraft
4 Orinda Way, Suite leasing) (since March
220D 2002); Senior Vice
Orinda, CA 94563 President, Pegusus
Aviation, Inc.
(Aircraft leasing)
(1988-2001)
10
PROPOSED POSITION PRINCIPAL OCCUPATION NUMBER OF PORTFOLIOS IN OTHER
WITH THE NEW TRUST DURING THE FUND COMPLEX** TO BE DIRECTORSHIPS
NAME, AGE, AND ADDRESS AND TERM OF OFFICE* PAST FIVE YEARS OVERSEEN BY NOMINEE HELD BY NOMINEE
======================== =================== ========================= ========================== ===================
FRANK C. MARINARO Trustee Portfolio Manager, 3 Portfolios None
Age: 41 Emery and Howard
4 Orinda Way, Suite Portfolio Management
220D (since 1993)
Orinda, CA 94563
DAVID R. PEARCE Trustee Vice President, Chief 3 Portfolios None
Age: 44 Financial Officer, and
4 Orinda Way, Suite Treasurer, Geerlings &
220D Wade (wine retailer)
Orinda, CA 94563 (since 1996)
DAVID REICHENBAUM Trustee David Reichenbaum & 3 Portfolios None
Age: 45 Associates (family
4 Orinda Way, Suite office) (since March
220D 1998); Executive Vice
Orinda, CA 94563 President, MEDO
Industries, Inc.
(manufacturer)
(1978-1998)
INTERESTED TRUSTEE NOMINEES+
JOHN P. KRAMER Trustee and Principal, Kensington 3 Portfolios Malan Realty
Age: 45 President Investment Group, Inc. Investors,
4 Orinda Way, Suite (since August 1993) Inc.
220D
Orinda, CA 94563
PAUL GRAY Trustee and Vice Principal, Kensington 3 Portfolios Malan Realty
Age: 37 President Investment Group, Inc. Investors,
4 Orinda Way, Suite (since August 1993) Inc.
220D
Orinda, CA 94563
CRAIG M. KIRKPATRICK Trustee and Vice Principal, Kensington 3 Portfolios None
Age: 40 President Investment Group, Inc.
4 Orinda Way, Suite (since August 1993)
220D
Orinda, CA 94563
PROPOSED POSITION WITH THE NEW TRUST PRINCIPAL OCCUPATION DURING THE
NAME, AGE, AND ADDRESS AND TERM OF OFFICE* PAST FIVE YEARS
======================== ========================================= =====================================================
OTHER OFFICERS WHO ARE NOT ALSO TRUSTEE NOMINEES
CYNTHIA M. YEE Secretary and Treasurer Vice President and Chief Financial Officer,
Age: 37 Kensington Investment Group, Inc. (since January
4 Orinda Way, Suite 1994)
220D
Orinda, CA 94563
---------
* Trustees and Officers serve until his or her successor is elected and
qualified or their resignation, removal or death.
** As used in this Proxy Statement, "Fund Complex" includes the three New
Funds of the New Trust.
11
+ Messrs. Kramer, Gray and Kirkpatrick are each considered to be an
"interested person" of the New Trust as defined in the 1940 Act due to
their positions with Kensington Investment Group, the New Funds'
investment adviser.
The foregoing individuals proposed to serve as Trustees of the New
Trust are subject to change. However, at all times a majority of the Board of
Trustees will be Independent Trustees, and the nomination of new or additional
Independent Trustees will be placed within the discretion of the then existing
Independent Trustees.
OWNERSHIP OF SECURITIES
Because the New Funds have not yet commenced operations, there are no
outstanding New Fund shares. However, should the Reorganization be approved, the
Nominees and officers of the New Trust who own shares of the Funds will own
shares of the New Funds having the same net asset value on the Closing Date. For
the year ended December 31, 2002, the dollar range of equity securities owned
beneficially by each Nominee in the Funds and in any registered investment
companies overseen by the Trustee within the same family of investment companies
as the Funds is as follows:
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES OVERSEEN BY TRUSTEE IN FAMILY
NAME OF TRUSTEE NOMINEE SECURITIES IN THE FUNDS OF INVESTMENT COMPANIES
================================= ================================ ===========================================
INDEPENDENT TRUSTEE NOMINEES
ROBERT M. BROWN $0 $0
FRANK C. MARINARO Kensington Strategic Realty $10,001 - 50,000
Fund - $10,001 - 50,000
DAVID R. PEARCE $0 $0
DAVID REICHENBAUM Kensington Strategic Realty Over $100,001
Fund - over $100,001
Kensington Select Income Fund
- over $100,001
INTERESTED TRUSTEE NOMINEES*
JOHN P. KRAMER Kensington Strategic Realty Over $100,001
Fund - over $100,001
Kensington Select Income Fund
- over $100,001
Kensington Real Securities
Fund - over $100,001
PAUL GRAY Kensington Strategic Realty Over $100,001
Fund - over $100,001
Kensington Select Income Fund
- over $100,001
Kensington Real Securities
Fund - over $100,001
CRAIG M. KIRKPATRICK Kensington Strategic Realty Over $100,001
Fund - over $100,001
12
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY COMPANIES OVERSEEN BY TRUSTEE IN FAMILY
NAME OF TRUSTEE NOMINEE SECURITIES IN THE FUNDS OF INVESTMENT COMPANIES
================================= ================================ ===========================================
Kensington Select Income Fund
- over $100,001
Kensington Real Securities
Fund - over $100,001
* Shares of each of the Funds deemed to be owned by each of the
Interested Trustee Nominees include Fund shares owned by
Kensington Investment Group, Inc., of which each Interested
Trustee Nominee is a "control person."
TRUSTEE COMPENSATION
Trustees of the Trust not affiliated with BISYS or BISYS Fund Services
currently receive from the Trust an annual fee of $3,000, plus $2,250 for each
regular meeting of the Board of Trustees attended, $1,000 for each special
meeting of the Board attended in person, and $500 for other special meetings of
the Board attended by telephone, and are also reimbursed for all out-of-pocket
expenses relating to attendance at such meetings. Trustees who are affiliated
with BISYS or BISYS Fund Services do not receive compensation from the Group.
After the Reorganization, the Trustees for the New Trust will be
compensated as follows: for services on the Board of Trustees of the New Trust,
each Trustee who is not an officer or employee of Kensington Investment Group or
any of its affiliates will receive a fee of $2,000 per meeting of the Board
attended in person and $500 for each meeting of the Board attended by telephone.
Costs will be allocated equally among the New Funds within the fund complex. The
foregoing fees do not include the reimbursement of expenses incurred in
connection with meeting attendance. Trustees who are affiliated with Kensington
Investment Group will receive no compensation from the Trust.
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Reorganization Plan also authorizes each Fund, while it is the sole
shareholder of the corresponding New Fund, to ratify the selection of Ernst &
Young LLP as the independent public auditors for the New Trust for the fiscal
year ending December 31, 2003. Ernst & Young LLP, 10 West Broad Street, Suite
2300, Columbus, Ohio 43215, currently serves as independent auditors for
the Trust.
Neither Ernst & Young LLP nor any of its members have any material
direct or indirect financial interest in the Trust or in the New Trust. Ernst &
Young LLP, in accordance with Independence Standards Board Standard No. 1, has
confirmed to the New Trust that they are independent auditors with respect to
the New Funds. Since the New Trust has not yet commenced operations, the New
Trust has paid no fees to Ernst & Young LLP. The fees paid to Ernst & Young LLP
by the Funds for most recent fiscal year are detailed below.
13
Audit Fees. For the fiscal year ended March 31, 2002, the approximate
fee for professional services rendered for the audit of annual financial
statements for each Fund then in existence was as follows:
Strategic Realty Fund $11,000
Select Income Fund $7,300
Financial Information Systems Design and Implementation Fees. For the
fiscal year ended March 31, 2002, Ernst & Young LLP rendered no services for the
design or implementation of any financial information system for the Trust, the
Funds, the Adviser, or the Distributor.
All Other Fees. For the fiscal year ended March 31, 2002, Ernst & Young
LLP was also paid approximately $4,000 for tax-related services rendered to the
Funds, as well as for auditing and other services rendered to the Adviser and
Distributor.
Representatives of Ernst & Young LLP are not expected to be present at
the Meeting but will be available by telephone to respond to questions in the
event the need arises.
MANAGEMENT AND OTHER SERVICE PROVIDERS
Set forth below is a description of the current service providers of
the Trust and the proposed service providers of the New Trust.
THE ADVISER
The Funds' investment adviser, Kensington Investment Group ("Adviser"),
is an investment adviser registered with the SEC that specializes in traded and
non-traded real estate securities portfolio management. It was founded in 1993
by principals who have been active in real estate securities research, trading
and investment since 1985. The Adviser provides discretionary investment
management services for assets of approximately $600 million as of December 31,
2002 for private limited partnerships, separate accounts and registered
investment company clients.
The following table sets forth certain information with respect to the
Adviser's executive officers and directors:
NAME AND ADDRESS* PRINCIPAL OCCUPATION
=============================== ====================================================
JOHN P. KRAMER President of the Adviser
CRAIG M. KIRKPATRICK Executive Vice President of the Adviser
PAUL GRAY Executive Vice President of the Adviser
CYNTHIA M. YEE Vice President and Chief Financial Officer of the
Adviser
JOEL S. BEAM Vice President of the Adviser
IAN R. GOLTRA Vice President of the Adviser
LOUISE MODEL Vice President of the Adviser
14
NAME AND ADDRESS* PRINCIPAL OCCUPATION
=============================== ====================================================
BRIAN PAWLOWICZ Vice President of the Adviser
- --------
* The address for each officer and director is 4 Orinda Way,
Suite 220D, Orinda, CA 94563.
DISTRIBUTOR, ADMINISTRATOR, FUND ACCOUNTING AND TRANSFER AGENCY SERVICES
Following the Reorganization, BISYS Fund Services Limited Partnership
will continue to serve as the New Funds' Distributor. BISYS Fund Services Ohio,
Inc. will continue to serve as the New Funds' Administrator and Fund Accountant,
and BISYS Fund Services, Inc. will continue to serve as the New Funds' Transfer
Agent and Dividend Disbursing Agent. The address of each of these entities is
3435 Stelzer Road, Columbus, Ohio 43219.
CUSTODIAN
Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey
08540, will continue to serve as the New Funds' custodian.
FUND SHARES OWNED BY CERTAIN BENEFICIAL OWNERS
As of December 31, 2002, the following persons or entities owned
beneficially or of record 5% or more of the outstanding shares of the indicated
class of each of the Funds:
<Table>
<Caption>
NAME AND ADDRESS AMOUNT OF RECORD OR PERCENT OF
FUND NAME AND CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
-------------------------------------- -------------------------------- ------------------------- ---------------
Strategic Realty Fund Charles Schwab & Co., Inc. 230,136 5.31%
Class A 101 Montgomery Street
San Francisco, CA 94104
Select Income Fund Charles Schwab & Co., Inc. 861,059 13.19%
Class A 101 Montgomery Street
San Francisco, CA 94101
FTC & Co. 630,970 9.67%
P.O. Box 173736
Denver, CO 80217-3736
Real Estate Securities Fund
Class A Kensington Investment Group 3,200 100%
4 Orinda Way, Suite 220D
Orinda, CA 94563
Class B Kensington Investment Group 400 100%
4 Oridna Way, Suite 220D
Orinda CA 94563
Class C Kensington Investment Group 400 100%
4 Orinda Way, Suite 220D
Orinda, CA 94563
</Table>
As of the same date, the officers and Trustees of the Trust in the aggregate
owned less than 1% of each of the Fund's outstanding shares.
VOTING INFORMATION
Shareholders of the Funds are entitled to one vote for each share held
and a proportionate vote for each fractional share held. Shareholders of each
Fund will vote separately on each proposal. The holders of a majority of the
outstanding shares of each Fund entitled to vote shall constitute a quorum for
the meeting for that Fund. A quorum being present, the Trust will adopt the
proposal if a majority of the shares of each Fund vote to approve the proposal.
For purposes of each proposal, majority means the lesser of: (a) 67% or more of
the voting securities of that Fund present at the meeting, if 50% or more of the
outstanding voting securities of such Fund are represented in person or by
proxy; or (b) 50% or more of the outstanding voting securities of such Fund.
As of the Record Date, there were issued and outstanding the following
number of shares for each Fund:
Kensington Strategic Realty Fund 6,490,434 shares
Kensington Select Income Fund 10,008,703 shares
Kensington Real Estate Securities Fund 4,000 shares
15
For purposes of determining the presence of a quorum for transacting
business at the Meeting and for determining whether sufficient votes have been
received for approval of the proposal to be acted upon at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present at the Meeting, but which have not been
voted. For this reason, abstentions and broker non-votes will assist a Fund in
obtaining a quorum, but both have the practical effect of a "no" vote for
purposes of obtaining the requisite vote for approval of the proposal.
If either (a) a quorum is not present at the Meeting or (b) a quorum is
present but sufficient votes in favor of the proposal have not been obtained,
then the persons named as proxies may propose one or more adjournments of the
Meeting without further notice to shareholders to permit further solicitation of
proxies provided such persons determine, after consideration of all relevant
factors, including the nature of the proposal, the percentage of votes then
cast, the percentage of negative votes then cast, the nature of the proposed
solicitation activities and the nature of the reasons for such further
solicitation, that an adjournment and additional solicitation is reasonable and
in the interests of shareholders. The persons named as proxies will vote those
proxies that such persons are required to vote FOR the proposal in favor of such
an adjournment and will vote those proxies required to be voted AGAINST such
proposal against such adjournment.
The Meeting may be adjourned from time to time by the vote of a
majority of the shares represented at the Meeting, whether or not a quorum is
present. If the Meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting at which the adjournment is taken, unless a
new record date of the adjourned meeting is fixed. At any adjourned meeting, the
Trust may transact any business which might have been transacted at the original
meeting.
The individuals named as proxies on the enclosed proxy card will vote
in accordance with the shareholder's direction, as indicated thereon, if the
proxy card is received and is properly executed. If the shareholder properly
executes a proxy and gives no voting instructions with respect to a proposal,
the shares will be voted in favor of such proposal. The proxies, in their
discretion, may vote upon such other matters as may properly come before the
Meeting. The Board of Trustees of the Trust is not aware of any other matters to
come before the Meeting.
REVOCATION OF PROXIES
If you return a properly executed proxy card, but later wish to revoke
it, you may do so at any time before it is voted by doing any of the following:
o delivering written notice of the proxy's revocation to the
Secretary of the Trust at the above address prior to the
Meeting;
o submitting a properly-executed proxy bearing a later date, but
prior to the Meeting;
o submitting a subsequent telephone vote; or
o attending and voting in person at the Meeting and giving oral
notice of revocation to the Chairman of the Meeting.
16
SOLICITATION OF PROXIES
We are soliciting these proxies by U.S. mail and may also solicit them
in person, by telephone, by facsimile, or by any other electronic means.
Kensington Investment Group, Inc., the investment adviser for the Funds and
proposed investment adviser for the New Funds, is paying for the costs of this
proposed Reorganization, and is paying for the expense of the preparation,
printing, and mailing of the enclosed proxy card, this proxy statement, and
other expenses relating to the Meeting. Kensington Investment Group has engaged
Georgeson Shareholder Communications, Inc. to assist in proxy solicitation at a
cost to Kensington Investment Group of approximately $30,000. Employees of
Kensington Investment Group or BISYS Fund Services Ohio, Inc. ("BISYS"), the
transfer agent for the Funds, may make additional solicitations to obtain the
necessary representation at the Meeting, but will receive no additional
compensation for doing so. We may count proxies authorized by telephone or
electronically-transmitted instruments if we follow procedures designed to
verify that you have authorized us to accept your proxy in that manner.
OTHER BUSINESS
The Board of Trustees of the Trust knows of no business to be brought
before the Meeting other than the matters set forth in this Proxy Statement.
Should any other matter requiring a vote of the shareholders of the Funds arise,
however, the proxies will vote thereon according to their best judgment in the
interests of the Funds and the shareholders of the Funds.
The Trust does not hold annual meetings of shareholders. There will
normally be no meeting of shareholders for the purpose of electing Trustees of
the Trust unless and until such time as fewer than a majority of the Trustees
holding office have been elected by the shareholders, at which time the Trustees
then in office will call a shareholder meeting for the election of Trustees.
Shareholders wishing to submit proposals for inclusion in the Proxy Statement
for any subsequent shareholder meeting of their Fund (or the corresponding New
Fund post-Reorganization) should send their written submissions to the principal
executive offices of the Funds at 3435 Stelzer Road, Columbus, Ohio 43219.
Shareholder proposals must meet certain requirements and there is no guarantee
that any proposal will be presented at a shareholder meeting.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
REORGANIZATION PLAN.
17
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this __ day of _______, 2003, by and between The Coventry Group, a
Massachusetts business trust (the "Predecessor Trust"), on behalf of the
Kensington Strategic Realty Fund, Kensington Select Income Fund, and Kensington
Real Estate Securities Fund (collectively, the "Predecessor Funds" and each
individually, a "Predecessor Fund"), and The Kensington Funds, a Delaware
statutory trust (the "Successor Trust" or "Trust"), on behalf of the Kensington
Strategic Realty Fund, Kensington Select Income Fund, and Kensington Real Estate
Securities Fund (collectively, the "Successor Funds" and each individually, a
"Successor Fund").
All references in this Agreement to action taken by the Predecessor
Funds or the Successor Funds shall be deemed to refer to action taken by the
Predecessor Trust or the Successor Trust, respectively, on behalf of the
respective portfolio series.
This Agreement is intended to be and is adopted as plans of
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer by each Predecessor Fund of all
of its assets to the corresponding Successor Fund, in exchange solely for shares
of beneficial interest in such Successor Fund ("New Shares") having a net asset
value equal to the net asset value of the corresponding Predecessor Fund, the
assumption by each Successor Fund of all the liabilities of the corresponding
Predecessor Fund, and the distribution of the New Shares to the shareholders of
each Predecessor Fund in complete liquidation of such Predecessor Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Predecessor Trust and the Successor Trust are each
open-end, registered investment companies of the management type; and
WHEREAS, the Board of Trustees of the Predecessor Trust and the Board
of Trustees of the Successor Trust have determined that it is in the best
interest of the Predecessor Funds and the Successor Funds, respectively, that
the assets of the Predecessor Funds be acquired by the Successor Funds pursuant
to this Agreement and in accordance with the applicable statutes of the
Commonwealth of Massachusetts and the State of Delaware and that the interests
of existing shareholders will not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. PLAN OF REORGANIZATION
1.1 Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained
herein, the Predecessor Trust agrees to transfer all of the
assets of each Predecessor Fund, as set forth in paragraph
1.2, to the corresponding Successor Fund and the Successor
Trust agrees in exchange therefor: (i) to deliver to the
Predecessor Trust a number of full and fractional New Shares
of each Successor Fund equal to the number of shares of the
corresponding Predecessor Fund as of the time and date set
forth in Article 2,
A-1
and (ii) to assume all the liabilities of each Predecessor Fund,
as set forth in paragraph 1.2. Such transactions shall take place
at the closing provided for in paragraph 2.1 (the "Closing").
1.2 The assets of the Predecessor Funds to be acquired by the
corresponding Successor Funds shall consist of all property,
including, without limitation, all cash, securities, commodities
and futures interests, and dividends or interest receivable which
are owned by the Predecessor Funds and any deferred or prepaid
expenses shown as an asset on the books of the Predecessor Funds
on the closing date provided in paragraph 2.1 (the "Closing
Date"). All liabilities, expenses, costs, charges and reserves of
the Predecessor Funds, to the extent that they exist at or after
the Closing, shall after the Closing attach to the corresponding
Successor Funds and may be enforced against the Successor Funds to
the same extent as if the same had been incurred by the Successor
Fund.
1.3 Immediately upon delivery to the Predecessor Funds of the New
Shares, the Predecessor Funds, as the then sole shareholders of
the Successor Funds, shall (i) elect trustees of the Trust, (ii)
approve an Investment Advisory Agreement(s) between the Trust, on
behalf of the Successor Funds and Kensington Investment Group,
Inc. (the "Investment Manager"), (iii) approve the distribution
plan(s) administered pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended ("1940 Act") with respect to each
Successor Fund, and (iv) ratify the selection of Ernst & Young LLP
as the independent accountants of the Successor Funds.
1.4 Immediately following the action contemplated by paragraph 1.3,
the Predecessor Funds will distribute pro rata to their respective
shareholders of record, determined as of immediately after the
close of business on the Closing Date (the "Current
Shareholders"), the corresponding New Shares received by the
Predecessor Trust pursuant to paragraph 1.1. Such distribution and
liquidation will be accomplished by the transfer of the New Shares
then credited to the accounts of the Predecessor Funds on the
books of the Successor Funds to open accounts on the share records
of the Successor Funds in the names of the Current Shareholders
and representing the respective pro rata number of the New Shares
due such shareholders. All issued and outstanding shares of the
Predecessor Funds will simultaneously be canceled on the books of
the Predecessor Trust, although share certificates representing
interests in the Predecessor Trust will represent a number of
Successor Shares after the Closing Date as determined in
accordance with paragraph 2.2. The Successor Funds shall not issue
certificates representing the New Shares in connection with such
exchange. Ownership of New Shares will be shown on the books of
the Successor Trust's transfer agent. As soon as practicable after
the Closing, the Predecessor Trust shall take all steps necessary
to effect a complete liquidation of the Predecessor Funds and
shall file such instruments, if any, as are necessary to effect
the dissolution of the Predecessor Funds and shall take all other
steps necessary to effect such dissolution.
2. CLOSING AND CLOSING DATE
2.1 The Closing Date shall be the next full business day following
satisfaction (or waiver as provided herein) of all of the
conditions set forth in Article 4 of this Agreement (other than
those conditions which may by their terms be satisfied only at the
Closing), or such other date as the parties may agree to in
writing. All acts taking place at the Closing shall be deemed to
take place simultaneously as of immediately after the close of
business on the
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Closing Date unless otherwise agreed to by the parties. The close
of business on the Closing Date shall be as of 4:00 p.m. New York
Time. The Closing shall be held at the offices of the Successor
Trust, 3435 Stelzer Road, Columbus, Ohio 43219, or at such other
time and/or place as the parties may agree.
2.2 The Predecessor Trust shall cause BISYS Fund Services (the
"Transfer Agent"), transfer agent of the Predecessor Funds, to
deliver at the Closing a certificate of an authorized officer
stating that its records contain the names and addresses of the
Current Shareholders and the number and percentage ownership of
outstanding shares of the Predecessor Funds owned by each such
shareholder immediately prior to the Closing. The Successor Funds
shall issue and deliver a confirmation evidencing the New Shares
to be credited on the Closing Date to the Secretary of the
Predecessor Trust or provide evidence satisfactory to the
Predecessor Trust that such New Shares have been credited to the
accounts of the Predecessor Funds on the books of the Successor
Funds. At the Closing, each party shall deliver to the other such
bills of sales, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may
reasonably request.
3. REPRESENTATIONS AND WARRANTIES
3.1 The Predecessor Trust, on behalf of each Predecessor Fund, hereby
represents and warrants to the Successor Funds as follows:
(i) the Predecessor Trust is duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Massachusetts and has full power and authority to conduct its
business as presently conducted;
(ii) the Predecessor Trust has full power and authority to execute,
deliver and carry out the terms of this Agreement on behalf of
each Predecessor Fund;
(iii) the execution and delivery of this Agreement on behalf of each
Predecessor Fund and the consummation of the transactions
contemplated hereby are duly authorized and no other
proceedings on the part of the Predecessor Trust or the
shareholders of the Predecessor Fund (other than as
contemplated in paragraph 4.1(vi) are necessary to authorize
this Agreement and the transactions contemplated hereby;
(iv) the Predecessor Trust is registered under the 1940 Act as an
open-end management investment company; such registration has
not been revoked or rescinded and is in full force and effect.
The Predecessor Funds are each a separate series of the
Predecessor Trust;
(v) there are no material liabilities of the Predecessor Funds
whether or not determined or determinable, other than
liabilities disclosed or provided for in the Funds' Financial
Statements and liabilities incurred in the ordinary course of
business after the date of such Financial Statements;
(vi) there are no claims, actions, suits or proceedings pending or,
to the knowledge of the Predecessor Trust, threatened which
would adversely affect the Predecessor Funds or its assets or
business or which would prevent or hinder consummation of the
transactions contemplated hereby or which upon such
consummation would adversely affect the Successor Fund;
A-3
(vii) this Agreement has been duly executed by the Predecessor Trust
on behalf of the Predecessor Funds and constitutes its valid
and binding obligation, enforceable in accordance with its
terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other rights affecting creditors'
rights generally, and general equitable principles;
(viii) neither the execution and delivery of this Agreement by the
Predecessor Trust on behalf of the Predecessor Funds, nor the
consummation by the Predecessor Trust on behalf of the
Predecessor Funds of the transactions contemplated hereby will
conflict with, result in a breach or violation of or
constitute (or with notice, lapse of time or both) a breach of
or default under, the Declaration of Trust or By-Laws of the
Predecessor Trust, as each may be amended, or any statute,
regulation, order, judgment or decree, or any instrument,
contract or other agreement to which the Predecessor Trust is
a party or by which the Predecessor Trust or any of its assets
is subject or bound;
(ix) as of the Effective Time of the Reorganization, all federal
and other tax returns and reports of the Predecessor Funds
required by law to have been filed shall have been filed, and
all taxes of the Predecessor Funds shall have been paid so far
as due, or provision shall have been made for the payment
thereof, and to the best of the Predecessor Trust's knowledge,
no such return is currently under audit and no assessment has
been asserted with respect to any of such returns. The Funds
have qualified and elected, and continue to qualify, to be
treated as regulated investment companies under the provisions
of Subchapter M of the Code; and
(x) no authorization, consent or approval of any governmental or
other public body or authority or any other party is necessary
for the execution and delivery of this Agreement by the
Predecessor Trust on behalf of the Predecessor Funds or the
consummation of any transactions contemplated hereby by the
Predecessor Trust, other than as shall be obtained at or prior
to the Closing.
3.2 The Successor Trust, on behalf of each of the Successor Funds,
hereby represents and warrants to the Predecessor Funds as
follows:
(i) the Successor Trust is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has
full power and authority to conduct its business as presently
conducted;
(ii) the Successor Trust has full power and authority to execute,
deliver and carry out the terms of this Agreement on behalf of
the Successor Funds;
(iii) the execution and delivery of this Agreement on behalf of the
Successor Funds and the consummation of the transactions
contemplated hereby are duly authorized and no other
proceedings on the part of the Successor Trust or the
shareholders of the Successor Funds are necessary to authorize
this Agreement and the transactions contemplated hereby;
(iv) the Successor Trust is (or will be before the Effective Time
of the Reorganization) registered under the 1940 Act as an
open-end management investment company; such registration has
not been revoked or rescinded and is in full force and effect;
A-4
(v) the Successor Trust's New Shares to be issued in connection
with the Reorganization have been duly authorized and upon
consummation of the Reorganization will be validly issued,
fully paid and non assessable. Except for the share issued
pursuant to Article 1 above, there shall be no issued and
outstanding New Shares or any other securities issued by the
Successor Fund before the Effective Time of the
Reorganization;
(vi) there are no liabilities of the Successor Trust, whether or
not determined or determinable, other than liabilities
incurred in the ordinary course of business or otherwise
previously disclosed to the Predecessor Funds in writing.
There are no liabilities of the Successor Trust of any kind
for which the holders of the Old Shares shall become
responsible as the result of this Agreement or the
consummation of the transactions contemplated hereby or
otherwise;
(vii) there are no claims, actions, suits or proceedings pending
or, to the knowledge of the Successor Trust, threatened
which would adversely affect the Successor Trust or its
assets or business or which would prevent or hinder
consummation of the transactions contemplated hereby or
which upon such consummation would adversely affect the
Successor Fund;
(viii) this Agreement has been duly executed by the Successor Trust
on behalf of the Successor Funds and constitutes its valid and
binding obligation, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency,
moratorium and other rights affecting creditors' rights
generally, and general equitable principles;
(ix) neither the execution and delivery of this Agreement by the
Successor Trust on behalf of the Successor Funds, nor the
consummation by the Successor Trust on behalf of the Successor
Funds of the transactions contemplated hereby will conflict
with, result in a breach or violation of or constitute (or
with notice, lapse of time or both constitute) a breach of or
default under, the Declaration of Trust or By-Laws of the
Successor Trust, as each may be amended, or any statute,
regulation, order, judgment or decree, or any instrument,
contract or other agreement to which the Successor Trust is a
party or by which the Successor Trust or any of its assets is
subject or bound;
(x) as of the Effective Time of the Reorganization, all federal
and other tax returns and reports of the Successor Trust
required by law to have been filed shall have been filed, and
all taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof, and to the best
of the Successor Trust's knowledge, no such return is
currently under audit and no assessment has been asserted with
respect to any of such returns;
(xi) no authorization, consent or approval of any governmental or
other public body or authority or any other party is necessary
for the execution and delivery of this Agreement by the
Successor Trust on behalf of the Successor Funds or the
consummation of any transactions contemplated hereby by the
Successor Trust, other than as shall be obtained at or prior
to the Closing.
A-5
(xii) before the Effective Time of the Reorganization, the Successor
Trust will take all steps necessary to cause the formation of
the three (3) Successor Funds. The Successor Funds will have
the same investment objective and policies, and the same
investment adviser as the Predecessor Funds.
(xiii) All information contained in the proxy statement to be
supplied to shareholders of the Predecessor Funds in
connection with the Reorganization that relates to the
Predecessor Trust, the New Funds, Investment Manager, the
agreements between the Successor Trust and other service
providers, the effects, tax and otherwise, of the
Reorganization on Fund shareholders and other matters known
primarily to Successor Trust or the Investment Manager (i) is
true and correct in all material respects and (ii) does not
contain (and will not contain at the time the proxy statement
is mailed to Fund shareholders) any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
4. CONDITIONS PRECEDENT
4.1 The obligations of the Predecessor Trust on behalf of the
Predecessor Funds and the Successor Trust on behalf of the
Successor Funds to effectuate the Reorganization shall be subject
to the satisfaction of the following conditions:
(i) Such authority from the Securities and Exchange Commission
(the "SEC") and state securities commissions as may be
necessary to permit the parties to carry out the transactions
contemplated by this Agreement shall have been received.
(ii) The Registration Statement of the Successor Trust with respect
to the Successor Funds shall have been filed with the SEC and
shall have become effective, and no stop-order suspending the
effectiveness of the Registration Statement or amendment
thereto shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened by the SEC
(and not withdrawn or terminated).
(iii) The applicable New Shares shall have been duly qualified for
offering to the public in all states in which such
qualification is required for consummation of the transactions
contemplated hereunder;
(iv) All representations and warranties of the Predecessor Trust on
behalf of the Predecessor Funds contained in this Agreement
shall be true and correct in all material respects as of the
date hereof and as of the Closing, with the same force and
effect as if then made, and the Successor Trust on behalf of
the Successor Funds shall have received a certificate of an
officer of the Predecessor Trust acting on behalf of the
Predecessor Funds to that effect in form and substance
reasonably satisfactory to the Successor Trust on behalf of
the Successor Funds;
(v) All representations and warranties of the Successor Trust on
behalf of the Successor Funds contained in this Agreement
shall be true and correct in all material respects as of the
date hereof and as of the Closing, with the same force and
effect as if then made, and the Predecessor Trust on behalf of
the Predecessor Funds shall have received a certificate of an
officer of the Successor Trust acting on behalf of the
Successor Funds to that effect in form and substance
reasonably satisfactory to the Predecessor Trust on behalf of
the Predecessor Funds;
A-6
(vi) The Predecessor Trust on behalf of the Predecessor Funds and
the Successor Trust on behalf of the Successor Funds shall
have received opinions from counsel, Dechert, regarding
certain tax matters in connection with the Reorganization; and
(vii) A vote approving this Agreement shall have been adopted by at
least a majority of the outstanding shares of each Predecessor
Fund entitled to vote at a special meeting of shareholders of
each such Predecessor Fund duly called for such purpose (the
"Special Meeting").
5. BROKERAGE FEES AND EXPENSES
5.1 The Successor Trust and the Predecessor Trust each represents and
warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the
transactions provided for herein.
5.2 All of the expenses and costs of the Reorganization and the
transactions contemplated thereby shall be borne by the
Investment Manager.
6. ENTIRE AGREEMENT
The Successor Trust and the Predecessor Trust agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
7. TERMINATION
This Agreement and the transactions contemplated hereby may be
terminated and abandoned by either party by resolution of the party's Board of
Trustees, at any time prior to the Closing Date, if circumstances should develop
that, in the opinion of such Board, make proceeding with the Agreement
inadvisable. In the event of any such termination, there shall be no liability
for damages on the part of either the Successor Trust or the Predecessor Trust,
or their respective Trustees or officers, to the other party.
8. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Predecessor Trust and the Successor Trust; provided, however, that following the
meeting of the Current Shareholders called by the Predecessor Trust pursuant to
paragraph 4.1(vi) of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of New Shares to be issued to
the Current Shareholders under this Agreement to the detriment of such
shareholders without their further approval.
9. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the parties hereto at their
principal place of business.
A-7
10. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
10.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.2 This Agreement may be executed in any number of counterparts
each of which shall be deemed an original.
10.3 This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
10.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent
of the other party. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or
by reason of this Agreement.
10.5 It is expressly agreed that the obligations of the Predecessor
Trust hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents, or employees of the
Predecessor Trust personally, but shall bind only the trust
property of the Predecessor Trust, as provided in the Declaration
of Trust of the Predecessor Trust. The execution and delivery by
such officers of the Predecessor Trust shall not be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property
of the Predecessor Trust as provided in the Declaration of Trust
of the Predecessor Trust. The Predecessor Trust is a series
company with multiple series, including Kensington Strategic
Realty Fund, Kensington Select Income Fund, and Kensington Real
Estate Securities Fund and has entered into this Agreement on
behalf of the Predecessor Funds. With respect to any obligation of
the Predecessor Trust arising hereunder, the Successor Trust and
the Successor Funds shall look for payment or satisfaction of such
obligations solely to the assets and property of the corresponding
Predecessor Funds.
10.6 It is expressly agreed that the obligations of the Successor Trust
hereunder shall not be binding upon any of the trustees,
shareholders, nominees, officers, agents or employees of the
Successor Trust personally, but shall bind only the trust property
of the Successor Trust, as provided in the Declaration of Trust of
the Successor Trust. The execution and delivery by such officers
of the Successor Trust shall not be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the
Successor Trust as provided in the Declaration of Trust of the
Successor Trust. The Successor Trust is a series company with
multiple series, Kensington Strategic Realty Fund, Kensington
Select Income Fund, and Kensington Real Estate Securities Fund and
has entered into this Agreement on behalf of the Successor Funds.
With respect to any obligation of the Successor Trust arising
hereunder, the Predecessor Funds and the Predecessor Trust shall
look for payment or satisfaction of such obligations solely to the
assets and property of the corresponding Successor Funds.
A-8
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized representatives.
Attest: THE COVENTRY GROUP, a Massachusetts
Business Trust
By: By:
---------------------------------- -----------------------------------
Name: Name:
-------------------------------- ----------------------------------
Title: Title:
------------------------------- ---------------------------------
Attest: THE KENSINGTON FUNDS, a Delaware
Statutory Trust
By: By:
---------------------------------- -----------------------------------
Name: Name:
---------------------------------- -----------------------------------
Title: Title:
---------------------------------- -----------------------------------
A-9
THE COVENTRY GROUP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
MARCH 14, 2003
KENSINGTON STRATEGIC REALTY FUND
PROXY
The undersigned hereby appoints R. Jeffrey Young and George L. Stevens,
and any one of them, attorney and proxy with full power of substitution to vote
and act with respect to all shares of Kensington Strategic Realty Fund ("Fund"),
a series of The Coventry Group (the "Trust") held by the undersigned at the
Special Meeting of Shareholders of the Fund to be held at 10:00 a.m., Eastern
Time, on March 14, 2003, at the offices of the Fund, 3435 Stelzer Road,
Columbus, Ohio 43219 and at any adjournments thereof ("Meeting"), and instructs
each of them to vote as indicated on the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby acknowledged, with
discretionary power to vote upon such other business as may properly come before
the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND. The Board
of Trustees recommends that you vote FOR the following proposal:
VOTE ON PROPOSAL:
PROPOSAL 1:
1. To approve a proposed Agreement and Plan of Reorganization and the
transactions contemplated thereby, which include: (a) the transfer of
all assets of the Fund to a newly formed series also called Kensington
Strategic Realty Fund (the "New Fund") of The Kensington Funds, a
Delaware statutory trust (the "New Trust"), in exchange for shares of
the New Fund, and the assumption by the New Fund of liabilities of the
Fund; and (b) the distribution to Fund shareholders of such New Fund's
shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE FOR A
PROPOSAL, THIS PROXY WILL BE VOTED FOR THAT PROPOSAL.
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Date:__________________, 2003
Please date and sign exactly as the name or names appear on your shareholder
account statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder must sign.
- ------------------------------ ----------------------------
Signature Signature (if held jointly)
- ------------------------------ ----------------------------
Title (If applicable) Title (If applicable)
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN ENCLOSED ENVELOPE IF YOU ARE NOT
VOTING BY PHONE
THE COVENTRY GROUP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
MARCH 14, 2003
KENSINGTON SELECT INCOME FUND
PROXY
The undersigned hereby appoints R. Jeffrey Young and George L. Stevens,
and any one of them, attorney and proxy with full power of substitution to vote
and act with respect to all shares of Kensington Select Income Fund ("Fund"), a
series of The Coventry Group (the "Trust") held by the undersigned at the
Special Meeting of Shareholders of the Fund to be held at 10:00 a.m., Eastern
Time, on March 14, 2003, at the offices of the Fund, 3435 Stelzer Road,
Columbus, Ohio 43219 and at any adjournments thereof ("Meeting"), and instructs
each of them to vote as indicated on the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby acknowledged, with
discretionary power to vote upon such other business as may properly come before
the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND. The Board
of Trustees recommends that you vote FOR the following proposal:
VOTE ON PROPOSAL:
PROPOSAL 1:
1. To approve a proposed Agreement and Plan of Reorganization and the
transactions contemplated thereby, which include: (a) the transfer of
all assets of the Fund to a newly formed series also called Kensington
Select Income Fund (the "New Fund") of The Kensington Funds, a Delaware
statutory trust (the "New Trust"), in exchange for shares of the New
Fund, and the assumption by the New Fund of liabilities of the Fund;
and (b) the distribution to Fund shareholders of such New Fund's
shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE FOR A
PROPOSAL, THIS PROXY WILL BE VOTED FOR THAT PROPOSAL.
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Date: __________________, 2003
Please date and sign exactly as the name or names appear on your shareholder
account statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder must sign.
- ------------------------------ ----------------------------
Signature Signature (if held jointly)
- ------------------------------ ----------------------------
Title (If applicable) Title (If applicable)
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN ENCLOSED ENVELOPE IF YOU ARE NOT
VOTING BY PHONE
THE COVENTRY GROUP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
MARCH 14, 2003
KENSINGTON REAL ESTATE SECURITIES FUND
PROXY
The undersigned hereby appoints R. Jeffrey Young and George L. Stevens,
and any one of them, attorney and proxy with full power of substitution to vote
and act with respect to all shares of Kensington Real Estate Securities Fund
("Fund"), a series of The Coventry Group (the "Trust") held by the undersigned
at the Special Meeting of Shareholders of the Fund to be held at 10:00 a.m.,
Eastern Time, on March 14, 2003, at the offices of the Fund, 3435 Stelzer Road,
Columbus, Ohio 43219 and at any adjournments thereof ("Meeting"), and instructs
each of them to vote as indicated on the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby acknowledged, with
discretionary power to vote upon such other business as may properly come before
the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE FUND. The Board
of Trustees recommends that you vote FOR the following proposal:
VOTE ON PROPOSAL:
PROPOSAL 1:
1. To approve a proposed Agreement and Plan of Reorganization and the
transactions contemplated thereby, which include: (a) the transfer of
all assets of the Fund to a newly formed series also called Kensington
Real Estate Securities Fund (the "New Fund") of The Kensington Funds, a
Delaware statutory trust (the "New Trust"), in exchange for shares of
the New Fund, and the assumption by the New Fund of liabilities of the
Fund; and (b) the distribution to Fund shareholders of such New Fund's
shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE FOR A
PROPOSAL, THIS PROXY WILL BE VOTED FOR THAT PROPOSAL.
Receipt of the Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
Date:__________________, 2003
Please date and sign exactly as the name or names appear on your shareholder
account statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder must sign.
- ------------------------------ ----------------------------
Signature Signature (if held jointly)
- ------------------------------ ----------------------------
Title (If applicable) Title (If applicable)
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN ENCLOSED ENVELOPE IF YOU ARE NOT
VOTING BY PHONE.